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What Is a Collateral Assignment of Life Insurance?

Charlene Rhinehart is a CPA , CFE, chair of an Illinois CPA Society committee, and has a degree in accounting and finance from DePaul University.

A collateral assignment of life insurance is a conditional assignment appointing a lender as an assignee of a policy. Essentially, the lender has a claim to some or all of the death benefit until the loan is repaid. The death benefit is used as collateral for a loan.

The advantage to using a collateral assignee over naming the lender as a beneficiary is that you can specify that the lender is only entitled to a certain amount, namely the amount of the outstanding loan. That would allow your beneficiaries still be entitled to any remaining death benefit.

Lenders commonly require that life insurance serve as collateral for a business loan to guarantee repayment if the borrower dies or defaults. They may even require you to get a life insurance policy to be approved for a business loan.

Key Takeaways

• The borrower of a business loan using life insurance as collateral must be the policy owner, who may or may not be the insured.
• The collateral assignment helps you avoid naming a lender as a beneficiary.
• The collateral assignment may be against all or part of the policy's value.
• If any amount of the death benefit remains after the lender is paid, it is distributed to beneficiaries.
• Once the loan is fully repaid, the life insurance policy is no longer used as collateral.

How a Collateral Assignment of Life Insurance Works

Collateral assignments make sure the lender gets paid only what they are due. The borrower must be the owner of the policy, but they do not have to be the insured person. And the policy must remain current for the life of the loan, with the policy owner continuing to pay all premiums . You can use either term or whole life insurance policy as collateral, but the death benefit must meet the lender's terms.

A permanent life insurance policy with a cash value allows the lender access to the cash value to use as loan payment if the borrower defaults. Many lenders don't accept term life insurance policies as collateral because they do not accumulate cash value.

Alternately, the policy owner's access to the cash value is restricted to protect the collateral. If the loan is repaid before the borrower's death, the assignment is removed, and the lender is no longer the beneficiary of the death benefit.

Insurance companies must be notified of the collateral assignment of a policy. However, other than their obligation to meet the terms of the contract, they are not involved in the agreement.

Example of Collateral Assignment of Life Insurance

For example, say you have a business plan for a floral shop and need a $50,000 loan to get started. When you apply for the loan, the bank says you must have collateral in the form of a life insurance policy to back it up. You have a whole life insurance policy with a cash value of $65,000 and a death benefit of $300,000, which the bank accepts as collateral.

So, you then designate the bank as the policy's assignee until you repay the $50,000 loan. That way, the bank can ensure it will be repaid the funds it lent you, even if you died. In this case, because the cash value and death benefit is more than what you owe the lender, your beneficiaries would still inherit money.

Alternatives to Collateral Assignment of Life Insurance

Using a collateral assignment to secure a business loan can help you access the funds you need to start or grow your business. However, you would be at risk of losing your life insurance policy if you defaulted on the loan, meaning your beneficiaries may not receive the money you'd planned for them to inherit.

Consult with a financial advisor to discuss whether a collateral assignment or one of these alternatives may be most appropriate for your financial situation.

Life insurance loan (policy loan) : If you already have a life insurance policy with a cash value, you can likely borrow against it. Policy loans are not taxed and have less stringent requirements such as no credit or income checks. However, this option would not work if you do not already have a permanent life insurance policy because the cash value component takes time to build.

Surrendering your policy : You can also surrender your policy to access any cash value you've built up. However, your beneficiaries would no longer receive a death benefit.

Other loan types : Finally, you can apply for other loans, such as a personal loan, that do not require life insurance as collateral. You could use loans that rely on other types of collateral, such as a home equity loan that uses your home equity.

What Are the Benefits of Collateral Assignment of Life Insurance?

A collateral assignment of a life insurance policy may be required if you need a business loan. Lenders typically require life insurance as collateral for business loans because they guarantee repayment if the borrower dies. A policy with cash value can guarantee repayment if the borrower defaults.

What Kind of Life Insurance Can Be Used for Collateral?

You can typically use any type of life insurance policy as collateral for a business loan, depending on the lender's requirements. A permanent life insurance policy with a cash value allows the lender a source of funds to use if the borrower defaults. Some lenders may not accept term life insurance policies, which have no cash value. The lender will typically require the death benefit be a certain amount, depending on your loan size.

Is Collateral Assignment of Life Insurance Irrevocable?

A collateral assignment of life insurance is irrevocable. So, the policyholder may not use the cash value of a life insurance policy dedicated toward collateral for a loan until that loan has been repaid.

What is the Difference Between an Assignment and a Collateral Assignment?

With an absolute assignment , the entire ownership of the policy would be transferred to the assignee, or the lender. Then, the lender would be entitled to the full death benefit. With a collateral assignment, the lender is only entitled to the balance of the outstanding loan.

The Bottom Line

If you are applying for life insurance to secure your own business loan, remember you do not need to make the lender the beneficiary. Instead you can use a collateral assignment. Consult a financial advisor or insurance broker who can walk you through the process and explain its pros and cons as they apply to your situation.

Progressive. " Collateral Assignment of Life Insurance ."

Fidelity Life. " What Is a Collateral Assignment of a Life Insurance Policy? "

Kansas Legislative Research Department. " Collateral Assignment of Life Insurance Proceeds ."

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Understanding Life Insurance Assignments: Your Complete Guide

A life insurance assignment allows you to transfer the rights of your policy, either temporarily or permanently.

Learn how collateral and absolute assignments can be used for loan collateral, estate planning, and other financial purposes.

Medicaid Planning

What is a collateral assignment.

Collateral assignments are used to secure a lender’s financial interest in your policy in exchange for lending you money.

If you die, the collateral assignment allows the lender to collect your policy’s death benefit up to the amount of the outstanding loan balance.

How Do Collateral Assignments Work?

A typical scenario involves taking out a business loan .

The lender may require a life insurance policy as collateral.

The type of life insurance policy used, whether a term, whole life, or universal life doesn’t matter.

The insurance policy will pay off the balance if you die while the loan is outstanding.

One of the most common uses for collateral assignments is with SBA loans , especially if you do not have other assets to post as collateral.

The collateral assignment applies to the entire policy, including any life insurance rider benefits that may be included.

The Collateral Assignment Process: A Step-by-Step Guide

The process is similar whether you are adding the assignment to an existing policy or buying new coverage.

There are two parties to a collateral assignment.

• Assignor – Is the owner of the life insurance policy
• Assignee – Is the lender

Life insurance companies have standardized forms used for this purpose.

• The owner completes the form and sends it to the lender for review and signature.
• Once completed by the lender, the form is sent to the insurance company.
• The insurance company records the assignment and confirms to the owner and lender that it is complete.

This may all seem confusing if you haven’t used an assignment before, but the reality is that most life insurers make it pretty easy to complete.

Releasing a Collateral Assignment

When you pay off your loan, you have the right to have the collateral assignment released.

It’s a simple process :

• The policy owner completes the form and sends it to the lender.
• The lender signs off on the release. Many companies require a notary as a witness. The lender may return the form to the owner or the insurance company.
• Once completed and returned to the insurance company, the release is recorded, and all parties are notified.

Companies typically complete this process in about a week, and it’s a good idea to confirm everything with the home office to avoid potential issues.

Your agent can help with this.

What Happens to a Collateral Assignment if You Die?

How do collateral assignments work when you die?

Your beneficiary will file a death claim with the life insurer at some point.

Collateral Assignment Tip # 1

If your beneficiary is a loved one, it’s a good idea to let them know that your policy has a collateral assignment so they are not surprised when they file the claim.

Here’s an example of how a death claim with a collateral assignment works:

• Policy Face Amount = $5,000,000
• Beneficiary = Your Spouse
• Original Bank Loan = $200,000
• Outstanding Loan Balance at Death = $100,000

What happens next?

• Your beneficiary will file the death claim with the life insurance company.
• The life insurance company will review the claim and see a collateral assignment attached to your policy.
• The life insurer contacts the lender for an updated payoff figure.
• Payoff amounts are sent directly to the lender.
• Your beneficiary receives the balance of the policy death benefit .

For the above example, your lender would receive $100,000, and your beneficiary would receive the remaining $4,900,000.

Collateral Assignment Tip # 2

NEVER name your lender directly as a beneficiary. If you do, the lender will receive the entire death benefit, and your intended beneficiary will have to go through the lender to receive their share.

Collateral Assignments and Health Issues

While lenders may want a life insurance policy as collateral, obtaining life insurance can sometimes be difficult if the insured has substantial health issues .

If you have an existing life insurance policy in effect, you can use that for the assignment.

Another option that exists in some states is contingent coverage.

Contingent coverage is a one-year policy that you can renew.

The policy will exclude death from the known health issue but provide coverage for new health issues that develop or from accidental deaths .

Many lenders accept this coverage when it’s the only option available. And we’ve also seen lenders waive the collateral assignment requirement at times.

What is an Absolute Assignment?

An absolute assignment is a change of ownership of the policy.

When you want to permanently relinquish your rights to the life insurance policy, an absolute assignment is used.

Examples where absolute assignments are used include:

Life Insurance Settlements

1035 exchange, gifting life insurance to charities, irrevocable life insurance trusts (ilit), business insurance planning.

With this transaction, you are selling your life insurance policy to a third party.

If it is a term policy, you would convert a term policy to permanent insurance before it is sold. In some cases, a company will buy the term policy.

Another example may involve admitting seniors to a nursing home, where the nursing home may take over the policy you have.

A 1035 exchange is a tax-free transfer of cash value from universal life or whole life policy to another similar policy.

You can use absolute assignments to transfer your policy to your favorite charity.

You use absolute assignments to transfer your policy to an ILIT permanently.

An example would be a survivorship policy you and your spouse own that you are transferring to the trust.

Many other potential issues may arise with transfers to an ILIT that are beyond the scope of this article.

If you purchase key person life insurance on an employee, absolute assignments transfer ownership to the employee.

Many times, this happens if the employee leaves the company or retires.

You may have a policy permanently assigned to a nursing home or assisted living facility to help with long-term care expenses.

How Do Absolute Assignments Work?

Life insurance companies have forms used for Absolute Assignments.

Absolute assignment forms require:

• Current owner name, address, and tax ID information.
• New owner name, address, and tax ID information.
• Relationship to the proposed insured.
• Spousal consent in some states and situations.

The completed forms are submitted to the insurance company, recorded, and confirmations are sent to all parties.

Frequently Asked Questions About Life Insurance Assignments

You may have questions about your life insurance assignment and how it works.

The following are general guidelines, as each situation is uniquely different.

Can the collateral assignment change the beneficiary?

No, the collateral assignment does not change the beneficiary.

The life insurance assignment gives the lender the right to receive proceeds equal to their outstanding loan balance.

Can a business be a beneficiary in a collateral assignment of life insurance?

A business can be the beneficiary of a life insurance policy that is collaterally assigned.

Final Words

Life insurance assignments are common for absolute and collateral assignments.

What is most important is that you understand what is involved with this process.

That’s where we’ll help you make the best decision for your life insurance.

There is never any pressure or obligation with our life insurance service.

Please take a few minutes to submit your quote request today. Thank you.

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About the author.

Michael Horbal

Collateral assignment of life insurance

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Secured loans are often used by individuals needing financial resources for any reason, whether it’s to fund a business, remodel a home or pay medical bills. One asset that may be used for a secured loan is life insurance. Although there are pros and cons to this type of financial transaction, it can be an excellent way to access needed funding. Bankrate’s insurance editorial team discusses what a collateral assignment of life insurance is and when it might—or might not—be the best loan option for you.

What is collateral assignment of life insurance?

A collateral assignment of life insurance is a method of securing a loan by using a life insurance policy as collateral . If you pass away before the loan is repaid, the lender can collect the outstanding loan balance from the death benefit of your life insurance policy . Any remaining funds from the death benefit would then be disbursed to the policy’s designated beneficiary(ies).

Why use life insurance as collateral?

Collateral assignment of life insurance may be a useful option if you want to access funds without placing any of your assets, such as a car or house, at risk. If you already have a life insurance policy, it can be a simple process to assign it as collateral. You may even be able to use your policy as collateral for more than one loan, which is called cross-collateralization, if there is enough value in the policy.

Collateral assignment may also be a credible choice if your credit rating is not high, which can make it difficult to find attractive loan terms. Since your lender can rely on your policy’s death benefit to pay off the loan if necessary, they are more likely to give you favorable terms despite a low credit score.

Pros and cons of using life insurance as collateral

If you are considering collateral assignment, here are some pros and cons of this type of financial arrangement.

• It may be an affordable option, especially if your life insurance premiums are less than your payments would be for an unsecured loan with a higher interest rate.
• You will not need to place personal property, such as your home, as collateral, which you would need to do if you take out a secured loan. Instead, if you pass away before the loan is repaid, lenders will be paid from the policy’s death benefit. Any remaining payout goes to your named beneficiaries.
• You may find lenders who are eager to work with you since life insurance is generally considered a good choice for collateral.
• The amount that your beneficiaries would have received will be reduced if you pass away before the loan is paid off since the lender has first rights to death benefits.
• You may not be able to successfully purchase life insurance if you are older or in poor health.
• If you are using a permanent form of life insurance as collateral, there may be an impact on your ability to use the policy's cash value during the life of the loan. If the loan balance and interest payments exceed the cash value, it can erode the policy's value over time.

What types of life insurance can I use as collateral for a loan?

You may use either of the main types of life insurance— term and permanent —for collateral assignment. If you are using term life insurance, you will need a policy with a term length that is at least as long as the term of the loan. In other words, if you have 20 years to pay off the loan, the term insurance you need must have a term of at least 20 years.

Subcategories of permanent life insurance, such as whole life , universal life and variable life, may also be used. Depending on lender requirements, you may be able to use an existing policy or could purchase a new one for the loan. A permanent policy with cash value may be especially appealing to a lender, considering the added benefit of the cash reserves they could access if necessary.

How do I take out a loan using a collateral assignment of life insurance?

If you already have enough life insurance to use for collateral assignment, your next step is to find a lender who is willing to work with you. If you don’t yet have life insurance, or you don’t have enough, consider the amount of coverage you need and apply for a policy . You may need to undergo a medical exam and fill out an application .

Once your policy has been approved, ask your insurance company or agent for a collateral assignment form, which you will complete and submit with your loan application papers. The form names your lender as an assignee of the policy—meaning that they have a stake in its benefits for as long as the loan exists. You will also name beneficiaries or a single beneficiary, who will receive whatever is left over from the death benefits after the loan is repaid.

Note that you will need to stay current on your life insurance premium payments while the collateral assignment is active. This will be stated in the loan agreement, and failure to do so could have serious repercussions.

Alternatives to life insurance as collateral

If you are considering a collateral assignment of life insurance, there are a few alternative funding options that might be worth exploring. Since many factors determine each option, working with a financial advisor may be the best way to find the ideal solution for your situation.

Unsecured loan

Depending on your situation, an unsecured loan may be more affordable than a secured loan with life insurance as collateral. This is more likely to be the case if you have good enough credit to qualify for a low-interest rate without having to offer any type of collateral. There are many different types of unsecured loans, including credit cards and personal loans.

Secured loan

In addition to life insurance, there are other items you can use as collateral for a secured loan . Your home, a car or a boat, for example, could be used if you have enough equity in them. Typically, secured loans are easier to qualify for than unsecured, since they are not as risky for the lender, and you are likely to find a lower interest rate than you would with an unsecured loan. The flip side, of course, is that if you default on the loan, the lender can take the asset that you used to secure it and sell it to recoup their losses.

Life insurance loan

Some permanent life insurance policies accumulate cash value over time that you can use in different ways. If you have such a policy, you may be able to partially withdraw the cash value or take a loan against your cash value. However, there are implications to using the cash value in your life insurance policy, so be sure to discuss this solution with a life insurance agent or your financial advisor before making a decision.

Home equity line of credit (HELOC)

A home equity line of credit (HELOC) is a more flexible way to access funds than a standard secured loan. While HELOCs carry the downside of risking your home as collateral, you retain more control over the amount you borrow. Instead of receiving one lump sum, you will have access to a line of credit that you can withdraw from as needed. You will only have to pay interest on the actual amount borrowed.

Frequently asked questions

What is the best life insurance company, what type of loans are collateral assignments usually associated with, what are other common forms of collateral, what are the two types of life insurance assignments, related articles.

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Absolute Assignment of Life Insurance Policies

An absolute assignment transfers all ownership rights of a life insurance policy.

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More Articles

•   1. What Is the Assignment of Insurance Benefits?
•   2. What Is a Life Insurance Assignment?
•   3. Does Life Insurance Count Towards the Two Million for Federal Estate Tax?

An absolute assignment of a life insurance policy involves transferring all rights and ownership decisions to another party. You could have one of several reasons for wanting to do this; for example, using the policy as collateral for a loan, or making a donation to your favorite charity at death. Making an absolute assignment is relatively simple as long as your life insurance policy allows it.

How Transfer of Ownership Works

Absolute assignment is akin to a transfer of ownership, in that you are giving all ownership rights to another party. Although you remain the insured under the contract, the new party can change the beneficiary (usually to itself), it can make decisions about investment options of a whole-life policy, and it can take any other action that does not jeopardize the policy's in-force status. You remain responsible for the premium payments, and you could be in breach of the assignment provisions if you don't pay them.

Collateral Loan Bank Assignment

Absolute assignment of life insurance is often done when a person applies for a loan. If the bank is concerned that the loan might not be repaid if you died, if might require a life policy with an absolute assignment to the bank. The bank names itself the beneficiary of the policy up to the amount of the loan balance. Any residual death benefit would go to your named beneficiary.

Financing a Charitable Gift

Another use of absolute assignment is to make a charitable gift. This approach is gaining in popularity.

Life insurance is often purchased to finance a charitable donation by the estate of a deceased individual. One drawback to this approach is that the entire gift goes through the estate and might incur probate delays and fees.

The use of an absolute assignment streamlines the process, as the charity can name itself the beneficiary of the policy. The charity can issue you a tax receipt for every premium, which you can deduct as a charitable contribution.

Absolute Assignment Legal Considerations

Insurance companies freely provide assignment forms that are straightforward and easy to fill out. Once an assignment is complete, a copy of the form should be filed with the insurance company.

The life insurance company may withhold part of its payout to any beneficiary -- including a newly designated one -- if a premium hasn't been fully paid, or because of other indebtedness. That might have legal ramifications for you and the assignee, in which the insurance company will take no part.

• Standard Life Insurance Co. of New York: Absolute Assignment Form
• Waypoint Partners: Assigning Your Life Insurance Policy
• Collateral Assignment Agreement

Philippe Lanctot started writing for business trade publications in 1990. He has contributed copy for the "Canadian Insurance Journal" and has been the co-author of text for life insurance company marketing guides. He holds a Bachelor of Science in mathematics from the University of Montreal with a minor in English.

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LESSON 3: LIFE INSURANCE POLICIES, PROVISIONS, OPTIONS AND RIDERS

3.9.9 assignment provision - absolute and collateral.

Since the policyowner actually owns the policy, not the insurer, the owner has every right to give the policy away just like any other owned piece of property; the insurer's permission is not required. The transfer of ownership is referred to as assignment and the new owner is the assignee .

If the policy is transferred under an absolute assignment , the transfer is irrevocable and the assignee receives full control of the policy. As long as the beneficiary was not designated as an irrevocable, the assignee can even change the beneficiary without the beneficiary's permission.

If the policy is transferred as a means of establishing security on a debt, it is considered a collateral assignment . If the insured dies before the debt is repaid, the balance of the debt is paid to the creditor out of the policy proceeds. If there are any funds left once the debt has been satisfied, the rest of the proceeds go to the policy's beneficiary.

A policyowner has assigned a $10,000 policy to cover a $5,000 mortgage. How will the company pay the claim at the insured's death?

If an absolute assignment was made, the company will pay the entire proceeds to the assignee. If a collateral assignment was made, the company will usually make the check payable jointly to the assignee and the beneficiary. If a partial assignment was made, the unpaid mortgage balance will be paid to the assignee and the remainder will be paid to the beneficiary named in the policy.

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Collateral Assignment of Life Insurance

Collateral assignment of life insurance means using a policy as collateral for a loan. If the borrower dies before paying it back, the lender can take the unpaid amount from the insurance payout upon the borrower’s death.

In this guide, you’ll learn how collateral assignments work, why they’re used, and the pros and cons of using life insurance as collateral.

Table of Contents

What Is Collateral Assignment?

• Policy Options for Collateral Assignment

How to Use Life Insurance as Collateral for a Loan

• Life Insurance as Collateral: Pros & Cons
• Alternatives to Life Insurance

Did you know you can use  life insurance to secure an SBA loan for your growing business? Get started today.

Valuable assets (like a home or vehicle) typically serve as collateral for a mortgage or an auto loan. If you default on payments, the lender can repossess it to recover their money.

Lenders require reassurance for loans that aren’t directly tied to a physical asset. You can use a life insurance policy as loan collateral in these cases.

As owner of the life insurance policy , you collaterally assign it to the lender, which means:

• If you die before the loan is repaid, the death benefit covers your remaining loan balance
• Any remaining proceeds go to your named beneficiaries

Collateral vs Absolute Assignment of Life Insurance

There are two types of assignment for life insurance: collateral and absolute.

Collateral assignment of life insurance : You control the policy. It’s commonly used to secure a small business loan.

Absolute assignment : You transfer all policy rights to the assignee. It’s often used when a policy owner sells it to a third party for an immediate cash benefit.

Similarities between collateral and absolute assignment:

• Both involve the transfer of rights under a policy.
• Both require the consent of the insurance company.
• Both can be used as a means of managing financial risks or responsibilities.

Differences between collateral and absolute assignment:

Collateral assignment:

• Used to secure a loan or other financial obligation.
• The policy owner maintains ownership and control over the asset, except for the rights assigned as collateral.
• The lender (assignee) only has rights to the asset in the event of death or, in some cases, default.
• The assignment is temporary and removed when the loan is repaid.

