collateral assignment in chinese

US:USA pronunciation: respellingUSA pronunciation: respelling(kə lat ər əl)

WordReference English- Chinese Dictionary © 2024:

标题中含有单词 'collateral' 的论坛讨论：

• Go to Preferences page and choose from different actions for taps or mouse clicks.

其他语言： 西班牙语 | 法语 | 意大利语 | 葡萄牙语 | 罗马尼亚语 | 德语 | 荷兰语 | 瑞典语 | 俄语 | 波兰语 | 捷克语 | 希腊语 | 土耳其语 | 日语 | 韩语 | 阿拉伯语

Collateral assignment of life insurance

Advertiser disclosure.

We are an independent, advertising-supported comparison service. Our goal is to help you make smarter financial decisions by providing you with interactive tools and financial calculators, publishing original and objective content, by enabling you to conduct research and compare information for free - so that you can make financial decisions with confidence.

Our content is backed by Coverage.com, LLC, a licensed insurance producer (NPN: 19966249). Coverage.com services are only available in states where it is licensed . Coverage.com may not offer insurance coverage in all states or scenarios. All insurance products are governed by the terms in the applicable insurance policy, and all related decisions (such as approval for coverage, premiums, commissions and fees) and policy obligations are the sole responsibility of the underwriting insurer. The information on this site does not modify any insurance policy terms in any way.

How We Make Money

The offers that appear on this site are from companies that compensate us. This compensation may impact how and where products appear on this site, including, for example, the order in which they may appear within the listing categories, except where prohibited by law for our mortgage, home equity and other home lending products. But this compensation does not influence the information we publish, or the reviews that you see on this site. We do not include the universe of companies or financial offers that may be available to you.

• Share this article on Facebook Facebook
• Share this article on Twitter Twitter
• Share this article on LinkedIn LinkedIn
• Share this article via email Email

At Bankrate, we take the accuracy of our content seriously.

“Expert verified” means that our Financial Review Board thoroughly evaluated the article for accuracy and clarity. The Review Board comprises a panel of financial experts whose objective is to ensure that our content is always objective and balanced.

Their reviews hold us accountable for publishing high-quality and trustworthy content.

• • Auto insurance
• • Life insurance
• Connect with Mary Van Keuren on LinkedIn LinkedIn
• Get in contact with Mary Van Keuren via Email Email
• Connect with Natasha Cornelius, CLU on LinkedIn LinkedIn

The Bankrate promise

At Bankrate we strive to help you make smarter financial decisions. While we adhere to strict editorial integrity , this post may contain references to products from our partners. Here's an explanation for how we make money . This content is powered by HomeInsurance.com (NPN: 8781838). For more information, please see our Insurance Disclosure .

Founded in 1976, Bankrate has a long track record of helping people make smart financial choices. We’ve maintained this reputation for over four decades by demystifying the financial decision-making process and giving people confidence in which actions to take next.

Bankrate follows a strict editorial policy , so you can trust that we’re putting your interests first. All of our content is authored by highly qualified professionals and edited by subject matter experts , who ensure everything we publish is objective, accurate and trustworthy.

Our banking reporters and editors focus on the points consumers care about most — the best banks, latest rates, different types of accounts, money-saving tips and more — so you can feel confident as you’re managing your money.

Editorial integrity

Bankrate follows a strict editorial policy , so you can trust that we’re putting your interests first. Our award-winning editors and reporters create honest and accurate content to help you make the right financial decisions.

Key Principles

We value your trust. Our mission is to provide readers with accurate and unbiased information, and we have editorial standards in place to ensure that happens. Our editors and reporters thoroughly fact-check editorial content to ensure the information you’re reading is accurate. We maintain a firewall between our advertisers and our editorial team. Our editorial team does not receive direct compensation from our advertisers.

Editorial Independence

Bankrate’s editorial team writes on behalf of YOU – the reader. Our goal is to give you the best advice to help you make smart personal finance decisions. We follow strict guidelines to ensure that our editorial content is not influenced by advertisers. Our editorial team receives no direct compensation from advertisers, and our content is thoroughly fact-checked to ensure accuracy. So, whether you’re reading an article or a review, you can trust that you’re getting credible and dependable information.

How we make money

You have money questions. Bankrate has answers. Our experts have been helping you master your money for over four decades. We continually strive to provide consumers with the expert advice and tools needed to succeed throughout life’s financial journey.

Bankrate follows a strict editorial policy , so you can trust that our content is honest and accurate. Our award-winning editors and reporters create honest and accurate content to help you make the right financial decisions. The content created by our editorial staff is objective, factual, and not influenced by our advertisers.

We’re transparent about how we are able to bring quality content, competitive rates, and useful tools to you by explaining how we make money.

Bankrate.com is an independent, advertising-supported publisher and comparison service. We are compensated in exchange for placement of sponsored products and services, or by you clicking on certain links posted on our site. Therefore, this compensation may impact how, where and in what order products appear within listing categories, except where prohibited by law for our mortgage, home equity and other home lending products. Other factors, such as our own proprietary website rules and whether a product is offered in your area or at your self-selected credit score range, can also impact how and where products appear on this site. While we strive to provide a wide range of offers, Bankrate does not include information about every financial or credit product or service.

Insurance Disclosure

This content is powered by HomeInsurance.com, a licensed insurance producer (NPN: 8781838) and a corporate affiliate of Bankrate.com. HomeInsurance.com LLC services are only available in states where it is licensed and insurance coverage through HomeInsurance.com may not be available in all states. All insurance products are governed by the terms in the applicable insurance policy, and all related decisions (such as approval for coverage, premiums, commissions and fees) and policy obligations are the sole responsibility of the underwriting insurer. The information on this site does not modify any insurance policy terms in any way.

Secured loans are often used by individuals needing financial resources for any reason, whether it’s to fund a business, remodel a home or pay medical bills. One asset that may be used for a secured loan is life insurance. Although there are pros and cons to this type of financial transaction, it can be an excellent way to access needed funding. Bankrate’s insurance editorial team discusses what a collateral assignment of life insurance is and when it might—or might not—be the best loan option for you.

What is collateral assignment of life insurance?

A collateral assignment of life insurance is a method of securing a loan by using a life insurance policy as collateral . If you pass away before the loan is repaid, the lender can collect the outstanding loan balance from the death benefit of your life insurance policy . Any remaining funds from the death benefit would then be disbursed to the policy’s designated beneficiary(ies).

Why use life insurance as collateral?

Collateral assignment of life insurance may be a useful option if you want to access funds without placing any of your assets, such as a car or house, at risk. If you already have a life insurance policy, it can be a simple process to assign it as collateral. You may even be able to use your policy as collateral for more than one loan, which is called cross-collateralization, if there is enough value in the policy.

Collateral assignment may also be a credible choice if your credit rating is not high, which can make it difficult to find attractive loan terms. Since your lender can rely on your policy’s death benefit to pay off the loan if necessary, they are more likely to give you favorable terms despite a low credit score.

Pros and cons of using life insurance as collateral

If you are considering collateral assignment, here are some pros and cons of this type of financial arrangement.

