by Nomination and assignment are two important terms in life insurance policies that refer to the process of assigning the ownership and benefits of the policy to another person or entity.
Nomination:
Nomination is the process of appointing a person or entity to receive the proceeds of the policy in the event of the policyholder’s death. The person appointed is called the nominee. Nomination is an important aspect of a life insurance policy as it ensures that the proceeds of the policy are passed on to the intended person or entity.
Nomination can be done at the time of purchasing the policy or at any time during the policy term. The policyholder can change the nominee at any time during the policy term by submitting a written request to the insurance company.
Example of Nomination:
Suppose Mr. A takes a life insurance policy and nominates his wife, Mrs. B as the nominee. If Mr. A passes away during the policy term, the death benefit will be paid to Mrs. B, who is the nominee.
Assignment:
Assignment is the process of transferring the ownership of the policy to another person or entity. The person who receives the ownership of the policy is called the assignee. Assignment of a policy can be partial or complete. In partial assignment, a portion of the policy is assigned to the assignee, while in complete assignment, the entire policy is transferred to the assignee.
Assignment can be done by endorsing the policy document and submitting it to the insurance company. Once the assignment is done, the assignee becomes the owner of the policy and is entitled to receive the benefits of the policy.
Example of Assignment:
Suppose Mr. X takes a life insurance policy and assigns it to his son, Mr. Y. If Mr. X passes away during the policy term, the death benefit will be paid to Mr. Y, who is the assignee.
It’s important to note that nomination and assignment are two different processes. In nomination, the proceeds of the policy are passed on to the nominee in the event of the policyholder’s death. In assignment, the ownership of the policy is transferred to the assignee. It’s important to understand the terms and conditions of the policy regarding nomination and assignment before making any changes to the policy.
Nomination and Assignment of policies laws INDIA
In India, the laws related to nomination and assignment of life insurance policies are governed by the Insurance Act, 1938 and the Insurance Regulatory and Development Authority of India (IRDAI). Here are the key provisions related to nomination and assignment of life insurance policies under these laws:
Nomination:
- According to Section 39 of the Insurance Act, the policyholder has the right to nominate a person or persons to receive the policy proceeds in the event of the policyholder’s death.
- The nomination can be made at the time of taking the policy or at any time during the policy term.
- The policyholder can change the nomination at any time during the policy term by giving a written notice to the insurance company.
- The nomination can be made in favor of any person or persons, including minors, but not in favor of a trust or an organization.
- If the nominee is a minor, the policyholder can appoint a trustee to receive the proceeds on behalf of the minor until the minor attains majority.
Assignment:
- According to Section 38 of the Insurance Act, a life insurance policy can be assigned to another person or entity by an endorsement on the policy document.
- The assignment can be partial or complete, and can be made in favor of any person or entity.
- Once the assignment is done, the rights and benefits under the policy are transferred to the assignee.
- The assignment can be made with or without the consent of the insurance company.
- If the policy is assigned to a creditor as security for a loan, the policyholder must inform the insurance company of the assignment.
- The assignment can be revoked by the policyholder at any time by giving a written notice to the insurance company.
It’s important to note that the laws related to nomination and assignment may vary slightly depending on the type of life insurance policy and the terms and conditions of the policy. It’s recommended to carefully read the policy document and consult with the insurance company or a financial advisor before making any changes to the policy.