Absolute assignment:

• The policy is fully transferred to a new owner.
• The original owner gives up all rights and control over the policy, including the right to name beneficiaries and access cash value.
• The new owner can manage the policy however they see fit, including selling it, borrowing against it, or changing its terms.
• The assignment is permanent; the original owner can’t reclaim rights to the policy without the new owner’s consent.

Life Insurance Assignee vs Beneficiary

A life insurance assignee is a person or entity to whom a policy’s rights have been transferred.

A beneficiary is a person, trust, or entity designated by a policy owner to receive the death benefit when the insured person dies.

Whether used for collateral assignment or not, your policy needs designated beneficiaries .

Here’s why:

• The lender only has a legal claim to the death benefit if you die before the loan is paid.
• If you pass away, the lender gets their payment, and the rest goes to your beneficiaries.
• If you repay the loan in full and die, the lender receives nothing, and your beneficiaries receive the full benefit.

Life Insurance Policy Options for Collateral Assignment

Using life insurance for collateral assignment when applying for loans is a common practice that almost every life insurance company and lender is equipped to handle.

Examples of when life insurance can be collaterally assigned include:

• Personal loans
• Business loans

There are two types of life insurance—term life insurance and permanent life insurance—and both kinds can be used for collateral assignment.

Term Life Insurance

Lenders typically accept term life insurance as collateral, provided that the policy aligns with the size and duration of the loan.

Coverage and term length must equal the loan’s terms– or exceed them.

For example, if you’re securing a 20-year loan, you would need a term life insurance policy that spans 20 years.

If you pass away before repayment, the insurance company pays the outstanding loan balance to the lender from your policy’s death benefit first. Any remaining amount after the loan is fully paid would then be distributed to the beneficiaries you have named on your policy.

If you repay the loan before passing, the collateral assignment ends, and the total death benefit amount is reserved for your beneficiaries.

Permanent Life Insurance

Lenders often find permanent life insurance policies appealing as collateral due to their unique cash value component.

Life insurance with cash value provides an added level of reassurance to the lender, ensuring the cash value will offset the loan if the borrower defaults. 

However, even though the policy’s worth grows over time, the death benefit must cover the entire loan.

If you pass away before the loan is repaid, the company would first pay the loan balance from your policy’s death benefit to the lender.

Any remaining proceeds from the death benefit would then be distributed to the beneficiaries named on your policy.

Learn more about the differences between term and permanent life insurance .

See what you’d pay for life insurance

If you’re looking to secure a loan with life insurance, you can buy a policy to do so or collaterally assign a policy you already own.

Collateral Assignment of a Life Insurance Policy You Already Own

To collaterally assign an existing policy, you and your lender must fill out a short form confirming the details.

You or your agent can request this form directly from the life insurance company.

Once the completed forms are back in the insurance company’s possession, they will review them and send confirmation in a few weeks.

• If you already own a life insurance policy worth enough to cover the loan, you can usually use it as collateral.
• If you currently have term life insurance, the remaining years on your term must be longer than the loan’s term.

Collateral Assignment of a New Life Insurance Policy

Buying a new life insurance policy for collateral assignment is similar to that of any other purpose for life insurance.

• Step 1: Determine the amount of life insurance coverage you need . While the coverage should be sufficient to cover the loan, you may consider additional obligations like income replacement for your family, mortgage payments, and more.
• Step 2: Apply for a life insurance policy as you would normally. List your chosen beneficiaries, such as your spouse, adult child, etc. At this stage, there’s no need to list the lender as a beneficiary.
• Step 3: Activate your policy. Then, request a collateral assignment form from your agent or insurer directly.
• Step 4: Complete the form and return it to the insurance company. After processing, the insurer acknowledges the collateral assignment. Then the lender obtains rights to the death benefit, up to the amount owed on the loan, if you die before the loan is repaid. Any remaining death benefit would be distributed to the other named beneficiaries.
• Step 5: While collateral assignment is active, policy control may be limited. The specifics of what actions are permissible can vary, so reviewing the terms of the loan and collateral assignment agreement is essential.
• Step 6: Collateral assignment terminates when the loan is paid. Your full ownership rights are then restored.

Explore the various ways business owners use life insurance to protect their business and their loved ones. 

Life Insurance as Collateral: Pros and Cons

Overall, using life insurance as collateral can be a sound and effective strategy for obtaining a loan, provided that it aligns with your financial circumstances and goals.

Collateral assignment impacts your control and financial protection for beneficiaries positively and negatively.

• Access to loans
• Loan approval
• Protection for beneficiaries
• Limited policy control
• Risk to beneficiaries
• Additional costs
• Policy loss

Alternatives to Collateral Assignment

Collateral assignment isn’t the only way to secure a loan. Knowing alternatives can help you decide what best aligns with your financial circumstances and goals.

Some examples include:

• Cash value: If you already own a permanent life insurance policy with accumulated cash value, you can borrow against this amount through policy loans .
• Unsecured loans: These do not require collateral and are primarily based on your creditworthiness. They often come with higher interest rates.
• Secured loans: These are backed by collateral that isn’t life insurance, like investments, savings accounts, or valuable property. If you default on a secured loan, the lender seizes the collateral.
• Home Equity Line of Credit (HELOC): This uses your home as collateral if you’ve built enough equity.
• Credit cards: Interest rates are higher than other loans, but credit cards can be used in a pinch.
• Grants or government programs: Grants or government programs might be available to provide funds with attractive terms.

Compare Life Insurance Quotes and Apply Today

The primary purpose of life insurance is to provide financial protection to those who depend on you. But life insurance has other uses as well, such as collateral assignment.

If you don’t yet have life insurance, start by getting quotes . Here at Quotacy, you can see quotes instantly without giving away any contact information. Compare policies from multiple top-rated insurers and apply with confidence.

The online application only takes a few minutes. When you submit yours, you’re assigned a dedicated life insurance agent who advocates for you. Your agent ensures you get the best possible rate and provides unbiased advice.

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Home > Finance > How Is A Collateral Assignment Used In A Life Insurance Contract?

How Is A Collateral Assignment Used In A Life Insurance Contract?

Published: October 14, 2023

Discover how collateral assignments are utilized in life insurance contracts, providing financial security and peace of mind. Learn about the benefits and considerations involved in this strategic financial tool.

(Many of the links in this article redirect to a specific reviewed product. Your purchase of these products through affiliate links helps to generate commission for LiveWell, at no extra cost. Learn more )

Table of Contents

Introduction, what is a collateral assignment, understanding life insurance contracts, how a collateral assignment works, benefits and uses of collateral assignments, risks and considerations, limitations and restrictions, how to set up a collateral assignment.

When it comes to financial matters, having a solid understanding of various concepts and strategies is crucial. One such concept is a collateral assignment, which plays a significant role in the world of life insurance contracts. Understanding how a collateral assignment works can provide you with valuable insights into how to manage and leverage your life insurance policy to meet your financial needs.

A collateral assignment involves using your life insurance policy as collateral for a loan or other financial transaction. It allows you to borrow against the cash value of your policy without surrendering the policy itself. This strategy can be particularly useful if you need access to funds for a specific purpose, such as starting a business, financing education expenses, or facing unexpected medical bills.

In order to grasp the significance of collateral assignments, it’s important to have a solid understanding of life insurance contracts. Life insurance is a contractual agreement between a policyholder and an insurance company. The policyholder pays regular premium payments, and in return, the insurance company provides a death benefit to the policy’s beneficiaries upon the policyholder’s death. Additionally, certain types of life insurance policies, such as whole life or universal life insurance, accumulate a cash value over time.

The cash value in a life insurance policy can be used in various ways. One option is to surrender the policy and receive the accumulated cash value. However, this may result in the termination of the policy and the loss of its associated benefits. Another option is to take a policy loan against the cash value. This allows the policyholder to access funds while keeping the policy intact.

This is where a collateral assignment becomes relevant. Instead of taking a policy loan, a policyholder can use a collateral assignment to borrow money from a lender by assigning a portion of the life insurance policy’s death benefit as collateral. In this arrangement, the lender becomes the assignee of the policy and is entitled to receive a portion of the death benefit if the policyholder passes away before the loan is repaid. This arrangement provides security to the lender and allows the policyholder to access funds without surrendering the policy.

In the following sections, we will delve deeper into how a collateral assignment works, its benefits and uses, as well as the considerations, limitations, and steps involved in setting it up.

A collateral assignment is a legal agreement that allows a policyholder to assign a portion of the death benefit from a life insurance policy as collateral for a loan or other financial obligation. It serves as a way to secure the loan by providing the lender with a potential source of repayment in the event of the policyholder’s death. This arrangement allows the policyholder to access funds without surrendering the policy or disrupting its financial benefits.

With a collateral assignment, the policyholder remains the owner of the life insurance policy and retains control over other aspects of the policy, such as changing beneficiaries or making withdrawals from the cash value. The assigned portion of the death benefit serves as collateral for the loan or debt, and if the policyholder passes away before the loan is repaid, the lender has the right to receive the assigned portion of the death benefit to satisfy the outstanding debt.

It’s important to note that a collateral assignment does not transfer ownership of the policy to the lender. Instead, it grants the lender a limited interest in the policy specifically for the purpose of securing the loan. Once the loan is repaid, the collateral assignment is released, and the policy returns to the full control of the policyholder.

A collateral assignment can be used for various financial purposes, including personal loans, business financing, or even as a form of security for a surety bond. The flexibility of this arrangement allows policyholders to leverage the accumulated cash value and death benefit of their life insurance policy to meet their financial needs without sacrificing the long-term benefits of the policy.

It’s worth noting that the availability and terms of collateral assignment can vary depending on the insurance company and the specific policy. Some policies may have limitations on the amount that can be assigned or require approval from the insurance company before the assignment can be made. It’s important to review the policy terms and consult with the insurance provider or a financial advisor to understand the specific guidelines and implications of a collateral assignment.

In the next section, we will explore how a collateral assignment works within the context of a life insurance contract.

Before delving deeper into how a collateral assignment works, it’s essential to have a solid understanding of life insurance contracts. A life insurance contract is a legal agreement between a policyholder and an insurance company, wherein the policyholder pays regular premium payments in exchange for financial protection for their loved ones in the event of their death.

Life insurance contracts come in various forms, but the two main types are term life insurance and permanent life insurance. Term life insurance provides coverage for a specific period, typically 10, 20, or 30 years. If the policyholder passes away during the term, the insurance company pays out a death benefit to the beneficiaries named in the policy. Permanent life insurance, on the other hand, provides lifelong coverage and includes a cash value component that accumulates over time.

The cash value in a permanent life insurance policy, such as whole life or universal life insurance, grows gradually over the years through premium payments and potential investment gains. This cash value can be accessed by the policyholder through withdrawals or policy loans, providing a source of liquidity that can be utilized for various financial needs.

One of the key advantages of permanent life insurance policies is their ability to accumulate cash value on a tax-deferred basis. This means that any growth in the cash value is not subject to immediate taxation, allowing the policyholder to potentially build a substantial cash reserve over time.

Furthermore, permanent life insurance policies often provide additional benefits such as the ability to participate in the insurance company’s profits through dividends, the option to increase or decrease the death benefit, and even the flexibility to adjust premium payments.

Given the unique features and advantages offered by permanent life insurance policies, they are often the type of policy chosen for a collateral assignment. The combination of death benefit protection and cash value growth make permanent life insurance policies an ideal asset to use as collateral for loans or other financial obligations.

Now that we have a basic understanding of life insurance contracts and their various components, let’s explore how a collateral assignment works in conjunction with a life insurance policy in the next section.

Now that we understand the basics of life insurance contracts, let’s dive into how a collateral assignment works within the context of these policies. A collateral assignment involves assigning a portion of the death benefit from a life insurance policy as collateral for a loan or other financial obligation.

Here’s a step-by-step breakdown of how a collateral assignment typically works:

• The policyholder identifies a need for funds and seeks a loan or financing.
• The policyholder and the lender determine the amount of the loan and agree on the terms and conditions.
• A collateral assignment agreement is drafted, which outlines the terms of the assignment, including the assigned portion of the death benefit, the loan amount, and the repayment terms.
• The collateral assignment agreement is signed by the policyholder, the lender, and the insurance company, acknowledging the assignment and providing consent for the assignee to receive a portion of the death benefit in the event of the policyholder’s death.
• Upon the policyholder’s passing, the lender files a claim with the insurance company, providing necessary documentation to establish the validity of the claim.
• The insurance company verifies the claim and disburses the assigned portion of the death benefit to the lender to satisfy the outstanding debt.
• If there are remaining funds from the death benefit after repaying the loan, they are distributed to the designated beneficiaries of the policy.

It’s important to note that the policyholder remains the owner of the life insurance policy and retains control over other aspects of the policy, such as changing beneficiaries or making withdrawals from the cash value. The assigned portion of the death benefit is solely used as collateral for the loan, and the lender only has a claim to that specific portion.

It’s crucial for both the policyholder and the lender to understand the terms and conditions of the collateral assignment, including any limitations or restrictions set by the insurance company. Some common restrictions may include a maximum assignment amount, a requirement to maintain the policy in-force, or a provision for the policyholder to replace the collateral assignment with another form of security if requested by the insurance company.

By using a collateral assignment, the policyholder can access funds while keeping the life insurance policy intact. This can be particularly advantageous in situations where surrendering the policy would result in the loss of the accumulated cash value and other benefits.

In the next section, we will explore the various benefits and uses of collateral assignments within the realm of financial planning.

Collateral assignments offer several benefits and serve various uses within the realm of financial planning. Let’s explore some of the key advantages and common uses of collateral assignments:

1. Access to Funds

One of the primary benefits of a collateral assignment is the ability to access funds without surrendering the life insurance policy. By using the death benefit as collateral, the policyholder can secure a loan or obtain financing for personal or business purposes. This allows individuals to meet immediate financial needs without disrupting their long-term insurance coverage.

2. Retention of Policy Benefits

Unlike policy loans, which require repayment with interest, collateral assignments allow policyholders to retain the full benefits of their life insurance policies. These benefits can include the death benefit for beneficiaries, potential cash value growth, and the ability to participate in policy dividends. By using a collateral assignment, policyholders do not have to forfeit these valuable features.

3. Lower Interest Rates

When compared to other types of loans, collateral assignments often offer lower interest rates. This is because the loan is backed by the assigned portion of the life insurance policy’s death benefit, providing additional security for the lender. Lower interest rates can result in significant cost savings for the policyholder over the life of the loan.

4. Flexible Repayment Terms

Collateral assignments provide flexibility in terms of loan repayment. Policyholders and lenders can negotiate repayment terms that align with the borrower’s financial capacity, allowing for customized repayment schedules. This flexibility can help borrowers manage their cash flow effectively and repay the loan on terms that suit their specific needs.

5. Diverse Financial Uses

Collateral assignments can be used for a wide range of financial purposes. Common uses include funding education expenses, starting or expanding a business, purchasing or renovating a property, financing a major purchase, or covering unexpected medical expenses. The versatility of collateral assignments allows policyholders to leverage their life insurance policies to meet various financial goals.

6. Potential Tax Advantages

Collateral assignments may offer potential tax advantages depending on the specific circumstances. For example, if the loan proceeds are used for investment purposes or to generate income, the interest paid on the loan may be tax-deductible. It’s crucial to consult with a tax advisor or financial expert to understand the tax implications of a collateral assignment in your specific situation.

By leveraging the benefits and uses of collateral assignments, policyholders can maximize the value of their life insurance policies and utilize them as a valuable financial asset. However, it’s essential to consider the potential risks and limitations associated with collateral assignments, which we will explore in the next section.

While collateral assignments offer several advantages, it’s important to fully understand the potential risks and considerations before entering into such an arrangement. Here are some key factors to keep in mind:

1. Impact on Death Benefit

Assigning a portion of the death benefit as collateral can reduce the overall amount payable to beneficiaries upon the policyholder’s death. It’s crucial to assess the impact of this reduction on the intended financial protection for loved ones and ensure that the remaining portion of the death benefit is still sufficient to address their needs.

2. Default Risk

If the policyholder fails to repay the loan, the lender may have the right to claim the assigned portion of the death benefit, potentially leaving beneficiaries with a reduced payout. It’s important to have a robust repayment plan in place and make timely payments to avoid default and the potential loss of policy benefits.

3. Policy Lapse

If the policy lapses due to missed premium payments or other reasons, the collateral assignment may become void, and the lender loses their security interest in the life insurance policy. Policyholders should ensure they have a sufficient plan in place to maintain premiums and keep the policy in force to protect the collateral assignment.

4. Limited Flexibility

Once a collateral assignment is in place, it restricts the policyholder’s ability to make changes to the policy, such as increasing or decreasing coverage, accessing the cash value, or changing beneficiaries. It’s important to evaluate whether the potential benefits of a collateral assignment outweigh the loss of flexibility in managing the life insurance policy.

5. Complex Documentation

Collateral assignments involve drafting and signing complex legal documents, including the collateral assignment agreement. It’s crucial to fully understand the terms and conditions of the agreement and consider seeking professional advice to ensure that all parties involved are clear on their rights and obligations.

6. Insurance Company Regulations

Each insurance company may have specific regulations and requirements regarding collateral assignments. It’s important to review the policy terms and consult with the insurance provider to understand any restrictions, limitations, or approval processes associated with collateral assignments.

Considering these risks and considerations is essential to make informed decisions when considering a collateral assignment. Seeking guidance from a financial advisor or insurance professional can help assess the suitability of a collateral assignment and its potential impact on your overall financial plan.

In the next section, we will explore any limitations and restrictions that may apply to collateral assignments.

While collateral assignments can be valuable tools, there are certain limitations and restrictions that policyholders should be aware of. These limitations can vary depending on the insurance company and the specific policy. Here are some common limitations and restrictions to consider:

1. Assignment Limits

Insurance companies often impose limits on the amount that can be assigned from a life insurance policy. This limit is typically a percentage of the policy’s death benefit. It’s essential to review the policy terms to understand the maximum allowable assignment amount.

2. Policy Approval

In some cases, insurance companies require policyholder approval before a collateral assignment can be implemented. This approval process may involve submitting an application, providing financial information, or meeting certain criteria determined by the insurance company.

3. Maintaining Policy In-Force

To retain the collateral assignment, policyholders must keep the life insurance policy in force, which includes paying premiums on time. If the policy lapses or is terminated, the collateral assignment may become void, and the policyholder may lose the associated benefits.

4. Replacement of Collateral

In certain situations, insurance companies may require the policyholder to replace the collateral assignment with another form of security if requested. This requirement ensures that the insurance company is adequately protected against potential losses.

5. Removing the Collateral Assignment

If the policyholder wishes to remove the collateral assignment, they will need to follow the specified procedure outlined by the insurance company. This often involves submitting a formal request, providing necessary documentation, and obtaining the insurance company’s approval.

6. Financial Institution Requirements

Financial institutions, such as banks or lenders, may have their own specific requirements for collateral assignments. These requirements may include minimum loan amounts, credit checks, or additional documentation. It’s important to familiarize yourself with the lender’s guidelines to ensure a smooth collateral assignment process.

7. Legal and Financial Advice

Due to the complex nature of collateral assignments, it’s wise to seek advice from legal and financial professionals. They can provide guidance on the legal implications, tax considerations, and overall suitability of a collateral assignment based on your specific circumstances.

Understanding these limitations and restrictions is crucial when considering a collateral assignment. It’s important to review the policy documents, consult with the insurance company and relevant professionals, and ensure compliance with all applicable regulations to navigate the process successfully.

In the next section, we will outline the general steps involved in setting up a collateral assignment.

Setting up a collateral assignment requires careful consideration and following specific steps. While the exact process may vary depending on the insurance company and the lender, here are some general guidelines to help you navigate the setup process:

1. Assess Your Financial Needs

Determine the amount of funds you need and the purpose for which you require the loan or financing. Assess your financial situation and ensure that a collateral assignment aligns with your overall financial goals and needs.

2. Identify the Lender

Research potential lenders that offer collateral assignments and select one that best meets your requirements. Consider factors such as interest rates, loan terms, and reputation when making your decision.

3. Consult with professionals

Seek the advice of financial and legal professionals who specialize in life insurance policies and collateral assignments. They can guide you through the process, provide expert recommendations, and ensure that you fully understand the implications and obligations associated with a collateral assignment.

4. Review Policy Terms

Review the terms of your life insurance policy, paying particular attention to any provisions related to collateral assignments. Understand the limitations, restrictions, and requirements set by your insurance company.

5. Draft the Collateral Assignment Agreement

Work with legal professionals to draft a collateral assignment agreement that outlines the terms and conditions of the assignment. This agreement should clearly specify the assigned portion of the death benefit, the loan amount, the repayment terms, and any other relevant provisions.

6. Obtain Signatures and Consent

Ensure that all parties involved, including yourself, the lender, and the insurance company, sign the collateral assignment agreement. The insurance company’s consent is crucial to acknowledge and approve the assignment.

7. Submit Documentation

Provide the necessary documentation to the insurance company and the lender to establish the collateral assignment. This may include copies of the collateral assignment agreement, policy documents, and any other requested information.

8. Stay Informed and Compliant

Keep track of your loan repayments and stay informed about any updates or changes related to the collateral assignment. Comply with the terms and conditions stated in the collateral assignment agreement, including making timely payments to the lender and maintaining the life insurance policy in force.

Remember that these steps are general guidelines, and the specific process may vary based on your unique situation and the requirements set by the insurance company and the lender. Consulting with professionals experienced in collateral assignments will ensure a smooth and successful setup process.

In the final section, we will conclude our discussion on collateral assignments and summarize the key points to remember.

Collateral assignments serve as a valuable tool in leveraging the benefits of a life insurance policy while accessing funds for various financial needs. By assigning a portion of the death benefit as collateral, policyholders can secure loans or financing without surrendering their policies or disrupting the benefits associated with them.

We began by understanding the basics of collateral assignments and the concept of life insurance contracts. We then explored how a collateral assignment works within the context of a life insurance policy, outlining the steps involved in setting one up.

