Assignment as Security (Policenverpfändung)
In an assignment as security, the claims arising from a life insurance policy are pledged as collateral for a third party's claim (e.g. a bank), without the policyholder changing.
Concept
In an assignment as security, the policyholder assigns the claims arising from a life insurance policy as collateral for their own liability to a third party (the pledgee, often a bank), without anything changing in the insurance relationship itself. In the event of the policyholder’s default, the pledgee obtains the right to satisfy their claim out of the insurance benefit becoming due.
Practical Application
Assignment as security is frequently used in practice to secure mortgage loans: an existing or newly concluded life insurance policy with a capital benefit is pledged to the financing bank so that, upon the policyholder’s death, the remaining mortgage debt can be repaid from the insurance benefit. The insurer is informed of the pledge (notification) and may no longer pay out benefits directly to the policyholder without the pledgee’s consent.
Relevance for Insurance Practice
Assignment as security should be distinguished from restriction of disposal (Vinkulierung), where the policy is blocked in favour of a third party; both instruments, however, serve the same purpose of securing a third party through existing insurance cover without the need to conclude a separate insurance contract.