All the following statements concerning the American Bankers Association (ABA) assignment form are correct EXCEPT:

• A. It is used in virtually all cases where life insurance policies are pledged as collateral for loans today.
• B. It clearly and specifically sets forth the rights that are transferred to the assignee and the rights that are not transferred.
• C. It provides that the rights vested in the assignee can be exercised without the consent of any other party.
• D. It limits the assignee's rights to their interest, with all rights reverting to the assignor upon termination of the assignee's interest.

Answer: (D)

Collateral assignments for life insurance are designed to secure a loan by using the policy as collateral and to define exactly what rights the lender (the assignee) gains and what rights the policyowner retains. The ABA form is widely used because it clearly outlines these rights, clarifies which powers transfer to the lender, and shows how policy proceeds will be applied to repay the loan if the insured dies. It also makes clear that the assignee’s rights can be exercised without needing others’ consent, which helps the lender enforce its position if repayment becomes an issue.

The statement that does not fit is the one claiming that the form limits the assignee’s rights to their interest and that all rights revert to the assignor upon termination of the assignee’s interest. In reality, the assignment is tied to the loan: when the loan is paid off or the assignment ends, the policyowner regains full control and the lender no longer holds those rights. The form does not establish a perpetual or continuing reversion of all rights to the assignor.