State RegulationsVA specificDifficulty 2/5
A policyowner signs an assignment giving a lender an interest in his life insurance policy as loan collateral, but no copy of the assignment is ever filed with the insurer. The insured dies and the lender demands payment. Under Va. Code § 38.2-3111, what is the result?
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Answer & full 3-part explanation (select an option above, or peek)
Why B is correct
Va. Code § 38.2-3111 conditions an assignment's binding effect on the insurer receiving notice of the assignment. Because no copy was filed with the insurer in this scenario, the insurer can pay the claim without regard to the lender's interest — the insurer is protected from liability it could not have known about. The lesson for candidates is procedural: an assignment is completed for insurer purposes only when the insurer is put on notice, so assignees file the paperwork promptly.
Why the other options are wrong
- A) Execution during the insured's life binds the assignor, but under Va. Code § 38.2-3111 it does not bind the insurer that never received notice.
- C) Producing the document after death cannot cure the missing precondition; the statute requires notice to the insurer, which is what shields it from competing claims.
- D) Virginia law does not condition assignments on the insurer's consent; the statutory requirement under Va. Code § 38.2-3111 is notice to the insurer.
Memory hook
File the assignment with the insurer or the insurer never has to honor it.