• It may be an affordable option, especially if your life insurance premiums are less than your payments would be for an unsecured loan with a higher interest rate.
• You will not need to place personal property, such as your home, as collateral, which you would need to do if you take out a secured loan. Instead, if you pass away before the loan is repaid, lenders will be paid from the policy’s death benefit. Any remaining payout goes to your named beneficiaries.
• You may find lenders who are eager to work with you since life insurance is generally considered a good choice for collateral.
• The amount that your beneficiaries would have received will be reduced if you pass away before the loan is paid off since the lender has first rights to death benefits.
• You may not be able to successfully purchase life insurance if you are older or in poor health.
• If you are using a permanent form of life insurance as collateral, there may be an impact on your ability to use the policy's cash value during the life of the loan. If the loan balance and interest payments exceed the cash value, it can erode the policy's value over time.

What types of life insurance can I use as collateral for a loan?

You may use either of the main types of life insurance— term and permanent —for collateral assignment. If you are using term life insurance, you will need a policy with a term length that is at least as long as the term of the loan. In other words, if you have 20 years to pay off the loan, the term insurance you need must have a term of at least 20 years.

Subcategories of permanent life insurance, such as whole life , universal life and variable life, may also be used. Depending on lender requirements, you may be able to use an existing policy or could purchase a new one for the loan. A permanent policy with cash value may be especially appealing to a lender, considering the added benefit of the cash reserves they could access if necessary.

How do I take out a loan using a collateral assignment of life insurance?

If you already have enough life insurance to use for collateral assignment, your next step is to find a lender who is willing to work with you. If you don’t yet have life insurance, or you don’t have enough, consider the amount of coverage you need and apply for a policy . You may need to undergo a medical exam and fill out an application .

Once your policy has been approved, ask your insurance company or agent for a collateral assignment form, which you will complete and submit with your loan application papers. The form names your lender as an assignee of the policy—meaning that they have a stake in its benefits for as long as the loan exists. You will also name beneficiaries or a single beneficiary, who will receive whatever is left over from the death benefits after the loan is repaid.

Note that you will need to stay current on your life insurance premium payments while the collateral assignment is active. This will be stated in the loan agreement, and failure to do so could have serious repercussions.

Alternatives to life insurance as collateral

If you are considering a collateral assignment of life insurance, there are a few alternative funding options that might be worth exploring. Since many factors determine each option, working with a financial advisor may be the best way to find the ideal solution for your situation.

Unsecured loan

Depending on your situation, an unsecured loan may be more affordable than a secured loan with life insurance as collateral. This is more likely to be the case if you have good enough credit to qualify for a low-interest rate without having to offer any type of collateral. There are many different types of unsecured loans, including credit cards and personal loans.

Secured loan

In addition to life insurance, there are other items you can use as collateral for a secured loan . Your home, a car or a boat, for example, could be used if you have enough equity in them. Typically, secured loans are easier to qualify for than unsecured, since they are not as risky for the lender, and you are likely to find a lower interest rate than you would with an unsecured loan. The flip side, of course, is that if you default on the loan, the lender can take the asset that you used to secure it and sell it to recoup their losses.

Life insurance loan

Some permanent life insurance policies accumulate cash value over time that you can use in different ways. If you have such a policy, you may be able to partially withdraw the cash value or take a loan against your cash value. However, there are implications to using the cash value in your life insurance policy, so be sure to discuss this solution with a life insurance agent or your financial advisor before making a decision.

Home equity line of credit (HELOC)

A home equity line of credit (HELOC) is a more flexible way to access funds than a standard secured loan. While HELOCs carry the downside of risking your home as collateral, you retain more control over the amount you borrow. Instead of receiving one lump sum, you will have access to a line of credit that you can withdraw from as needed. You will only have to pay interest on the actual amount borrowed.

Frequently asked questions

What is the best life insurance company, what type of loans are collateral assignments usually associated with, what are other common forms of collateral, what are the two types of life insurance assignments, related articles.

Guaranteed issue life insurance

Life insurance death benefits

What does life insurance cover?

What is collateral insurance and how does it work?

Asia Pacific Guide to Lending and Taking Security

China/mainland china, select a topic.

• Related Publications
• 1. Are there any classes of unsecured and unsubordinated creditor whose claims against a debtor would rank equally with or above those of the debtor’s secured creditors?
• 2. May security given by a company rank in a specified order so as to secure liabilities owed to different creditors of the company in that order and, if that is not possible, is it viable for parties to enter into a contractual arrangement for the purposes of moderating this order?
• 3. Does this jurisdiction recognise the concept of floating security or similar equivalent (i.e., security over a changing pool of assets that the company giving the security is free to buy, sell and generally deal with)?
• 4. If so, are there any practical reasons why floating security is difficult to take, maintain or enforce?
• 5. May security be granted to a trustee to be held on trust for the lenders from time to time, in such a way that a change of lenders does not require new security to be taken?
• 6. If not, are there any techniques that can be used to achieve substantially the same effect (e.g., parallel debt structures)?
• 7. If an agent holds security for the lenders rather than a trustee, is it necessary to take new security on a change of lenders? If no, why not? If yes, are there ways to structure the transaction to avoid such a requirement?
• 8. Under the laws of this jurisdiction, is there any class of asset over which it is difficult or impossible to grant effective and perfected security, or in relation to which any security granted will be of limited effect?
• 9. Under the laws of this jurisdiction, are there any restrictions on offshore lenders taking security over any class of asset?
• 10. Must a company receive a corporate benefit in return for giving a guarantee or security? In particular, are there restrictions on the grant of upstream and cross-stream guarantees and security? If yes, briefly what is the effect of these laws?
• 11. What type of security interests does your jurisdiction recognise, e.g., pledge, charge, mortgage, hypothecation? In relation to each type of security interest, please state the formalities required to create and perfect that security.
• 12. Are there any registration, translation or notarization requirements in relation to security, guarantees, subordination or intercreditor documents?
• 13. Are there any stamp, documentary, registration, notarization or other taxes, duties or fees chargeable in respect of security, guarantees, subordination or intercreditor documents? If yes, what are the amounts and when are they payable?

No. Secured creditors generally have priority to the extent of the value of their security, but any portion of the debt not covered by the value of the security is treated as an unsecured claim.

For certain types of security, such as a mortgage, it is permissible for a security provider to create securities in favor of different creditors over the same assets. The PRC Civil Code contains general provisions in terms of priority among different creditors in relation to securities created over the same assets. For example:

• If there is more than one mortgage over the same asset (with a mortgage taking effect on registration with the relevant governmental authority), the priority is determined based on the sequence of registration.
• If there is a mortgage and a pledge over the same asset, a registered mortgage has priority over a pledge but a pledge has priority over an unregistered mortgage.

However, in practice, except for mortgages over real property, having more than one mortgage over the same asset does not often occur in banking transactions.

The PRC Civil Code recognizes the concept of a floating mortgage. This is usually created over assets such as equipment, raw materials, semi-finished products and finished products.

A floating mortgage will take effect when the mortgage contract takes effect, but it will not be upheld against bona fide third parties unless it is registered with the PBOC. Due to the floating nature of the underlying assets, a floating mortgage is not common in banking transactions.

Yes, although for domestic syndicated loan transactions, as only licensed trust companies may carry on trust business but cannot be a party to a syndicated loan transaction, a security agent (rather than a security trustee), which is one of the lending banks, is used.

Not applicable.