Collateral assignments offer several benefits, including access to funds, retention of policy benefits, lower interest rates, flexible repayment terms, and diverse financial uses. However, it’s important to consider the potential risks and limitations associated with collateral assignments, such as the impact on the death benefit, default risk, limited flexibility, and complex documentation.

It’s essential to carefully evaluate your financial needs, consult with professionals, review policy terms, and draft a well-structured collateral assignment agreement. By following these steps and staying compliant with the agreement, you can navigate the collateral assignment process successfully.

To ensure a smooth and efficient setup process, it’s advisable to seek guidance from financial advisors, insurance professionals, and legal experts who can provide personalized advice based on your specific circumstances.

In summary, a collateral assignment can be a powerful strategy to utilize the accumulated cash value and death benefit of a life insurance policy while addressing immediate financial needs. However, it’s crucial to conduct thorough research, seek professional advice, and fully understand the implications and obligations associated with collateral assignments.

By carefully weighing the benefits, risks, and considerations, you can make informed decisions and effectively use collateral assignments to enhance your financial plan and achieve your goals.

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What Is A Collateral Assignment Of Life Insurance?

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A collateral assignment is sometimes a necessity if you’re applying for larger financing amounts such as a mortgage or business loan.

But what is a collateral assignment and how do you go about getting it on your life insurance policy? 

In this article, we’ll cover what collateral assignment is, how you can add it to your life insurance, and what alternatives there are out there. 

What Is Collateral Assignment? 

A collateral assignment is a process by which a person uses their life insurance policy as collateral for a secured loan.

In simple terms, collateral assignment is reassigning priorities for who gets paid the death benefit of your life insurance policy.

What Is a death benefit?

A death benefit or face value of a life insurance contract is the amount of money that your beneficiaries will receive from your policy when you die.

Once you apply for collateral assignment and it’s approved, your specified debtor (the loan provider) will be paid first and then your beneficiaries will receive what is left over in your life insurance policy.

This is different from using your cash value to loan money as you are taking out a loan from another financial institution and using your policy as a guarantee that you’ll cover any debt when you die. 

For example, let’s say you want to take out a secured loan from your local bank and want to use your life insurance policy as a collateral assignment.

In this situation, you’d still have to pay back any debt you have with interest during the loan period. 

However, the life insurance policy would be used if the borrower dies and there was an outstanding loan balance remaining. 

Secured Loans vs. Unsecured Loans

Secured loans are debts that are backed by assets that a lender can claim if the debt isn’t repaid. These types of loans often offer better interest rates and more generous payment terms.

Unsecured loans are debts that don’t have collateral. These types of loans are more expensive to repay and considered riskier than secured loans.

Source: Pexels

How Does Applying for Collateral Assignment Work?

The process for getting collateral assignments for life insurance is the same as when you apply for new life insurance coverage. 

All you’ll be doing is indicating to your life insurance provider that your lender will be given priority for the amount of money you have borrowed through them.

There is an:

Application process.

Underwriting process.

Offer that you’ll receive.

You’ll be required to name beneficiaries as well as indicate ownership of the life insurance policy in the collateral assignment form which will be provided by your life insurance company.

This is because you’re changing the terms of your payout and your life insurance provider will need to follow these instructions once you die.

NB Some insurance companies don’t offer collateral assignment on new loans and generally only provide this feature to an existing life insurance policy.

You should check beforehand to see what will be required to apply for a collateral assignment. If you need help finding plans that offer this, send an email to a licensed insurance agent today.

Once you’ve assigned a new collateral assignee to your life insurance policy, they will be entitled to lay a claim on your death benefit for any debt you have with them.

For example, let’s say you take out a collateral assignment life insurance policy worth $200,000 for a loan of $75,000 over 7 years at an interest rate of 18%.

If you die after five years, based on these figures, you’ll still have $41,231.02 owed on your loan.

Your $200,000 life insurance plan will be used to cover this and your beneficiaries will receive the remaining $158 768.98 from your life insurance policy.

Your lender is only allowed to take the amount outstanding on the debt owed and cannot take more. 

What about Missed Payments and Cash Value Life Insurance?

If you have a permanent life policy with a cash value account, sometimes called cash value life insurance, your lender will have access to it to cover missed payments on your loan.

For example, let’s say you miss a payment on your loan and have a collateral assignment. Your lender will be able to access your cash value account and withdraw that month’s payment to cover your debt.

Who Can You Add as a Collateral Assignee?

You can add any person or institution as a collateral assignee to your life insurance policy if you owe them money.

This can include banks, lenders, private individuals, businesses, or credit card companies. 

The most common collateral assignments are for business loans and mortgages. This is because they are loans for high amounts that are paid off over several years. 

In fact, some banks and financial lenders may require that you add them as collateral assignees when you apply for any of the financing options mentioned below.

Common Collateral Assignees Include:

💵 Bank loans

💳 Credit cards

🏡 Mortgages

💼 Business loans

What Do I Do If I’ve Paid Off My Debt?

If you’ve managed to pay off your debt - firstly, congratulations! Secondly, you’ll want to notify your life insurance company that you’ll be changing your collateral assignments on your life policy.

While there is no legal claim that a company can make to debts that aren’t owed anymore, there may be a hold up in paying out the death benefit to your beneficiaries and other collateral assignees.

Life insurance companies will have to figure out who must be paid first, according to the order stated in your collateral assignment terms.

In general, life insurance policies will settle claims within 24 hours of being notified of a policyholder’s death.

The process can be delayed if you do not release your collateral assignees from your life insurance contract. 

Tips to Make Sure Your Life Policy Is Paid Out Quickly

Here are some tips if you want your beneficiary claims to be handled as fast as possible:

1) Keep a copy of your life insurance policy and policy number in a safe place or with your lawyer, financial advisor, or estate planner.

2) Speak to your beneficiaries about your policies and give them the contact details of the relevant life insurance company.

3) Make sure your life insurance contract is updated to reflect your latest list of beneficiaries.

4) Make sure you have your beneficiaries' details listed in the contract or with your lawyer.

The Benefits of Using Collateral Assignment of Life Insurance

While adding a collateral assignment to your current life insurance policy may require an application, paperwork, and time, there are benefits:

Many lenders like it: Banks and financial institutions sometimes prefer it when applicants use their life insurance policy as collateral for a loan. This is because they know that their debt will be serviced long-term by your insurance company which makes their loan to you a lower risk.

Your private property won’t be jeopardized: The last thing you want when you go into debt is to put your personal items, such as your car, investments, or home on the line as collateral. Using collateral assignment is an alternative to this and can protect you in the event that you can’t service your debt.

It can be affordable for some people: If you’re in good health and young, you may be paying affordable rates for permanent life cover. In situations like this, it can make sense to use your life cover as collateral for debts you’ve incurred.

What Are Some Alternatives to Collateral Assignment?

Term Life Insurance: Getting a term life insurance contract to cover specific debts is one way of ensuring your estate and family are protected when you die.

There are multiple types of term life insurance plans and they are more affordable than permanent life insurance. This makes options like level term life insurance and decreasing term life insurance ideal for different types of debts you may have over your lifetime.

What Is Term Life?

Term life is a temporary life coverage option that lasts for a specific period of time. It is different from permanent life insurance which lasts until you die or you stop paying premiums.

Term life contracts are typically between 5 to 20 years, however, you can get renewable term life plans and even a forty-year term life plan .

Borrow from your life insurance: If you have a permanent life insurance policy, such as universal, whole, or indexed life cover, you can borrow money from your cash value account. 

However, keep in mind that you’ll be required to pay interest on any amount that you borrow and any amount of debt incurred will be deducted from your policy’s death benefit when you die.

What Is Cash Value?

Cash value is a feature of permanent life insurance plans that policyholders can contribute additional money toward while they have a policy in force.

This money is set aside in a cash value account which is tax-deferred and can be used in a number of ways.

In some cases, if your policy allows it, you can end your contract and get the cash surrender value of it. This amount is usually much less than the value of your total life insurance contract. 

Our Verdict on Collateral Assignment

Many banks, lenders, and financial institutions want long-term guarantees that you’ll be able to service your debt if anything happens to you.

In some situations, getting collateral assignments on your life insurance to cover these debts is a good option for people who are trying to access finance from these institutions. 

However, there is a risk that your death benefit payout may be delayed for your beneficiaries if you don’t keep your different collateral assignees up to date.

If you already have a life insurance policy, you should contact your provider to find out what the process is and what you’ll need to do to change the collateral assignees on your policy.

If you don’t have a policy yet, our advice is to look at all of your options before you decide to take a permanent life insurance contract with a collateral assignment.

There are alternatives out there that are more affordable if you’re looking to protect your family and estate from debt.

Term life is one such option that is adaptable to your life and easy to get. 

For example, a decreasing term life insurance policy might be the right choice for someone who has recently bought a home and wants to cover their mortgage while they pay it back.

Another option is final expense insurance, which is a permanent life policy for smaller amounts, usually under $50,000.

With final expense insurance, your beneficiaries can pay for anything they want, including any debts you may have had in your life.

The process for applying is simple and you won't have to go through a medical exam or intensive underwriting as you would with traditional permanent life insurance. 

If you need any assistance with finding, comparing, or learning about the different life insurance options to cover your debts, speak to one of our expert advisors today at 1-888-912-2132 or [email protected] .

Where Can I Learn More about Life Insurance?

If you’re looking to learn more about life insurance, different kinds of coverage, or costs, visit our life insurance hub to find our latest articles.

We do the research so that you don’t have to and our articles cover complicated topics like what is a cash value account, what is key person insurance, or how long life insurance takes to pay out a death benefit.  

If you need help with quotes, try out a life insurance quote finder or reach out to us via email at [email protected] to get in touch with a licensed life insurance agent for your state.

Collateral Assignment Life Insurance Guide

Before delving further into finer details about collateral assignment, you need to understand what it is. 

What is a collateral assignment? 

This is a conditional assignment where a borrower allows their lender to receive proceeds from his/her insurance policy as a means of repaying a loan. When you borrow a loan from a bank or a credit union, they will often request for collateral. If you don’t have a different form of collateral, you can assign your insurance policy as collateral to the lender

A collateral assignment also requires a beneficiary to be named. The beneficiary will receive the remaining proceeds of the insurance policy after you die, after the loan balance is completely paid off. So, your beneficiary should be someone you trust or someone you would like your money to go to after your death.

There are two types of assignment for life insurance that you should avoid mixing up. 

Collateral assignment and absolute assignment. 

Collateral Assignment

With collateral assignment , you are in full control of the insurance policy, meaning that you are the only person with the power to make any changes and pay the required premiums. 

Absolute Assignment

As opposed to collateral assignment, an absolute assignment signs over all the rights of the insurance policy to the lender. You remain to be the insured party but you hand over all control to your lender. This means that they possess the power to make any changes to the policy, like adding beneficiaries and they are also responsible for paying premiums. This form of assignment is also regarded as a gift or sale. 

When collaterally assigning a life insurance policy, there are two main things you need to consider. First of all, you need to ensure that your insurer allows collateral assignment. While most insurance companies do, it is still important to confirm if your insurer does. 

Second and last, you need to confirm with your lender if it accepts life insurance policies as collateral. You do not want to be in for surprises so make sure to ask just so as to get the facts straight. 

Best Life Insurance to Use for Collateral

You can use any type of life insurance as collateral. The choice you make should be determined by your needs so at the time of choosing it as collateral, you ought to have enough information regarding the involved processes. The following are life insurance policies that can be used as collateral.

Term Life Insurance 

Proceeds from a term life insurance policy are usually issued for a specific time period that could be 10 years, 15 years, 20 years, and so on. The major advantage of term life insurance is that premiums for purchasing a large coverage are cost-effective.

In addition, the death benefits and premiums will remain the same until the end of the term. In its simplest form, term life insurance is used to provide coverage at the needed/specified time. 

When to Consider Term Life Insurance 

If you are considering a term life insurance policy, then ensure that your needs for insurance coverage are for a certain period of time. Also, term life insurance is the best option when you are on a budget and when you want a large face amount from your insurance policy.

Whole Life Insurance

As opposed to term life insurance which covers you for a specific period of time, whole life insurance is meant to cover you until the event of your death. It includes cash value components and stays value for as long as you make your premium payments. The premium payments will remain the same up to the end or and if lucky you may not have to pay them later in life. 

When to Consider Whole Life Insurance

For whole life insurance to work for you, you need to go through the loan policy features and ensure that you are comfortable with them. Also, if you plan to use your life insurance policy to give a financial gift then whole life insurance may be your best choice. Unless you want a short term coverage only choose whole life insurance if you want coverage that won’t expire for the rest of your life. 

No Exam Life Insurance

No exam life insurance is usually issued without a medical examination. Due to this, it usually has downsides to it but is still a great option for you if you want approval in a shorter period. It is a great option for collateral assignment and is usually available as whole life, universal, and term life insurance. 

When to Consider No Exam Life Insurance

As mentioned, no exam life insurance usually takes off a considerable amount of time for approval, so is a great option if you need insurance as fast as possible. Also, if your health is in great condition, then a no exam life insurance may help you get good rates for the insurance policy. If you are worried that something you didn’t know of might manifest itself then you can skip the whole medical examination process straight to the application process. 

Universal Life Insurance

Universal Life(UL) insurance is similar to the whole life insurance but only differs in that it has flexible premium payments. 

When to Consider Universal Life Insurance

You may consider universal life insurance if you need a permanent policy that will last as long as you live. Also, you need to know that with universal life insurance, the death benefit can be adjusted and so can the premiums you pay every year. The two depend on both your needs and those of the policy. In addition, the investment component of your insurance policy will be affected by market performance. 

Guaranteed Universal Life Insurance

A guaranteed universal life insurance policy, abbreviated as GUL, is a combination of permanent and term life insurance. It is the best option for you if you need a lifelong insurance policy that is not expensive. With guaranteed universal life insurance, you will receive coverage until you attain a certain age which is usually over 100years. 

When to Consider Guaranteed Universal Life Insurance

When choosing guaranteed universal life insurance as your policy, you need to know that the death benefits and premiums remain the same until the end. It is a cheaper option compared to whole life insurance but will cost more than term life insurance and it has no cash value component. 

Generally, collateral assignment will be good for you if you lack enough cash reserves that you can use as collateral for your loan. It will also make sense for you when you are applying for a loan with specifications for collateral assignment. 

On the other hand, you may not need a collateral assignment if your loan can be approved without one. Also, you may not need a collateral assignment if you prefer to use another form of collateral which you can easily access. 

The Collateral Assignment Process

You may be confused as to what to apply for first, the loan or the insurance policy. The very first step is to consult with your potential lender to ensure that life insurance can be used as collateral. If it can, you need to also confirm if an existing policy can be used. Moving forward, you will be able to know if the insurance policy you wish to use as collateral is valid to your lender. Read on to see the steps involved in collateral assignment process. 

Application

The first step for the collateral assignment process is the application of the insurance policy. During this process, you need to name a beneficiary, who could be your spouse, child, or anyone else who is dependent on you. 

Completing the Collateral Assignment Form

After the insurance policy is approved, you will be required to fill in the collateral assignment form. Filing and acknowledgment may take a varying time period depending on the company and the urgency. 

Signing of the Form

You are required to sign the form before forwarding it back to the insurance company. Some companies will request for a signature that is notarized so be sure to confirm with them. 

Acknowledgment of the Assignment

After the collateral assignment form has been signed and sent back to the insurance company, you will have to wait for them to acknowledge the process. This may take some days but the process can be accelerated if need be.

When applying for a collateral assignment make sure that you don’t list your lender as your beneficiary. Only name a spouse or another family member as your beneficiary. If you list your lender as the beneficiary, they may claim the insurance proceeds that exceed the initial loan amount.

After your death, the policy proceeds that go to the bank or credit union which is the collateral assignee will only cover the principal balance and interest. The remaining proceeds are transferred to whoever you listed as your beneficiary.

However, there may come a time when you need to change the collaterally assigned insurance company. So if you need such a change, there are also a few steps involved. They include;

You need to find an insurance policy that you can afford while also fulfilling all the requirements of your lender. 

After approval of the coverage, you will have to sign the collateral assignment form together with the lender. The insurance company then signs the form before processing as an acknowledgment of the new collateral assignment. 

An email is sent by the insurance company to both the lender and the insured as formal communication of the whole change process.

When to Best Use Collateral Assignment

If you do not have enough borrowing power to get a loan, then a collateral assignment would be a great solution. It is good to note that a collateral assignment will work best in some case scenarios when compared to others. The following are some of the best situations to best use a collateral assignment.

If You Have a New Policy

You can apply for a new insurance policy specifically for the collateral assignment, even if you have another one that already covers your family and other beneficiaries. You can choose to have the older policy strictly for your family then use a new one for collateral assignment.

However, it is important to understand that you can assign your policy to one lender. All that is needed is to ensure that your insurer meets all the requirements and that all your lenders accept the policy as collateral. 

If You Cannot Borrow

If you are not eligible for loans from most lenders, then your best shot to securing a loan is through a collateral assignment. It allows you to borrow a loan even when you don’t have the power to do so.

If You Have Additional Coverage

With every stage of life, you will require a certain amount of coverage. What may be enough coverage in your younger years may not be necessary in your older years. Later in your life, you may be able to afford a collateral assignment and still have the coverage you need. 

Making and Ending a Collateral Assignment

Making a collateral assignment is easy and begins from downloading the form or asking your insurance company to mail it to you. Before making your inquiry, first check with the company to ensure that it allows for collateral assignment. 

If you decide to make any changes to the insurance policy and the collateral assignment, then you will need to send copies of the correspondence to your lender. 

On the completion of the loan repayment, it means that the collateral assignment is ended. Your lender needs to send a release form to your insurer so as to lift the assignment from the insurance policy. Upon receiving the release form, the insurance company transfers back all the policy rights to you and cancels the collateral assignment.

While a collateral assignment is highly beneficial, it also has a few downsides. Let’s look at the two sides of the coin below.

The following are some of the top advantages of having life insurance as a collateral assignment;

Freedom to Your Property

One reason why you should have your insurance policy as a collateral assignment is that it gives you the freedom to do what you wish with your personal property. When you list your own property as collateral, your lender can claim it when you default your loan. Also, you may be faced with serious problems when you sell the property listed as collateral.

Using your life insurance policy as collateral is a unique way to pay up your loan even when you pass away. Your death, which means the end of insurance premiums payments also denotes the loan balance repayments from the policy proceeds. 

Affordability

With some life insurance policies, you will be able to receive large coverage even when paying small premiums. This is an affordable way of repaying a huge loan without breaking your back. 

Disadvantages

A collateral assignment is appealing to most people, but it also has a few disadvantages listed below;

Loss of Policy Control

Your lender has the right to purchase a different policy for you and add the premiums to the initial principal if you don’t pay for the initial policy premiums. This would only happen if the loan is not fully repaid, so make sure that the insurance policy remains active until you fully repay your loan.

Limited Death Benefit

If the death benefit is assigned to the lender, they could claim all the death benefit proceeds. To avoid such a situation, assign a different insurance policy as collateral or just a portion of the initial policy. 

Limited Use of Cash Value

When cash value is used as collateral for your policy, it may limit flexibility. With a whole life insurance policy, the cash value component can be used later in life to shrink annual premiums which makes coverage more affordable. With other insurance policies, the cash value is tied to the investment index.

Getting Insured

The struggle for getting insured is real. To get insured, it may take a few weeks, especially if you want the policy to be medically underwritten. The other struggle is getting attractive premiums if you are healthy. On the brighter side, the underwriting process has been quickened but it is still hard to get an affordable premium with appealing premiums, all in a short period of time. 

Key Message

When applying for a collateral assignment, it is important to ensure that insurer approves it and the lender accepts it. From there, you can plan accordingly to avoid unnecessary delays if you need it in a short time. Also, avoid making mistakes like naming your lender as your primary beneficiary. In your collateral assignment, your lender should only be your assignee and nothing else. While you may not be able to place value to your life insurance policy, it is an important part of securing an important loan. 

About Jason Hill Founder and President | CFA Insurance

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What Is A Collateral Assignment?

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Life insurance is often the key to securing a loan.

Frequently, lenders request a  collateral assignment of life insurance  as a requirement for loan approval.

Your bank, or lending institution, has an interest in guaranteeing the loan they provide will be paid back , regardless of your circumstances.

Think of an assignment of life insurance as collateral as a promise to your lender.

It’s the lender’s job to assess your ability to repay a loan, and the promise of a life insurance policy can make all the difference.

Here, we will cover life insurance as a collateral assignment in its entirety so that you can make an educated decision moving forward.

Table of Contents

• Definitions
• Requirements
• How To Decide

What Is Collateral Assignment Of Life Insurance?

A conditional assignment in which the lender is a recipient of the death benefit (or cash value) of a life insurance policy for an amount equivalent to the balance of the loan.

Let’s take a look at a couple of definitions related to collateral assignments:

• Collateral  – something offered (in this case, life insurance) as a guarantee of loan repayment if you default on your loan.
• In other words, your lender no longer qualifies for the death benefit or cash value of your policy once your loan is paid off.

SBA loans , structured settlement buyouts, and bank loans commonly require life insurance as collateral.

Requirements For Assignment Of Life Insurance As Collateral

There are two primary requirements to secure a loan through the assignment of a life insurance policy:

• The life insurance company must approve  the assignment (most do).
• The lender must accept  the life insurance policy as collateral.

Process Of Securing Collateral Assignment

The steps to securing your loan through the assignment of life insurance as your collateral are typically uncomplicated:

• Purchase life insurance  – be sure to name primary and contingent beneficiaries .
• A collateral assignment is accomplished via a collateral assignment form . Your life insurance carrier typically provides the form.
• Note – a collateral assignment can only be processed after your policy’s issuance.

