What is the primary benefit of assigning policy ownership to a bank for a collateral loan?

When a policyholder assigns ownership of a policy to a bank as collateral for a loan, the primary benefit of this arrangement is to guarantee loan repayment. By having the bank as the policy owner, it secures their interest in the event of default on the loan. If the borrower fails to repay, the bank can access the policy's cash value or proceeds to recover the amount owed.

This assurance provides the bank with a level of security against the financial risk associated with lending, making it more willing to extend credit to the borrower. The ownership transfer ideally aligns the interests of both the borrower and the lender, creating a financial safeguard for the bank.

While other options may touch on benefits related to liability or immediate access to loans, they do not directly align with the specific purpose of assigning policy ownership for collateral. The focus is on the bank’s ability to capture the policy's value as repayment security, underscoring the importance of guaranteeing loan repayment through this mechanism.