Question

When a borrower opts for an insurance policy in connection with a loan, it is a case of _______

A Assignment Correct Answer Incorrect Answer
B Pledge Correct Answer Incorrect Answer
C Mortgage Correct Answer Incorrect Answer
D Hypothecation Correct Answer Incorrect Answer
E Guaranty Correct Answer Incorrect Answer

Solution

When a borrower opts for an insurance policy in connection with a loan, it is common for the lender to require the borrower to assign the insurance policy to the lender. This means that the borrower transfers the rights and benefits of the insurance policy to the lender as security for the loan. This assignment serves as additional collateral for the loan, providing the lender with a claim on the insurance proceeds in the event of a claimable event. Therefore, the loan opted insurance policy is associated with the case of assignment.

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