Key Details

• List beneficiaries other than your lender (for example, your spouse). Your lender should NOT be your primary beneficiary.
• As a collateral assignee, your lender will ONLY receive the amount of life insurance proceeds which covers the balance (principal plus interest ) of your loan, should you pass away prior to payoff.
• The remaining death benefit (or cash value amount if utilizing a permanent life insurance policy) will go to your designated beneficiaries.

Important Note!

Collateral assignments are first-in-line for your life insurance proceeds. Your beneficiaries are second-in-line.

Said differently, your policy’s proceeds go to your lender first, in the event of your death.

Once your loan is satisfied, your beneficiaries receive the remaining death benefit.

Types Of Life Insurance Used As Collateral

Just about any form of life insurance can qualify for collateral assignment as long the lender accepts it as collateral.

You will want to select the best life insurance policy to fit your needs.

Consider the following types:

It’s common to be in a hurry to secure a loan.

No exam life insurance often takes weeks off of the application process, making this type of life insurance ideal for a collateral loan assignment.

What is it?  Life insurance issued without a medical examination of the insured.

No exam life insurance is available as term life insurance, universal life, and whole life insurance.

Is No Exam right for me?

There are a number of instances in which we recommend no exam life insurance:

• You need life insurance, fast . Some carriers will issue a no exam policy within minutes .
• You have a few health conditions . If you are in less than excellent health, you may qualify for better rates by skipping the paramedical exam.
• You haven’t seen a doctor in a number of years . It’s possible something might pop-up on your blood work that you are unaware of, like high cholesterol or elevated blood sugar.
• The idea of needles and nurses makes you wince . Yep, just go ahead and skip dreaded needle if you want.

Term life insurance is popular because you can purchase a large amount of coverage with cost-effective premiums.

What is it?  Life insurance issued for a specific period of time. For example, 10 or 20 years .

Term life insurance provides coverage for when you need it most. For instance, you likely need protection while you are raising a family and working.

Premium payments and death benefit are typically level (they stay the same) for the amount of time chosen.

Is Term right for me? 

Consider purchasing term if:

• You need a life insurance policy with a larger face amount.
• Your life insurance needs are for a particular amount of time.
• You are on a budget.

Whole life insurance , also called permanent life insurance, lasts your whole life.

What is it?  Lifelong life insurance protection which includes a cash value component.

Whole life insurance, as long as you make your premium payments, will not expire.

Your premium payments are typically level, and can even go away in later years.

Is Whole right for me?

Whole life insurance can make sense under certain circumstances:

• You want a cash value component to your policy.
• The policy loan features interest you.
• Life insurance coverage which does not expire is ideal for you.
• You plan to give a financial gift via life insurance.

Universal life insurance (UL) is a specific type of permanent life insurance.

What is it? A form of whole life insurance with flexible premium payments and an investment piece.

Universal life insurance is known for its adaptability.

Is Universal right for me? 

Universal life insurance includes unique characteristics:

• Market performance affects the investment component of your policy.
• Your premium payment amounts can be flexible. They are dependent on your life insurance needs and the needs of the policy.
• The death benefit is often adjustable.
• Your policy is permanent and lasts your whole life.

Guaranteed Universal

Guaranteed Universal life insurance (GUL) is ideal for someone who is looking for an affordable life insurance policy which would likely last your entire life.

What is it?   GUL is a hybrid of term and permanent life insurance products.

Guaranteed Universal is popular because it’s a cost-effective way to secure life insurance coverage until you reach a certain age, often over age 100.

Is Guaranteed Universal right for me?

Also called No Lapse , Guaranteed Universal life insurance has many appealing features:

• Policy length is determined by an age limit, not term length. For example, your GUL policy can last up to age 121.
• Your policy will likely be more expensive than term life insurance but cost less than whole life insurance.
• There is often not a cash value component.
• Your premium payments and death benefit are level.

You have the option to utilize the cash value of a permanent life insurance product (Whole Life, Universal Life, sometimes Guaranteed Universal Life) for collateral assignment. That way, your beneficiaries receive all of the death benefit.

Keep in mind , your access to the cash value of your policy will commonly restricted if you have a collateral assignment attached to it.

You will want to go about securing your collateral assignment in the best possible way and avoid potential pitfalls.

Pay close attention to our list of important do’s and don’ts:

• Purchase life insurance that is approved for collateral assignment
• Name primary and contingent beneficiaries
• Verify with your lender that the policy will qualify
• After loan payoff, obtain a release of assignment from lender
• Submit release of assignment to life insurance carrier

Don’t

• Assign lender as primary beneficiary
• Purchase a policy with a face amount that is less than your loan amount
• Let your policy lapse
• Lose the original policy
• Lose track of repayment schedule

Commonly Asked Questions About Collateral Assignments

It depends. The amount of time it takes to secure your collateral assignment is dependent on the carrier, the type of life insurance policy, and your unique needs. For instance, if you purchase a no medical exam life insurance policy, the process will be much faster than if you participate in a paramedical exam (fully underwritten policy). Potentially, your collateral assignment could be in place within days, or it might take weeks.

Keep in mind, you DO NOT want to list your bank or lending institution as your primary beneficiary. Instead, name those you care about most, and depend on you financially, as your beneficiaries. That way, your lender – as a collateral assignee – only receives a death benefit amount that equals the balance of your loan. The remaining policy proceeds will go to your beneficiaries.

Not necessarily. In general, a life insurance purchase does not require you to have a stellar credit rating. In fact, qualifying for a loan usually has stricter credit score requirements . If, however, you are going through bankruptcy proceedings , or you have recently, your life insurance application will likely be affected. Speak to an independent life insurance agent for information about bankruptcy and life insurance.

In a word, don’t. Plan on your lender being notified if you miss a premium payment. If you encounter financial hardship and find difficulty in making your premium payments, contact your lender right away to discuss options. Should you default on your life insurance policy, your lender could consider your loan to be in violation of the contractual provisions. Your lender may make premium payments on your behalf to keep the policy in force. Your loan will (almost always) have the payments made for you tacked on to the loan balance. If you are utilizing the cash-value of a whole life insurance policy as collateral, your lender will likely have the ability to pull funds from the cash-value to make your premium payments.

Yes. If you would like to use a different life insurance policy as a collateral assignment, speak to a life insurance agent about the process. As long as the other life insurance policy qualifies, you can change your collateral assignment. Remember, there are two primary requirements for the assignment of life insurance as collateral: 1. Your carrier must agree to the collateral assignment of the life insurance policy. 2. The lender must approve the collateral assignment – meaning the policy needs to be for an appropriate amount and length of time .

No. You do not need to be the insured on the life insurance policy. You do, on the other hand, need to be the policy owner . The policy owner has control of the life insurance contract and has the ability to designate a collateral assignment. Often the insured and policy owner are the same person.

This type of collateral assignment is unique to employers and their key employees. Split dollar plans are not designed for individuals looking to secure a loan. Essentially, a collateral assignment under a split dollar structure allows an employer to loan money to a key employee to make premium payments on a life insurance policy. In turn, the employee assigns the life insurance policy as collateral for the loan. The intended result is to provide additional value to employees who are vital to a company’s success.

Yes. As long as your policy meets the requirements, multiple lenders can accept your policy as a collateral assignment. For example, let’s say you are in the process of securing loans through your bank and an additional lending institution. Your bank loan is for $50,000 and your lending institution loan is for $80,000. The term lengths on your loans are 10 years and 15 years, respectively. In this hypothetical, say you own a 20-year term life insurance policy for $250,000. Your policy is for an amount and term length that would satisfy the collateral needs of both loans. As long as the life insurance company and lenders agree, your policy can be used as a collateral assignment for the two loans.

Possibly. You will typically need written consent from your lender prior to taking out a loan. Remember, policy loans are available through whole life insurance. In essence, your lender must agree that the collateral assignment is not put in jeopardy as a result of a policy loan. You will want to contact your lender to discuss your options.

Contact your lender as soon as your loan is paid off. The lender will provide a formal release of collateral assignment form. The form surrenders their rights to your life insurance policy. You will submit the form to your life insurance carrier . That way, your beneficiaries will not encounter delays to your policy’s proceeds.

Is Collateral Assignment Right For Me?

The collateral assignment of life insurance DOES make sense if:

• You are in the process of securing a loan with a collateral assignment stipulation.
• You do not have cash reserves to use as collateral for loan approval.

The collateral assignment of life insurance does NOT make sense if:

• Your loan can be approved without a collateral requirement.
• Another acceptable (and preferred) form of collateral, like cash, is available.

Final Thoughts

There a number of important things you need to know if you are in the process of establishing a loan with a collateral assignment requirement:

• Your life insurance carrier must approve  the assignment, while your lender must accept the assignment.
• Most types of life insurance policies qualify as collateral.
• Your lender should be your collateral assignee , NOT your primary beneficiary.
• A collateral assignment can take just a  few days , however, it may require weeks, so plan accordingly.

Finally, the process of establishing a collateral assignment of life insurance is typically simple and straightforward, but feel free to ask someone for help.

Life insurance is an invaluable tool for securing an important loan.

Heidi Mertlich

Heidi Mertlich is the owner of NoPhysicalTermLife.com. She is an independent life insurance agent specializing in no medical exam life insurance. Heidi is also an author for LifeInsurancePost.com, an online community of life insurance experts.

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Who Should Use Life Insurance as Collateral?

You can use life insurance as collateral for a loan, which can offer many benefits but also comes with risks. Whether this is a wise financial strategy for you will depend on your needs, circumstances and goals.

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Updated: July 23, 2024

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• How Collateral Assignment Works
• Pros and Cons
• Eligible Life Insurance Types
• Using Life Insurance as Collateral
• Other Ways to Use Life Insurance
• Alternatives to Life Insurance
• When to Use It

Policyholders can use life insurance as collateral when taking out a loan, allowing you to access funds by assigning a portion or all of your policy's death benefit to a lender as collateral. You may use the cash value component if you have a permanent policy.

Although the collateral assignment of life insurance can provide financial flexibility among other benefits, it requires careful consideration of all variables, such as the type of life insurance policy, terms and individual financial needs. Comparing it to alternative options can also help you decide if you should use life insurance as collateral for a loan.

How Collateral Assignment of Life Insurance Works

• Advantages and Drawbacks of Using Life Insurance as Loan Collateral

Life Insurance Types That Can Act as Collateral

How to use life insurance as loan collateral, alternatives to life insurance as collateral, when to use life insurance as collateral, faq about collateral assignment of life insurance, key takeaways.

Collateral assignment of life insurance involves using a life policy as security for a loan, ensuring that the lender will be repaid if the borrower defaults.

Although you can use term life insurance as collateral in some cases, permanent life insurance policies like whole and universal life can act as collateral more effectively as they build cash value.

Utilizing life insurance as collateral may be a good choice for individuals who need access to funds but want to keep assets private. Collateral assignment of life insurance may also offer potential tax benefits and lower interest rates.

Collateral assignment of life insurance is a legal agreement where the policyholder assigns a portion or all of the policy's death benefit or cash value to a lender as collateral for a loan. This arrangement provides the lender with security, knowing that if the borrower defaults, the lender can claim the amount due from the death benefit.

The amount you can borrow under a collateral assignment life insurance agreement generally depends on negotiations between you and the lender, factoring in the policy’s death benefit amount, its duration and your creditworthiness. Banks and other lenders that accept life insurance as collateral consider these elements to determine loan eligibility and terms.

Understanding the definition of collateral assignment and the role of a collateral assignee is pivotal in navigating this financial strategy. The assignment of a life insurance policy as collateral underlines the borrower's responsibility to keep the policy in good standing.

Collateral Assignee Definition

A collateral assignee in life insurance refers to the lender or financial institution that holds the rights to a portion or the entire death benefit of a policy as security under a collateral assignment life insurance agreement. This entity can claim the assigned benefits if the borrower defaults.

Collateral Beneficiary Definition

A collateral beneficiary is an entity designated to receive specific benefits from a life insurance policy under a collateral assignment. Unlike the primary beneficiary, who is entitled to the remainder of the death benefit post-loan settlement, the collateral beneficiary directly benefits from the insurance arrangement related to the terms of a loan or financial obligation secured by the policy. In the context of collateral assignment of life insurance, the collateral assignee effectively acts as a collateral beneficiary.

Absolute Assignment vs. Collateral Assignment

There are two assignment options related to life insurance policies: absolute and collateral.

Absolute assignment refers to the complete transfer of all rights, ownership and control of a life insurance policy from the current policy owner (assignor) to a new owner (assignee). This transfer is permanent and irrevocable. After the assignment, the original owner has no further rights or control over the policy. The new owner can change beneficiaries, borrow against the policy or even surrender the policy for its cash value. Absolute assignments may be useful in estate planning, business agreements or fulfilling contractual obligations.

Collateral assignment , on the other hand, is a temporary and often revocable arrangement. The policyholder retains ownership and control over the policy but agrees that the lender has a claim to a part of the death benefit if the loan is not repaid. Unlike absolute assignment, the policyholder continues to have rights over the policy in collateral assignments, subject to the terms of the loan agreement.

Tax Implications of Using Life Insurance as Collateral

Loans secured through collateral assignment of life insurance are generally not considered taxable income, as you are borrowing against your own asset. However, there are situations where tax liabilities may apply:

Failure to Repay the Loan : If you fail to repay the loan and the policy lapses, the outstanding loan amount could be considered income, subject to regular income tax.

Exceeding Cash Value : If the amount you borrowed exceeds the policy's cash value, the excess could be considered a distribution and might be taxable.

Surrendering the Policy : If you surrender the policy with an outstanding loan, the total amount borrowed minus premiums paid could be considered taxable income.

Death of the Policyholder : If the policyholder dies with an outstanding loan, the death benefit paid to beneficiaries may be reduced by the loan amount. The reduced amount is generally not taxable, but the loan interest might be.

Understanding the tax implications of assigning a life insurance policy as collateral helps ensure informed financial decisions.

Pros and Cons of Using Life Insurance as Loan Collateral

Using life insurance as collateral for a loan is a strategy that can provide financial leverage in various situations, but it's not without its risks. Below, we highlight some of the advantages and drawbacks of this approach.

Advantages of Using Life Insurance as Collateral:

Access to Funds Without Selling Assets : By using life insurance as collateral, you can access funds without having to sell or liquidate other assets. This allows you to retain your investments and other valuable possessions while obtaining the necessary capital.

Potential Tax Benefits : Depending on individual circumstances, loans against life insurance may offer a tax advantage since the borrowed amount is generally not considered taxable income.

Maintaining Life Insurance Coverage : Collateral assignment of life insurance allows you to keep the coverage. The death benefit remains intact (minus the loan amount if not repaid), providing continued protection for your beneficiaries.

Lower Interest Rates : Loans secured with life insurance as collateral may offer lower interest rates compared to unsecured loans. The collateral provides security for the lender, often resulting in more favorable loan terms.

Easier Access : Since the life insurance policy secures the loan, lenders may not require a credit check or a lengthy approval process. This can make accessing funds quicker and more accessible, especially for those with less-than-perfect credit.

Customizable Repayment Terms : Typically, borrowers can customize the repayment terms for loans using life insurance as collateral to fit their financial situation. Whether you need short-term financing or a longer repayment period, you may find options that align with your needs.

Potential for Continued Growth : If you have a whole or universal life insurance policy, the cash value may continue to grow even when you use it as collateral. This growth can offset interest costs and contribute to the policy's overall value.

Drawbacks of Using Life Insurance as Collateral:

Impact on Beneficiaries : Collateral assignment of life insurance may reduce the death benefit available to beneficiaries. If the loan remains unpaid at the time of the policyholder's death, the lender will receive the outstanding amount, and only the remaining benefit will go to the beneficiaries.

Unexpected Tax Liabilities : Mismanagement of collateral loans on life insurance, such as failure to repay or allowing the life insurance policy to lapse with an outstanding loan, may lead to unexpected tax liabilities. For example, if the policy lapses with an outstanding loan, the total amount you borrowed minus the premiums you paid may be considered taxable income.

Risk of Policy Lapse : If the loan interest accumulates and is not paid, it could reduce the cash value and eventually lead to a policy lapse. Losing life insurance coverage could have significant consequences, especially if obtaining a new policy is difficult or more expensive due to age or health conditions.

Possible Restrictions on Policy Changes : Some collateral assignments may include terms restricting the policyholder's ability to make certain changes to the policy without the lender's consent. This could limit flexibility in managing the policy according to changing needs or circumstances.

Interest Accumulation : Interest on the loan will typically accumulate, and if not managed properly, it can become a significant financial burden. Understanding the interest rate and having a clear plan for managing the interest will help you avoid unexpected financial strain.

Reduced Investment Growth : For policies with a cash value component, borrowing against the policy may reduce the cash value's growth potential. This could impact the policy's investment performance and reduce its overall benefits over the long term.

Understanding these potential pitfalls and benefits can help you make an informed financial decision when considering your options for collateral.

Before using life insurance as collateral for a loan, you should know which types of policies are suitable for this purpose. Generally, you can use the following types of life insurance as collateral:

Whole Life Insurance : This provides permanent coverage, meaning it lasts for the insured's entire life as long as you pay premiums. One of the key features of whole life insurance is the cash value component, which grows over time on a tax-deferred basis. This cash value can be used as collateral for a loan, providing a source of funds you can access without surrendering the policy.

Universal Life Insurance : This permanent life insurance offers more flexibility in premiums and benefits. Like whole life insurance, universal life also builds cash value that you can use as collateral. However, universal life policies often include variable interest rates on the cash value, which may lead to fluctuations in the amount available for borrowing.

Term Life Insurance : Unlike whole and universal life insurance, term life insurance doesn't build cash value. It provides coverage for a specific term, such as 10, 20 or 30 years. While it's generally not used for borrowing against the cash value, you can still use term life insurance in collateral assignment in some cases. The lender may agree to accept the death benefit as collateral, and the loan amount would be based on the death benefit's value and the lender's willingness to lend against it. Specific terms depend on negotiations with the lender.

Identifying the right type of life insurance to use involves understanding the nuances of each policy type, including their capacity to serve as insurance collateral.

Using life insurance as collateral for a loan involves coordinating with the insurer and the lender. Here's a comprehensive guide to the process:

Contact Your Insurer

The first step in the collateral assignment of life insurance is to contact your insurance company to discuss the possibility of using your policy as collateral. They will provide the necessary paperwork and guide you through the requirements. This step may include supplying details about the policy, the intended lender and the loan amount. Ensure that your policy qualifies for collateral assignment and follow the insurer's specific procedures.

Find a Lender

Not all lenders are willing to accept life insurance collateral assignments, so you need to find a suitable lender. Discuss your intentions with potential lenders, understand their requirements and ensure they are comfortable with the collateral assignment process. This step may involve negotiating the loan terms, including interest rates and repayment schedules.

Know the Loan Terms and Compare With Other Options

Understand the loan terms, including the interest rate, repayment schedule and any conditions related to the collateral assignment. Consider comparing these terms with other loan options to ensure that using life insurance as collateral is the best choice for your situation.

Complete the Collateral Assignment Form

Once you've agreed to the terms with the lender, you'll need to complete a collateral assignment of life insurance form. This legal document outlines the specifics of the agreement. Both the policyholder and the lender must sign this form.

Submit the Form to the Insurer

After completing and signing the collateral assignment form, submit it to the insurance company for processing. The insurer will review the form, ensure you meet all requirements and then formally record the collateral assignment. This step makes the agreement legally binding.

Monitor the Loan and Policy

Keep track of loan payments, interest accumulation and any changes in the policy's cash value or death benefit. Regular monitoring helps ensure that the loan and the policy remain in good standing.

Repay the Loan

Repaying the loan according to the agreed-upon schedule will maintain the coverage. Remember that failure to repay the loan could lead to reduced death benefits or tax implications.

What to Expect in a Collateral Assignment of Life Insurance Form

A collateral assignment of life insurance form is a key document containing the following important details about using your life insurance as collateral for a loan.

Policy Identification : This section includes specific policy details, such as the policy number, the insured's name and the coverage amount.

Collateral Assignee Information : This part provides comprehensive information about the lender, including name, address and contact details.

Terms and Conditions of the Assignment : This outlines the specifics of the agreement, such as the loan amount, interest rate and any special conditions or requirements.

Signatures of Owners and Assignees : Signatures from both the policyholder and the lender are necessary for legal validation, confirming agreement to the terms.

Familiarizing yourself with these documents is a key step to preparing for the process of collateral assignment.

Other Ways to Use Life Insurance for a Loan

If using life insurance as collateral for a loan is not for you, you may explore other ways to access funds with your policy.

Life Insurance Loan (Policy Loan) : A policy loan allows you to borrow directly against the cash value of a permanent life insurance policy, such as whole or universal life. This loan doesn't require a credit check, and the interest rates are often competitive. The loan amount is limited to the policy's cash value minus any existing loans or withdrawals. While this option provides quick access to funds, failure to repay the loan can reduce the death benefit and lead to tax implications.

Surrendering Your Policy : Surrendering a life insurance policy means giving up the policy in exchange for its cash surrender value . This option provides a lump sum that you can use as needed but also means losing the death benefit and any future growth potential. Surrender charges may apply, especially if the policy is surrendered in the early years.

Consider your options for accessing funds through your insurance policy and determine if other avenues better suit your circumstances.

While using life insurance as collateral can be viable, other financial solutions may be a better fit. Here's a closer look at some alternatives:

HELOC (Home Equity Line of Credit) : A HELOC allows you to borrow against the equity in your home. It offers a revolving line of credit with variable interest rates, allowing you to borrow as needed. However, it puts your home at risk if you fail to repay.

Home Equity Loan : A home equity loan allows you to borrow against your home's value and typically comes with fixed interest rates. It provides a lump sum suitable for large, one-time expenses.

Unsecured Loan : An unsecured personal loan doesn't require collateral, making it a less risky option for your assets. Interest rates may be higher, and credit requirements more stringent, but it doesn't directly impact your life insurance or other valuable assets.

