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CS Professional · Banking and Insurance - Laws and Practice · Functions in Insurance and Compliance related thereto (Part II)

A policyholder assigns a policy to a friend, with the endorsement expressly stating the assignment is conditional on the assignee predeceasing the insured, whereupon proceeds go back to the policyholder's nominee. The assignee later asks the insurer for a loan on the policy. Under the Act:

The assignee cannot obtain a loan. The Act validates such conditional assignments but provides that a conditional assignee is not entitled to obtain a loan on the policy or to surrender it; only an absolute assignee has those rights.

  1. AThe conditional assignee is not entitled to obtain a loan on the policy or surrender itCorrect
  2. BThe assignee may take a loan but cannot surrender the policy
  3. CThe assignee may take a loan and surrender the policy freely
  4. DThe condition is void and the assignment becomes absolute

Explanation

Section 38(10) validates assignments conditional on the assignee predeceasing the insured or on the insured surviving the term, but the proviso bars a conditional assignee from obtaining a loan or surrendering. Absolute assignees may do both under Section 38(8). The condition is not void because it is expressly indicated in the endorsement.

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