whenever a life insurance policies advantages are used as collateral. If demise should occur the financial institution is paid first versus beneficiary. Only life insurance can be used in this way.
Transfer by the holder of a life insurance coverage (the assignor) associated with the benefits or proceeds of plan to a lender (the assignee), as a collateral for a loan. In the case of the loss of the assignor, the assignee is compensated initially as well as the balance (if any) is compensated to the plan's beneficiary. Other forms of insurance policies may not be used for this purpose.