You can use life insurance as collateral in the UK only where your policy terms and your lender allow it. Insurers' own documents say a policy can be assigned, meaning its legal ownership is transferred, and Aviva's customer booklet says an assignment could take place when the policy is used as security for a loan.

If a lender has handed you an assignment deed to sign, an FCA-authorised broker will look over the policy alongside you in a free phone call; to arrange it, type a name, phone number and email into the form on this page.

What does assigning a life insurance policy mean?

Assignment is the transfer of a policy's ownership to someone else, who is then called the assignee. Aviva's glossary defines the assignee as "A person to whom this insurance is legally transferred." The cover itself carries on as before. LV= says, in its Life Protection policy conditions, that you "can’t change who the policy is insuring, just the owner", and that this can be done only before a claim is made.

The same LV= conditions describe the purpose: if you want a claim paid to another person or company, such as a family member or a mortgage lender, you can transfer the policy to them, which "is called ‘assigning’ it", or you can place it into a trust. So assignment is the route for passing the rights in a policy to a named person or company, and it is a different step from naming a beneficiary or setting up a trust (see changing a life insurance beneficiary and what a life insurance trust is).

Can a lender take your life insurance as security for a loan?

Aviva describes this use in two documents. Its booklet for its Life Insurance product (EDCO2264 0126) says: "An assignment could take place when you’re using your insurance as security for a loan." Its Business Protection Term Assurance cover details (EDCO1589 0126) use almost the same words for a business that owns the cover. In both, the wording says only that an assignment could take place. It does not say a lender will ask for one or accept one.

Once a policy is assigned to a lender, the lender becomes the owner, so a claim is paid to the lender rather than to your family or your estate. That follows from Aviva's rule that when a policy has been assigned by deed, it pays "this assignee". What the lender does with the money is set by the deed and the loan agreement.

Life cover bought alongside a home loan is covered at how mortgage life insurance works, with the question of whether a lender can require cover at all in do I need life insurance for a mortgage. For a personal loan or business loan, a lender's willingness to take a particular policy as security is the lender's call, and how your own insurer would handle such an assignment is something the call-back can clear up.

Does it matter whether the policy has a cash value?

Using a policy as collateral in the American sense, with a loan from the insurer measured against cash value, is a separate matter, and UK whole of life plans quoted in whole life insurance policy borrowing describe having no cash-in value. The assignment wording from Aviva and LV= above is about who owns the policy and who is paid, not about a cash value, and it appears in documents for ordinary protection cover.

Types of whole life insurance explains the different plans.

How is a policy assigned, and what must the insurer be told?

Assignment is done by a deed, which the insurer then has to be told about. Royal London's Deed of Assignment form covers assignment by an absolute owner "to another person absolutely, e.g. where no trust is involved", and it says a signed copy "must be returned to us for noting". Aviva says that if you have told it to pay an assignee by deed of assignment, the assignee must send the original deed before it pays out.

Zurich's Personal Protection terms (PW720480017 04/26) say that if ownership is transferred, it must be informed by a "notice of assignment", which "protects the legal position of the person to whom it is transferred". Aviva's booklet likewise says it needs to see notice of the assignment when a claim is made. LV= asks to be told straight away and to be sent a copy of the trust or assignment deed.

The law backs up the notice rule. Section 3 of the Policies of Assurance Act 1867 says an assignment of a life policy does not give the assignee any right to sue for the policy money until written notice of its date and purport has been given to the insurer, and that the date notice is received sets the priority of claims under any assignment. That is the wording of the statute as shown on legislation.gov.uk on 1 November 2026, not advice on your own deed.

LV= puts the job of getting an assignment right on the policyholder, warns that one done wrongly won't be valid, and says you may want to talk to a solicitor or financial adviser first. Aviva says "Professional guidance should be sought before any type of assignment or changed ownership is undertaken." If a lender is asking for an assignment, it can say what form of deed it wants, and a broker can go over your insurer's steps with you, and the enquiry form here arranges that call at no cost.

Can you transfer a policy to another person?

Yes, where the insurer's terms allow it, and the same tool is used. LV=, answering a reader who wants cover on someone else, says the other person can take the policy on themselves and then "the policy ownership can be transferred to you with a ‘deed of assignment’. You’ll be the new owner and get the money when the policy pays out." The life insured does not change, so the person covered stays the same and only the owner is different.

Transfer to a person is separate from putting a policy in trust, where trustees rather than one person become owners; the tax side of that is in whether life insurance is taxable in a trust. Whether your insurer will accept a transfer, and on what paperwork, depends on its terms.

What does assigning to a lender close off?

Because an assignment moves ownership, it can rule out other arrangements. Scottish Widows' policy summary (61041 01/26) says "Beneficiary nomination will prevent your policy being assigned to a third party, such as a mortgage lender." Legal & General's trusts page says that transferring ownership, for instance "by providing it as security for a loan", may mean that a trust cannot be used. Beagle Street's terms are blunter: "Policies that are assigned as a security on a loan (e.g. a mortgage) cannot be put in trust."

If the policy isWhat the insurer's document says
Assigned to a person or companyAviva: it pays the assignee, who sends in the original deed
Under beneficiary nominationScottish Widows: nomination prevents assignment to a third party
Assigned as security for a loanBeagle Street: it cannot be put in trust

Each row is one insurer's rule, not the whole market's. The links among trusts, mortgage cover and lenders are in mortgage protection policy in trust and putting a policy in trust step by step. Whether your plan could be switched or moved to a new insurer after an assignment is explored for mortgage cover in can you change mortgage protection.

Frequently asked questions

Can I use term life insurance as collateral for a loan?

Aviva's Life Insurance booklet, for cover that lasts a length of time you pick, names using it as security for a loan as one occasion when an assignment might be made. Whether a lender takes a term policy is the lender's decision.

Is term life insurance transferable?

LV= says policy ownership can be transferred with a deed of assignment, and you can only do that before a claim is made. The person covered stays the same. Other insurers' terms may differ.

Can whole life insurance be used as collateral for a loan?

Assignment is about ownership rather than value, so for a whole of life plan the question is whether its own terms allow a transfer. Borrowing from the insurer against a cash value is covered at whole life insurance policy borrowing.

What is a mortgage of a life insurance policy?

The insurer documents quoted on this page use the word assignment for handing a policy to a lender as security for a loan, as Aviva's booklet does. The wording of any deed with your lender decides what rights the lender has.

Do I have to tell my insurer if I assign my policy?

Insurers' terms say they must be told: Zurich requires a notice of assignment, and Aviva and LV= ask to see the notice or deed when a claim is made. The 1867 Act also ties an assignee's right to sue to written notice to the insurer.

Who gets the money if my policy is assigned to a lender?

Under Aviva's terms the insurer pays the assignee, which here would be the lender. What the lender does with the money is set by the deed and your loan agreement.

For a loan, a lender's request or a policy transfer, the enquiry form here brings a broker's call, free of charge, to go through what your own policy would let you do.

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