R05 Assignments: free practice questions

1. Question 1 of 5

   In relation to a life policy, what is an assignment?

   Option A: A change in the person whose life is assured under the policyOption B: The appointment of a trustee to hold the policy for beneficiariesOption C: A transfer of ownership of the policy from one person to anotherOption D: A reduction in the sum assured

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   The answer is C: A transfer of ownership of the policy from one person to another

   An assignment transfers ownership. It may be absolute, such as by sale or gift, by way of mortgage, by operation of law on bankruptcy, or to trustees.

   Why the other options are wrong

   A

   Changing the life assured isn't an assignment.

   B

   Appointing a trustee is a trust matter, not a transfer of ownership in itself.

   D

   Reducing the sum assured isn't an assignment.

2. Question 2 of 5

   A married couple hold a joint life first death policy as joint tenants. The husband dies. Who is entitled to the sum assured?

   Option A: Whoever is named in the husband's willOption B: The husband's personal representativesOption C: The couple's children equallyOption D: The surviving wife, automatically

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   The answer is D: The surviving wife, automatically

   Joint life first death policies are usually held by the two lives assured as joint tenants, so the survivor takes the sum assured automatically.

   Why the other options are wrong

   A

   A joint tenant's share passes by survivorship, not under the will.

   B

   As joint tenants, the survivor takes automatically; it doesn't go to his personal representatives.

   C

   The children aren't entitled under a joint tenancy.

3. Question 3 of 5

   Anil assigns his policy to Bank X in March, but Bank X does not notify the insurer. In June he assigns the same policy to Bank Y, which knows nothing of the earlier assignment and notifies the insurer immediately. Who has priority of claim against the life office?

   Option A: The two banks share the proceeds equallyOption B: Neither, as both assignments are voidOption C: Bank Y, because it gave notice firstOption D: Bank X, because its assignment is earlier

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   The answer is C: Bank Y, because it gave notice first

   Under the Act, priority of notice governs priority of claim against the insurer, even where the assignment with notice is later. This does not apply if the later assignee knew of the earlier interest when taking the assignment.

   Why the other options are wrong

   A

   The Act doesn't split proceeds; the first to give notice has priority.

   B

   Both assignments are valid; the question is which ranks first against the insurer.

   D

   Being first to take the assignment isn't enough; priority against the insurer follows priority of notice.

4. Question 4 of 5

   An insurer knows that someone other than the policyholder has been paying the premiums on a policy. What type of notice might the insurer be said to have of that person's possible interest?

   Option A: Formal noticeOption B: Statutory noticeOption C: Express written noticeOption D: Constructive notice

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   The answer is D: Constructive notice

   Constructive notice arises where the insurer has reason to suspect an assignment without receiving express or implied notice. The insurer would be wise to check with the premium payer before paying out.

   Why the other options are wrong

   A

   No formal notice has been given.

   B

   There's no 'statutory notice' in this sense; the insurer merely has reason to suspect.

   C

   Express notice is formal written notice, which hasn't been given here.

5. Question 5 of 5

   Which statement about the legal requirements for assigning a life policy is FALSE?

   Option A: Half of the legal interest in a policy may be assigned to one personOption B: The assignment must be in writingOption C: The assignment must be dated while the life assured is still aliveOption D: The assignment must be made during the currency of the policy

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   The answer is A: Half of the legal interest in a policy may be assigned to one person

   The legal interest must be assigned as a whole, although joint assignees and equitable interests in portions under a trust are possible. A policy cannot be assigned by mere delivery, and an assignment made after the life assured has died is void (Scott v. Coulson, 1903).

   Why the other options are wrong

   B

   This is true: an assignment must be in writing.

   C

   This is true: an assignment made after the life assured has died is void.

   D

   This is true: the policy must still be in force when it's assigned.

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