What is involved in securing life insurance?
Collateral assignment of life insurance is a type of collateral that believes to extract from debtors as a basis or condition for lending money. It is a kind of security for creditors who ensures that his money is paid off. This collateral is obtained by the creditor from the debtor when the creditor needs a special certainty that the debtor repays the debt. Life insurance can be assigned to anyone insurance owner, which is what makes this ideal for debtors.
The creditor may insist on ensuring life insurance when he is not sure the debtor is paying money. It may be a condition for paying the loan. In this case, the debtor will take out life insurance and name the creditors as the recipient. If the debtor dies before repaying the loan, the creditor receives this money from the dividends of life insurance.
The creditor can only obtain the money he owes him already. If there is any money left after the creditor has extract the debt that owes him, the money will be paid to other recipientsInsurance - usually the debtor's family members. If the debtor did not name anyone but the creditor as the recipient, the balance will be applied to the debtor's estate.
Most insurance companies are familiar with the collateral assignment of life insurance and each company has its own insurance for such coverage. Some insurance companies will try to contact the creditors directly to find out exactly how much they expect to get life insurance if the owner of the insurance dies. They may also want to know what conditions the creditor attaches to securing life insurance. Insurance companies do this to avoid any surprises if such an event OCCUR.
If the debtor is able to repay the money due to the creditor, the creditor will not be entitled to any life insurance money. Agreement between the debtor and the creditor concerning the securing of life insuredIt usually contains clauses that the creditor's claim as a recipient of life insurance becomes invalid after a complete repayment of the debt. Life insurance serves only as a advance in case the debtor fails to repay the loan or if the debtor dies before paying all the money owed to the creditor.