What type of assignment allows temporary transfer of ownership of a life insurance policy?

The correct answer is the collateral assignment, which permits a temporary transfer of ownership of a life insurance policy. In a collateral assignment, the policyholder designates a lender or another party as a temporary owner to secure a loan. This type of assignment does not permanently change the ownership of the policy; instead, it allows the lender to claim benefits only to the extent necessary to satisfy the debt. Once the loan is repaid, the rights revert back to the original policyholder.

In contrast, absolute assignment provides a complete transfer of ownership of the policy without any conditions, meaning the new owner has full control and rights over the policy permanently. Conditional assignment is not a standard term within insurance policies, which may lead to confusion regarding its meaning or usage. Permanent assignment suggests an unqualified transfer of rights and ownership, which does not align with the concept of temporary ownership inherent in collateral assignment. Understanding the nuances between these terms helps clarify the specific nature of ownership transfers in life insurance policies.