Annuity as Collateral : An annuity is a financial product that provides regular income payments and is often used in retirement planning. If you have an annuity, you may be able to use it as collateral for a loan. This option can provide access to funds without affecting life insurance benefits, but understanding the terms and potential implications is crucial.

Laying out all your options for accessing necessary funds will assist you in making a more informed financial decision, allowing you to weigh the advantages and risks of different scenarios.

Life insurance as collateral for a loan may be a good choice if you have a whole or universal life insurance policy with sufficient cash value, need access to funds without selling other assets and are comfortable with the potential risks and terms of the loan. It may provide financial flexibility, potential tax benefits and lower interest rates than unsecured loans.

On the other hand, collateral assignment of life insurance may not be the best choice if you have a term life insurance policy without cash value or are concerned about the impact on beneficiaries if the potential risks and complexities outweigh the benefits for your specific situation. Alternative options like a HELOC, home equity loan or unsecured personal loan might be more suitable depending on your needs and risk tolerance.

Careful consideration and comparison of alternative options will help you determine if a collateral assignment of life insurance is right for you. You may also consult with financial advisors, tax professionals or legal experts for guidance and to understand the specific implications of using this financial strategy for your situation.

Navigating the specifics of collateral assignment of life insurance can raise several questions. This section aims to clarify common inquiries, ensuring you understand how this financial strategy can impact your loan and insurance policy.

A collateral assignment is a legal agreement in which a life insurance policy's benefits are assigned to a lender as insurance collateral for a loan.

The collateral assignee is the lender in a collateral assignment agreement. It holds a secured interest in the death benefit of a life insurance policy until the loan is fully repaid.

The collateral in a life insurance policy loan typically refers to the cash value. This value secures the loan and ensures the lender can reclaim their funds if the borrower defaults.

Collateral assignments are typically associated with loans where borrowers want to secure financing without selling assets. They use the value of their life insurance policy as security for the loan.

In a life insurance contract , a collateral assignment ensures that the lender receives payment from the death benefit if the borrower fails to repay the loan without transferring full ownership of the policy to the lender.

Collateral assignments are temporary and allow the borrower to retain ownership and control over the policy, whereas absolute assignments permanently transfer all rights, ownership and control to another party.

If a bank loan application requires collateral, the policy owner can opt for a collateral assignment of life insurance, assigning their policy as security to meet the bank's requirements. This is subject to approval by lenders that accept life insurance as collateral.

Only the policy owner, who holds the rights to the life insurance policy, is authorized to assign it as collateral. This process involves filling out a collateral assignment of life insurance form and providing a copy of the insurance policy on collateral to the collateral assignee.

Many financial institutions and banks that accept collateral assignments provide loans that allow the use of life insurance. These lenders assess the policy’s value and terms before approving the loan.

Yes, whole life insurance is commonly used as collateral due to its inherent cash value accumulation. Collateral loans on life insurance like these can provide a solid basis for securing a loan.

Typically, annuities can be used as collateral for loans. However, this depends on the terms of the annuity and the lender's willingness to accept it as security. Like life insurance, the annuity must have a sufficient value to cover the loan.

About Melissa Wylie

Melissa Wylie is the Content and SEO Manager at MoneyGeek, with nearly a decade of editorial experience and six years of work in financial content focused on small businesses. She previously held SEO positions at Bankrate and LendingTree, with bylines on ValuePenguin and MagnifyMoney.

Wylie has a journalism degree from the University of North Texas. Her strong foundation in journalism helps her craft content that simplifies complex financial topics to help everyone feel confident when making decisions with their money.

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Using Life Insurance For Collateral Assignment

Fact Checker - Licensed Life Insurance Agent

The most common way that life insurance policy protects you and your loved ones is by providing financial support to your family in the event of your untimely death.

In some situations, life insurance serves to replace lost income with death benefits, in others, life insurance can be used to pay off remaining debts and death expenses. 

Life insurance can also be used as a very helpful tool in order to obtain financing for a loan .

This process of using a life insurance policy to take out a loan is called “ collateral assignment ” of life insurance.

Before we discuss everything you need to know about the collateral assignment of life insurance, let’s take a quick peek at what we will be covering in this article:

What you will learn in this article (click to go to section):

• What is Collateral Assignment of Life Insurance?

How Does Collateral Assignment of Life Insurance Work?

• Can I Apply for Multiple Loans With Life Insurance as Collateral?
• How to Apply for Collateral Assignment of Life Insurance
• Requirements, Limitations, and Restrictions 
• What Happens in the Event of Default or Death?
• What if I Pay Off my Loan While Using Life Insurance as Collateral?
• Who Qualifies for Collateral Assignment of Life Insurance?
• Choosing a Beneficiary for Your Policy
• Best Life Insurance Companies for Collateral Assignment
• Finding a Life Insurance Policy to Use for Collateral Assignment

What is a Collateral Assignment of Life Insurance?

The collateral assignment of life insurance is a legal way for you to assign your life insurance policy as a form of collateral for a loan to banks.

With this, you can be far more likely to receive financing for loans you may not otherwise be able to secure because the bank knows they will get their money back no matter what.

The way collateral assignment of life insurance works is like this:

• You have a life insurance policy that is in your name. This coverage is paid for by you just like any regular life insurance policy.
• Once you have this coverage, you must apply for a collateral assignment of life insurance with both your life insurance company and the bank. (Below we describe how to apply for a collateral assignment of life insurance in detail.)
• Once the life insurance company clears you to use the policy as collateral for the loan, you must then specify to your lender that this is what you intend to do.
• From there, you simply wait for the bank to get back to you on your application, and if they approve, you have successfully used life insurance as collateral assignment on a loan from the bank!

Can I Apply For Multiple Loans With Life Insurance As Collateral?

You can apply to as many loans as you please using your life insurance policy as collateral, as long as the policy has a large enough death benefit to cover the total amount owed on the loans you are applying for.

How to Apply For Collateral Assignment Of Life Insurance

Applying through your bank.

There are some lenders who will consider using your existing life insurance policy for collateral assignment if you request it, but others might require you to take out a brand new policy specific for that purpose.

In either case, using life insurance for collateral assignment when applying for loans is a fairly common practice that almost every life insurance company and the bank is equipped to handle.

You start off the application for assignment by securing the loan with the bank in question. This is where you will discover the limitations and regulations the bank has regarding the collateral assignment of life insurance. Each lender has different policies.

Applying Through Your Insurer

Once you have found the right loan, you must fill out the collateral assignment form . Your insurer will be able to provide you with this form easily.

The form has to be filled out by every party involved, including yourself, the lender, and the insurance company. You can sign the forms at the time of your loan application or you can sign them after your policy has been issued.

If you are taking out a brand new life insurance policy, you are better off signing all of the documents for this at the beginning of the application. The time frame to request a collateral assignment and be accepted for it ranges between 24 hours and 48 hours.

Some banks might require that you notarize the form, which can add some time to the application and acceptance process.

Collateral Assignment Of Life Insurance Requirements, Limitations, & Restrictions

When it comes to applying for and using life insurance as collateral assignment for a loan, there are a few common requirements to keep in mind to make sure that you get the most out of your policy, and also to make sure that you can be accepted quickly and easily .

1. Beneficiary and Policyowner Requirements

Policyowners of a life insurance policy that qualifies for collateral assignment must be the owner of the policy . They do not necessarily need to be the insured or the beneficiary, but they must be the owner of the policy.

The policy owner must maintain payment of all premiums in order for this policy to remain in place as collateral.

2. Types of Life insurance policies that qualify for collateral assignment

Any type of life insurance policy is capable of being used as collateral assignment for loans, as long as the company that issues it does not have any rules against it being used as such.

Term Life Insurance

Term life insurance policies used as a collateral assignment for loans must have terms longer than the length of the loan . Additionally, if the loan is paid off prior to the expiration of the policy, the policy is no longer payable to the bank.

Be sure to notify your insurer in the event that you pay off a loan which used your life insurance policy as the collateral assignment. You can then assign a new beneficiary to the life insurance policy with their help.

Permanent Life Insurance

Permanent life insurance policies  can also be used as collateral assignment for loans from banks. In this case, any cash value accumulated by the policy is only accessible by the bank in order to maintain collateral in the case of a loan default.

3. Lender Rights

If you default on your loan , the bank reserves all rights to utilize your life insurance policy’s death benefit as a form of repayment for your defaulted payments.

On top of this, they reserve the right to take from your cash value on permanent life insurance policies, as mentioned above.

What Happens If You Die Or Default With Your Life Insurance Policy Being Used As Collateral Assignment?

A collateral assignment is a form of limited transfer, unlike an absolute assignment which gives over all of your policy with no chance of reversing it.

If you were to pass away before your loan is repaid the lender will receive whatever amount is still owed from your death benefit. The remaining balance will be given to your beneficiaries .

As long as you pay your premiums on time and your policy is current you can use this to secure any type of loan with any bank that will accept it.

The same goes for defaulting on your loan.  If you default, the bank only has access to the amount of death benefit that is owed to them. The rest is secure and still under your policy, to be paid out to beneficiaries in the event of your death.

What If I Pay Off My Loan While Using My Life Insurance Policy As Collateral?

If you pay off the loan entirely before you pass away, or before the end of your policy, then the lender is no longer entitled to any of your death benefit and the full death benefit continues into the hands of your beneficiary.

At this point with permanent life insurance policies, your access to cash value is reinstated as well.

Who Qualifies For Collateral Assignment Of Life Insurance?

Any policyholder that has a permanent or term life insurance policy can qualify for collateral assignment.

Not every company allows collateral assignment of life insurance policies, and therefore it is best that you speak with your life insurance provider to see what their limits are with regard to Collateral Assignment.

However, most life insurance companies are equipped to handle this easily.

Many life insurance providers do not care how you use the policy, as long as it is in a legal fashion, and they will likely sign your application for collateral assignment quickly and with minimal friction.

Choosing A Beneficiary For Your Life Insurance Policy With Collateral Assignment

If you are attempting a collateral assignment, your bank might ask you to assign them as the beneficiary.

DO NOT ASSIGN YOUR BANK AS THE BENEFICIARY OF YOUR LIFE INSURANCE POLICY! 

If you die and you only paid off half of your loan and you made the bank your beneficiary, the bank will receive the remaining balance of your entire death benefit.

If you were to take out a $100,000 loan and you assigned the bank as your beneficiary they would receive the entire amount even if the amount owed to the bank at the time of your passing was only $20,000.

You do not want this to happen.

Banks only require a collateral assignment and that means they are only entitled to the amount owed on your loan, an amount which theoretically decreases with time.

If you have no beneficiaries listed, the remaining amount will theoretically go to your estate. But there may not be anyone around to enforce this. 

You can choose whomever you please as your beneficiary on your life insurance policy, as long as it is not yourself. Just be sure the beneficiary you choose is not your bank, regardless of what they tell you .

Best Life Insurance Companies For Collateral Assignment Of Life Insurance 

SBLI Life Insurance is also known as Mutual insurance company and they provide affordable policies to smokers and non-smokers.  They were founded in 1907 and since they are a mutual company they are owned by the policyholders and not by the stockholders.

As such their primary objective is to show allegiance to the clients rather than to their investors. This particular company is popular because they help customers blend different term life insurance policies with whole life insurance policies.

They have an A , excellent, rating from A.M. Best. They have an A+ rating from the BBB. Their financial history has remained level and strong since their inception.

Sagicor is rated A- by A.M. Best with a financial rating of A- . They have been in business for over 60 years offering products across 45 states. Without undergoing a medical exam you can still qualify for coverage up to $500,000 .

If you don’t want to answer any medical questions you can still get covered under $250,000 with this particular company.

They are not favorable toward individuals with diabetes or people who want a 30-year term plan but they are perfectly suited for individuals who are looking for whole life insurance policies that offer collateral assignment options.

North American Company

The North American company has a solid financial strength rating. They are given a superior rating which is the second highest rating you can get, from A.M. Best.

They also have an A+ from the S&P rating and Fitch rating.  This company is also privately owned so they are able to invest in Secure assets rather than things like government bonds.

North American has an array of whole life insurance policies that are offered it to anyone 85 or younger and they have favorable terms for collateral assignment options.

Banner Life

Banner Life Insurance Company Offers an array of inexpensive universal life insurance products. However, they do not have a whole life insurance policy.

They are licensed to conduct business in every state but New York. If you are a New York resident you can still get coverage but you have to go through William Penn. They have a financial strength rating of excellent.

Finding A Life Insurance Policy To Use For Collateral Assignment

If you are looking for life insurance coverage which you can also use as collateral on a loan, then you want to take some time to make sure that you understand the stipulations of your bank and insurance provider.

On top of this, you want to be sure that the policy you choose offers great rates and is offered by a company with a history of paying out claims on time and when needed.

The easiest way to find the best life insurance coverage to use for collateral assignment is to speak with an independent life insurance agent who can help you compare life insurance policies and rates from dozens of the best life insurance companies on the market.

We are very experienced in this area and have the knowledge necessary about life insurance providers and collateral assignment with banks to ensure that you find the best coverage for your situation.

Give us a call today to speak with a professional, or get started online using our quoting tool for quick and easy life insurance quotes.

Ty Stewart is a founder and contributor of SimpleLifeInsure.com. He started researching and studying about life insurance when he got his first policy for his own family. He has been featured as a life insurance expert speaker at agent conventions and in top publications. As an independent licensed life insurance agent he has helped clients nationwide to secure affordable coverage while making the process simple.

I’m Bennett Bier , owner, author and fact checker of Simple Life Insure. I believe working with a small independent broker offers consumers more personal attention and superior customer service. As an independent agent licensed in all 50 states and the District of Columbia I have access to many of the top A+ rated life insurance carriers. This lets me locate a plan that you will qualify for while saving you money at the same time. Over the years I have mastered the art of underwriting, getting approvals even for my highest risk clients. I’m also likely the person that will answer the phone when you call.

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Welcome Funds has compiled every term, phrase & definition related to life settlements. Have more questions? Call us toll-free at 877.227.4484 or complete our Quick Life Settlement Qualifier to determine your eligibility.

• The Life Settlement Option

WHAT IS ABSOLUTE ASSIGNMENT?

Absolute Assignment is a legal instrument that allows the owner of a life insurance policy or other valuable assets to transfer all rights and ownership of the asset to a designated assignee. This transfer of ownership is comprehensive and unrestricted, giving the assignee complete control and authority over the asset. Unlike conditional assignment, which may have specific conditions attached, absolute assignment represents an unqualified transfer of ownership..

Absolute assignment can be used not only in the context of life insurance but also for transferring ownership of other valuable assets such as real estate and securities. It involves a meticulous adherence to legal requirements and procedural details to ensure the validity and legality of the ownership transfer. Seeking guidance from legal and financial experts is essential to ensure a smooth and legally sound execution of the absolute assignment process.

Exploring Life Settlements

When considering selling a life insurance policy, individuals have the option to engage in a life settlement, wherein the policy is sold to institutional buyers in the secondary market. This process involves applying to various licensed buyers who compete to offer the highest bid for the policy. An experienced life settlement broker can facilitate this auction-style bid process, ensuring that policy owners receive the best possible offer for their policies.

Welcome Funds: Your Life Settlement Partner

Welcome Funds is a nationally licensed life settlement broker that specializes in representing policy owners in the secondary market for life insurance. They engage in an auction bidding process to secure the highest offer from institutional buyers, providing professional representation and expert counsel throughout the sale of the life insurance policy.

Explore Your Options with a Life Settlement Qualification Process

To explore the eligibility of a life insurance policy for a potential life settlement, individuals can embark on a cost-free and commitment-free journey by engaging in the Life Settlement Qualification Process. This process includes a complimentary personal consultation & appraisal, during which confidentiality is safeguarded. Interested individuals can complete a Quick Life Settlement Qualifier online or call a toll-free number to connect with a dedicated client care advocate.

Overall, the combination of absolute assignment and the life settlement process provides individuals with a means to transfer ownership of valuable assets and explore options for selling their life insurance policies in a competitive market.

Ready to Explore Your Options?

Complete our quick Life Settlement Qualifier or call us toll-free at 877.227.4484 to speak with a client care advocate.

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Posted: by John Welcom

Welcome Funds has the privilege of working with numerous financial advisors and wealth managers – and have done so for two decades – some who exclusively focus on servicing high net worth clients. One such advisor who is active in the life settlement market — and already understands the value he can create for his clients — had historically negotiated directly himself with two or three leading buyers of life insurance policies. He thought that simply engaging with mor...

How to Sell Your Life Insurance Policy for $4,743,000 Instead of $275,485?

Mr. Williams purchased $10 Million in life insurance coverage in 2001 to provide his family with financial security. Over time, his financial priorities changed: his wife passed away, his children became financially independent, financial burdens arose and the estate tax exemption increased substantially.

Suitability of Life Settlements

Traditionally, estate planning advisors counsel their high net worth clients to obtain life insurance policies with large death benefits. The strategy is simple: create a vehicle for heirs to receive tax-free income at the time of an insured’s passing so sufficient funds are available to pay large estate tax bills when assets are inherited.

What is the Most Suitable Exit Strategy for Life Insurance?

All eyes in the life insurance agency and the financial advisory world have been on New York, where in the summer of 2019, the New York State Supreme Court paved the way for implementation of Insurance Regulation 187.  This rule imposes a new standard for agents and brokers when issuing a recommendation to a client regarding an annuity or life insurance product.

How to Get the Highest Life Settlement Offer

When you decide to sell a valuable personal asset, you usually want to obtain the highest purchase price for that property. It is sound business sense. However, how do you truly know when you have reached the point of accepting and securing the most desirable offer?

Understanding the Fair Market Value of a Life Insurance Policy

When a professional advisor identifies a life insurance policy that a client no longer needs or wishes to maintain, he should ask, as standard protocol, whether that policy may have value in the secondary market. If so, the client may be able to sell the policy in a life settlement transaction, enabling him to receive a higher cash payout than he otherwise would obtain by lapsing or surrendering the policy back to the insurance company.

The Power of a Life Settlement Auction

Professional advisors with clients who no longer need or wish to maintain a life insurance policy have options when exploring the secondary market.  Many advisors prudently rely on a licensed life settlement broker to assist them in the sale of the policy and with all aspects of the transaction.  However, there is still a large number of professionals persuaded to work directly with only one buyer, called a life settlement provider.

Rebuttals to the “Direct Buyer” Model for Life Settlements

Most professional advisors who explore the potential sale of an unwanted life insurance policy on behalf of their clients will rely on the assistance of a licensed life settlement broker. Life settlement brokers represent the policy owner in the transaction and have a duty to act in their best interests. Most notably, the broker’s and client’s goal is aligned: to sell the policy for the highest price possible.

Carrier Resistance To Life Settlements: Clients Need To Know They Can Sell Their Policies

Consumers who sell their life insurance policies in the life settlement market receive as much as seven times more money than they would have received by surrendering their policies back to the insurance companies.  Seven times!  However, an estimated 9 out of 10 policies are allowed to lapse before paying a claim, according to the Life Insurance...

The Danger of Trying to “Time the Market” for Life Settlements

Most investors in the stock market understand the danger of “market timing” — trying to choose the right day to buy a stock when the price is low and sell it when the price is high.

COMPANY INFO

Welcome Funds, Inc. 4755 Technology Way Suite 202 Boca Raton, FL 33431

Toll-Free: 877.227.4484 Phone: 561.862.0244 Fax: 561.862.0242 [email protected]

CONSUMER EDUCATION

• Life Settlement Applications
• Life Settlement Glossary

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TEXAS DISCLAIMER - This website is not intended for owners of a life insurance policy or a certificate holder under a group policy in the State of Texas. Texas owners and certificate holders, please click here.

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• Customer Services
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• Policy Assignment
• Assign Policy to New Owner

Assign policy to new owner

Assigning a policy to a new owner, also called an absolute assignment, is a transfer of ownership from the assured (assignor) to another person or company/institution (assignee). 

The assignee becomes the new policy owner and assumes full legal rights over the policy. All proceeds, including surrender, maturity, and claims will be payable to the assignee.

A policy can be assigned if both assignor and assignee are of sound mind, not bankrupt or under duress, and if the policy is:

• Not using CPF/SRS funds for premium payments
• Not effected under trust
• Not used to be exempted from CPF Board's Home Protection Scheme (HPS)
• Allowed to be assigned under the plan

Additionally, the assignor must be at least 18 years old. For policies issued on or after 1 March 2009, the assignee must be at least 18 years old. For policies issued before 1 March 2009, the assignee must be at least 21 years old.

How to assign a policy to a new owner

Both the assignor and assignee must come to our Customer Service Centre at the following address with their NRICs:

1 Pickering Street Great Eastern Centre #01-01 Singapore 048659

If the assignment is made between spouses, parent and child, or siblings, and relationship can be established by producing a marriage or birth certificate, they need not be present at our Customer Service Centre. You can call our Customer Service Officers at 1800 248 2888 for assistance in making the assignment.

Questions and Answers

No. Once a policy is absolutely assigned, the policy ownership will belong to the assignee. However, the policy ownership can be transferred back to you provided the assignee agrees to it. A new assignment will need to be done.

You can still assign the policy if the nomination made is a revocable nomination. The revocable nomination will be automatically revoked once the policy is assigned. If the policy has a trust nomination, the trust nomination will have to be revoked before you make an assignment.

