What is the primary consequence for a creditor in a collateral assignment?

In a collateral assignment, the primary consequence for a creditor is that the creditor receives payment from the policy proceeds. This arrangement allows the creditor to have a secured interest in the life insurance policy as collateral for a loan or obligation. If the policyholder defaults, the creditor can collect the amount owed directly from the insurance proceeds, ensuring that they have a way to recover their lent funds.

The other choices do not accurately depict the nature of a collateral assignment. A creditor does not become the policyholder; they merely have a claim against the policy proceeds. Additionally, they do not gain control over the management of the policy itself but rather a right to payment. Finally, a creditor cannot alter the beneficiary designation through collateral assignment; the original policyholder retains the right to designate beneficiaries unless they explicitly transfer that authority. Therefore, the focus of a collateral assignment is primarily on ensuring that the creditor receives the proceeds from the policy in the event of claim, validating the selection of that answer.