No. If the security is held by a security agent, it is not necessary to take new security (or amend the security agreement or update the security registration with government authorities) if there is a change of lenders.

Under the PRC Civil Code, a mortgage or a pledge cannot be created over the following assets:

• Land title (with a few exceptions, land title belongs to the state; therefore, the land title cannot be mortgaged or pledged and, instead, the land use right can be mortgaged).
• A land use right in relation to collectively owned land (which refers to some land in rural areas).
• Educational facilities, hospital facilities and other public service facilities.
• Assets whose title or use right is unclear or in dispute.
• Assets that are subject to attachment.
• Assets that are not allowed to be mortgaged or pledged by law (as may be prohibited by national and local laws and regulations).

There is no concept of "corporate benefit" under PRC law; therefore, there is no prohibition on a PRC company providing security or a guarantee to a third party.

Types of typical security

The PRC Civil Code recognizes the following types of typical security: 1

It is not necessary to complete any regulatory formalities to create and perfect a guarantee.

A mortgage can be created over real property and movable assets.

For a mortgage over real property (including real property with construction in progress), the mortgage will take effect on its registration with the local authority (usually the local real estate registration authority).

For a mortgage over movable assets (such as equipment, vehicles and aircraft), the mortgage will take effect when the mortgage contract takes effect, but it will not be upheld against bona fide third parties unless it is registered with the relevant authority. See the answer to question 4 of this section in relation to a floating mortgage.

A pledge can be created over movable assets and certain rights (such as stocks, equity interest and accounts receivable). For a pledge over movable assets, the pledge will take effect when the pledged asset is delivered to the pledgee. For a pledge over rights, the pledge will take effect when the following occur:

• The certificate evidencing that right (such as a certificate of time deposit) is delivered to the pledgee; and
• The pledge is registered with the relevant authority.

A cash deposit takes effect when the deposit is delivered to the beneficiary.

It is not necessary to complete any regulatory formalities to create and perfect a lien.

Administrative practices and requirements in different provinces, cities, districts and counties may vary. It is therefore advisable to check with the relevant local authorities before taking security.

For further details on the registration requirements, see the answer to question 12 of this section.

1 Apart from the types of typical PRC law security listed, the PRC Civil Code also recognizes the "non-standard security" interest contemplated by "non-typical security contracts." Such contracts are contracts that do not take the form of a guarantee, mortgage or pledge but would nevertheless serve a security function according to their respective terms. Currently, security by transfer of ownership, retention of title, financial leasing and factoring arrangements would generally fall within the scope of such "non-standard security." The overall legal judicial practice regarding such "non-standard security contracts" has not yet been well established. It is expected to evolve given that the PRC Civil Code is still fairly new legislation and it is not yet common for creditors to take "non-standard security" in the market. Hence, we have only focused on the types of typical security in our responses that are most popular among offshore lender banks.

Jurisdiction of companies involved

There are some particular requirements, depending on whether the security relates to a PRC company or a foreign entity.

For a pledge over an equity interest in a PRC company, the pledge must be recorded in the company's share register and registered with the local counterpart of the State Administration for Market Regulation.

If the beneficiary of the security is a foreign entity, the exchange control regulations on cross-border security may be relevant. In particular, if:

• Both the primary obligor and the creditor (i.e., the beneficiary of the security) are foreign parties; and
• The security provider (references to "security provider" include reference to guarantors as well) is a PRC party,

the security provider (references to "security provider" include reference to guarantors as well) must effect cross-border security registration with the State Administration of Foreign Exchange. The registration is not a condition that affects the validity of the security but without registration, it will be difficult for the security provider to remit the enforcement proceeds out of the PRC when the security is enforced.

Additional requirements in some localities

In some localities, there are additional administrative requirements. For example, for a mortgage over real property, if the mortgagor or mortgagee is a foreign entity, the mortgage contract and the foreign entity's corporate documents may need to be notarized and legalized 1 or apostilled 2 before they are permitted to be submitted to the local authorities.

Subordination and intercreditor documents

There are no registration or notarization requirements in relation to subordination or intercreditor documents.

1   Applicable to documents issued in a non-contracting state of Hague Convention Abolishing the Requirement of Legalization.

2   Applicable to documents issued in a contracting state of Hague Convention Abolishing the Requirement of Legalization.

No stamp duty is payable in relation to securities (including guarantees), subordination or intercreditor documents.

In most cases, the registration of securities is free of charge, except that local authorities may charge a fee for the registration of a mortgage over real property. Local practice should therefore be checked at an early stage.

• Practical Law

Lending and Taking Security in China: Overview

Get full access to this document with a free trial.

Try free and see for yourself how Practical Law resources can improve productivity, efficiency and response times.

About Practical Law

This document is from Thomson Reuters Practical Law, the legal know-how that goes beyond primary law and traditional legal research to give lawyers a better starting point. We provide standard documents, checklists, legal updates, how-to guides, and more.

650+ full-time experienced lawyer editors globally create and maintain timely, reliable and accurate resources across all major practice areas.

83% of customers are highly satisfied with Practical Law and would recommend to a colleague.

81% of customers agree that Practical Law saves them time.

• Security and Quasi Security
• Cross-border - Finance

Credit Cards

Financial planning.

• Cheapest Car Insurance
• Cheapest Full Coverage Car Insurance
• Car Insurance Cost Calculator
• Best Car Insurance
• Compare Car Insurance Costs
• Average Cost of Car Insurance
• Best Term Life Insurance
• Best Whole Life Insurance
• Best Life Insurance Companies
• Best Universal Life Insurance
• Best Life Insurance for Seniors
• Compare Quotes
• Best Auto and Home Insurance Bundle
• Homeowners Insurance
• Renters Insurance
• Health Insurance
• Pet Insurance
• Small Business Insurance

Insurance Guidance

• Conventional Mortgages
• Jumbo Loans
• Best HELOC Loans and Rates
• Get a HELOC With Bad Credit
• Pay Off Your Mortgage With a HELOC
• Pros and Cons of HELOCs
• The HELOC Approval Process
• Mortgage Payment Calculator
• Reverse Mortgage Calculator
• FHA vs. Conventional Loan Calculator
• Private Mortgage Insurance Calculator
• Debt-to-Income Ratio Calculator

Mortgage Guidance

• Best Balance Transfer Credit Cards
• Best Cash Back Credit Cards
• Best Travel Rewards Credit Cards
• Best Airline Credit Cards
• Best Credit Cards for Excellent Credit
• Best Business Credit Cards
• Best American Express Cards
• Best Capital One Credit Cards
• Best Chase Credit Cards
• Best Citi Credit Cards
• Best Bank of America Credit Cards
• Cash Back Calculator
• Pros and Cons of Balance Transfers
• Practical Guide for Improving Credit Fast
• Average Credit Score by Age
• Credit Cards For Bad Debt
• Credit Card Glossary

Recent Credit Card Reviews & Comparisons

• Best Personal Loans of 2024
• Best Personal Loans for Excellent Credit
• Best Personal Loans for Good Credit
• Best Personal Loans for Bad Credit
• Best Same-Day Approval Loans
• Best Personal Loans for Debt Consolidation
• Best Private Student Loans
• Best Student Loans for Bad Credit
• Best Student Loans for International Students
• Best Low-Interest Student Loans
• Best Student Loans Without a Co-Signer
• Personal Loan Calculator
• Auto Loan Calculator
• Student Loan Calculator
• How to Calculate Loan Payments
• Can You Get a Personal Loan With Bad Credit?

