Assignment Vs Nomination In Life Insurance
Table of Contents
Before purchasing a life insurance policy, one must know what is nomination and assignment, so that he/she can make an informed decision. Nomination and Assignment are two major terms used in the life insurance sector. Nomination and Assignment are used for different purposes under a life insurance policy.
What is Nomination?
Nomination is the right of decision, made by the policyholder, to nominate a person, the policyholder is given the authority to appoint a person who will receive the benefits in case of an unforeseen demise of the life assured during the policy term. The person who will receive the benefit is known as a Nominee. Nomination is permitted under Section 39 of the Insurance Act.
What is Assignment?
Assignment is known as the transfer of policy right and ownership from the policyholder to the person chosen for the Assignment. The person who is chosen for Assignment Is known as Assignee. Assignment is also permitted under Section 38 of the Insurance Act.
Assignment Vs Nomination In Life Insurance
Following is the difference between Assignment and Nomination under life insurance policy:
|
Parameter |
Assignment |
Nomination |
|
Ownership |
Assignment is transferring of rights or policy ownership from the policyholder to the assignee. It can be made by an endorsement on the life insurance policy. |
Under nomination a person is nominated by the policyholder, who will receive the benefits in case of an unforeseen demise of the life assured during the policy term. Nomination is made by mentioning the nominees in the policy documents. |
|
Witness |
Assignment requires witnesses, without witness the assignment shall be considered invalid. |
No witness is required for nomination. |
|
Purpose |
The policy ownership or rights are transferred from the policyholder to the assignee. |
Nominees will only receive the benefits in case the life assured passes away during the policy term. |
|
Authority |
Assignee can sue the Assignor. |
Nominees cannot sue the policyholder. |
|
Benefits |
Assignee shall receive the policy money. |
Nominees shall be paid death benefit in case the life assured passes away. |
Types of Nominees
Following are the different types of nominee:
- Beneficial Nominee: If the policyholder nominates an immediate family member of his family, the nominated person shall be termed as beneficial nominee. If a policyholder opts for a family member such as spouse, parent or children as the nominee, the nominated person will be a beneficial nominee.
- Minor Nominee: A nominated person who is below 18 years of age is known as a minor nominee. If the policyholder chooses to nominate his/her child under the life insurance, the nominated person shall be termed as minor nominee.
- Non-Family Nominee: If the policyholder nominates distant relatives and friends, the nominated person shall be termed as non-family nominee.
Types of Assignees
Following are the the different types of assignee:
- Absolute Assignment: Absolute assignment is when the policyholder transfers the policy right/ownership to the assignee without any terms and conditions.
- Conditional Assignment: Conditional assignment is when policyholder decides to transfer the policy right/ownership to the assignee under certain conditions, if the terms and conditions are fulfilled then only the assignee will receive the policy rights/ownership.
Conclusion
Assignment and Nomination are two different terms that are repetitive and both of them have different purposes under the life insurance policy. Before making a decision the above mentioned details and aspects may help you to come to a point where you consider either of them under your life insurance policy.
Also read - What Kind of Deaths are Not Covered in Term Insurance
What are the common exclusions under term insurance plans?
Disclaimer: This article is issued in the general public interest and meant for general information purposes only. Readers are advised not to rely on the contents of the article as conclusive in nature and should research further or consult an expert in this regard.
