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Assignment vs Nomination in Life Insurance

Assignment vs Nomination in Life Insurance

Table of Content:

Difference between Nomination and Assignment

In life insurance products, two terms assignment and nomination are frequently used. While not many may understand them, it is imperative to know the meaning and the difference between assignment and nomination before purchasing any insurance plan. 

The primary difference is about policy ownership. While in nomination, the policy owner remains unchanged. However, in an assignment, the policy ownership is transferred from one person to another. The nominee (as in nomination) gets the benefit after the death of the life assured but the assignee (as in assignment) gets the benefits when the life assured transfers the rights and ownership of his/her policy to the assignee. These are some of the basic and common differences between nomination and assignment. 

Let us learn some more about assignment and nomination, and what role they play in insurance. 

What is Nomination in life insurance?

Nomination is one of the most essential processes of the life insurance policy. The policyholder has to make any one family member his/her nominee. The nominee is considered eligible to claim the benefits of the life insurance policy if the insured individual dies. In this way, the insurance company ensures that the family of the insured does not have to suffer financial problems even after an earning member of the family passes away. Hence, the policyholder should choose the nominee of his/her insurance policy carefully.

Types of nominees in life insurance 

The policyholder gets the choice of choosing one among the five types of nominees. Let’s understand them in detail. Here are the following five types of nominees in life insurance:

1. Beneficial Nominee

IRDA has introduced a new term ‘beneficiary nominee’ instead of the nominee. It means that the policyholder has the right to make anyone his/her nominee. The nominee can be the policyholder’s parent/ guardian, child, or companion. If the policyholder has already chosen his/her nominee, then no dispute will arise in getting the claim.

2. Minor Nominee

The policyholder can make his/her minor child the nominee of his/her life insurance policy to secure the child’s future in his/her absence. But if the insured individual dies untimely, the amount of the claim will be payable to the legal custodian or the appointee of the child. The child’s custodian hands over that money to the child when he/she turns 18 years old.

3. Non-Family Nominee

It is also possible for the policyholder to choose a non-family member as his/her nominee. However, this is generally not recommended.

4. Multiple Nominees

Two or more two persons can be chosen by the policyholder under the multiple nominees of the insurance policy. In this case, the policyholder divides the share of the total amount between the two nominees. If the policyholder doesn’t divide the amount while filling the nomination form, then, the amount of the claim is divided equally between the nominees by the insurer.

5. Changing Nominee

Under this type of nominee, the policyholder is able to choose his/her nominee during the life insurance policy tenure.

6. Successive Nominee

Under many circumstances, people prefer choosing more than 1 nominee, in successive nominations, one can choose up to three nominees. After the death of the insured, the 1st nominee will receive the death benefit. In case the 1st nominee is also dead, the death benefit will go to the 2nd nominee and so on. 

Important Things to Know About Nominations 

There are a few quintessential things about the nominations that every policyholder must keep in mind. The important things that should be known about nominations are given below: 

  • The life assured and the policyholder should be the same in the life insurance policy for the process of nomination. If they are two different persons, then, the claim benefits will be taken by the policyholder of the insurance plan.
  • The nominee has no right to request any kind of change in the insurance policy.

What is an Assignment in Life Insurance?

Under Section 38 of the Insurance Act, 1938, there is a provision for assignment in life insurance. The policyholder transfers the rights of his/her policyholder to another person. The person who transfers the insurance rights is called the assignor and the person to whom the policy rights are transferred is called the assignee. In this way, the assignee becomes the owner of the insurance policy. 

Generally, the people choose banks for assigning their policy rights. The bank becomes the policyholder but the life assured of the insurance policy is not changed. The benefits of the claim are received by the bank (policyholder). 

Types of Assignment in Life Insurance 

There are two types of assignment in life insurance i.e. Absolute Assignment and Conditional Assignment.

1. Absolute Assignment

In the absolute assignment, the rights of the life insurance policy are given to another person (assignee) without any terms and conditions. Generally, this type of assignment is done by the policyholders to show love for someone or to repay the bank loan.

