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Nomination is an act by which the policyholders authorises another person to receivethe policy money. The person so authorised is called a nominee. Nomination is a rightgiven to the life insurance policyholder to appoint a person or persons to receive the

benefit under the policy in case it becomes a death claim. Assume if a person who is insured

dies, the nominee is entitled to receive the policy proceeds subject to certain conditions.

While applying for life insurance, the individual should mention the nominee detailsin the proposal form. The details of the nominee will basically include full name, age,

address of the nominee and nominees relationship with the life assured. Accordingto Section 39 of Insurance Act, 1938, one can have multiple persons as nominees

and can also specify their shares of the policy proceeds in percentage terms.

The policyholder should also review nomination whenever required. He shouldchange the nomination after marriage/divorce and also if nominee has died before

the policyholder. Policy proceeds under a death claim usually comprise the sum

assured and the bonuses accrued (if any). In case of ULIPs (unit-linked insurance

plans), the nominee would receive market value of units and the sum assured.

Assignment of a life insurance policy means transfer of rights from one person toanother. The policyholder can transfer the rights of his insurance policy to another for

various reasons and this process is called assignment.

The original policyholder who assigns the policy, i.e. transfers the rights, is calledthe assignor and the one to whom the policy has been assignedthe person towhom the policy rights have been transferredis called the assignee. Once the

rights have been transferred to the assignee, the assignor has no right on the policy,

and the assignee becomes the owner of the policy.

One can usually come across an assignment where the policyholder is trying to usethe life insurance policy as collateral against a loan he intends to raise. Assignmentmust be in writing and a notice to that effect must be given to the insurer.

Assume, Mr X buys a house for which he needs a home loan of Rs. 25 lakh from abank. Mr X takes a home loan against his policy of sum assured Rs. 25 lakh. To take a

loan from the bank, he assigns the policy to that bank, and then the bank would be

able to pay out the loan money to him. If Mr X failed to repay the loan, then the bank

would surrender the policy and get their money back. The original policyholder will

pay the premium before or on the payment due date and not the bank.

In the event of the death of the assignor, the assignee is paid first and the balance (ifany) is paid to the policys beneficiary. Types of insurance policies used for thispurpose usually include an endowment plan, money back policy or a ULIP. Term

plans cannot be used in case of assigning a policy.

Assignment of a life insurance policy

Assignment of a life insurance policy may be made by making an endorsement to that effect

in the policy document. Another way of transferring or assigning the life insurance policy is

by getting a separate assignment deed executed. An assignment should be signed by the

assignor or his duly authorised agent specifically stating the fact of transfer or assignmentand attested by at least one witness.

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The assignee acquires the complete title of the policy the policy. He can further assign the

policy and can surrender the policy if he so desires. The assignment once effected cannot

be cancelled. In case of death of the absolute assignee the rights under the policy delve on

the legal heirs of the assignee. It can only be reassigned.

Nomination vsassignmentWhile the nomination is an authorisation to receive the policy money in the event of the

death of the life assured, it does not give the nominee an absolute right over the money

received to the exclusion of other legal heirs. Further, the nomination can be changed any

time during the lifetime of the policyholder. On the other hand, assignment of an insurance

policy is a transfer or assignment of all rights and liabilities to the insurance policy in

favour of the assignee.