Jeffrey Johnson is a legal writer with a focus on personal injury. He has worked on personal injury and sovereign immunity litigation in addition to experience in family, estate, and criminal law. He earned a J.D. from the University of Baltimore and has worked in legal offices and non-profits in Maryland, Texas, and North Carolina. He has also earned an MFA in screenwriting from Chapman Univer...

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Benjamin Carr was a licensed insurance agent in Georgia and has two years' experience in life, health, property and casualty coverage. He has worked with State Farm and other risk management firms. He is also a strategic writer and editor with a background in branding, marketing, and quality assurance. He has been in military newsrooms — literally on the frontline of journalism.

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Reviewed by Benji Carr
Former Licensed Life Insurance Agent Benji Carr

UPDATED: Nov 3, 2021

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The Facts of Life

  • Collateral assignment can pay off debts
  • Collateral assignment reduces death benefits
  • Beneficiaries receive the difference after a collateral assignment is applied

Are you searching for life insurance companies that allow assignment of collateral? You can use the collateral assignment clause as debt protection while you’re living and after you pass away.

But is assignment of collateral a reliable debt controlling strategy? Why is it important to look at collateral assignment of life insurance sample clauses?

Don’t worry — we’re here to help. Our guide breaks down how collateral assignment works, which companies provide collateral assignment, and why you should shop around for the best life insurance companies.

After you learn more about life insurance companies that allow assignment of collateral, enter your ZIP code in the free online quote tool above to compare multiple companies in your area.

Which life insurance companies allow the assignment of collateral?

Collateral assignment of life insurance is an option at some of the top life insurance companies in the United States.

If you haven’t purchased a life insurance policy yet, you should compare the top life insurance companies in the nation before making a choice.

Here’s a list of the best life insurance companies.

Top 10 Life Insurance Companies By Direct Premiums Written
RanksCompaniesDirect Premiums WrittenMarket Shares
1stMetLife Inc.$103,335,05513%
2ndEquitable Holdings$62,688,6578%
3rdPrudential Financial Inc.$61,913,9768%
4thNew York Life Insurance Group$40,211,6425%
5thMassachusetts Mutual Life Insurance Co.$38,461,1975%
6thPrincipal Financial Group Inc.$26,439,6713%
7thLincoln National Corp.$25,385,4503%
8thWestern & Southern Financial Group$22,920,7173%
10thAmerican International Group (AIG)$22,620,8033%
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The most prominent life insurance companies have collateral assignment forms, especially companies that sell permanent life insurance policies.

But it’s not unusual to add a collateral assignment to your term life insurance policy.

Are there any life insurance companies that don’t allow assignment of collateral?

We looked for life insurance companies that don’t provide assignment of collateral, but we couldn’t locate an answer.

You’ll find that many life insurance companies don’t announce whether or not they provide collateral assignments. You won’t know until you ask an agent or company representative directly.

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What is considered the collateral on a life insurance policy loan?

Life insurance death benefits (policy amount) and the accumulated cash value of permanent life insurance are financial assets.

Term life insurance doesn’t provide an accumulated cash account.

Your policy amount is collateral. If you get a loan, you can use your life insurance policy instead of your house, vehicle, etc.

A collateral assignment is used when you default on a loan or if you pass away before you can pay off a debt.

Are there different types of collateral assignments?

The answer is yes. The two main types of assignment of collateral are absolute assignment and conditional assignment.

The absolute assignment gives your lender some control over the life insurance policy. In other words, the lender can make changes to the policy.

The conditional assignment gives the policyholder control over the life insurance policy, preventing the lender from accessing the death benefits or other policy parts.

What life insurance policies can I use in an assignment of collateral?

Term life insurance and permanent life insurance can be used in collateral assignment.

However, permanent life insurance policies like whole life insurance and universal life insurance are better with an assignment of collateral.

Permanent life insurance has the policy limit and accumulated cash value. Using your accumulated cash value as collateral can protect your death benefits.

If your accumulated cash account isn’t enough, you can use your policy’s death benefits.

Money that you don’t pay back to the life insurance company is deducted from your death benefits, and the difference is given to your beneficiaries.

How do I apply for a collateral assignment?

After you’re approved for a life insurance policy and make your first monthly payment, ask your life insurance company for a collateral assignment form.

Only the life insurance policyholder can fill out and complete a collateral assignment form.

The life insurance company underwrites your collateral assignment, which takes about four to six weeks to complete. The underwriting process may include another medical exam.

But you can speed up the collateral assignment process if you qualify for accelerated underwriting and instant decision perks.

When should I sign up for the assignment of collateral?

You can apply for collateral assignments after you’ve made your first payment. However, we recommend that you look at a few collateral assignments of life insurance sample clauses.

This will give you an idea of what to expect from life insurance companies.

Collateral assignment usually ends after your debt has been paid. Once your debts are clear, you’re not legally tied to the lender any longer.

How do I name beneficiaries for my life insurance policy?

During the life insurance underwriting process, you’ll have an option to name beneficiaries. The collateral assignment allows you to name a lender as a beneficiary.

We highly recommend that you do not name a lender as a beneficiary. Use your collateral assignment to send a set amount to the lender.

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What are the advantages and disadvantages of collateral assignment?

Assignment of collateral has a few benefits, but it also has some drawbacks. Don’t worry — we’ll show you the pros and cons of collateral assignment.

  • Protects the interests of lenders
  • An alternative way to pay off debt
  • An affordable method to pay back a loan


  • Debt is deducted from death benefits
  • A collateral assignment is connected to more expensive life insurance
  • Delinquent life insurance payments could affect your policy
  • Your cash value use is limited
  • The type of policy impacts collateral assignment

The cons outweigh the pros, but collateral assignment varies for each company. A company could have a collateral assignment clause that’s more beneficial for policyholders.

Life Insurance Companies That Allow Assignment of Collateral: The Bottom Line

A collateral assignment is an excellent way to tackle loan debt, but you’ll need to be very careful about your options.

While the healthiest people can secure the best life insurance policies, you should look at any alternative to an assignment of collateral you can find before making a decision. And the first step is to shop around for reliable life insurance coverage.

Now that you know more about life insurance companies that allow assignment of collateral, use our free online quote tool to compare multiple companies near you.