Question 82

All incidents of ownership are transferred to the assignee.

In the context of an absolute assignment of a life insurance policy, the assignee receives full ownership rights, meaning all incidents of ownership are transferred to them. This includes the rights to change beneficiaries, access cash values, and make policy decisions.

A) all incidents of ownership are transferred to the assignee

This option is correct because an absolute assignment involves the complete transfer of ownership rights from the original policyholder to the assignee. The assignee gains full control over the policy, including the right to manage the policy as they see fit.

B) the original policy owner may change the beneficiary designation

This option is incorrect. Once an absolute assignment takes place, the original policy owner loses the ability to change the beneficiary designation, as these rights are now held by the assignee.

C) all debts owed to the insurance company are canceled

This option is also incorrect. The assignment does not cancel any existing debts owed to the insurance company; rather, it simply transfers ownership of the policy. Any outstanding debts would still need to be addressed by the policyholder or the assignee, as applicable.

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

This option is incorrect as well. After an absolute assignment, the original policy owner no longer holds entitlement to the cash value of the policy, as this right has been transferred to the assignee.

Conclusion

Option A is definitively correct because it accurately describes the nature of absolute assignment in life insurance policies, where all ownership rights are transferred to the assignee. Other options fail to reflect the implications of such an assignment, as they suggest retained rights or benefits that are no longer applicable to the original policy owner.