State RegulationsFL specificDifficulty 3/5
A Miami business owner collateralized her life policy for a bank loan and has now repaid it in full. What is the effect on the policy?
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Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
Under Chapter 627, Florida Statutes, a collateral assignment exists only to secure the debt it covers. Once the loan is repaid, the assignment should be released, and the bank has no further interest in the policy: the full ownership rights stay with the policyowner, and the eventual death benefit is payable to the beneficiary without any deduction for the retired loan. Keeping the release on file with the insurer keeps the records clean.
Why the other options are wrong
- B) A collateral assignment lasts only as long as the debt it secures; repayment ends it.
- C) The bank never owned the policy - a collateral assignment is a security interest, not a transfer of title.
- D) A repaid loan leaves nothing to deduct; the death benefit is unaffected once the assignment is released.
Memory hook
Debt paid, lien gone - the policy comes back to you whole.