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Nomination & Assignment of Policies

Nomination appoints a beneficiary to receive policy benefits in the event of the policyholder's death. Assignment transfers all legal rights and title of the policy to another person. Mr. Deepak took out a life insurance policy and nominated his wife to receive benefits. In year 7, he assigned the policy to his bank as collateral for a loan. The bank received payments until the loan was repaid in 2016, at which point rights reverted to Mr. Deepak's wife as his nominee. When Mr. Deepak died in 2018, the remaining benefits were paid to his wife as his original nominee.

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Yuvraj Chauhan
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79 views12 pages

Nomination & Assignment of Policies

Nomination appoints a beneficiary to receive policy benefits in the event of the policyholder's death. Assignment transfers all legal rights and title of the policy to another person. Mr. Deepak took out a life insurance policy and nominated his wife to receive benefits. In year 7, he assigned the policy to his bank as collateral for a loan. The bank received payments until the loan was repaid in 2016, at which point rights reverted to Mr. Deepak's wife as his nominee. When Mr. Deepak died in 2018, the remaining benefits were paid to his wife as his original nominee.

Uploaded by

Yuvraj Chauhan
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PPTX, PDF, TXT or read online on Scribd
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Nomination

&

Assignment of Policies
Nomination

• Nomination is a benefit where in case of death of the policy holder the


funds are given to beneficiary (nominee), whose name is mentioned by
the policyholder while enrolling for the policy. The policyholder has the
option to change the nominee at any time during the term of the policy. If
you want the proceeds to be given to the nominee make sure the name
and details are mentioned correctly. The details of the nominee required
are his name, age, address and his relationship with the policyholder
Features of Nomination

1. Nomination is appointing some person(s) to receive policy benefits only


when the policy has a death claim.
2. In other words, by merely nominating someone, the right, title and
interest of the insured over the policy is not transferred straight
forwardly to that nominated person and remains with the insured
person only.
3. Nomination is done at the instance of the insured.
4. It can be changed or revoked several times.
Assignment

• Assignment, is when the policyholder wants to give another person the


rights of the policy , this is done through a deed and the insurer need to
be given a notice for the same. The policyholder is called the assignee
and the person who he appoints is called the assignor. Here the
assignee has the complete power and title of the policy. He can make
decisions like surrendering the policy or even reassign the policy. This
assignment must be known to the insurer through a notice and should
be in writing.
Kinds of Assignments

1. Absolute Assignment:
In an absolute assignment, all rights on the policy both maturity and
death benefits are transferred to the assignee. Example if you as a
proposer made an absolute assignment, say as a gift to a friend, then
the all rights on the policy are transferred to your friend. The assignee
receives the maturity and death benefits. The proposer which is you, will
lose all legal rights on your policy. You cannot revert back an
assignment. Any changes thereafter can only be done by the assignee
which is your friend.
2.Conditional Assignment:
Conditional assignment has some conditions and clauses attached
to the assignment. The assignment is only valid as per the
condition.

Absolute Assignment is used in case of gifts.


Conditional Assignment is used in case of mortgages, etc.
Features of Assignment

1. Assignment is transfer of rights, title and interest of the policy to some


person(s).
2. The insurer is bound to pass over the benefits, claims and/or interests
to the assigned person(s). Even during the time the insured is alive (or
even prior to the death of the insured person). since the policy benefits
are assigned till the time the assignment is revoked once again.
3. Along with the instance of the insured, consent of insurer is also
required
4. Normally assignment is done once or twice during the policy period.
Assignment can be normally revoked after obtaining the "no objection
certificate" from the concerned Assignees.
Case:

In 2001, Mr. Deepak takes a Life insurance - Money Back policy of Rs.
5,00,000 sum assured (s.a.) for a 20 years term with survival benefits
payable @ 20% of s.a. at the end of every 4th year and balance
payable at the time of maturity (2020) along with bonus and final loyalty
addition bonus, if any. Death benefits payable to the nominee or a legal
heir full sum assured (Rs. 5,00,000) + bonus without deducting the
survival benefits earlier paid. Mr. Deepak dies in 2018.
• In this case Mr. Deepak is entitled to receive survival benefit / other
benefits if he continues to pay regularly the annual premium and
policy is in force. Now we need to understand what will happen and
who will receive the survival benefit (s.b.)/ death claim on different
events. Further if Mr. Deepak assigns the policy in 7th year, earlier
nominated in her wife's name, to his bankers from where he took a
loan and amount repayable inclusive interest Rs. 3,00,000/-.
Otherwise, loan amount of bank, if any would have due the same
would have been paid to bank and rest would go to Mrs Deepak the
nominee of Mr. Deepak.
From the above illustration we can make out the following:

• 1. Nominee are entitled to receive payment after death of the insured


and not otherwise even their name is nominated.
2. Assignees are entitled to receive payment not more than the amount
they are entitled to receive. 
3. In the above case, the payment of Rs. 3 lakh was made by insurance
company directly to bank till 2016. Mrs. x is a nominee under the policy
and Mr. x is alive. 
4. The final payment in 2018 on account of death of Mr. Deepak passes
to Mrs. Deepak being nominee under the policy and assignment being
earlier revoked. 
• In both Life insurance and non-life insurance there are times when
nomination and assignment under the policy is required by the insured.
Almost all forms of life insurance policies can be nominated and/or are
assignable. Examples under Non-life insurance were nomination/
assignment can be effected :- 
1. Personal Accident policy
2. Marine Insurance policy
3. Workmen Compensation Policy
4. Overseas Travel policy are

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