State RegulationsFL specificDifficulty 2/5
A Florida business owner assigns his life policy to a bank as security for a business loan. What type of assignment has he made?
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Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
Under Chapter 627, Florida Statutes, a collateral assignment transfers rights in the policy only to the extent needed to secure a debt: the bank receives policy proceeds up to the loan balance, and anything beyond that goes to the policy's beneficiaries. An absolute assignment, by contrast, would transfer the entire policy; a beneficiary designation and a settlement option do not involve transferring rights to a creditor.
Why the other options are wrong
- B) An absolute assignment transfers the entire policy permanently; securing a debt calls for a collateral assignment.
- C) Naming a beneficiary directs proceeds at death but transfers no rights to a creditor.
- D) A settlement option shapes how proceeds are paid, not who holds rights in the policy.
Memory hook
Bank gets collateral: debt paid first, family gets the rest.