Hawaii Insurance License Test 2025 – 400 Free Practice Questions to Pass the Exam

Question: 1 / 400

When two policyholders' house burns down and they agree to give the proceeds to someone after a loss, this is called?

Transfer of benefit

Assignment

The situation described pertains to the transfer of rights or benefits under an insurance policy, and the term that best fits this scenario is assignment. In the context of insurance, an assignment occurs when a policyholder transfers their rights to the benefits or proceeds of their insurance policy to another party. This might happen in situations like the one described, where two policyholders agree to designate another individual to receive the proceeds after a loss occurs.

When an assignment is made, it is typically done in writing, documenting the transfer of the right to collect benefits from the insurer to another party. It is important because it allows policyholders to determine how and to whom their policy benefits should be paid in the event of a claim.

While transfer of benefit and beneficiary designation may sound similar, they do not accurately describe the action of transferring rights to proceeds as assignment does. Collateral assignment is a specific type of assignment often used in financing, where an insurance policy is pledged as collateral for a loan; it does not apply to the general transfer of benefits between policyholders. Thus, the choice of assignment accurately encapsulates the action where the proceeds from the insurance policy are directed to another person by mutual agreement.

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Beneficiary designation

Collateral assignment

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