Loans Guidance

• Compound Interest Calculator
• Cost of Living Calculator
• Financial Literacy Handbook
• Guide to Retirement Planning
• Ultimate Guide to Budgeting
• Understanding Types of Debt
• How to Pay Down Student Loan Debt
• How to Start Saving & Investing
• Should You Rent or Buy a House
• How to Pay for College
• Guide to Buying a Car
• Guide to Negotiating Salary
• Safest Cities in America
• Top Cities for Job Seekers
• Most & Least Tax-Friendly States
• Most Dangerous Days for DUIs

What Is Collateral Assignment of Life Insurance?

Collateral assignment of life insurance designates a lender as the assignee of a policy, granting them the right to part or all of the death benefit until the loan is repaid.

Nathan Paulus

Director of Content Marketing, MoneyGeek

Nathan Paulus is the Head of Content Marketing at MoneyGeek, with nearly 10 years of experience researching and creating content related to personal finance and financial literacy. Paulus has a bachelor's degree in English from the University of St. Thomas, Houston. He enjoys helping people from all walks of life build stronger financial foundations.

Casie McCoskey

Content Editor

Casie McCoskey is a professional editor passionate about providing people with accessible information on personal finance. Before MoneyGeek, she worked in the legal field, drafting and editing briefs and motions.

Quality Verified

MoneyGeek is dedicated to providing trustworthy information to help you make informed financial decisions. Each article is edited, fact-checked and reviewed by industry professionals to ensure quality and accuracy.

Updated: June 5, 2024

• How It Works
• Overview of Application Process

Pros and Cons

• Impact on Beneficiaries
• Alternatives

Related Content

Advertising & Editorial Disclosure

Collateral assignment of life insurance is an arrangement where a policyholder uses the face value of their life insurance policy, which can be a term or permanent life insurance policy, as collateral to secure a loan. If the policyholder dies before they pay off the loan, the lender is prioritized to receive a portion of the death benefit equivalent to the outstanding loan balance. The remaining benefit then goes to the policy's beneficiaries. This agreement ensures that life insurance collateral assignment acts as a safety net for both the lender and the beneficiaries.

• Collateral assignment involves using a life insurance policy as security for a loan, where the lender has a claim on the death benefit if the borrower defaults or passes away before repaying the loan.
• The lender receives priority over the death benefit, which means they are paid first from the policy's payout before any beneficiaries if the loan remains unpaid.
• Various life insurance policies, including term, whole and universal, can be used for collateral assignment, depending on the insurance company's policies and the policy's value.
• If a life insurance policy lapses or is canceled during a collateral assignment, it can breach the loan agreement, potentially resulting in immediate repayment demands.

How Collateral Assignment of Life Insurance Works

The collateral assignment allows you to use your life insurance policy as security for a loan. The process involves legally designating your policy as collateral, which means if you pass away before fully repaying the loan, the lender can claim the death benefit to cover the remaining balance. You start by choosing either a term policy or whole life insurance and then complete a collateral assignment agreement. This agreement is legally binding and sets the terms for the lender to access the death benefit .

For your beneficiaries, the assignment of your life insurance policy as collateral could reduce the death benefit they receive. If you die with an outstanding loan balance, the lender is paid first from the policy's proceeds. Any remaining amount goes to your beneficiaries only after the loan is settled.

For example, a policyholder with a $500,000 policy uses their life insurance as collateral for a $200,000 loan. If the policyholder dies before settling the loan, the lender will receive $200,000 from the policy's death benefit. Meanwhile, the remaining $300,000 gets disbursed to the policy's beneficiaries.

Roles of the Policyholder, Lender and Insurance Provider

Role of the Policyholder

• Ensure consistent premium payments to keep the policy active and in force.
• Inform the lender of any policy changes, such as lapses or surrenders.
• Understand that active management upholds the collateral agreement's integrity.

Role of the Lender

• Accept the life insurance policy as collateral.
• Right to recover owed amounts from the policy's death benefit if the policyholder dies before loan repayment.
• Priority claim on the death benefit, with remaining funds disbursed to beneficiaries.
• Responsible for releasing the assignment after full loan repayment.

Role of the Insurance Provider

• Approve or reject the collateral assignment of the policy.
• Evaluate and ensure compliance with policy terms.
• Officially record the assignment as part of the policy.

Applying for Collateral Assignment

Applying for collateral assignment is a process moderated by your life insurance company designed to secure loans using your life insurance policy as collateral. It involves a series of steps:

Obtain a Collateral Assignment Form

Request a collateral assignment form from your life insurance provider. This form is vital for designating the lender as a collateral beneficiary for the loan amount. Ensure you obtain the correct form, as forms vary based on policy type and insurer.

Fill Out the Form Correctly

Complete the form with accurate details, including policy number, loan amount and lender information. Pay close attention to all sections to avoid errors that could delay or invalidate the assignment. Incomplete or incorrect information can lead to processing delays or rejection.

Sign the Paperwork

Ensure both the policyholder and lender sign the form, confirming the agreement. This dual signature legally binds both parties to the terms of the collateral assignment. Any discrepancy in signatures may question the form's validity.

Submit the Completed Form

Submit the signed form back to the insurance company for processing. Consider using a traceable delivery method for submission to confirm receipt. Delays in submission can impact the timeline of the loan approval process.

Await Approval or Rejection From the Insurance Company

Wait for the insurer to review and approve or reject the collateral assignment. The insurer may request additional information or clarification, which can extend the approval timeline.

Receive a Letter of Acknowledgment

You and your lender will receive a letter of acknowledgment from the insurer if your collateral assignment application is approved.

Obtaining Required Documentation

The required documentation for collateral assignment of life insurance is straightforward. Typically, you'll need to provide two main types of documents for the assignment of a life insurance policy as collateral:

• Collateral Assignment Form: This form is critical because it officially transfers a portion of your life insurance policy benefits to the lender as collateral. It demonstrates to the lender that you have taken the steps to secure your loan against your life insurance policy.
• Original Life Insurance Policy and Proof of Loan: Lenders may require your original life insurance policy to ensure it is valid and enforceable. Proof of the loan agreement or obligation, such as a mortgage note or other loan document, is also commonly required. This establishes the legitimacy of your loan and substantiates the life insurance collateral assignment.

If you need more clarification about documentation requirements, contact your lender to confirm the necessary details to avoid process delays.

Pros and Cons of Collateral Assignment

Using life insurance as collateral can offer a range of benefits and potential drawbacks. Collateral assignment of a policy allows you to secure loans and is often safer than using physical assets as collateral. However, you should also note the inherent risks, primarily that the lender retains the first right to your policy’s death benefit upon your death.

• Lower interest rates on loans.
• Allows you to use the policy and not physical assets as collateral.
• The cash value of your insurance policy continues to grow.
• The lender has the first right to the death benefit.
• Failure to repay the loan can reduce or even eliminate the death benefit.
• Any lapse or cancellation of the policy may lead to violating the loan terms.

