A policyholder signs a form directing the insurer to pay a hospital directly for a hospitalization that has already occurred. Under insurance contract law, this action is best described as:

Why A is correct

Health insurance is a personal contract: it covers a particular insured, and the policy itself generally cannot be assigned to substitute a different person as the insured without the insurer's consent. However, an insured may assign the right to receive benefits that have already accrued — as when a hospital bills directly and the insured directs payment to it. That is an assignment of benefits, a routine and permissible transaction that does not change who is insured under the policy.

Why the other options are wrong

• B) The policy itself is not being transferred; only the right to the already-incurred benefits is assigned, and health policies are not freely assignable to substitute insureds.
• C) Directing payment to a provider does not cancel the policy; coverage continues in force.
• D) No new insured is being substituted, so no new underwriting is involved.

Memory hook

Assign the claim, not the contract. Benefits can be redirected; the insured stays put.