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As soon as we start having a steady income, we should start investing our money, and it really does not matter whether the scale is large or small. One of the things that is well worth investing your money in, is a life insurance policy. As a matter of fact, life insurance has become a familiar term to almost all the families in urban India. The biggest reason for its widespread popularity is that a life insurance policy comes with a heap of benefits. As we talk about life insurance, we must be aware of the two commonly used terms, assignment and nomination. So, let us talk about these two terms here today.
Assignment in insurance means transferring the rights, title, and ownership of the policy from a policyholder to another individual or even an entity. The person who is involved in transferring the policy is called an assignor and the person to whom the policy has been transferred is called the assignee. Under section 38 of the Insurance Act, 1938, assignment is regulated.
An assignment is further divided into two types, such as Absolute Assignment and Conditional Assignment. Let us discuss them a bit here.
Things that you should know about Assignment
Nomination in insurance is a right that the policyholder gets that gives the authority to him or her to appoint an individual to receive benefits in case the life assured passes away. The person who the policyholder appoints to get death benefits is a nominee. A nominee is usually a family member. Nomination runs under Section 39 of the Insurance Act, 1938.
Here are some of the types of nominees mentioned below:
Under this type, policyholders are allowed to change their preference of nominees several times. However, the current nominee must supersede all the other nominees.
The basic difference between nomination and assignment is the purpose. The nomination helps in protecting the interest of the policyholder as well as the insurance provider in providing the claim benefits under a life insurance plan. While an assignment helps in protecting the interest of an assignee for availing of the financial benefits under a life insurance policy. As a policyholder, you must be aware of both concepts to choose the best option that suits your needs. This can help you in making the most of your insurance policy and care for your loved ones even when you are not there.
Also Read: Grace Period in Term Insurance Policy
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