Nomination & Assignment

Difference between Nomination and Assignment:-

Sl.No Nomination
Assignment

1. Nomination is appointing some person(s) to receive policy benefits only when the policy has a death claim. Assignment is transfer of rights, title and interest of the policy to some person(s).

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. In other words, 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. We can also say that Nominee is taken to be one of the named custodian of the insured (after his death) to whom the insurer are suppose to handover the policy benefits, claim proceeds subject to "No Objection" being raised by the legal heirs of the insured after his death. That means, the right of the legal heirs to recover the money from the nominee is protected by law.

4. Nomination is done at the instance of the insured Along with the instance of the insured, consent of insurer is also required

5. It can be changed or revoked several times. 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.

Nomination and assignment by way of an example :

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 loyality 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.

Sl.No.
Year
Event
Remarks / Beneficiary Payment Made

1 2001 Policy in force & premium paid
Nominee Mrs. Deepak Nil

2 2002 Policy in force & premium paid Nominee Mrs. Deepak Nil

3 2003 Policy in force & premium paid Nominee Mrs. Deepak Nil

4 2004 Policy in force & premium paid Nominee Mrs. Deepak / S.B. paid to Mr. Deepak Rs 1,00,000

5 2008 Policy in force & premium paid Assignment in favor of Bank / S.B. paid to the Bank
Rs 1,00,000

6 2012 Policy in force & premium paid Assignment in favor of Bank / S.B. paid to the Bank Rs 1,00,000

7 2016 Policy in force & premium paid Assignment in favor of Bank / S.B. paid to the Bank Rs 1,00,000

8 2018 Mr. Deepak dies Mrs. Deepak will receive Death Benefit Rs. 5,00,000 + Bonus for 18 years

9 2019 Policy ceases death claim paid

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 instant case, the payment of Rs. 3 lakh was made by insurance company directly to bank till 2016 evwn 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
Please note during the currency of the policy the insured discharged his duties/liabilities by making timely payment to the insurance company and did not breach any warranties conditions, hence all the payment by the insurer were also remitted without any problem. The most interesting point that we all have to member is that even after nomination/ assignment the insured is not discharged by the insurance comapny from his duties/liabilities and compliance of warranties to be fulfilled from time to time by the insured.