South Carolina Personal Lines Practice Exam

What does assignment refer to in insurance terminology?

1. The sale of a policy

2. An agreement transferring insurance claim rights

3. Changing beneficiaries

4. Renewing a policy

The correct answer is: An agreement transferring insurance claim rights

In insurance terminology, assignment refers specifically to an agreement transferring insurance claim rights from one party to another. This means that the policyholder allows another individual or entity to handle or collect on insurance claims. For example, if a policyholder has a homeowners insurance policy and experiences a loss, they could assign their right to receive the claims payment to a contractor who will complete the repairs. This is a critical concept in insurance, as it allows for flexibility in managing claims and can facilitate the process of getting the necessary repairs or compensation done. The other options do not accurately define assignment in this context. The sale of a policy refers to the transaction of buying insurance coverage, changing beneficiaries involves altering who will receive benefits upon the insured's death, and renewing a policy pertains to extending the duration of coverage. None of these actions involve the transfer of claim rights, which is why the definition related to assignment specifically highlights claim rights transfer as the correct context.