2. Conditional Assignment

In a conditional assignment, the policyholder (assignor) transfers the rights of the life insurance policy to another person (assignee) under certain terms and conditions. If the terms and conditions are fulfilled, only then, the ownership of the policy will be transferred. 

Important things to know about assignments

Check out the essential things about the assignment that you must not forget to keep in mind:

  1. Only the owner of the policy is changed in the assignment. The life assured will remain the same.
  2. The policyholder of each insurance plan can transfer the rights of the insurance policy to the assignee. Only the pension plan and the insurance plans that are bought under the Married Women’s Property Act (MWP) are excluded.
  3. The nomination of the insurance policy is cancelled if the policyholder gives the rights of his/her insurance policy to the insurance company for paying the insurance company’s loan.

Differences between Nominations and Assignments

The table given below gives you a quick insight into the several differences between nominations and assignments.





The insured transfers the rights of his/her insurance policy to the assignee (person/entity) with or without terms and conditions.

The insured chooses the nominee for his/her life insurance policy benefits.

Policy Rights

The assignee gets the complete rights of the insurance policy. He/she can transfer the policy rights to the third person as well.

The nominee has no right over the insurance policy of the insured.

Claim Benefits

The claim benefits are enjoyed by the assignee of the life insurance policy if the insured dies. The assignee becomes the nominee of the insurance plan.

The claim benefits are enjoyed by the chosen nominee. The nominee can be changed by the insured during the policy tenure.

Maturity Benefits

When the insurance policy gets matured, all the benefits are directly enjoyed by the assignee of that policy.

No maturity benefits are enjoyed by the nominee if the policyholder is alive till the end of the policy tenure.

Legal endorsement

Assignment is a legal endorsement. It needs to be changed only as an endorsement on the original policy bond by the insurer.

There is no legal endorsement of a nomination. It can be changed by a simple email or a letter.


There is the requirement of witnesses.

There is no requirement for the witness when the insured chooses the nominee for his/her life insurance policy. If the nominee is a minor, an appointee would be required for the same.


It is very important for the policyholder to know about assignment and nomination. This is because the nomination and assignment have their own benefits that the policyholder can enjoy without any ado. Therefore, a piece of complete information has been shared with the help of this article. It is recommended to the policyholder to choose the right life insurance policy that can serve their family members even in their absence.

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1. What is the meaning of endorsement in the assignment?

The policyholder has to sign the endorsement while transferring the rights of his/her insurance policy to the assignee. The sign of one witness is also required. Thereafter, the policyholder (assignor) has to mention precisely the reasons for transferring the rights of the insurance policy. The terms and conditions are also mentioned in the form (if any). Furthermore, the details of the assignee are also included in the form. 

2. What are the liabilities and rights of the assignee?

The liabilities and rights of the assignee are different on the basis of the types of assignment. In the absolute assignment, the right of policy ownership, responsibility to pay future insurance premiums, and the right of getting maturity benefits are transferred to the assignee. But in the conditional assignment, these rights and liabilities are determined as per the terms and conditions. 

3. When does the insurance company cancel the nomination in the assignment process?

When the assignor assigns the rights of the insurance policy to the assignee, then the nomination is cancelled by the insurance company. The nomination is not cancelled if the assignment is temporary. In that case, the rights of the insurance policy will be given back to the insured when he/she will pay the loan. 

4. Who can become the assignee of my insurance policy?

The assignee of the insurance policy can be a person or a financial institution. There should be an insurable interest between you and the person/financial institution. The assignee is either temporary or permanent. In some cases, the insured chooses the financial institution or insurance company as the assignee on some terms and conditions. But after some time, when the loan is paid, the insured will become the owner of the insurance policy again.

5. When does the insurance company accept the assignment?

If the insurance company finds that there is an insurable interest between the assignor and assignee, then the assignment is accepted. The insurance company makes sure that the assignment is not against the public interest and also not for trading purposes. The assignment should be in the interest of the policyholder only.


This article is issued in the general public interest and is for educational purposes only. The blogs should not be used as a substitute for competent expert advice from a licensed professional to best suit your needs. Insurance is a subject matter of solicitation. For more details on policy terms, conditions, exclusions, limitations, please refer/read policy brochure before concluding sale.

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