What type of assignment involves assigning a policy to a creditor as security for a debt?

A collateral assignment is the correct choice because it specifically pertains to the process of assigning a life insurance policy to a creditor as security for a debt. In this arrangement, the policyholder still retains ownership of the policy and the rights that go along with it, but the creditor gains the right to claim the policy's death benefit if the policyholder defaults on the debt. This type of assignment is commonly used in financing situations where a lender needs assurance in case of non-payment.

This distinguishes it from absolute assignment, where all rights and ownership of the policy are fully transferred to another party, leaving the original policyholder without any claim or control over the policy. Conditional assignment involves transferring rights under certain conditions or stipulations, which is not specifically tied to securing a debt. Beneficial assignment is not a standard term used in insurance contexts and typically lacks specific legal recognition in comparison to the more defined assignments mentioned above.