LLQP (Life Licence Qualification Program) Practice Exam · Question
How does a 'Collateral Assignment' differ from an 'Absolute Assignment' of a life insurance policy?
A collateral assignment allows a policyowner to use their life insurance policy as security for a loan. The lender (assignee) gets the first right to the death
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Question: How does a 'Collateral Assignment' differ from an 'Absolute Assignment' of a life insurance policy?
Answer options: ✅ It allows a policyowner to use the policy as security for a loan.
- It permanently transfers all ownership rights to a third party.
- It makes the beneficiary designation irrevocable.
- It prevents the insurer from contesting the policy for fraud.
Correct answer: It allows a policyowner to use the policy as security for a loan.
Explanation: A collateral assignment allows a policyowner to use their life insurance policy as security for a loan. The lender (assignee) gets the first right to the death benefit or cash value to satisfy the debt, while any excess goes to the original beneficiary.
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- A life insurance policy that offers lifelong coverage, a guaranteed death benefit, and a savings component tha
- Group benefits in Canada commonly include:
- Sarah, a 35-year-old marketing professional in Ontario, purchases a participating whole life insurance policy
- Mark, a 45-year-old business owner in British Columbia, has a Universal Life policy with a Level Cost of Insur
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