What does "policy assignment" refer to in insurance?

In insurance, "policy assignment" specifically refers to the transfer of rights and benefits of a policy to another party. This process allows the policyholder to assign their interests in the insurance policy, effectively enabling another individual or entity to receive the benefits that the policy provides.

By using assignment, the original policyholder can make financial arrangements, such as securing a loan where the policy serves as collateral, or transferring the coverage to someone else who may need it. This transfer is formalized through a written assignment, which is then acknowledged by the insurance company to ensure that all parties are aware of the change in rights and benefits. The assignee typically becomes entitled to any claims or benefits associated with the policy, demonstrating how critical an understanding of assignment is within the insurance industry.

In contrast, other options suggest actions that do not align with the legal concept of assignment. Changing the beneficiary pertains to the designation of who receives benefits upon the death of the insured, while renewing a policy or adjusting premium payments relate to maintaining and managing an insurance policy rather than transferring rights.