PSI Ohio Insurance Practice Exam

Which type of assignment occurs when a person transfers ownership of a life insurance policy to another person, such as a son when turning 18?

1. Temporary assignment

2. Conditional assignment

3. Permanent assignment

4. Revocable assignment

The correct answer is: Permanent assignment

The transfer of ownership of a life insurance policy to another person, such as a son upon turning 18, is an example of a permanent assignment. In this scenario, the original policyholder relinquishes their rights and ownership of the policy, granting the new owner full control and benefits associated with the policy. This type of assignment signifies a complete and lasting change in ownership, which means that the new holder has the authority to make decisions regarding the policy, such as changing the beneficiary, borrowing against the cash value, or even canceling the policy. Unlike temporary assignments or conditional assignments, which might suggest that ownership rights can revert back or are limited to specific conditions, a permanent assignment ensures that the policy now belongs entirely to the new owner without any future claims from the original policyholder. Revocable assignments allow the original owner to regain control of the policy at any time, making it different from a permanent assignment. Understanding these distinctions is crucial for navigating life insurance policies and ownership transfers effectively.