Impact of Collateral Assignment on Beneficiaries

While the collateral assignment of life insurance has its benefits, it’s important to remember that it can impact the amount your beneficiaries receive. If you pass away with an outstanding balance on your loan:

Your Lender Will Be Paid First

In the collateral assignment arrangement, the lender is designated as the collateral beneficiary holding the primary claim to the death benefit for the outstanding loan amount. This means if you pass away before fully repaying the loan, the lender is entitled to receive payment from the death benefit first. The amount collected by the lender is limited to the remaining loan balance.

Any Remaining Death Benefit Will Be Disbursed to Your Beneficiaries

After the lender's claim is satisfied, the remaining death benefit is disbursed to your policy’s designated beneficiaries. The amount they receive depends on the loan balance at the time of your death. If the loan balance is substantial, your beneficiaries will receive significantly less than the policy's total death benefit.

This structure underscores the importance of carefully considering life insurance collateral loans and their impact on future financial planning. Policyholders using life insurance as collateral need to understand the terms set forth by loan companies that accept it.

Alternatives to Collateral Assignment

Alternatives to collateral assignment include personal loans , home equity loans or surrendering the life insurance policy for its cash value. None of these options require using life insurance as collateral, and each offers different benefits and risks compared to using life insurance as collateral.

FAQ About Collateral Assignment

These questions cover various topics related to collateral assignments, including their requirements, implications for beneficiaries and what happens in different scenarios.

A collateral assignment is a contractual arrangement in which a borrower uses their life insurance policy as collateral for a loan. This agreement grants the lender rights to the policy’s death benefit. The lender is prioritized over other beneficiaries until the loan is repaid in full.

In the context of a life insurance collateral assignment, the collateral is the policy's death benefit. This setup allows lenders to be listed as collateral beneficiaries, guaranteeing that they can recover the outstanding loan balance from the death benefit in the event of the borrower’s death before the debt is fully paid.

In a life insurance contract, a collateral assignment allocates the policy's death benefit as security for a loan. This means that if the borrower dies before repaying the loan, the lender, as the collateral assignee of the life insurance, can claim the owed amount from the death benefit. The remaining balance, if any, goes to the designated beneficiaries, ensuring the loan is covered without affecting other assets.

Collateral assignment allows a lender to claim the life insurance death benefit for an outstanding loan amount while naming a life insurance beneficiary designated who receives the death benefit. The lender's claim is prioritized over the beneficiaries' in collateral assignment.

Most types of life insurance policies , including term, whole and universal life, can be used for collateral assignment, provided the insurance company allows it and the policy has sufficient value.

Yes, the policyholder can change beneficiaries after a collateral assignment, but the lender's right to the death benefit amount remains until the loan is repaid. This ensures the lender's position as a collateral beneficiary.

Canceling your life insurance policy before repaying the debt can lead to a breach of the collateral assignment loan agreement. This action may prompt the lender to increase your interest rate or demand immediate repayment of the outstanding loan balance.

These related sections offer additional insights into concepts and alternatives connected to collateral assignments and life insurance:

Using Collateral for a Personal Loan — This link explains how to use various types of collateral for securing a personal loan, providing a broader context to the specific use of life insurance as collateral.

Term vs. Permanent Life Insurance — This resource compares term and permanent life insurance, helping to understand which policies can be used for collateral assignments.

Permanent Life Insurance — This page details permanent life insurance, a type commonly used in collateral assignments due to its cash value component.

Life Insurance Calculator — This page helps you calculate the appropriate amount of life insurance coverage needed, which is crucial when considering using a policy for collateral.

About Nathan Paulus

Nathan Paulus is the Head of Content Marketing at MoneyGeek, with nearly 10 years of experience researching and creating content related to personal finance and financial literacy.

Paulus has a bachelor's degree in English from the University of St. Thomas, Houston. He enjoys helping people from all walks of life build stronger financial foundations.

• Car Insurance
• Home Insurance
• Rental Insurance
• Life Insurance
• Refinancing
• Conventional Loan
• Business Credit Cards
• Student Credit Cards
• Balance Transfer Cards
• Credit Cards with Rewards
• Travel Credit Cards
• Cash Back Credit Cards

What Is A Collateral Assignment Of Life Insurance?

Our content follows strict guidelines for editorial accuracy and integrity. Learn about our editorial standards and how we make money.

A collateral assignment is sometimes a necessity if you’re applying for larger financing amounts such as a mortgage or business loan.

But what is a collateral assignment and how do you go about getting it on your life insurance policy? 

In this article, we’ll cover what collateral assignment is, how you can add it to your life insurance, and what alternatives there are out there. 

What Is Collateral Assignment? 

A collateral assignment is a process by which a person uses their life insurance policy as collateral for a secured loan.

In simple terms, collateral assignment is reassigning priorities for who gets paid the death benefit of your life insurance policy.

What Is a death benefit?

A death benefit or face value of a life insurance contract is the amount of money that your beneficiaries will receive from your policy when you die.

Once you apply for collateral assignment and it’s approved, your specified debtor (the loan provider) will be paid first and then your beneficiaries will receive what is left over in your life insurance policy.

This is different from using your cash value to loan money as you are taking out a loan from another financial institution and using your policy as a guarantee that you’ll cover any debt when you die. 

For example, let’s say you want to take out a secured loan from your local bank and want to use your life insurance policy as a collateral assignment.

In this situation, you’d still have to pay back any debt you have with interest during the loan period. 

However, the life insurance policy would be used if the borrower dies and there was an outstanding loan balance remaining. 

Secured Loans vs. Unsecured Loans

Secured loans are debts that are backed by assets that a lender can claim if the debt isn’t repaid. These types of loans often offer better interest rates and more generous payment terms.

Unsecured loans are debts that don’t have collateral. These types of loans are more expensive to repay and considered riskier than secured loans.

Source: Pexels

How Does Applying for Collateral Assignment Work?

The process for getting collateral assignments for life insurance is the same as when you apply for new life insurance coverage. 

All you’ll be doing is indicating to your life insurance provider that your lender will be given priority for the amount of money you have borrowed through them.

There is an:

Application process.

Underwriting process.

Offer that you’ll receive.

You’ll be required to name beneficiaries as well as indicate ownership of the life insurance policy in the collateral assignment form which will be provided by your life insurance company.

This is because you’re changing the terms of your payout and your life insurance provider will need to follow these instructions once you die.

NB Some insurance companies don’t offer collateral assignment on new loans and generally only provide this feature to an existing life insurance policy.

You should check beforehand to see what will be required to apply for a collateral assignment. If you need help finding plans that offer this, send an email to a licensed insurance agent today.

Once you’ve assigned a new collateral assignee to your life insurance policy, they will be entitled to lay a claim on your death benefit for any debt you have with them.

For example, let’s say you take out a collateral assignment life insurance policy worth $200,000 for a loan of $75,000 over 7 years at an interest rate of 18%.

If you die after five years, based on these figures, you’ll still have $41,231.02 owed on your loan.

Your $200,000 life insurance plan will be used to cover this and your beneficiaries will receive the remaining $158 768.98 from your life insurance policy.

Your lender is only allowed to take the amount outstanding on the debt owed and cannot take more. 

What about Missed Payments and Cash Value Life Insurance?

If you have a permanent life policy with a cash value account, sometimes called cash value life insurance, your lender will have access to it to cover missed payments on your loan.

