Nominee, appointee and assignee: what does each one mean?

A nominee is the person you name to receive the policy money if you die; an appointee is the person you name to receive it on behalf of a nominee who is a minor; an assignee is someone to whom you have transferred your rights in the policy, such as a lender. Assigning a life policy cancels the nomination, except where it is assigned for a loan — to the insurer on the security of the policy within its surrender value, or to a lender who advanced the loan — when it affects the nominee only to the extent of the insurer's or the lender's interest. Whether a nominee keeps the money depends on who the nominee is.

The nominee

Under Section 39 of the Insurance Act, the holder of a life policy on their own life can, when taking out the policy or any time before it matures for payment, nominate the person or persons to receive the money on their death. A life insurer cannot accept a proposal without a nomination, and IRDAI's circular lets you name several nominees and fix each one's share.^{[1, 2, 3]}

• Changing it: You can change or cancel a nomination, but until the insurer receives written notice it is not liable for a payment made in good faith to the nominee on its records.^[1]
• Acknowledgement: The insurer must acknowledge a registered nomination or change in writing; a nomination recorded in the schedule, or in an endorsement accepting a change, counts as that acknowledgement.^{[1, 2]}
• Who keeps the money: If you nominate your parents, spouse or children, they are beneficially entitled to the amount — for policies maturing for payment after the 2015 amendments — unless it is proved you could not have conferred that title. This does not defeat a creditor's right to be paid from the proceeds.^[1]
• Health and general policies: General and health insurers must also obtain a nomination when issuing a new policy and at renewal.^[2]

The appointee

Where a nominee is a minor, Section 39 lets the policyholder appoint a person, in the manner the insurer sets, to receive the money if the policyholder dies while the nominee is still a minor. The appointee receives the money on the child's behalf. A life policy must name the guardian for a minor nominee, so check that your policy shows one.^{[1, 4]}

The assignee

Assignment transfers the policy, or rights under it, to someone else under Section 38 — for example, to a bank as security for a loan. An assignment under Section 38 automatically cancels a nomination. But assigning the policy to the insurer for a loan it grants on the security of the policy within its surrender value, or to another lender in return for a loan it advanced to you, does not cancel the nomination; it affects the nominee's rights only to the extent of the insurer's or the lender's interest. And a nomination that an assignment did cancel revives automatically when the policy is reassigned to you on repayment of the loan.^[1]

If a policyholder dies while the policy is assigned, IRDAI advises the nominee to check that the assignment to the lender is valid, that only the outstanding loan is paid to the lender, and that any balance is paid to the nominee's bank account.^[3]

If no nominee survives

If all the nominees die before the policy matures for payment, the money is payable to the policyholder or their heirs or legal representatives. When there is no nominee covers the claim process.^[1]

ClaimAssure is an independent private platform. It is not an insurer, IRDAI, Bima Bharosa or the Insurance Ombudsman, it never files anything on your behalf, and it cannot promise any outcome. What it does is read your documents and show you what they say.

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