Question 82

All incidents of ownership are transferred to the assignee.

Under the absolute assignment of a life insurance policy, the assignee receives all rights associated with the policy, including the ability to make changes and claim benefits.

A) all incidents of ownership are transferred to the assignee

This option is correct because absolute assignment involves transferring all rights and privileges of the life insurance policy from the original owner to the assignee. This includes the right to change beneficiaries, access cash values, and receive death benefits.

B) the original policy owner may change the beneficiary designation

This option is incorrect as, once an absolute assignment is made, the original policy owner no longer retains the rights to make changes to the policy, including changing the beneficiary designation. The assignee now holds that authority.

C) all debts owed to the insurance company are canceled

This option is incorrect. The absolute assignment does not cancel any debts owed to the insurance company. Any outstanding premiums or loans against the policy remain the responsibility of the original policy owner unless specifically addressed in the assignment agreement.

D) the original policy owner is entitled to receive the cash value of the policy

This option is incorrect because, with absolute assignment, the rights to the cash value of the policy are transferred to the assignee. The original policy owner loses their entitlement to these funds once the assignment is executed.

Conclusion

The correct answer is A, as absolute assignment completely transfers all ownership rights to the assignee, including the ability to manage the policy. Options B, C, and D fail to recognize the implications of this transfer, as the original policy owner loses significant rights upon assigning the policy. Understanding the nature of absolute assignment is crucial for proper management of life insurance policies.