For example, let’s say you miss a payment on your loan and have a collateral assignment. Your lender will be able to access your cash value account and withdraw that month’s payment to cover your debt.

Who Can You Add as a Collateral Assignee?

You can add any person or institution as a collateral assignee to your life insurance policy if you owe them money.

This can include banks, lenders, private individuals, businesses, or credit card companies. 

The most common collateral assignments are for business loans and mortgages. This is because they are loans for high amounts that are paid off over several years. 

In fact, some banks and financial lenders may require that you add them as collateral assignees when you apply for any of the financing options mentioned below.

Common Collateral Assignees Include:

💵 Bank loans

💳 Credit cards

🏡 Mortgages

💼 Business loans

What Do I Do If I’ve Paid Off My Debt?

If you’ve managed to pay off your debt - firstly, congratulations! Secondly, you’ll want to notify your life insurance company that you’ll be changing your collateral assignments on your life policy.

While there is no legal claim that a company can make to debts that aren’t owed anymore, there may be a hold up in paying out the death benefit to your beneficiaries and other collateral assignees.

Life insurance companies will have to figure out who must be paid first, according to the order stated in your collateral assignment terms.

In general, life insurance policies will settle claims within 24 hours of being notified of a policyholder’s death.

The process can be delayed if you do not release your collateral assignees from your life insurance contract. 

Tips to Make Sure Your Life Policy Is Paid Out Quickly

Here are some tips if you want your beneficiary claims to be handled as fast as possible:

1) Keep a copy of your life insurance policy and policy number in a safe place or with your lawyer, financial advisor, or estate planner.

2) Speak to your beneficiaries about your policies and give them the contact details of the relevant life insurance company.

3) Make sure your life insurance contract is updated to reflect your latest list of beneficiaries.

4) Make sure you have your beneficiaries' details listed in the contract or with your lawyer.

The Benefits of Using Collateral Assignment of Life Insurance

While adding a collateral assignment to your current life insurance policy may require an application, paperwork, and time, there are benefits:

Many lenders like it: Banks and financial institutions sometimes prefer it when applicants use their life insurance policy as collateral for a loan. This is because they know that their debt will be serviced long-term by your insurance company which makes their loan to you a lower risk.

Your private property won’t be jeopardized: The last thing you want when you go into debt is to put your personal items, such as your car, investments, or home on the line as collateral. Using collateral assignment is an alternative to this and can protect you in the event that you can’t service your debt.

It can be affordable for some people: If you’re in good health and young, you may be paying affordable rates for permanent life cover. In situations like this, it can make sense to use your life cover as collateral for debts you’ve incurred.

What Are Some Alternatives to Collateral Assignment?

Term Life Insurance: Getting a term life insurance contract to cover specific debts is one way of ensuring your estate and family are protected when you die.

There are multiple types of term life insurance plans and they are more affordable than permanent life insurance. This makes options like level term life insurance and decreasing term life insurance ideal for different types of debts you may have over your lifetime.

What Is Term Life?

Term life is a temporary life coverage option that lasts for a specific period of time. It is different from permanent life insurance which lasts until you die or you stop paying premiums.

Term life contracts are typically between 5 to 20 years, however, you can get renewable term life plans and even a forty-year term life plan .

Borrow from your life insurance: If you have a permanent life insurance policy, such as universal, whole, or indexed life cover, you can borrow money from your cash value account. 

However, keep in mind that you’ll be required to pay interest on any amount that you borrow and any amount of debt incurred will be deducted from your policy’s death benefit when you die.

What Is Cash Value?

Cash value is a feature of permanent life insurance plans that policyholders can contribute additional money toward while they have a policy in force.

This money is set aside in a cash value account which is tax-deferred and can be used in a number of ways.

In some cases, if your policy allows it, you can end your contract and get the cash surrender value of it. This amount is usually much less than the value of your total life insurance contract. 

Our Verdict on Collateral Assignment

Many banks, lenders, and financial institutions want long-term guarantees that you’ll be able to service your debt if anything happens to you.

In some situations, getting collateral assignments on your life insurance to cover these debts is a good option for people who are trying to access finance from these institutions. 

However, there is a risk that your death benefit payout may be delayed for your beneficiaries if you don’t keep your different collateral assignees up to date.

If you already have a life insurance policy, you should contact your provider to find out what the process is and what you’ll need to do to change the collateral assignees on your policy.

If you don’t have a policy yet, our advice is to look at all of your options before you decide to take a permanent life insurance contract with a collateral assignment.

There are alternatives out there that are more affordable if you’re looking to protect your family and estate from debt.

Term life is one such option that is adaptable to your life and easy to get. 

For example, a decreasing term life insurance policy might be the right choice for someone who has recently bought a home and wants to cover their mortgage while they pay it back.

Another option is final expense insurance, which is a permanent life policy for smaller amounts, usually under $50,000.

With final expense insurance, your beneficiaries can pay for anything they want, including any debts you may have had in your life.

The process for applying is simple and you won't have to go through a medical exam or intensive underwriting as you would with traditional permanent life insurance. 

If you need any assistance with finding, comparing, or learning about the different life insurance options to cover your debts, speak to one of our expert advisors today at 1-888-912-2132 or [email protected] .

Where Can I Learn More about Life Insurance?

If you’re looking to learn more about life insurance, different kinds of coverage, or costs, visit our life insurance hub to find our latest articles.

We do the research so that you don’t have to and our articles cover complicated topics like what is a cash value account, what is key person insurance, or how long life insurance takes to pay out a death benefit.  

If you need help with quotes, try out a life insurance quote finder or reach out to us via email at [email protected] to get in touch with a licensed life insurance agent for your state.

Sharing the Insights!

What is a collateral assignment.

Rather than obtain funding of leases at lease origination , lessors often assign the lease payments and the leased assets to finance the leases after lease inception .  By back-leveraging , a lease funder makes a nonrecourse loan to the lease originator after inception of the lease that is secured by the collateral assignment of the leased asset to the funder and the lease payments as the means to service the debt .  As a collateral assignment, the lessor incurs a direct obligation to the lease funder for the loan while remaining the owner of the leased asset.  Since a collateral assignment usually requires lessee consent, lessors obtain the right to back- leverage leases at lease origination.

Back-Leveraging = Collateral Assignment after Lease Inception

Although the lessor retains ownership of the leased asset, a collaterally- assigned lease must be managed with the consent and approval of the assignees .  Moreover, a collateral assignment generally allows funders to share in and exercise rights of the lessor under the lease in their own name, which makes it necessary for the lessor to negotiate shared rights with the funders.  Shared rights , which are the rights of the lessor – as assignor – and the assignee that each exercises in its own name, typically include the right to receive notices and other documents from the lessee, to inspect the property interest , to enforce lessee compliance with certain covenants , to call upon the lessee for the payment of indemnities, and to seek recovery under the lessee’s liability insurance coverage.  Once the funding is repaid in full, the funder relinquishes the collateral assignment and the lessor again has full control over the asset.

In addition to shared rights and the terms of lessee consent, lease assignment provisions normally stipulate the level of assistance a lessee is to provide to a lessor, such as indemnification and insurance.  Moreover, the lease agreement will typically also contain a provision expressly providing to lessees the right to quiet enjoyment , which is the right of tenants and landlords to the continued undisturbed use and enjoyment of real property to be honored by the assignee should the real estate be collaterally-assigned.

