Assignment is a mean whereby the beneficial interest, right and title under a insurance policy get transferred from the assignor to the assignee. ‘Assignor’ is the policyholder, who transfers the title and ‘Assignee’ is the person, who derives the title from the assignor. Upon the assignment of a insurance policy the policyholder declares that all the benefits of the policy on the maturity of the insurance policy or on the death of the policyholder belongs to the assignee and not to the policyholder or his nominee.
What is the difference between nomination and assignment?
While nomination is an authorization to receive the policy monies in the event of 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 revoked or cancelled at any time during the lifetime of the customer at his will and pleasure or by a subsequent assignment. On the other hand, assignment of an insurance policy is a transfer or assignment of all rights and liabilities of the insurance policy in favour of the assignee.
Types of Assignment
There are two types of Assignments –
A. Conditional Assignment
Conditional Assignment is usually effected for consideration of natural Love and Affection. Under Conditional Assignment, if the Conditional Assignee dies, the benefit under the Insurance Policy goes back to the Life Assured if surviving. Otherwise, the benefit goes to Policyholder’s Nominee.
B. Absolute Assignment
Absolute Assignment is usually effected for valuable consideration. Under Absolute Assignment, if the Absolute Assignee dies, the benefits under the Insurance Policy go to the Legal Heirs of the Assignee.
Who all can do the assignment of the Insurance Policy?
Assignment can be done by the proposer, policy holder, or the absolute assignee.
What all documents are required for an assignment?
1. Duly filled Assignment Form of the Insurance Company (If any) Or Plain Application
2. Policy Document (In Original and Photocopy)
3. Or Duly Stamped Assignment Deed
How do I assign a policy or transfer a life insurance policy?
Assignment or transfer of a life insurance policy may be made by simply making an endorsement to that effect in the policy document. Another way of transferring or assigning the life insurance policy is to get a separate duly stamped assignment deed executed.
The former case is the preferred mode of assignment as it is exempt from further stamp duty. An assignment should be signed by the assignor or his duly authorized agent, and should specifically state the fact of transfer or assignment. The document should be attested by at least one witness.
What are the rights of an assignor and assignee?
1. Assignor must be a major, and must have an absolute right over the Policy. Assignment must be in writing and the Assignor’s signature along with a Witness is a must.
2. Assignment can be made only after acquiring the Policy.
3. Assignment can be done only for consideration – for money or money’s worth or good, moral and meritorious consideration, like Love and Affection.
4. Assignor must have an absolute right over the policy.
5. Assignment must be in writing.
6. Notice of assignment should be submitted to Life Insurer along with the other necessary documents mentioned above.
7. The policy holder can assign the policy to a financial institution for his financial needs and when the financial contract between the policy holder and the financial institution is finished the policy should be reassigned to the policy holder.
8. On Assigning the Policy, the Assignor loses his right over the Policy and the Assignee gets the right and becomes the owner of the Policy.
9. The Assignee can further re-assign the Policy and he also has a right to sue under the Policy.
What are the pre-requisites for a valid assignment?
1. On assigning the policy, the assignor (life assured/policy holder) loses his right over the policy and the assignee gets the right and becomes the owner of the policy.
2. The assignee can further re-assign the policy and he also has a right to sue under the policy.
3. A valid assignment once made cannot be cancelled. It can be done only by another valid assignment.
4. In all the cases, Assignment automatically cancels the nomination. However, when the policy is assigned to the Insurer, nomination gets affected and it does not get cancelled.
5. Under absolute assignment, if the absolute assignee dies, the benefits under the policy go to the legal heirs of the assignee.
6. In all the cases, Assignment automatically cancels an earlier Nomination. However, when the Policy is assigned to the insurer say for loan, Nomination gets affected and it does not get cancelled.
Is assignment allowed on all the insurance plans?
Assignment is applicable on all insurance plans except Pension Policies and Married Women’s Property Act (MWP).