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Proposed Rule

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Heat Injury and Illness Prevention in Outdoor and Indoor Work Settings

A Proposed Rule by the Occupational Safety and Health Administration on 08/30/2024

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• Document Details Published Content - Document Details Agencies Department of Labor Occupational Safety and Health Administration Agency/Docket Number Docket No. OSHA-2021-0009 CFR 29 CFR 1910 29 CFR 1915 29 CFR 1917 29 CFR 1918 29 CFR 1926 29 CFR 1928 Document Citation 89 FR 70698 Document Number 2024-14824 Document Type Proposed Rule Pages 70698-71073 (376 pages) Publication Date 08/30/2024 RIN 1218-AD39 Published Content - Document Details
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• Document Dates Published Content - Document Dates Comments Close 12/30/2024 Dates Text Comments to this NPRM (including requests for a hearing) and other information must be submitted by December 30, 2024. Published Content - Document Dates

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FOR FURTHER INFORMATION CONTACT:

Supplementary information:, table of contents, i. executive summary, ii. pertinent legal authority, a. introduction, b. significant risk, c. feasibility, i. technological feasibility, ii. economic feasibility, d. high degree of employee protection, iii. background, b. need for proposal, c. events leading to the proposal, i. history of heat as a recognized occupational hazard, ii. osha's heat injury and illness prevention efforts, iii. osha's heat-related enforcement, iv. rulemaking activities leading to this proposal, d. other standards, iv. health effects, i. health effects of occupational heat exposure, ii. literature review for health effects section, iii. summary, b. general mechanisms of heat-related health effects, c. identifying cases of heat-related health effects, i. international statistical classification of diseases and related health problems (icd) codes, ii. occupational illness and injury classification system (oiics) codes, iii. limitations, iv. summary, d. heat-related deaths, i. introduction, ii. physiological mechanisms, iii. determining heat as a cause of death, iv. occupational heat-related deaths, e. heat stroke, iii. occupational heat stroke, iv. treatment and recovery, f. heat exhaustion, iii. occupational heat exhaustion, g. heat syncope, iii. occupational heat syncope, h. rhabdomyolysis, iii. occupational rhabdomyolysis, i. hyponatremia, iii. occupational hyponatremia, j. heat cramps, iii. occupational heat cramps, k. heat rash, iii. occupational heat rash, l. heat edema, ii. physiological mechanism, iii. occupational heat edema, m. kidney health effects, ii. kidney stones, b. physiological mechanisms, c. occupational heat exposure and kidney stones, d. treatment and recovery, iii. acute kidney injury, c. identifying cases of acute kidney injury, d. experimental evidence, e. cases of occupational heat-related aki, f. treatment and recovery, iv. chronic kidney disease, c. identifying cases of chronic kidney disease, d. observational evidence, e. treatment and recovery, n. other health effects, ii. reproductive and developmental health effects, iii. health effects associated with prior episodes of heat illness, o. factors that affect risk for heat-related health effects, ii. risk factors, p. heat-related injuries, ii. occupational heat-related injuries, iii. mechanisms, a. impaired psychomotor performance, i. impaired movement, strength, or coordination (fatigue), ii. impaired postural stability and balance, iii. impaired performance in accuracy, speed, and reaction time, b. impaired mental performance, i. impaired cognition or cognitive performance, ii. impaired visual-motor tracking, iii. impaired decision-making or judgment, c. other factors contributing to heat-related injury, q. requests for comments, v. risk assessment, a. risk assessment, ii. reported annual incidence of nonfatal occupational heat-related injuries and illnesses, a. bls survey of occupational injuries and illnesses, b. workers' compensation claims, i. washington state, ii. california, iv. wisconsin, c. emergency department (ed) visits and inpatient hospitalizations, i. southeast u.s., ii. florida, iii. louisiana, iv. multiple states, v. maricopa county, arizona, d. indirect injuries, e. worker self-reports, f. summary of reported annual incidence of nonfatal occupational heat-related injuries and illnesses, iii. reported occupational heat-related fatalities, a. summary of reported occupational heat-related fatalities, iv. limitations and underreporting, a. incidence estimation, b. undercounting of cases, i. bls soii, ii. workers' compensation, iii. hospital discharge data, iv. bls cfoi, v. requests for comments, b. basis for initial and high heat triggers, ii. observational evidence, a. fatalities, b. non-fatalities, iii. experimental evidence, iv. state standards and non-governmental recommendations, a. requests for comments, c. risk reduction, ii. evidence on the effectiveness of individual control measures, a. systematic reviews and consensus statements, b. summary for systematic reviews and consensus statements, iii. experimental and observational evidence, a. rest breaks, i. observational studies, ii. experimental studies, iii. conclusions for rest breaks, i. conclusions for shade, i. conclusions for fans, i. conclusions for water, e. acclimatization, i. evidence of tenure as a risk factor, ii. conclusions for acclimatization, iv. evidence on the effectiveness of multicomponent interventions, a. civilian workers, b. military personnel, c. conclusions for multicomponent interventions in civilian and military employees, v. governmental and non-governmental organizations' requirements and recommendations, a. governmental requirements and recommendations, b. national non-governmental organizations, c. conclusion on governmental and non-governmental recommendations, vi. conclusion, vii. requests for comments, vi. significance of risk, a. material harm, c. preliminary conclusions, vii. explanation of proposed requirements, a. paragraph (a) scope and application, i. requests for comments, b. paragraph (b) definitions, c. paragraph (c) heat injury and illness prevention plan, d. paragraph (d) identifying heat hazards, e. paragraph (e) requirements at or above the initial heat trigger, ii. drinking water, iii. break area(s) at outdoor work sites, iv. break area(s) at indoor work sites, v. indoor work area controls, vi. evaluation of fan use, vii. acclimatization, viii. rest breaks if needed, ix. effective communication, x. personal protective equipment (ppe), f. paragraph (f) requirements at or above the high heat trigger, ii. rest breaks, a. background on the provision, b. complying with rest break provisions, c. requests for comments, iii. observation for signs and symptoms, iv. hazard alert, v. excessively high heat areas, g. paragraph (g) heat illness and emergency response and planning, h. paragraph (h) training, i. paragraph (i) recordkeeping, j. paragraph (j) requirements implemented at no cost to employees, k. paragraph (k) dates, l. paragraph (l) severability, viii. preliminary economic analysis and initial regulatory flexibility analysis, a. market failure and need for regulation, ii. labor market imperfections, a. imperfect information, i. lack of employer information, ii. lack of employee information about health hazards, b. externalities, c. imperfect competition, iii. non-market and quasi-market alternatives, a. information dissemination programs, b. workers' compensation systems, i. limitations on payouts, ii. a divergence between workers' compensation premiums and workplace risk, c. tort liability options, b. profile of affected industries, ii. potentially affected industries and employees, a. potentially affected industries, b. states and geographic regions., c. potentially affected employees based on work conditions, iii. entities not covered by the proposed standard, a. work activities with no reasonable expectation of exposure at or above initial heat trigger, b. short duration exposure at or above initial heat trigger, c. emergency response activities, d. sedentary work activities at indoor work areas, e. telework, f. indoor work areas where temperature is maintained below 80 °f, g. employees working in cooled vehicles, h. exemptions based on osha jurisdiction, i. summary of exempt employees, iv. affected employees, a. affected employees by work conditions, b. affected employees by shift type, ii. evening, iii. overnight, iv. other shift categories, v. estimates of the number of in-scope employees by work shift, v. affected entities, a. summary of affected entities, b. determining entity size, c. summary of small and very small entities, c. costs of compliance, ii. cost assumptions, a. baseline non-compliance rates, b. cost savings, c. temperature, d. heat-related illnesses—counts and incidence rates, iii. labor rates, iv. estimated unit costs of compliance, a. rule familiarization, b. heat injury and illness prevention plan (hiipp), c. identifying heat hazards, i. drinking water, ii. break area(s) at outdoor work sites, iii. break area(s) and work area(s) at indoor work sites, iv. acclimatization, v. rest breaks if needed, vi. effective communication, e. requirements at or above the high heat trigger, i. rest breaks, ii. observation for signs and symptoms, iii. hazard alert, iv. warning signs for excessively high heat areas, f. heat illness and emergency response and planning, g. training, h. recordkeeping, v. estimated total costs of compliance, d. requirements at or above the initial heat trigger, e. requirements at or above the high heat trigger, i. total costs of the proposed standard, vi. sensitivity analysis, d. economic feasibility, ii. osha's screening test for economic feasibility, iii. time parameters for analysis, iv. data used for the feasibility screening test, v. factors that indicate the ability to absorb or pass on the costs of the proposed standard, vi. economic feasibility screening analysis, a. economic feasibility screening analysis: all establishments, b. economic feasibility screening analysis: small and very small entities, e. benefits, ii. fatal and non-fatal heat-related injuries and illnesses, a. heat-related fatalities, b. non-fatal heat-related injuries and illnesses (hris), c. underreporting, i. underreporting of heat-related fatalities, ii. osha's underreporting adjustment—heat-related fatalities, iii. underreporting of non-fatal hris, iv. osha's underreporting adjustment—non-fatal hris, v. underreporting-adjusted hris and heat-related fatalities, iii. monetized health and safety benefits, iv. additional unquantified potential benefits, a. indirect fatalities and non-fatal injuries, b. worker disutility and decreased labor supply, v. uncertainty, a. underreporting, b. program effectiveness, c. labor productivity losses, vii. conclusion, f. initial regulatory flexibility analysis, small business regulatory enforcement fairness act, and executive order 13272 (proper consideration of small entities in agency rulemaking), ii. initial regulatory flexibility analysis, a. description of the reasons why action by the agency is being considered, b. statement of the objectives of and legal basis for the proposed rule, c. description and estimate of the number of small entities to which the proposed rule will apply, e. description of the projected reporting, recordkeeping, and other compliance requirements of the proposed rule, f. federal rules which may duplicate, overlap, or conflict with the proposed rule, i. other federal agency rules, ii. osha standards, g. alternatives and regulatory options to the proposed rule, i. regulatory options, a. regulatory option 1—all establishments write hiipps regardless of number of employees, b. regulatory option 2—at or above the high heat trigger 15-minute rest break at least every hour, c. regulatory option 3—upper bound heat index for sedentary work exemption, d. regulatory option 4—medical surveillance, ii. alternatives, a. alternative 1—review hiipp at least every other year, b. alternative 2—no written hiipp required for establishments with <20 employees, c. alternative 3—10-minute rest breaks at the high heat trigger, d. alternative 4—refresher trainings at least every other year, e. alternative 5—95-degree high heat trigger, f. alternative 6—acclimatization for employees returning after 30 days away, h. sbar panel recommendations, g. distributional analysis, i. impact of heat on underserved populations, a. heat exposure of workers by socioeconomic status, b. productivity and health effects, ii. averted injuries, illnesses, and fatalities by socioeconomic status, iii. which business owners are impacted by the proposed standard, iv. conclusion, h. appendix a. description of the cost savings approach, ii. primary approach, a. summary of approach, b. general assumptions, c. productivity loss estimates by group, i. group 1 studies, iii. group 3 studies, iii. findings of primary approach, iv. alternate approaches under consideration, i. appendix b. review of literature on effects of heat exposure on non-health outcomes, ii. effect of heat exposure on non-health outcomes, a. labor supply, b. labor productivity, i. direct measures of labor productivity, a. agriculture., b. manufacturing, c. other sectors, ii. proxies for labor productivity, a. physical work capacity, exposure-response functions, b. empirically-derived exposure-response functions, c. guideline-based exposure-response functions, d. physical activity, e. self-perceived labor productivity, iii. occupational versus laboratory settings, c. mental performance (cognitive function, decision-making)., i. test scores, ii. athletic performance, iii. workplace performance, d. economic output, i. studies directly estimating the effect on heat exposure using economic output data, a. plant/firm-level output effects, b. region-level output effects, ii. studies borrowing exposure-response functions from occupational health literature, e. worker utility, f. summary of section viii.i.ii, iii. workplace characteristics and labor productivity effects of heat exposure, a. incentive structures, b. adaptation, c. summary of section viii.i.iii, j. appendix c. heat exposure methodology used in distributional analysis, i. acs data processing, ii. merging acs data with heat exposure measures, iii. calculate exposure by demographic and economic group, k. appendix d. definitions of core industry categories used in cost analysis, ix. technological feasibility, b. methodology, c. environmental monitoring, i. heat index, ii. wet bulb globe temperature (wbgt), iii. ambient temperature (at), iv. preliminary findings on environmental monitoring, d. engineering controls, i. workers exposed to heat generating process, a. preliminary feasibility finding for heat generating processes., ii. workers exposed to ambient heat, a. indoor workplaces, i. air-conditioning, ii. humidity control, iv. evaporative coolers, v. preliminary feasibility finding for indoor workplaces, b. outdoor workplaces, ii. air-conditioning for outdoor workers, iii. preliminary feasibility finding for outdoor workplaces, c. mobile workplaces, i. preliminary feasibility finding for mobile workplaces, e. preliminary feasibility findings, f. requests for comments, x. additional requirements, a. unfunded mandates reform act, 2 u.s.c. 1501 et seq., b. consultation and coordination with indian tribal governments/ executive order 13175, c. consultation with the advisory committee on construction safety and health, d. environmental impacts, e. consensus standards, f. incorporation by reference, g. protection of children from environmental health risks and safety risks, h. federalism, i. requirements for states with osha-approved state plans, j. omb review under the paperwork reduction act of 1995, a. overview, b. solicitation of comments, c. proposed collection of information requirements, d. submitting comments, e. docket and inquiries, xi. authority and signature, list of subjects in 29 cfr parts 1910 , 1915 , 1917 , 1918 , 1926 , and 1928, amendments to standards, part 1910—occupational safety and health standards, subpart a—general, subpart j—general environmental controls, part 1915—occupational safety and health standards for shipyard employment, subpart f—general working conditions, part 1917—marine terminals, subpart b—marine terminal operations, part 1918—safety and health regulations for longshoring, subpart l—occupational health and environmental controls, part 1926—safety and health regulations for construction, subpart d—occupational health and environmental controls, part 1928—occupational safety and health standards for agriculture.

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Department of Labor

Occupational safety and health administration.

• 29 CFR Part 1910, 1915, 1917, 1918, 1926, and 1928
• [Docket No. OSHA-2021-0009]
• RIN 1218-AD39

Occupational Safety and Health Administration (OSHA), Labor.

Notice of proposed rulemaking (NPRM); request for comments.

OSHA is proposing to issue a new standard, titled Heat Injury and Illness Prevention in Outdoor and Indoor Work Settings. The standard would apply to all employers conducting outdoor and indoor work in all general industry, construction, maritime, and agriculture sectors where OSHA has jurisdiction, with some exceptions. It would be a programmatic standard that would require employers to create a plan to evaluate and control heat hazards in their workplace. It would more clearly set forth employer obligations and the measures necessary to effectively protect employees from hazardous heat. OSHA requests comments on all aspects of the proposed rule.

Comments to this NPRM (including requests for a hearing) and other information must be submitted by December 30, 2024.

Informal public hearing: OSHA will schedule an informal public hearing on the proposed rule if requested during the comment period. If a hearing is requested, the location and date of the hearing, procedures for interested parties to notify the agency of their intention to participate, and procedures for participants to submit their testimony and documentary evidence will be announced in the Federal Register .

Written comments: You may submit comments and attachments, identified by Docket No. OSHA-2021-0009, electronically at https://www.regulations.gov , which is the Federal e-Rulemaking Portal. Follow the instructions online for making electronic submissions. After accessing “all documents and comments” in the docket (Docket No. OSHA-2021-0009), check the “proposed rule” box in the column headed “Document Type,” find the document posted on the date of publication of this document, and click the “Comment Now” link. When uploading multiple attachments to regulations.gov, please number all of your attachments because regulations.gov will not automatically number the attachments. This will be very useful in identifying all attachments. For example, Attachment 1—title of your document, Attachment 2—title of your document, Attachment 3—title of your document. For assistance with commenting and uploading documents, please see the Frequently Asked Questions on regulations.gov.

Instructions: All submissions must include the agency's name and the docket number for this rulemaking (Docket No. OSHA-2021-0009). All comments, including any personal information you provide, are placed in the public docket without change and may be made available online at https://www.regulations.gov . Therefore, OSHA cautions commenters about submitting information they do not want made available to the public, or submitting materials that contain personal information (either about themselves or others), such as Social Security Numbers and birthdates.

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C. Events Leading to Proposal

P. Heat-Related Injuries ( print page 70699)

F. Initial Regulatory Flexibility Analysis

Heat is the leading cause of death among all weather-related phenomena in the United States. Excessive heat in the workplace can cause a number of adverse health effects, including heat stroke and even death, if not treated properly. Yet, there is currently no Federal OSHA standard that regulates heat stress hazards in the workplace. Although several governmental and non-governmental organizations have published regulations and guidance to help protect workers from heat hazards, OSHA believes that a mandatory Federal standard specific to heat-related injury and illness prevention is necessary to address the hazards posed by occupational heat exposure. OSHA has preliminarily determined that this proposed rule would substantially reduce the risk posed by occupational exposure to hazardous heat by clearly setting forth employer obligations and the measures necessary to effectively protect exposed workers.

OSHA is proposing this standard pursuant to the Occupational Safety and Health Act of 1970, 29 U.S.C. 651 et seq. (OSH Act or Act). The Act authorizes the agency to issue safety or health standards that are “reasonably necessary or appropriate” to provide safe or healthful employment and places of employment ( 29 U.S.C. 652(8) ). A standard is reasonably necessary or appropriate when a significant risk of material harm exists in the workplace and the standard would substantially reduce or eliminate that workplace risk. Applicable legal requirements are more fully discussed in Section II., Pertinent Legal Authority.

Workers in both outdoor and indoor work settings without adequate climate controls are at risk of hazardous heat exposure. Certain heat-generating processes, machinery, and equipment ( e.g., hot tar ovens, furnaces) can also cause heat hazards when cooling measures are not in place. Based on the best available evidence, as discussed in this preamble, OSHA has preliminarily determined that exposure to hazardous heat in the workplace poses a significant risk of serious injury and illness. This finding of a significant risk of material harm is based on the health consequences associated with exposure to heat (see Section IV., Health Effects) as well as the risk assessment (see Section V., Risk Assessment and Section VI., Significance of Risk). In Section V.C., Risk Reduction, OSHA demonstrates the efficacy of the controls relied on in this proposed rule to reduce the risk of heat-related injury and illness in the workplace. Employees working in workplaces without these controls are at higher risk of severe health outcomes from exposure to hazardous heat.

On October 27, 2021, OSHA published in the Federal Register an advance notice of proposed rulemaking (ANPRM) for Heat Injury and Illness Prevention in Outdoor and Indoor Work Settings ( 86 FR 59309 ). The ANPRM outlined key issues and challenges in occupational heat-related injury and illness prevention and aimed to collect evidence, data, and information critical to informing how OSHA proceeds in the rulemaking process. The ANPRM included background information on injuries, illnesses, and fatalities due to heat, underreporting, scope, geographic region, and inequality in exposures and outcomes. The ANPRM also covered existing heat injury and illness prevention efforts including OSHA's efforts, the National Institute for Occupational Safety and Health (NIOSH) criteria documents, State standards, and other standards.

OSHA received 965 unique public comments, which largely supported the need for continued rulemaking. The agency then worked with the National Advisory Committee on Occupational Safety and Health (NACOSH) to assemble a Heat Injury and Illness Prevention Work Group. The Work Group was tasked with evaluating stakeholder input to the ANPRM and developing recommendations on potential elements of a proposed heat injury and illness prevention standard. The Work Group presented its recommendations on potential elements of a proposed heat injury and illness prevention standard for consideration by the full NACOSH committee. On May 31, 2023, NACOSH amended the report to ask OSHA to include a model written plan and then unanimously voted to submit the Work Group's recommendations to the Secretary of Labor.

In accordance with the requirements of the Small Business Regulatory Enforcement Fairness Act (SBREFA), OSHA next convened a Small Business Advocacy Review (SBAR) Panel in August 2023. The Panel, comprised of members from the Small Business Administration's (SBA) Office of Advocacy, OSHA, and OMB's Office of Information and Regulatory Affairs, heard comments directly from Small Entity Representatives (SERs) on the potential impacts of a heat-specific standard. The Panel received advice and recommendations from the SERs and reported its findings and recommendations to OSHA. OSHA has taken the SER's comments and the Panel's findings and recommendations into consideration in the development of this proposed rule (see Section VIII.F., Initial Regulatory Flexibility Analysis).

In accordance with 29 CFR parts 1911 and 1912 , OSHA also consulted with and considered feedback from the Advisory Committee on Construction ( print page 70700) Safety and Health (ACCSH). On April 24, 2024, the Committee unanimously passed a motion recommending that OSHA proceed expeditiously with proposing a standard on heat injury and illness prevention. In addition, in accordance with Executive Order 13175 , Consultation and Coordination with Indian Tribal Governments, 65 FR 67249 (Nov. 6, 2000), OSHA held a listening session on May 15, 2024, with Tribal representatives regarding this Heat Injury and Illness Prevention in Outdoor and Indoor Work Settings rulemaking and provided an opportunity for the representatives to offer feedback.

The proposed rule is a programmatic standard that requires employers to create a heat injury and illness prevention plan to evaluate and control heat hazards in their workplace. It establishes requirements for identifying heat hazards, implementing engineering and work practice control measures at or above two heat trigger levels ( i.e., an initial heat trigger and a high heat trigger), developing and implementing a heat illness and emergency response plan, providing training to employees and supervisors, and retaining records. The proposed rule would apply to all employers conducting outdoor and indoor work in all general industry, construction, maritime, and agriculture sectors, with some exceptions (see Section VII.A., Paragraph (a) Scope and Application). Throughout this document, OSHA seeks input on alternatives and potential exclusions.

Organizations affected by heat hazards vary significantly in size and workplace activities. Accordingly, many of the provisions of the proposed standard provide flexibility for affected employers to choose the control measures most suited to their workplace. The flexible nature of the proposed rule may be particularly beneficial to small organizations with limited resources.

Additionally, to determine whether the proposed rule is feasible for affected employers, and in accordance with Executive Orders 12866 and 13563, the Regulatory Flexibility Act (RFA), and the Unfunded Mandates Reform Act ( 2 U.S.C 1501 et seq. ), OSHA has prepared a Preliminary Economic Analysis (PEA), including an Initial Regulatory Flexibility Analysis (see Section VIII., Preliminary Economic Analysis and Initial Regulatory Flexibility Analysis). Supporting materials prepared by OSHA are available in the public docket for this rulemaking, Document ID OSHA-2021-0009, through regulations.gov.

