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Term life Insurance

What Is Assignment and Nomination in Life Insurance plans?

Term Life Insurance is now India’s most purchased life insurance policy because of its great features and flexibility. Term Life Insurance plan is the most affordable and simple life insurance plan amongst others, and this is the reason people are more inclined towards it nowadays.What Is Assignment and Nomination in Life Insurance plans

Though it is very easy to understand, still there are few terminologies in a life insurance plan which may confuse you for a while. Assignment and Nomination is one of the most appropriate examples of the same, as both the terms are quite similar in terms of functionality. Still, it is very crucial to understand the difference between both before buying any life insurance policy.

So, let us discuss the two most complicated terms Assignment and Nomination in depth.

What is an Assignment in Term Life Insurance?

Assignment as the word describes itself is to assign something to someone else. Here in Term Life Insurance Assignment of the policy refers to assigning legal rights and policy ownership to someone else.

Assignment of the policy comes under section 38 of the Insurance Act, 1938. The one who assigns the policy is known as Assignor while the other person/entity who has been assigned the policy is known as Assignee.

Assignment of policy is broadly categorised into two parts that are:

  1. Absolute Assignment: Under absolute assignment of the policy, policyholder or Assignor transfers all the rights, legal interests, title and ownership without any modification in the policy to the Assignee. This transfer of policy includes no terms and conditions on Assignee’s part. The primary purpose of an absolute assignment is to repay the debts or to show affection to the loved ones.
  2. Conditional or Collateral Assignment: Conditional or Collateral Assignment refers to an assignment wherein the policyholder assigns the policy on specific terms and conditions, and the Assignee is only eligible to avail the benefits of all the terms and conditions. The primary purpose of assigning a policy in a collateral manner is to repay loans and liabilities that you’re unable to pay.

What is Nomination in Term Life Insurance?

Nomination in insurance policy refers to nominate someone on your behalf to collect the benefit in your absence. It is similar to make a beneficiary in a bank account. You can nominate someone who is trustworthy and will not misuse the benefit or coverage amount received upon your death. Instead, you can choose the one who will safeguard your family and loved ones in your absence. That individual is the right person to have opted as the nominee of your policy.

In most cases, people choose their family member as the nominee of the policy. However, as per the insurance act 1938, under section 39, Nomination is not restricted to your family only. You can nominate whosoever you think will be the right person to receive the benefit in your absence (outsiders as well).

There are majorly three types of nominees as follows:

  1. Beneficiary Nominee: One can only make beneficiary to the immediate family members including parents, children and spouse. Upon the unfavourable circumstances, the beneficiary will be eligible to receive the benefit of the policy legally.
  2. Minor Nominee: In case the policyholder chooses his/her child who is a minor as the nominee then he/she will also have to give the details of guardians of the minor as the minor will not be able to tackle the financials. So, by the time minor nominee turns 18 in age, the coverage amount will be taken care by the guardians of the minor and post completion of 18 years minor have the option to utilise the money in his/her interest.
  3. Non-Family Nominee: As the name suggests, Non-family Nominee is the one who does not have blood relation with the policyholder. This could be a distant relative, neighbour, friend, or lover. Under section 39 of the insurance act 1938, you can nominate anyone as your policy nominee.

There is no obligation in changing your policy nominee; you can opt for changing your nominee at any point of time.

Difference b/w Assignment and Nomination:

S. No. Criterion Nomination Assignment
1 Objective Its purpose is to give the death benefit to the loved ones so that they can survive economically in the absence of policyholder. Its purpose is the repay any debt or loan in case of the policyholder is unable to pay it so that the family might not get burdened up.
2 Legal Perspective A nominee cannot take any legal action against the policyholder. An assignee can sue the policyholder in case of any false disclosure of information about the policy.
3 Policy Possession Policy possession remains constant to the policyholder. Policy possession may or may not change from assignor to assignee. This should be mutually decided and agreed.
4 Requirement of Witness An eyewitness to nominate someone to receive death benefit is not required. The witness of the assignment of policy is mandatory, and without it, the assignment is considered as illegal and invalid.
5 Derivation It is to be done at the time of buying a policy; though you can always change your nominee. Assignment happens after policy issuance.

Hope the above information will clear all your doubts and queries related to Nomination as well as Assignment of the life insurance plan. In case you still have any questions about anything related to term life insurance then you can connect with the insurance experts of

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