If Earl uses an existing life insurance policy to secure a debt instead of purchasing Credit Life insurance, what is this called?

When Earl uses an existing life insurance policy to secure a debt, this action is referred to as a collateral assignment. This specific term describes the process by which a policyholder temporarily assigns the benefits of their life insurance policy to a lender as security for a loan or debt. In the event that the policyholder passes away before the debt is paid, the lender would receive the death benefit up to the amount owed, ensuring that their loan is secured.

This approach is advantageous because it allows the policyholder to keep ownership and control of the policy while using it as collateral. The assignment is typically temporary, meaning it can be reversed or terminated once the debt is fully repaid. This distinction is critical in making sure that policyholders understand their rights and the implications of using their life insurance policies in this manner.