Insurance assignment (vinkulace)
An arrangement under which the payout from property insurance (or life insurance) goes to the bank rather than straight to the insured. It is written into the policy or a separate amendment, and the insurer confirms it to the bank. This protects the value of the collateral: after major damage the bank releases the money for repairs or uses it to pay down the debt. Mortgage drawdown is normally conditional on it.
Example
A flat pledged for a CZK 4,000,000 mortgage (5.00 %, payment CZK 23,384) is damaged by fire, with damage of CZK 1,200,000. Because of the assignment, the insurer pays the benefit to the bank, which releases it for repairs once invoices are provided. Had the flat not been repaired, the bank would have used the money to reduce the debt.
In practice
The bank usually wants confirmation of the assignment before drawdown, so arrange the insurance and the assignment when you sign the contracts and the payout is not held up. If you change insurer, the assignment has to be set up again and the new confirmation delivered to the bank. Never cancel the old policy before the new assignment is in force: the bank may treat the gap as a breach of contract.
How it differs
Property insurance is the insurance contract itself; the assignment only decides who receives the benefit. The lien secures the debt with the property, the assignment with the insurance payout for that property. Risk life insurance can be assigned too, where it is a condition of a rate discount.
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