X

Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2017 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.


Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
Nomination vs. Assignment: Which Way to Go In Case Of Life Insurance - Outside View by PersonalFN
  • MyStocks

MEMBER'S LOGINX

     
Login Failure
   
     
   
     
 
 
 
(Please do not use this option on a public machine)
 
     
 
 
 
  Sign Up | Forgot Password?  

Nomination vs. Assignment: Which Way to Go In Case Of Life Insurance
Nov 30, 2015

Everyone wishes to provide security to their loved ones even after they've passed away. This is why we opt for life insurance policies, so our surviving family members won't have to face financial struggles in the case of our demise. The big concern for many of us is determining how to transfer the proceeds of such policies to our loved ones. The two popular methods used by policyholders for the transfer of insurance payouts are Nomination and Assignment.

Let's take a look into the details of each method:

Nomination:

Under the new Insurance Laws (Amendment) Act, 2015, there are two categories - 'beneficial nominee' and 'collector nominee'. If you nominate someone as your beneficial nominee, this nominee becomes the beneficiary of your policy and won't have to share the insurance money with other legal heirs. As a policyholder, you are free to appoint multiple 'beneficial nominee/s', mentioning each one's share. Keep in mind that it's necessary for beneficial nominee/s to be a family member such as spouse, parents, and children.

If you nominate someone as a 'collector nominee', this nominee will simply receive the policy payout from the insurance company and will have to facilitate the transmission to the legal heir/s, which may happen based on country/state succession laws. 

Assignment:

This refers to the transfer of your rights on an insurance policy to another person. Once you assign the insurance policy to somebody else, he/she becomes the owner of the policy. The catch here is that once the assignment has been done, it cannot be revoked. After assignment, the assignee will be eligible to receive the proceeds from the policy, and not you, even if you survive the tenure, (unlike nomination).

The assignment of life insurance policies can also be used as collateral while taking a loan. If an insurance policy is assigned to the lending bank and the policy holder expires during the tenure, the insurance company shall pay the outstanding loan amount to the bank and the remainder (if any) will be paid to the legal heirs of the policy holder. In this case, if the holder survives the tenure, the bank will reassign the policy back to him/her.

How should you transfer the proceeds of your life insurance policy?

PersonalFN believes that if you are absolutely sure of whom you want to transfer your policy proceeds to and trust that person completely, you may opt for assigning the policy. This method will ensure the transfer of money to your chosen beneficiary without any legal disputes coming up. Moreover under the assignment method, it is also possible to ascribe your policy to a third party. It is necessary to know that once it has been assigned, a policy cannot be taken back, unless the assignee himself reassigns the policy back to you.

If you are unsure, it is better to opt for the nomination method. Along with this, prudently make a Will and mention the name of the beneficiary of your policy in a clear manner.

PersonalFN believes that undertaking proper estate planning is extremely important if you wish to transfer all of your assets to your loved ones easily, without having them go through intricate legal formalities and disputes. In this endeavour, it's wise to seek the advice of a lawyer who has the expertise of carrying out such activities (internationally/nationally) to ensure that you make informed decisions and complete any necessary paperwork.

PersonalFN is a Mumbai based personal finance firm offering Financial Planning and Mutual Fund Research services.

Disclaimer:

The views mentioned above are of the author only. Data and charts, if used, in the article have been sourced from available information and have not been authenticated by any statutory authority. The author and Equitymaster do not claim it to be accurate nor accept any responsibility for the same. The views constitute only the opinions and do not constitute any guidelines or recommendation on any course of action to be followed by the reader. Please read the detailed Terms of Use of the web site.

Equitymaster requests your view! Post a comment on "Nomination vs. Assignment: Which Way to Go In Case Of Life Insurance". Click here!

  

More Views on News

The Right Financial Advisor Is Around the Corner (Outside View)

Mar 10, 2016

An opportunity to find an impeccably trustworthy and competent financial guardian is in the offing.

Why financial planning should be dull and boring (Mutual Fund Corner)

Feb 29, 2016

Most financial planners come out as whiz kids who throw around financial jargon. But financial planning can be actually easy, provided one follows a disciplined approach.

What Are E-Wallets And How To Use Them (Mutual Fund Corner)

Feb 12, 2016

PersonalFN highlights the benefits of parking a portion of your expenses in e-wallets and using them efficiently.

Is Consumption Boom Over In India? (Mutual Fund Corner)

Feb 2, 2016

Mutual funds take a bearish call on the FMCG sector. The sector has started playing out due to a combination of slower growth and expensive valuations.

How to Find a Saint Amongst Sinners? (Mutual Fund Corner)

Feb 1, 2016

Ethical practices help build long lasting relationships, and healthy long-term business relationships are often mutually rewarding. But PersonalFN is of the view that the financial services industry in India seems to have forgotten this.

More Views on News

Most Popular

This Small Cap Can Drive Chinese Players Out of India (and Make a Fortune in the Process)(The 5 Minute Wrapup)

Aug 17, 2017

A small-cap Indian company with high-return potential and blue-chip-like stability is set to supplant the Chinese players in this niche segment.

Dear PM Modi, India is Already Land of Self-Employed, and It Ain't Working(Vivek Kaul's Diary)

Aug 21, 2017

Most Indians who cannot find jobs, look at becoming self-employed.

It's the Best Time to Buy IT Stocks(Daily Profit Hunter)

Aug 16, 2017

The IT Sector could be in an uptrend till February 2019. Are you prepared to ride the trend?

5 Steps To Become Financially Independent(Outside View)

Aug 16, 2017

Ensure your financial Independence, and pledge to start the journey towards financial freedom today!

Think Twice Before You Keep Money In A Savings Bank Account(Outside View)

Aug 22, 2017

Post demonetisation, a cut in bank savings deposits rates was in the offing.

More

Become A Smarter Investor In
Just 5 Minutes

Multibagger Stocks Guide 2017
Get our special report, Multibagger Stocks Guide (2017 Edition) Now!
We will never sell or rent your email id.
Please read our Terms

MARKET STATS