LLQP Life Insurance · Component 4.1 · 10% of the exam
An absolute assignment of a life insurance policy:
- Transfers all ownership rights in the policy to another person or entity, who becomes the new policyholder
- BIs temporary, lasting only until a stated event such as the repayment of a loan or the sale of a business, after which ownership reverts
- CChanges only the beneficiary, leaving the owner with every other right under the contract
- DPledges the policy as security for a loan, with the lender's interest limited to the amount of the debt
Correct answer: A) Transfers all ownership rights in the policy to another person or entity, who becomes the new policyholder
An absolute assignment is a transfer of ownership — for example, to a corporation, a trust or a former spouse under a separation agreement. It can be a taxable disposition and may require the consent of an irrevocable beneficiary.
Why the other options are wrong
- BAn absolute assignment is permanent.
- CAn assignment changes ownership, not merely the beneficiary.
- DPledging the policy as security is a collateral assignment.
Exam tip
Absolute assignment = transfer of ownership; may be a taxable disposition and may need an irrevocable beneficiary's consent.
Common mistake
Confusing an absolute assignment with a beneficiary change.
What this tests
CISRO competency component 4.1 — Provide customer service during the validity period of the coverage — which is weighted at 10% of the Life Insurance module. Written against the published curriculum.
More from component 4
- After a policy is reinstated, the contestability period:
- A revocable beneficiary designation is changed by:
- A client asks the agent to hold the beneficiary change form 'until next week' and dies in the meantime. The consequence is that:
- A client wants to reduce the face amount of her policy because her needs have fallen. The agent should note that:
- A client is unable to pay premiums temporarily on a whole life policy. Before letting it lapse, the agent should suggest:
- A client's term policy is being replaced with a new one from another insurer because it is cheaper and he remains healthy. To protect the client, the agent should ensure that:
Practice the whole Life Insurance module
Timed sets weighted like the exam, and review of every question you miss. Free to start.