What it means
A collateral assignment gives a lender specified rights in a life insurance policy as security for a debt. It is not the same thing as changing the policy’s beneficiary. The policy and assignment documents govern the actual rights and remaining proceeds.
What can hold up closing
Common delays include an incorrect assignee name, using an unapproved form, missing carrier acknowledgement or sending only proof that an assignment was submitted. Ask the lender what documentation it requires and confirm the carrier can complete the process.
After the loan is paid off
Request a written release from the lender and have the insurer record it according to its process. Do not assume the policy should be cancelled once the loan is repaid; it may still support family or business planning needs.
Read the complete SBA life insurance guide for how assignment fits the larger closing process.