Related Items

• How do lessees classify leases under ASC 840 and IAS 17?
• How are commercial real estate leases structured?
• How do lessees account for leases?
• How are leveraged leases accounted for under US GAAP?

Share the knowledge!  Choose your platform:

Leave a comment cancel reply.

You must be logged in to post a comment.

© 2015-2024 SEEDIS .  All rights reserved.

If not now, when?  If not us, who?  It’s up to us!  Be a part of the solution.

• Please note that the information you provide us now will serve as the basis of our offer. In the event we require more information or clarification, we will contact you.

Identification

• Name * First Last
• Business Name *
• Email * Enter Email Confirm Email

Content Details

• Course Title
• Subject Area & Topics
• Course Objective
• Estimated Total Number of Hours of Courseware Use * 4 8 12 16 20 More than 20
• Estimated Number of Courseware Users per Course * 4 8 12 16 20 More than 20
• Blended (Original + Pecunica)
• Content Specifications *
• Glossary Examples Drop files here or

User Information

• Type of Courseware User Industry Professional Graduate Student Tertiary-Level Undergraduate Upper Secondary-Level Student Other
• Course Creation Consultation
• Subject Matter Expert
• General Course Administration
• Text-to-Speech Rendering
• You have not selected any Learning Management Services.
• Brand for White-Labeling
• Special Requirements
• Name This field is for validation purposes and should be left unchanged.
• Kindly use this form to contact us only if you are not provided an appropriate form (e.g., a service-specific request form) for the purpose.
• Subject * General Enquiry Course Enquiry Collaboration with Pecunica Request for Support Courseware Evaluation Request Request Corporate Discount
• I understand and accept the Nondisclosure Agreement

Privacy Statement

Any information obtained from Users of this Website at the time of any communication with us (the "Company") or otherwise is stored by the Company. This information is collected solely for the purposes of communicating with the User, processing registrations, creating and maintaining user records, keeping Users informed of upcoming events and products, and assisting the Company in improving services. Under no circumstances shall this confidential information be passed by the Company to a third party, except with the explicit approval of the User or as may be required by law, court order or governmental regulation or if such disclosure is otherwise necessary in support of any criminal or other legal investigation or proceeding.

• Use this form for submitting links to content, such as guidance, reports, images, suggesting edits to the text, and to report errors. Topic: What is a collateral assignment?
• Comment Suggestion Report Error

[ultimatemember form_id=”41044″]

Published daily by the Lowy Institute

China’s ungainly balancing act with Russia

The promise is a “no limits” friendship. But there are evident boundaries, all the same.

President Xi Jinping’s  meeting  with Vladimir Putin on the sidelines of the Shanghai Cooperation Organisation summit in Uzbekistan has prompted another round of  speculation  about China’s stake in its Russian relations.

Some would argue that combined with the earlier visit to Vladivostok by Li Zhanshu, Chairman of the Standing Committee of the National People's Congress (the third-most senior leader within the Chinese Communist Party), the Xi-Putin meeting demonstrates that the normative basis of the “ no limits ” relationship between Beijing and Moscow proclaimed in February remains firm.

But an interests-based assessment of China’s behaviour since the Russian invasion of Ukraine indicates that Beijing is attempting an ungainly balancing act between its simultaneous desire to maintain the strategic partnership with Russia and minimise collateral damage to its economic interests and diplomatic reputation, while also extracting leverage from Moscow’s travails.

This stands in contrast to some prominent commentary on Sino-Russian ties, which often swings between alarmism and triumphalism.

Prior to the war, some asserted that Moscow and Beijing were building a “grand coalition” that was “increasingly joining forces in the international arena to balance against America”. With Russia’s military reversals , however, the pendulum has swung back towards confident assertions that a defeat for Moscow in Ukraine is a defeat for China, and that Putin’s misadventure marks a “huge embarrassment” for Xi.

These swings misread the nature and extent of Beijing’s stakes in its relationship with Moscow, and how Beijing sees it as contributing to its broader geopolitical goals.

Beijing has sought to bolster the “no limits” rhetoric through a number of measures such as abstaining from the 25 February UN Security Council vote to condemn Russia’s invasion, regularly asserting its opposition to economic and diplomatic sanctions on Moscow, and continued promotion of the idea that China and Russia are building an alternate international order to that authored by the West. This has been coupled with regular repetition of the Russian narratives regarding the causes of the war in Ukraine, including by Li Zhanshu if we are to believe the Russian readout of his meeting with leaders of the Russian Duma on 9 September.

Even so, Beijing is reticent about lending full-throated support to Moscow. In contrast to the Russian version, the Xinhua report of Li’s remarks in Vladivostok makes no mention at all of the war in Ukraine. Instead, it highlighted the standard boilerplate that relations between the countries set “a good example of good-neighbourly friendship and win-win cooperation between major countries”, and the vague declaration that “China is willing to continue to work with Russia to firmly support each other on issues concerning each other's core interests”.

Beijing has also limited collateral damage to its economic interests and diplomatic reputation by not assisting Russia to evade US and European sanctions, as well as restricting Chinese state bank financing for Russian commodity purchases. Importantly, Chinese companies have also halted or paused projects with Russia.

Further belying the “no limits” rhetoric has been Beijing’s efforts to leverage Russian weakness. This has been most apparent in an economic context as Western-imposed sanctions have forced Moscow to turn towards  China, making Russia even more of a junior partner in the relationship. This has been most noticeable in the energy sector where Russia overtook Saudi Arabia as China’s leading source of oil in May and June. China’s economic interest rather than political solidarity has driven this as international sanctions on Russian oil “mean traders have been wary of handling Russian crude, creating a mini glut that sees Russia’s oil trading $20 to $30 cheaper than international benchmark prices”.

Beijing’s efforts to balance Sino-Russian relations with its broader economic and diplomatic interests may indeed look ungainly. However, they demonstrate that it will not sacrifice its own core interests on the altar of Putin’s folly.

This was underlined during the Xi-Putin meeting in Samarkand. Here, Putin appeared almost apologetic, acknowledging publicly that China had “questions and concerns” about Russia’s “special military operation” that he would “explain in detail” to his counterpart.  

The Chinese readout, in contrast, made no reference to Ukraine and paid lip service to Sino-Russian efforts to build a “more equitable and reasonable international order”. Significantly, although Xi noted that "China is willing to strongly support each other with Russia on issues involving each other’s core interests”, the “core interests” of Russia’s that China is prepared to support were not specified. Russia’s commitment to common positions on China’s “core interests” are, however: commitment to the “One China principle”, condemnation of “provocative moves by individual countries on issues concerning China’s core interests”, and Sino-Russia commitment to “promote” regional security and stability “based on the principle of non-interference in each other’s internal affairs”.

While for some this demonstrates not only that China now has the “upper hand” in the Sino-Russian relationship but that Xi may “ditch” Putin, we must recognise the big ticket item that Xi gets out of continuing the relationship on its current course.

Xi’s driving agenda has been the “struggle” to attain the “China Dream” of “great national rejuvenation” and the primary obstacle to that is a truculent and declining US hegemon. Close Sino-Russian ties, from China’s perspective, are judged to be important in this context so long as they contribute to China’s economic and military strength and assist in constraining the United States.