In the Occupational Safety and Health Act, 29 U.S.C. 651 et seq., Congress authorized the Secretary of Labor (“the Secretary”) “to set mandatory occupational safety and health standards applicable to businesses affecting interstate commerce” ( 29 U.S.C. 651(b)(3) ; see Nat'l Fed'n of Indep. Bus. v. Dep't of Labor, 595 U.S. 109, 117 (2022) (per curiam); see also 29 U.S.C. 654(a)(2) (requiring employers to comply with OSHA standards)). Section 6(b) of the Act authorizes the promulgation, modification or revocation of occupational safety or health standards pursuant to detailed notice and comment procedures ( 29 U.S.C. 655(b) ).

Section 3(8) of the Act defines a safety or health standard as a standard which requires conditions, or the adoption or use of one or more practices, means, methods, operations, or processes “reasonably necessary or appropriate” to provide safe or healthful employment and places of employment ( 29 U.S.C. 652(8) ). A standard is reasonably necessary or appropriate within the meaning of section 3(8) when a significant risk of material harm exists in the workplace and the standard would substantially reduce or eliminate that workplace risk (see Indus. Union Dep't, AFL-CIO v. Am. Petroleum Inst., 448 U.S. 607 (1980) (“ Benzene ”)). OSHA's authority extends to, for example, removing workers from environments where workplace hazards exist (see, e.g., United Steelworkers of America v. Marshall, 647 F.2d 1189, 1228-38 (D.C. Cir. 1981); 29 CFR 1910.1028(i)(8) ; 29 CFR 1910.1024(l) ; cf. Whirlpool Corp. v. Marshall, 445 U.S. 1, 12 (1980) (upholding regulation allowing employees to refuse dangerous work in certain circumstances because “[t]he Act does not wait for an employee to die or become injured.”).

In addition to the requirement that each standard address a significant risk, standards must also be technologically feasible (see UAW v. OSHA, 37 F.3d 665, 668 (D.C. Cir. 1994)). A standard is technologically feasible when the protective measures it requires already exist, when available technology can bring the protective measures into existence, or when that technology is reasonably likely to develop (see Am. Iron and Steel Inst. v. OSHA, 939 F.2d 975, 980 (D.C. Cir. 1991)).

Finally, a standard must be economically feasible (see Forging Indus. Ass'n v. Secretary of Labor, 773 F.2d 1436, 1453 (4th Cir. 1985)). A standard is economically feasible if industry can absorb or pass on the costs of compliance without threatening its long-term profitability or competitive structure (see American Textile Mfrs. Inst., Inc., 452 U.S. 490, 530 n.55 (“ Cotton Dust ”)). Each of these requirements is discussed further below.

As noted above, OSHA's workplace safety and health standards must address a significant risk of material harm that exists in the workplace (see Benzene, 448 U.S. at 614-15). The agency's risk assessments are based on the best available evidence, and its final conclusions are made only after considering all information in the rulemaking record. Reviewing courts have upheld the Secretary's significant risk determinations where supported by substantial evidence and “a reasoned explanation for [their] policy assumptions and conclusions” ( Bldg & Constr. Trades Dep't v. Brock, 838 F.2d 1258, 1266 (D.C. Cir. 1988) (“ Asbestos II ”)).

The Supreme Court in Benzene explained that “[i]t is the agency's responsibility to determine, in the first instance, what it considers to be a `significant' risk” ( Benzene, 448 U.S. at 655). The Court declined to “express any opinion on the . . . difficult question of what factual determinations would warrant a conclusion that significant risks are present which make promulgation of a new standard reasonably necessary or appropriate” ( Benzene, 448 U.S. at 659). The Court stated, however, that the substantial evidence standard applicable to OSHA's significant risk determination (see 29 U.S.C. 655(b)(f) ) does not require the agency “to support its finding that a significant risk exists with anything approaching scientific certainty” ( Benzene, 448 U.S. at 656). Rather, OSHA may rely on “a body of reputable scientific thought” to which “conservative assumptions in interpreting the data” may be applied, “risking error on the side of overprotection” ( Benzene, 448 U.S. at 656). The D.C. Circuit has further explained that OSHA may thus act with a pronounced bias towards worker safety in making its risk determinations ( Asbestos II, 838 F.2d at 1266). The Supreme Court also recognized that the determination of what constitutes “significant risk” is “not a mathematical straitjacket” and will be “based largely on policy considerations” ( Benzene, 448 U.S. at 655 & n.62).

Once OSHA makes its significant risk finding, the standard it promulgates must be “reasonably necessary or appropriate” to reduce or eliminate that ( print page 70701) risk ( 29 U.S.C. 652(8) ). In choosing among regulatory alternatives, however, “[t]he determination that [one standard] is appropriate, as opposed to a marginally [more or less protective] standard, is a technical decision entrusted to the expertise of the agency” ( Nat'l Mining Ass'n v. Mine Safety and Health Admin., 116 F.3d 520, 528 (D.C. Cir. 1997) (analyzing a Mine Safety and Health Administration standard under the Benzene significant risk standard)).

The statutory mandate to consider the feasibility of the standard encompasses both technological and economic feasibility; OSHA has performed these analyses primarily on an industry-by-industry basis ( United Steelworkers of Am., AFL-CIO-CLC v. Marshall, 647 F.2d 1189, 1264, 1301 (D.C. Cir. 1980) (“ Lead I ”)). The agency has also used application groups, defined by common tasks, as the structure for its feasibility analyses ( Pub. Citizen Health Research Grp. v. OSHA, 557 F.3d 165, 177-79 (3d Cir. 2009)). The Supreme Court has broadly defined feasible as “capable of being done” ( Cotton Dust, 452 U.S. at 509-10).

A standard is technologically feasible if the protective measures it requires already exist, can be brought into existence with available technology, or can be created with technology that can reasonably be expected to be developed ( Lead I, 647 F.2d at 1272; Amer. Iron & Steel Inst. v. OSHA, 939 F.2d 975, 980 (D.C. Cir. 1991) (“ Lead II ”)). Courts have also interpreted technological feasibility to mean that a typical firm in each affected industry or application group will reasonably be able to implement the requirements of the standard in most operations most of the time (see Public Citizen v. OSHA, 557 F.3d 165, 170-71 (3d Cir. 2009); Lead I, 647 F.2d at 1272; Lead II, 939 F.2d at 990)). OSHA's standards may be “technology forcing,” so long as the agency gives an industry a reasonable amount of time to develop new technologies to comply with the standard. Thus, OSHA is not bound by the “technological status quo” ( Lead I, 647 F.2d at 1264).

In addition to technological feasibility, OSHA is required to demonstrate that its standards are economically feasible. A reviewing court will examine the cost of compliance with an OSHA standard “in relation to the financial health and profitability of the industry and the likely effect of such costs on unit consumer prices” ( Lead I, 647 F.2d at 1265 (citation omitted)). As articulated by the D.C. Circuit in Lead I, “OSHA must construct a reasonable estimate of compliance costs and demonstrate a reasonable likelihood that these costs will not threaten the existence or competitive structure of an industry, even if it does portend disaster for some marginal firms” ( Lead I, 647 F.2d at 1272). A reasonable estimate entails assessing “the likely range of costs and the likely effects of those costs on the industry” ( Lead I, 647 F.2d at 1266). As with OSHA's consideration of scientific data and control technology, however, the estimates need not be precise ( Cotton Dust, 452 U.S. at 528-29 & n.54), as long as they are adequately explained.

OSHA standards satisfy the economic feasibility criterion even if they impose significant costs on regulated industries so long as they do not cause massive economic dislocations within a particular industry or imperil the very existence of the industry ( Lead II, 939 F.2d at 980; see also Lead I, 647 F.2d at 1272; Asbestos I, 499 F.2d. at 478). As with its other legal findings, OSHA “is not required to prove economic feasibility with certainty, but is required to use the best available evidence and to support its conclusions with substantial evidence” ( Lead II, 939 F.2d at 980-81 (citing Lead I, 647 F.2d at 1267)).

In addition to determining economic feasibility, OSHA estimates the costs and benefits of its proposed and final rules to ensure compliance with other requirements such as those in Executive Orders 12866 and 13563.

Safety standards must provide a high degree of employee protection to be consistent with the purpose of the Act (see Control of Hazardous Energy Sources (Lockout/Tagout) Final Rule, Supplemental Statement of Reasons, 58 FR 16612 , 16614-15 (March 30, 1993)). OSHA has preliminarily determined that this proposed standard is a safety standard because the health effects associated with exposure to occupational heat are generally acute. As explained in Section IV., Health Effects, the proposed standard aims to address the numerous acute health effects of occupational exposure to hazardous heat. These include, among other things, heat stroke, heat exhaustion, heat syncope, and physical injuries ( e.g., falls) due to fatigue or other heat-related impairments. These harms occur after relatively short-term exposures to hazardous heat and are typically apparent at the time of the exposure or shortly thereafter. Consequently, the link between these harms and heat exposures is also often apparent and they do not implicate the concerns about latent, hidden harms that underly health standards (see Benzene, 448 U.S. at 649 n. 54; UAW v. OSHA, 938 F.2d 1310, 1313 (D.C. Cir. 1991) (“ Lockout/Tagout I ”); National Grain & Feed Ass'n v. OSHA, 866 F.2d 717, 733 (5th Cir. 1989) (“ Grain Dust ”)).

Finally, although OSHA acknowledges that there is growing evidence occupational exposure to hazardous heat may lead to some chronic adverse health outcomes like chronic kidney disease, much of the science in this area is still developing (see Section IV., Health Effects). In any event, the agency expects that addressing the acute hazards posed by heat would also protect workers from potential chronic health outcomes by reducing workers' overall heat strain.

The Occupational Safety and Health Administration (OSHA) is proposing a new standard to protect outdoor and indoor workers from hazardous heat in the workplace. OSHA promulgates and enforces occupational safety and health standards under authority granted by the Occupational Safety and Health (OSH) Act of 1970 ( 29 U.S.C. 651 et seq. ).

In the absence of a Federal occupational heat standard, five States have issued heat injury and illness prevention regulations to protect employees exposed to heat hazards in the workplace: Minnesota (Minn. R. 5205.0110 (1997)); California (Cal. Code of Regs. tit. 8, section 3395 (2005)); Oregon (Or. Admin. R. 437-002-0156 (2022); Or. Admin. R. 437-004-1131 (2022)); Colorado (7 Colo. Code Regs. section 1103-15 (2022)); and Washington (Wash. Admin. Code sections 296-62-095 through 296-62-09560; 296-307-097 through 296-307-09760 (2023)). Although Minnesota was the first State to adopt a standard covering employees exposed to indoor environmental heat conditions, California was the first State to adopt a standard covering employees exposed to outdoor environmental heat conditions. Washington, Oregon, and Colorado have since enacted similar regulations to California's, requiring employers to implement controls and monitor for signs and symptoms of heat-related injury or illness, among other requirements. In 2023, California proposed a new standard that would cover indoor work environments (California, 2023). In 2024, Maryland ( print page 70702) published a proposed standard that would cover both outdoor and indoor work environments (Maryland, 2024).

Workers in many industries are at risk for heat-related injury and illness stemming from hazardous heat exposure (see Section V.A., Risk Assessment). While the general population may be able to avoid and limit prolonged heat exposure, workers across a wide range of indoor and outdoor settings often are required to work through shifts with prolonged heat exposure. Some workplaces have heat generation from industrial processes and expose workers to sources of radiant heat, such as ovens and furnaces. Additionally, employers may not take adequate steps to protect their employees from exposure to hazardous heat ( e.g., not providing rest breaks in cool areas). Many work operations also require the use of personal protective equipment (PPE) that can reduce the worker's heat tolerance because it can decrease the body's ability to cool down. Workers may also face pressure, or incentivization through pay structures, to push through and continue working despite high heat exposure, which can increase the risk of heat-related injury and illness (Billikopf and Norton, 1992; Johansson et al., 2010; Spector et al., 2015; Pan et al., 2021).

OSHA uses several terms related to excessive heat exposure throughout this proposal. Heat stress is the combined load of heat that a person experiences from sources of heat ( i.e., metabolic heat and the environment) and heat retention ( e.g., from clothing or personal protective equipment). Heat strain refers to the body's response to heat stress (American Conference of Governmental Industrial Hygienists (ACGIH), 2023). Heat-related illness means adverse clinical health outcomes that occur due to heat exposure, such as heat exhaustion or heat stroke. Heat-related injury means an injury linked to heat exposure, such as a fall or cut. OSHA sometimes refers to these collectively as “heat-related injuries and illnesses.”

Occupational heat exposure affects millions of workers in the United States. Each year, thousands of workers experience heat-related injuries and illnesses, and some of these cases result in fatalities (BLS, 2023b; BLS, 2024c). OSHA has relied on the General Duty Clause of the OSH Act (discussed further below), as well as enforcement emphasis programs and hazard alerts and other guidance, to protect workers and inform employers of their legal obligations. However, a standard specific to heat-related injury and illness prevention would more clearly set forth enforceable employer obligations and the measures necessary to effectively protect employees from hazardous heat.

Workers in both outdoor and indoor work settings without adequate climate controls are at risk of hazardous heat exposure. In addition to weather-related heat, certain heat-generating processes, machinery, and equipment ( e.g., hot tar ovens, furnaces) can cause hazardous heat exposure when cooling measures are not in place. An evaluation of 66 heat-related illness enforcement investigations from 2011-2016 found heat-related injuries and illnesses, including fatalities, occurring in both outdoor (n=34) and indoor (n=29) work environments (Tustin et al., 2018a). Excessive heat exacerbates existing health conditions like asthma, diabetes, kidney failure, and heart disease, and can cause heat stroke and death if not treated properly and promptly. Some groups may be more likely to experience adverse health effects from heat, such as pregnant workers (NIOSH, 2024), while others are disproportionately exposed to hazardous levels of heat, such as workers of color in essential jobs, who are more often employed in work settings with a high risk of hazardous heat exposure (Gubernot et al., 2015).

The Bureau of Labor Statistics (BLS), in its Census of Fatal Occupational Injuries, documented 1,042 U.S. worker deaths due to occupational exposure to environmental heat from 1992-2022, with an average of 34 fatalities per year during that period (BLS, 2024c). In 2022 alone, BLS reported 43 work-related deaths due to environmental heat exposure (BLS, 2024c). The BLS Annual Survey of Occupational Injuries and Illnesses (SOII) estimates 33,890 work-related heat injuries and illnesses involving days away from work from 2011-2020, which is an average of 3,389 injuries and illnesses occurring each year during this period (BLS, 2023b).

Workers across hundreds of industries are at risk for hazardous heat exposure and resulting heat-related injuries and illnesses. From January 1, 2017, to December 31, 2022, 1,054 heat-related injuries, illnesses, and fatalities were reported to and investigated by OSHA, including 625 heat-related hospitalizations and 211 heat-related fatalities, as well as 218 heat-related injuries and illnesses that did not result in hospitalization. During this time, hospitalizations occurred most frequently in construction, manufacturing, and postal and delivery service. Fatalities were most frequently reported in construction, landscaping, agriculture, manufacturing, and postal and delivery service (as identified by 2-digit NAICS codes).

However, as explained in Section V.A., Risk Assessment, these statistics likely do not capture the true magnitude and prevalence of heat-related injuries, illnesses, and fatalities. Recent studies demonstrate significant undercounting of occupational injuries and illnesses by both the BLS SOII and OSHA's enforcement data. One reason for this undercounting is that the BLS SOII only reports the number of heat-related injuries and illnesses involving days away from work and thus does not capture the full picture of heat-related injuries and illnesses. An examination of workers' compensation claims in California, which include more than only cases involving days away from work, identified 3 to 6 times the number of annual heat-related illness and injury cases than reported by BLS SOII (Heinzerling et al., 2020). In addition, evidence has shown significant underreporting as employers and employees are disincentivized from reporting injuries and illnesses due to several factors, including potential increases in workers' compensation costs or impacts on the employer's reputation, or an employee's fear of retaliation or lack of awareness of their right to speak out about workplace conditions (BLS, 2020b).

Heat-related injuries and illnesses may present unique challenges to surveillance efforts. As the nature of heat-related symptoms ( e.g., headache, fatigue) vary, some cases may be attributed to other illnesses rather than heat (as discussed in Section IV., Health Effects). Furthermore, heat is not always identified as a contributing factor to fatality, as heat exposure may exacerbate existing medical conditions and medical professionals may not witness the symptoms and events preceding death (Luber et al., 2006).

Finally, exposure to heat can interfere with routine occupational tasks and impact workers' psychomotor and mental performance, which can lead to workplace injuries. Particularly, heat can impair performance of job tasks related to complex cognitive function (Hancock and Vasmatzidis, 2003; Piil et al., 2017) and reduce decision making abilities (Ramsey et al., 1983; Xiang et al., 2014a) and productivity (Foster et al., 2021). A growing body of evidence has demonstrated that heat-induced impairments may result in significant occupational injuries that are not currently factored into official statistics for heat-related cases (Spector et al., 2016; Calkins et al., 2019; Dillender, 2021; Park et al., 2021). See Section V.A., Risk Assessment, for further ( print page 70703) discussion on underreporting of heat-related injuries, illnesses, and fatalities.

While a significant percentage of heat-related incidents are unreported, OSHA's investigations of reported heat-related fatalities point to many gaps in employee protections. OSHA has identified the following circumstances in its review of 211 heat-related fatality investigations from 2017-2022: employees left alone by employers after symptoms started; employers not providing adequate medical attention to employees with symptoms; employers preventing employees from taking rest breaks; employers not providing water on-site; employers not providing on-site access to shade; employers not providing cooling measures on-site; and employers not having programs to acclimatize employees to hot work environments ( https://www.osha.gov/​fatalities ). OSHA has relied on multiple mechanisms to protect employees from hazardous heat, however, OSHA's efforts to prevent the aforementioned circumstances have been met with challenges without a heat-specific standard (as discussed in Section III.C.III., OSHA's Heat-Related Enforcement).

Many U.S. States run their own OSHA-approved State Plans ( e.g., State heat standards, voluntary consensus standards) (see Section III.D., Other Standards), however OSHA has preliminarily determined that this standard is still needed to protect workers from the persistent and serious hazards posed by occupational heat exposure. As explained in Section VI., Significance of Risk, OSHA has preliminarily determined that a significant risk of material harm from occupational exposure to hazardous heat exists, and issuance of this standard would substantially reduce that risk. Therefore, to more clearly set forth employer obligations and the measures necessary to more effectively protect employees from hazardous heat, and reduce the number and frequency of occupational injuries, illness, and fatalities caused by exposure to hazardous heat, OSHA is proposing a Federal standard for Heat Injury and Illness Prevention for Outdoor and Indoor Work Settings.

Heat exposure has long been recognized as an occupational hazard. For example, in the United States, the occupational hazards associated with the construction of the Hoover Dam between 1931 and 1935 brought attention to the effects of heat on worker health. The Bureau of Reclamation reported that 14 dam workers and two others residing in the work area died from “heat prostration” in 1931 (Bureau of Reclamation, 2015). According to a local newspaper, temperatures at the dam site that summer reached 140 °F in the sun and 120 °F in the shade (Turk, 2018; Rogers, 2012). In response to the extreme heat of the summer and other unsafe working conditions, the Industrial Workers of the World convinced Hoover Dam workers to strike over safety concerns (Turk, 2018; Rogers, 2012). Six Companies, the conglomerate of companies hired by the Bureau of Reclamation to construct most of the dam, was forced to make concessions, including protections against HRI such as providing potable water in dormitories, bringing ice water to workers at their work sites, and adding first aid stations closer to the job site (Rogers, 2012). The heat-related deaths that occurred during 1931 also prompted Harvard University researchers from the Harvard Fatigue Laboratory to travel to the Hoover Dam and study the relationship between hot, dry temperatures, physical performance, and heart rate (Turk, 2018).

Heat-related illnesses were identified as a major concern for the U.S. military in the 1940s and 1950s. Between 1942 and 1944, 198 soldiers died of heat stroke at U.S.-based training camps, 157 of which did not have a known history of cardiac diseases or other conditions that may predispose them to heat illness (Schickele, 1947, p. 236). This led to investigations of the environmental conditions at the time of these deaths, and eventually to the development of wet bulb globe temperature (WBGT) to measure heat stress (Yaglou and Minard, 1957; Minard, 1961; Department of the Army, 2022; Department of the Navy, 2023).

Research on the effects of occupational heat exposure continued in the 1960s, as researchers conducted trials examining the physiological effects of work at various temperatures ( e.g., Lind, 1963). Findings from these trials would eventually underpin the American Conference of Governmental Industrial Hygienists (ACGIH) Threshold Limit Value (TLV), as well as the National Institute of Occupational Safety and Health (NIOSH) Recommended Exposure Limit (REL) (Dukes-Dobos and Henschel, 1973). ACGIH first proposed guidelines for a TLV in 1971, which were later adopted in 1974.

Heat was recognized as a preventable workplace hazard in the legislative history of the OSH Act. Senator Edmund Muskie submitted a letter in support of the OSH Act into the Congressional record on behalf of “a distinguished group of citizens, including a former Secretary of Labor and several noted scientists.” (Senate Debate on S. 2193, Nov. 16, 1970), reprinted in Legislative History of the Occupational Safety and Health Act of 1970, pp. 513-14 (1971) (Committee Print) (“Leg. Hist.”). The letter states, “Most industrial diseases and accidents are preventable. Modern technological and medical sciences are capable of solving the problems of noise, dust, heat, fumes, and toxic substances in the plants. However, existing legislation in this area does not begin to meet the problems” (Leg. Hist., pp. 513-14).

In 1972, just two years after promulgation of the OSH Act, NIOSH first recommended a potential OSHA heat standard in its Criteria for a Recommended Standard (NIOSH, 1972). This criteria document, issued under the authority of section 20(a) of the OSH Act, recommended an OSHA standard based on a critical review of scientific and technical information. In response, an OSHA Standards Advisory Committee on Heat Stress was appointed in 1973 and presented recommendations for a standard for work in hot environments in 1974. At the time, 12 of 15 members of the advisory committee agreed that occupational heat stress warranted a standard (Ramsey, 1975).

