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 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.
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!
Are you looking for a way to secure a loan, but do not have the credit rating or typical collateral in order to do so?
Then you might want to consider the assignment of life insurance policy as collateral for a loan.
This relatively new field in the obtainment of loans uses your own life insurance policy as the means for you to obtain the type of loan you want.
The collateral assignment of life insurance policy proceeds is a relatively simple one, but there are a few steps that need to be taken before you can take full advantage of this method.
Please note:You first must find a lender that will be willing to accept your life insurance as collateral. We do not do that. If you identify a lender that will, we can assist you in purchasing the most the affordable life insurance policy and completing the collateral assignment paperwork.
Finding Insurance Companies That Allows Collateral Assignment
The first question before the assignment of life insurance policy as collateral for loan can be processed is whether your life insurance company will allow it to happen. Many of them do have specific requirements and they need to be followed for the collateral assignment of life insurance policy can take place.
If the answer is no, at least you can eliminate that method to obtaining your loan and in the future obtain a life insurance policy that will not have these restrictions.
Most of the insurance carriers that we work with do allow for collateral assignment of your policy so as long as you identify a lender that will accept it.
There are companies out there that specialize in working with both lenders and life insurance companies that can help you obtain the goal of collateral assignment of life insurance policy for the purposes of getting a loan. In most cases, they follow a step-by-step approach that starts with contacting the lender to see what type of life insurance qualifies as collateral. The company will insure getting the exact wording necessary so that the next step can be taken.
Now you apply for the life insurance that qualifies for the loan, in some cases it may not need a medical exam which generally is more expensive but can be done in a few days or it may require an exam and be fully underwritten which is less expensive, but takes a few weeks. If you currently have a policy that qualifies for assignment of life insurance policy as collateral for loan, then this step can be avoided.
If you are in need of a quick option and are in overall good health, there are guaranteed acceptance insurance policies and simplified issued policies that require little to no medical exams and are issued rather quick.
Lender Accepting The Insurance Policy Proceeds As Collateral
The lender will now accept the life insurance as collateral for your loan, usually they are consulted beforehand to insure that all the wording and legal language requirements are met and that the application is essentially approved before it is sent in to avoid any unwanted surprises.
Once it is approved, then the forms are signed by both the lender and the life insurance company so that the process can take the final step of providing you with the loan that you need.
Sample Collateral Assignment Form
This rather straightforward process can be quite technical in nature and needs an experienced, knowledgeable company to make the transaction work so that you can get the loan you desire while satisfying the needs of both the lender and the life insurance company. This way, all the potential problems are ironed out beforehand and you get the loan you want.
If you are looking for another method to obtaining a loan, then using your life insurance policy proceeds or having one drawn up can be the way to get what you need.
Collateral Assignment Example
We recently had a client that was a real estate developer and needed to secure a $4 million term life policy to cover his bank loans. He was needing to get his life insurance fast, so we went with the carrier we felt would issue the quickest based on his situation.
Within 4 weeks the policy was in-force and he was completing the collateral assignment forms to hand over to his banks. Keep in mind that the assignment forms do not need to be completed until after you receive your policy from the insurance company.
Sample form: Collateral Assignment
Life Insurance For Your Family
The idea of using a life insurance policy as collateral is a relatively no idea. These plans are an excellent way to secure a loan that you wouldn’t be able to get otherwise. One thing to always be aware of is the life insurance protection that you’re giving your loved ones. Life insurance plans are a great way to close a loan, but the primary use for any life insurance policy should be to give your family members the money that they need if something tragic were to happen to you.
Thankfully, there are plenty of affordable life insurance policies that you can choose from, both for loan purposes or for protection for your family. If you’re looking to get the most affordable insurance policy, your best bet is going to be a term life insurance plan. As you probably know, these plans are bought with a pre-determined expiration date attached to them. After that date has passed, you’ll have to reapply for coverage. Because they aren’t a permanent form of coverage, they are going to be much more affordable than other options for life insurance.
Additionally, there are a few things that you can do to help secure the lowest premiums available. Before the insurance company approves your application, they are going to require that you complete a medical exam. The medical exam will give them an idea of what your overall health is and how much risk you are to insure with a life insurance plan. The better results that you get from the medical exam, the lower that your insurance rates are going to be.
If you want to save money on your insurance premiums, you’ll need to start getting regular exercise and stick to a healthy diet. Both of these can help you lose any extra weight, lower your cholesterol, and reduce your risk of having severe health complications later in life. It’s time to dust off your old tennis shoes and start hitting the gym. Your doctor and your wallet will both thank you.
Another way that you can get the lowest insurance rates is to eliminate any tobacco that you currently use. If you’re a smoker, you can expect to pay much higher rates on your premiums. In fact, smokers are going to pay twice as much for life insurance versus what a non-smoker is going to pay for the same amount of life insurance protection. If you want to get the most affordable plan, either for a loan or for traditional reasons, you’ll need to kick the bad habit once and for all.
If you have any questions about life insurance as collateral or about getting the most affordable coverage, please contact me today. I would be happy to answer those questions and ensure that you’re getting the best policy to meet your needs. Don’t wait any longer to get the life insurance protection that your loved ones need.