This calculus means that absent a complete Russian military collapse and/or overthrow of Putin, Beijing will likely continue its attempt to preserve Sino-Russian alignment, while deflecting potential collateral damage to its own interests.

Related Content

Managing Chinese economic risks means more than diversification

You may also be interested in, keeping australian uranium out of russian hands – and bombs, china’s muslim ban, china’s contributions are a blind spot in global climate finance.

• Cambridge Dictionary +Plus

Translation of collateral – English–Traditional Chinese dictionary

Your browser doesn't support HTML5 audio

collateral noun [U] ( SECURITY FOR DEBT )

Collateral noun [c] ( blood vessel ).

(Translation of collateral from the Cambridge English-Chinese (Traditional) Dictionary © Cambridge University Press)

Examples of collateral

Translations of collateral.

Get a quick, free translation!

Word of the Day

a day that you spend somewhere that is not your home or usual place of work

It’s not really my thing (How to say you don’t like something)

Learn more with +Plus

• Recent and Recommended {{#preferredDictionaries}} {{name}} {{/preferredDictionaries}}
• Definitions Clear explanations of natural written and spoken English English Learner’s Dictionary Essential British English Essential American English
• Grammar and thesaurus Usage explanations of natural written and spoken English Grammar Thesaurus
• Pronunciation British and American pronunciations with audio English Pronunciation
• English–Chinese (Simplified) Chinese (Simplified)–English
• English–Chinese (Traditional) Chinese (Traditional)–English
• English–Dutch Dutch–English
• English–French French–English
• English–German German–English
• English–Indonesian Indonesian–English
• English–Italian Italian–English
• English–Japanese Japanese–English
• English–Norwegian Norwegian–English
• English–Polish Polish–English
• English–Portuguese Portuguese–English
• English–Spanish Spanish–English
• English–Swedish Swedish–English
• Dictionary +Plus Word Lists
• collateral (SECURITY FOR DEBT )
• collateral (BLOOD VESSEL)
• Translations
• All translations

To add collateral to a word list please sign up or log in.

Add collateral to one of your lists below, or create a new one.

{{message}}

Something went wrong.

There was a problem sending your report.

• From the Desk of George Friedman
• Weekly Graphic
• Asia Pacific
• Middle East and North Africa
• Sub-Saharan Africa
• United States
• Video Discussions
• Discussion Forum
• Maps & Graphics Room
• GPF Presents
• Special Series on Geopolitics and Economics
• Special Series on Warfare
• Join the Club
• Israel/Palestine Conflict
• Mission Statement
• Welcome to Geopolitical Futures
• Speaking Events
• Ridvan Bari Urcosta
• Kamran Bokhari
• Ryan Bridges
• Antonia Colibasanu
• Allison Fedirka
• George Friedman
• Victoria Herczegh
• Hilal Khashan
• Ronan Wordsworth
• Ekaterina Zolotova
• Forecasting
• Intelligence
• Learn with GPF

Geopolitical Futures

• Sign in / Join
• Regional Directory

Russia and China, Nukes and Alliances

Last week, Moscow revived an oft-repeated threat to use nuclear weapons in Ukraine. Their use, of course, requires a few important things. They must be deliverable, and they must have a valuable target worth delivering to, ideally one that would inflict little collateral damage on untargeted or otherwise friendly cities. More important, they require a high degree of confidence in the attacking nation that its adversary cannot or will not retaliate with nukes of its own. The great unknowns are what the attacked country might do, the ability of the attacker to survive a response, and whether the initial strike would be sufficiently devastating. This uncertainty is precisely why there has not been a nuclear strike since Hiroshima and Nagasaki.

Russia’s threats, then, belie other intentions. Its primary intent is to raise the potential price of war in Ukraine beyond what the U.S. is prepared to risk. But given all the unknowns, Moscow has so far declined to execute a nuclear attack. Perhaps more interesting was China’s response. Beijing’s position on Ukraine has been measured. It abstained on the first U.N. vote to condemn the war, rather than voting with Russia. But as the conflict progressed, China’s position changed thanks to deteriorating relations with the United States and the need for an allied nation and new economic partner. Enter Russia, which by then realized that not only would it not overrun Ukraine quickly but it might not win the war at all. As with China, Russia’s main obstacle was the United States.

An alliance is far more than a press release and a handshake, although it is frequently mistaken as such. An alliance is the process of material cooperation and creating complementary weapons and forces to defeat an enemy. There are non-military alliances, but all alliances assume that both sides have or can acquire the tools needed to wage war successfully and at the right time. An alliance has a common goal: to establish the capability to significantly strengthen a joint force.

There has long been an assumption that Russia and China would create an alliance designed to break or at least weaken the United States. It has not happened. The U.S., aided by its own alliance in the North Atlantic, posed a land challenge to Russia. In theory, Russia could have used Chinese troops in the Ukraine war, but the distance posed logistical problems. Also Beijing’s interests were in keeping the U.S. from blockading its ports or creating a line of islands for protection. And besides, China and Russia have had an unhappy history sprinkled with numerous invasions and incursions. After an attack on the Ussuri River, China formed an anti-Russian agreement with the United States in the 1970s that included an intelligence gathering post for the U.S. in China.

That there has been additional tension between them is why it was surprising when, after Russia raised the possibility of the use of nuclear weapons, China said that their use against the U.S. was reasonable to consider, creating a merely spoken alliance between the two countries without committing to anything. China is a known nuclear power, and U.S. intelligence monitors the situation accordingly. Beijing’s statement, then, changes nothing. If we speculate on the purpose, it would be that Russia is facing peace talks that President Vladimir Putin has already publicly discussed, and China does not want to be facing an emboldened United States. By aligning temporarily with Russia and laying the nuclear card on the table, Beijing hoped to combine a spoken alliance with Russia with the perception that it does not take the U.S. capability as gospel.

But China is as likely to go nuclear as the U.S., so there is nothing pressing the U.S. to an alliance. Washington is content to let the war in Ukraine drain Russia and to let China obsess over its own economic problems. The U.S. has alliances in Europe and Asia, so it does not need the complexity of former alliances. Russia and China can wish they had the resources to build an alliance, but the most they can do is raise the specter of an implausible nuclear strike.

RELATED ARTICLES MORE FROM AUTHOR

Daily Memo: Sullivan Concludes China Trip, Russia Warns of Radicalized Muslims

Daily Memo: Sullivan’s China Visit, Iran Signals Openness to Nuclear Talks

Daily Memo: Libya Cease-Fire Unraveling, China Plans Ukraine Peace Talks

Latest posts, the geopolitics behind a normal meeting, implications of the war’s spread to the west bank.

• Website Security

Toll Free: 1-888-982-8217 International Callers: 1-512-687-3444

Copyright © 2024 Geopolitical Futures®. All rights reserved.

• Privacy Policy
• Terms of Service
• an insightful project by  EBIG

Get Geopolitical Futures FREE newsletter

Sign up now and receive our special report Understanding our Geopolitical Model

Email address:

Get weekly analysis from New York Times bestselling author George Friedman and our global team of analysts, plus special offers.

Subscribe Now

The Road to 2040

Free with an annual subscription to geopolitical futures..

Why the US Is Threatening to Send Cluster Bombs to Ukraine