NIOSH's criteria document for a recommended standard has since been updated in 1986 (NIOSH, 1986) and again in 2016 (NIOSH, 2016). The 2016 criteria document recommends various provisions to protect workers from heat stress, including rest breaks, hydration, shade, acclimatization plans, and worker training (NIOSH, 2016). The 2016 criteria document also recommends that no worker be “exposed to combinations of metabolic and environmental heat greater than” the recommended alert limit (RAL) for unacclimatized workers or the recommended exposure limit (REL) for acclimatized workers). The document recommends that environmental heat be assessed with measurements of WBGT (NIOSH, 2016).

A detailed report of the history of heat as a recognized occupational hazard is available in the docket (ERG, 2024a). The report summarizes historical documentation of occupational heat-related illness beginning in ancient times and from the eighteenth century through the regulatory interest in the twentieth century. ( print page 70704)

In 2011, OSHA issued a memorandum to inform regional administrators and State Plan designees of inspection guidance for heat-related illnesses (OSHA, 2011). That same year, OSHA launched the Heat Illness Prevention Campaign ( https://www.osha.gov/​heat ) to build awareness of prevention strategies and tools for employers and workers to reduce occupational heat-related illness. In its original form, the Campaign delivered a message of “Water. Rest. Shade.” The agency updated Campaign materials in 2021 to recognize both indoor and outdoor heat hazards, as well as the importance of protecting new and returning workers from hazardous heat with an acclimatization period.

In addition, OSHA maintains on its website a Heat Topics page on workplace heat exposure ( https://www.osha.gov/​heat-exposure/​ ), which provides additional information and resources. The page provides information on planning and supervision in hot work environments, identification of heat-related illness and first aid, information on prevention such as training, calculating heat stress and controls, personal risk factors, descriptions of other heat standards and case study examples of situations where workers developed heat-related illness. OSHA and NIOSH also co-developed a Heat Safety Tool Smartphone App for both Android and iPhone devices (see www.osha.gov/​heat/​heat-app ). The app provides outdoor, location-specific temperature, humidity, and heat index (HI) readings. Measurements for indoor work sites must be collected and manually entered into the app by the user for accurate calculations. The app also provides relevant information on identifying signs and symptoms of heat-related illness and steps to prevent heat-related injuries and illnesses. Despite the strengths and reach of the Campaign, Heat Topics page, and Heat Safety Tool App, these guidance and communication materials are not legally enforceable requirements.

Without a specific standard governing hazardous heat conditions at workplaces, the agency currently enforces section 5(a)(1) (the General Duty Clause) of the OSH Act against employers that expose their workers to this recognized hazard. Section 5(a)(1) states that employers have a general duty to furnish to each of their employees “employment and a place of employment which are free from recognized hazards that are causing or are likely to cause death or serious physical harm” to employees ( 29 U.S.C. 654(a)(1) ). To prove a violation of the General Duty Clause, OSHA must establish—in each individual case—that: (1) the employer failed to keep the workplace free of a hazard to which its employees were exposed; (2) the hazard was recognized; (3) the hazard was causing or likely to cause death or serious injury; and (4) a feasible means to eliminate or materially reduce the hazard existed (see, e.g., A.H. Sturgill Roofing, Inc., 2019 O.S.H. Dec. (CCH) ¶  33712, 2019 WL 1099857 (No. 13-0224, 2019)).

OSHA has relied on the General Duty Clause to cite employers for heat-related hazards for decades (see, e.g., Duriron Co., 11 BNA OSHC 1405, 1983 WL 23869 (No. 77-2847, 1983), aff'd, 750 F.2d 28 (6th Cir. 1984)). According to available OSHA enforcement data, between 1986 and 2023, Federal OSHA issued at least 348 hazardous heat-related citations under the General Duty Clause. Of these citations, 85 were issued between 1986-2000 (OSHA, 2024b). Citations were identified using multiple queries of OSHA enforcement data and then manually reviewed to ensure the inclusion of only citations due to heat exposure and no other exposures ( e.g., burns or explosions). Several keywords were utilized to filter the data for inclusion ( e.g., “heat,” “heat stress,” “heat illness,” “WBGT”) and exclusion ( e.g., “explosion,” “flash,” “electrical burn,” “fire”). Due to limitations of the data set on which OSHA relied, OSHA did not have access to violation text descriptions of citations issued before the mid-1980s and thus did not determine how many are related to heat exposure prior to this time period. Additionally, over half of the citations from 1986-1989 are missing violation text descriptions, which likely resulted in an undercount of heat-related citations.

OSHA has used its general inspection authority ( 29 U.S.C. 657 ) to target heat-related injuries and illnesses in various Regional Emphasis Programs (REPs). OSHA enforcement emphasis programs focus the agency's resources on particular hazards or high-hazard industries (see Marshall v. Barlow's, Inc. , 436 U.S. 307, 321 (1978) (affirming OSHA's use of an administrative plan containing specific neutral criteria to focus inspections)). OSHA's Region VI regional office, located in Dallas, TX, has a heat-related special REP (OSHA, 2019). This region covers Texas, New Mexico, Oklahoma, Arkansas, and Louisiana. OSHA's Region IX regional office, located in San Francisco, CA, also has a heat-related REP (OSHA, 2022). This region covers American Samoa, Arizona, California, Guam, Hawaii, Nevada, and the Northern Mariana Islands. These REPs allow field staff to conduct heat illness inspections of outdoor work activities on days when the high temperature is forecasted to be above 80 °F.

On September 1, 2021, OSHA issued updated Inspection Guidance for Heat-Related Hazards, which established a new enforcement initiative to protect employees from heat-related injuries and illnesses while working in hazardous hot indoor and outdoor environments (OSHA, 2021). The guidance provided that days when the heat index exceeds 80 °F would be considered heat priority days. It announced that enforcement efforts would be increased on heat priority days for a variety of indoor and outdoor industries, with the aim of identifying and mitigating potential hazards and preventing heat-illnesses before they occur.

In April 2022, OSHA launched a National Emphasis Program (NEP) to protect employees from heat-related hazards and resulting injuries and illnesses in outdoor and indoor workplaces. The NEP expanded the agency's ongoing heat-related injury and illness prevention initiatives and campaign by setting forth a targeted enforcement component and reiterating its compliance assistance and outreach efforts. The NEP targets specific industries expected to have the highest exposures to heat-related hazards and resulting illnesses and deaths. This approach is intended to encourage early interventions by employers to prevent illnesses and deaths among workers during high heat conditions (CPL 03-00-024). As of June 26, 2024, OSHA has conducted 5,038 Heat NEP Federal inspections. More than 1,229 of these were initiated by complaints and 117 were due to the occurrence of a fatality or catastrophe. As a result of these inspections, OSHA issued 56 General Duty Clause citations and 736 Hazard Alert Letters (HALs). Inspections occurred across various industries (as identified by 2-digit NAICS codes) including construction, which had the highest number of inspections, as well as manufacturing, maritime, agriculture, transportation, warehousing, food services, waste management, and remediation services.

On July 27, 2023, OSHA issued a heat hazard alert to remind employers of their obligation to protect workers against heat injury and illness in outdoor and indoor workplaces. The alert highlights what employers can and ( print page 70705) should be doing to protect employees. It also serves to remind employees of their rights, including protections against retaliation. In addition, the alert highlights steps OSHA is currently taking to protect workers and directs employers, employees, and the public to OSHA resources, including guidance and fact sheets on heat.

OSHA's efforts to protect employees from hazardous heat conditions using the General Duty Clause, although important, have limitations leaving many workers vulnerable to heat-related hazards. For example, the Commission has struggled to determine exactly what conditions create a recognized heat hazard under the General Duty Clause, and has therefore suggested the necessity of a standard (see, A.H. Sturgill Roofing, Inc., 2019 OSHD (CCH) ¶  33712, 2019 WL 1099857, at *2-5 and n.8 (No. 13-0224, 2019) (“The Secretary's failure to establish the existence of an excessive heat hazard here illustrates the difficulty in addressing this issue in the absence of an OSHA standard.”); U.S. Postal Service, 2023 OSHD (CCH) ¶ 33908, 2023 WL 2263313, at *3 n.7 (Nos. 16-1713, 16-1872, 17-0023,17-0279, 2023) (noting Commissioner Laihow's opinion that “A myriad of factors, such as the geographical area where the work is being performed and the nature of the tasks involved, can impact” whether excessive heat is present, and indicating that a standard is therefore necessary to define the hazard).

Under the General Duty Clause, OSHA cannot require abatement before proving in an enforcement proceeding that specific workplace conditions are hazardous; whereas a standard would establish the existence of the hazard at the rulemaking stage, thus allowing OSHA to identify and require specific abatement measures without having to prove the existence of a hazard in each case (see Sanderson Farms, Inc. v. Perez, 811 F.3d 730, 735 (5th Cir. 2016) (“Since OSHA is required to determine that there is a hazard before issuing a standard, the Secretary is not ordinarily required to prove the existence of a hazard each time a standard is enforced.”)). Given OSHA's burden under the General Duty Clause, it is currently difficult for OSHA to ensure necessary abatement before employee lives and health are unnecessarily endangered. Further, under the General Duty Clause OSHA must largely rely on expert witness testimony to prove both the existence of a hazard and the availability of feasible abatement measures that will materially reduce or eliminate the hazard in each individual case (see, e.g., Industrial Glass, 15 BNA OSHC 1594, 1992 WL 88787, at *4-7 (No. 88-348, 1992)).

Moreover, as OSHA has noted in similar contexts, standards have the advantage of providing greater clarity to employers and employees of the measures required to protect employees and are developed with the benefit of information gathered in the notice and comment process (see 86 FR 32376 , 32418 (Jun. 21, 2021) (COVID-19 Healthcare ETS); 56 FR 64004 , 64007 (Dec. 6, 1991) (Bloodborne Pathogens Standard)).

OSHA currently has other existing standards that, while applicable to some issues related to hazardous heat, have not proven to be adequate in protecting workers from exposure to hazardous heat. For example, OSHA's Recordkeeping standard ( 29 CFR 1904.7 ) requires employers to record and report injuries and illnesses that meet recording criteria. Additionally, the agency's Sanitation standards ( 29 CFR 1910.141 , 1915.88 , 1917.127 , 1926.51 , and 1928.110 ) require employers to provide potable water readily accessible to workers. While these standards require that drinking water be made available in “sufficient amounts,” they do not specify quantities, and employers are not required to encourage workers to frequently hydrate on hot days.

OSHA's Safety Training and Education standard ( 29 CFR 1926.21 ) requires employers in the construction industry to train employees in the recognition, avoidance, and prevention of unsafe conditions in their workplaces. OSHA's PPE standards ( 29 CFR 1910.132 , 1915.152 , 1917.95 , and 1926.28 ) require employers to conduct a hazard assessment to determine the appropriate PPE to be used to protect employees from the hazards identified in the assessment. However, hazardous heat is not specifically identified as a hazard for which workers need training or PPE, complicating the application of these requirements to hazardous heat.

OSHA has received multiple petitions to promulgate a heat injury and illness prevention standard, including in 2018 from Public Citizen, on behalf of approximately 130 organizations (Public Citizen et al., 2018). OSHA has also been urged by members of Congress to initiate rulemaking for a Federal heat standard, as well as by the Attorneys General of several States in 2023.

On October 27, 2021, OSHA published an advance notice of proposed rulemaking (ANPRM) for Heat Injury and Illness Prevention in Outdoor and Indoor Work Settings in the Federal Register ( 86 FR 59309 ) (referred to as “the ANPRM” hereafter). The ANPRM outlined key issues and challenges in occupational heat-related injury and illness prevention and aimed to collect evidence, data, and information critical to informing how OSHA proceeds in the rulemaking process. The ANPRM included background information on injuries, illnesses, and fatalities due to heat, underreporting, scope, geographic region, and inequality in exposures and outcomes. The ANPRM also covered existing heat injury and illness prevention efforts, including OSHA's efforts, the NIOSH criteria documents, State standards, and other standards. The initial public comment period was extended and closed on January 26, 2022. In response to the ANPRM, OSHA received 965 unique comments. The comments covered several topics, including the scope of a standard, heat stress thresholds for workers across various industries, heat acclimatization planning, and heat exposure monitoring, as well as the nature, types, and effectiveness of controls that may be required as part of a standard.

Following the publication of the ANPRM, OSHA presented topics from the ANPRM and updates on the heat rulemaking to several stakeholders, including several trade associations, the Office of Advocacy of the Small Business Administration's (SBA's Office of Advocacy) Labor Safety Roundtable (November 19, 2021), and NIOSH National Occupational Research Agenda (NORA) councils, including the Construction Sector Council (November 17, 2021), Landscaping Safety Workgroup (January 12, 2022), and Oil and Gas Extraction Sector (April 7, 2022).

On May 3, 2022, OSHA held a virtual public stakeholder meeting on the agency's “Initiatives to Protect Workers from Heat-Related Hazards.” A total of over 1,300 people attended the virtual meeting, and the recorded video has been viewed over 3,500 times (see www.youtube.com/​watch?​v=​Ud29WsnsOw8 ) as of June 2024. The six-hour meeting provided stakeholders an opportunity to learn about and comment on efforts OSHA is taking to protect workers from heat-related hazards and ways the public can participate in the agency's rulemaking process.

OSHA also established a Heat Injury and Illness Prevention Work Group of the National Advisory Committee on Occupational Safety and Health (NACOSH) to support the agency's rulemaking and outreach efforts. The Work Group was tasked with reviewing ( print page 70706) and developing recommendations on OSHA's heat illness prevention guidance materials, evaluating stakeholder input, and developing recommendations on potential elements of any proposed heat injury and illness prevention standard. On May 31, 2023, the Work Group presented its recommendations on potential elements of a proposed heat injury and illness prevention standard for consideration by the full NACOSH committee. The Work Group recommended that any proposed heat injury and illness prevention standard include: a written exposure control plan/heat illness prevention plan; training; environmental monitoring; workplace control measures; acclimatization; worker participation; and emergency response (Document ID OSHA-2023-0003-0007). After deliberations, NACOSH amended the report to ask OSHA to include a model written plan and then submitted its recommendations to the Secretary of Labor (Document ID OSHA-2023-0003-0012).

As an initial rulemaking step, OSHA convened a Small Business Advocacy Review Panel (SBAR Panel) on August 25, 2023, in accordance with the Regulatory Flexibility Act (RFA) ( 5 U.S.C. 601 et seq. ), as amended by the Small Business Regulatory Enforcement Act (SBREFA) of 1996. This SBAR Panel consisted of members from OSHA, SBA's Office of Advocacy, and the Office of Information and Regulatory Affairs (OIRA) in the White House Office of Management and Budget (OMB). The SBAR Panel identifies individual representatives of affected small entities, termed small entity representatives (SERs), which includes small businesses, small local government entities, and non-profits. This process enabled OSHA, with the assistance of SBA's Office of Advocacy and OIRA, to obtain advice and recommendations from SERs about the potential impacts of the regulatory options outlined in the regulatory framework and about additional options or alternatives to the regulatory framework that may alleviate those impacts while still meeting the objectives and requirements of the OSH Act.

The SBAR Panel hosted six online meetings on September 9, 12, 13, 14, 18, and 19, 2023, with participation from a total of 82 SERs from a wide range of industries. A final report containing the findings, advice, and recommendations of the SBAR Panel was submitted to the Assistant Secretary of Labor for Occupational Safety and Health on November 3, 2023, to help inform the agency's decision making with respect to this rulemaking (Document ID OSHA-2021-0009-1059).

In accordance with 29 CFR parts 1911 and 1912 , OSHA presented to the Advisory Committee on Construction Safety and Health (ACCSH) on its framework for a proposed rule for heat injury and illness prevention in outdoor and indoor work settings on April 24, 2024. The Committee then passed unanimously a motion recommending that OSHA proceed expeditiously with proposing a standard on heat injury and illness prevention. The Committee also recommended that OSHA consider the feedback and questions discussed by Committee members during the meeting in formulating the proposed rule (see the minutes from the meeting, Docket No. 2024-0002). OSHA has considered the Committee's feedback in the development of this proposal.

In accordance with Executive Order 13175 , Consultation and Coordination with Indian Tribal Governments, 65 FR 67249 (Nov. 6, 2000), OSHA held a listening session with Tribal representatives regarding this Heat Injury and Illness Prevention in Outdoor and Indoor Work Settings rulemaking on May 15, 2024. OSHA provided an overview of the rulemaking effort and sought comment on what, if any, tribal implications would result from the rulemaking. A summary of the meeting and list of attendees can be viewed in the docket (DOL, 2024a).

Various other organizations have also either identified the need for standards to prevent occupational heat-related injury and illness or published their own standards. In 2024, the American National Standards Institute/American Society of Safety Professionals A10 Committee (ANSI/ASSP) published a consensus standard on heat stress management in construction and demolition operations. The International Organization for Standardization (ISO) also has a standard for evaluating heat stress: ISO 7243: Ergonomics of the thermal environments—Assessment of heat stress using the WBGT (wet bulb globe temperature) index (ISO, 2017). ISO 7243 uses WBGT values, along with metabolic rate, to assess hot environments, similar to ACGIH and NIOSH recommendations. Additional ISO standards address predicting sweat rate and core temperature (ISO 7933), and determining metabolic rate (ISO 8996), physiological strain (ISO 9886), and thermal characteristics for clothing (ISO 9920). In 2021, the American Society for Testing and Materials (ASTM) finalized its Standard Guide for Managing Heat Stress and Heat Strain in Foundries (E3279-21) which establishes “best practices for recognizing and managing occupational heat stress and heat strain in foundry environments.” The standard outlines employer responsibilities and recommends elements for a “Heat Stress and Heat Strain Management Program” (ASTM, 2021).

ACGIH has identified TLVs for heat stress (ACGIH, 2023). The TLVs utilize WBGT and take into consideration metabolic rate or workload categories. Additionally, ACGIH provides clothing adjustment factors which are added to the measured WBGT for certain types of work clothing to account for the impaired thermal regulation.

The U.S. Armed Forces has developed extensive heat-related illness prevention and management strategies. The Warrior Heat and Exertion Related Events Collaborative is a tri-service group of military leaders focused on clinical, educational, and research efforts related to exercise and exertional heat-related illnesses and medical emergencies (HPRC, 2023). The U.S. Army has a Heat Center at Fort Benning which focuses on management, research, and prevention of heat-related illness and death (Galer, 2019). In 2023, the U.S. Army updated its Training and Doctrine Command (TRADOC) Regulation 350-29 addressing heat and cold casualties. The regulation includes requirements for rest and water consumption according to specific WBGT levels and work intensity (Department of the Army, 2023). The U.S. Navy has developed Physiological Heat Exposure Limit curves that are based on metabolic and environmental heat loads and represent the maximum allowable heat exposure limits, which were most recently updated in 2023. The Navy monitors WBGT and has guidelines based on these measurements, with physical training diminishing as WBGTs increase and all nonessential outdoor activity stopped when WBGTs exceed 90 °F (Department of the Navy, 2023). The U.S. Marine Corps follows the Navy's guidelines for implementation of the Marine Corps Heat Injury Prevention Program (Commandant of the Marine Corps, 2002). In 2022, the U.S. Army and U.S. Air Force issued an update to their technical heat stress bulletin, which outlines measures to prevent indoor and outdoor heat-related illness in soldiers. The bulletin includes recommended acclimatization planning, work-rest cycles, fluid and electrolyte replacement, and limitations on work based on WBGT (Department of the Army, 2022). ( print page 70707)

As of April 2024, five States have promulgated heat standards requiring employers in various industries and workplace settings to implement protections to reduce the risk of heat-related injuries and illnesses for their employees: California, Minnesota, Oregon, Washington, and Colorado. In addition, Maryland and California are currently engaged in rulemaking. State standards differ in the scope of coverage (see tables III-1 and 2). For example, Minnesota's standard covers only indoor workplaces. California and Washington standards cover only outdoor workplaces, although California's proposal would include coverage of indoor workplaces. Oregon's rule covers both indoor and outdoor workplaces. State rules also differ in the methods used for triggering protections against hazardous heat. Minnesota's standard considers the type of work being performed (light, moderate, or heavy) and provides WBGT trigger levels based on the type of work activity. California's heat-illness prevention protections go into effect at an ambient temperature of 80 °F. Washington's rule also relies on ambient temperature readings combined with considerations for the breathability of workers' clothing. Oregon's rule uses a heat index 80 °F as a trigger.

California, Washington, Colorado, and Oregon all have additional protections that are triggered by high heat. However, they differ as to the trigger for these additional protections. In California, high heat protections are triggered at an ambient temperature reading of 95 °F (and only apply in certain industries). In Washington, high heat protections are triggered at an ambient temperature reading of 90 °F. In Colorado, additional protections are triggered at an ambient temperature reading of 95 °F or by other factors such as unhealthy air quality, length of workday, heaviness of clothing or gear, and acclimatization status. These additional protections only apply to the agricultural industry. Finally, in Oregon, high heat protections are triggered at a heat index of 90 °F.

All the State standards require training for employees and supervisors. All the State standards, except for Minnesota, require employers to provide at least one quart of water per hour for each employee, require some form of emergency response plan, include provisions related to acclimatization for workers, and require access to shaded break areas. Washington and Oregon require that employers provide training in a language that the workers understand. Similarly, California's standard requires that employers create a written heat-illness prevention plan in English as well as in whatever other language is understood by the majority of workers at a given workplace. California also requires close monitoring of new employees for the first fourteen days and monitoring of all employees during a heat wave. Table III-1 below provides an overview of the provisions included in the existing and proposed State standards on heat injury and illness prevention. Table III-2 provides an overview of the additional provisions required when the high heat trigger is met or exceeded.