If you stumbled across this article it’s probably because you are curious of what collateral assignment of life insurance means or you are looking for a way to secure a loan but you probably don’t have a good credit rating to do so. Don’t worry we are here to help! If you found yourself in a position of no other option for securing a loan then you should consider the assignment of life insurance for a loan. In this article, we will be explaining collateral assignment of life insurance in detail, the types of life insurance policies that work for a collateral assignment, the process of obtaining a collateral assignment, and how to find companies that allow collateral assignment. The following are some key points from the article;
- Life Insurance is often times a requirement before a loan is approved.
- Your bank will try to be a beneficiary of your death policy, say no. This is a bad idea because if you have paid off some of your loan and you have the bank as your primary beneficiary, and you pass away, the bank would get all of your death benefits.
- When you begin the application for your life insurance you will also be given a collateral assignment form to sign at the same time. A request for the assignment can be done within 24 to 48 hours.
- The lenders that would accept a term life policy are those who only require the loan for a certain period of time that coincides with the term of the loan.
- It is very important to buy coverage from a company who offers the opportunity of using their policy as a collateral assignment otherwise you’re just buying life insurance for the fun of it. Many of them do have specific requirements and they need to be followed for the collateral assignment of life insurance can take place.
- Do you need a policy right away? If so, you should consider a no medical exam policy. A no medical exam policy will help you get a policy quick because it doesn’t require a medical exam. Traditional policies with a medical exam can make the policy take 4-8 weeks or more. With a no medical exam policy you can get approved within 24-48 hours!
Collateral Assignment Life Insurance Explained
Life insurance is often times a requirement to get a business loan. Many lenders accept life insurance simply because it ensures they can collect the money if you pass away. Basically, they accept life insurance because if the insured passes away the lenders would still be getting their money back. In many cases, people have appointed their primary beneficiary to be the lender but we will explain below why you shouldn’t do this.
When looking to get a collateral assignment in order to get approved for a loan keep in mind that life insurance may be a requirement.
A Simple Example
For example, Johnny was looking to get a loan of $250,000 to start his home business but when he went to lenders they denied him because of his credit. His dreams and hopes were at stake here until he found out he could get the loan with a collateral assignment of life insurance. So he then decides he is going to buy life insurance for $250,000. Two years later, his business kicks off quite well and he has paid $200,000 of the loan off already but one day he got into a car accident and sadly lost his life. Since Johnny has paid off $200,000 of his loan, Johnny only owed $50,000 so the bank takes out $50,000 of his policy’s death benefit and the rest of the benefit gets sent to Johnny’s beneficiaries.
Who to set as a beneficiary?
Your bank will try to be a beneficiary of your death policy, say no. This is a bad idea because if you have paid off some of your loan and you have the bank as your primary beneficiary, and you pass away, the bank would get all of your death benefit. This is unnecessary because you don’t need to do that, there is a document you can fill out which we will go over below that you don’t need to have the bank as your primary beneficiary.
Policies for Collateral Assignment
We mentioned before many lenders don’t accept a term life policy as collateral because of the fact that it doesn’t build cash value but there are lenders who do accept term life policies. The lenders that ask for term policies do it because the loan term is for less than 30 years. For example, if the lender tells you that you only need collateral life insurance for 7 years by that time you are required to pay in full, then a 10-year term life policy would best fit your situation, plus it is the most inexpensive option as far as life insurance policies go.
The process of obtaining a Collateral Assignment
The assignment itself is a one or two-page form depending on the company that you need to fill out once your policy is in active status. We usually provide the form for the company that you got approved for life insurance with. We like to use certain companies for all our collateral assignments because they have perfected the process. Below are some examples of different assignment form from various carriers.
Sample Banner Life Assignment Agreement Form
Sample Sagicor Life Assignment Agreement Form
Sample MetLife Assignment Agreement Form
Finding Insurance Companies that Allow Collateral Assignment
It is very important to buy coverage from a company who offers the opportunity of using their policy as a collateral assignment otherwise your just buying life insurance for the fun of it. Many of them do have specific requirements and they need to be followed for the collateral assignment of life insurance can take place. Most of the life insurance companies we work with do allow collateral assignment. There are even companies out there who offer both life insurance and a lender to be able to work together to help you obtain the goal of a collateral assignment of life insurance for the purpose of getting a loan.
How to get quick life insurance
In many cases, people need life insurance quick because their lender may require their life insurance to be placed in a certain time frame. If you do require a collateral assignment of life insurance, InsureChance can help!
Do you need a policy right away? If so, you should consider a no medical exam policy. A no medical exam policy will help you get a policy quick because it doesn’t require a medical exam. Traditional policies with a medical exam can make the policy take 4-8 weeks or more. With a no medical exam policy you can get approved within 24-48 hours! This is the fastest way to get covered and if you want to find out which companies are the best who offer no medical exam policies.
InsureChance is an independent life insurance agency who works with over 60 top rated companies. We are here with the mission of making life insurance a simple concept. We provide the service of matching you with the perfect company based on your specific needs, health, and your lifestyle. Did we mention we are also a free service? Check out the No Medical Exam Life Insurance quote engine and see for yourself what you could be paying in premiums.
Final Thoughts
In conclusion, getting a loan is not impossible if you have bad credit, you can always consider buying life insurance for assignment as collateral. It is not impossible and if you are looking for quick insurance for your loan to come through quicker consider no medical exam policies. Keep in mind that you can use our no medical exam quote engine to have an idea of what your premiums would look like or if you have 30 seconds use our quote engine below to see for yourself how your term life premiums would look like while comparing quotes with different A rated companies. Or you can take advantage of our free service, we can do all the shopping around for you! This way you can spend more time with the ones who really matter the most, your family. We not only will shop around for quotes and find the best company for you but we will also do the whole application process for you without a hassle!
