assignment and nomination in life insurance

• 1800 102 2355
• Download the APP
• 1800 102 2355 [9:30AM-6:30PM]
• Branch Locator
• Customer Portal Login
• Advisor Portal Login

What is Assignment and Nomination in Life Insurance?

‘Assignment’ and ‘Nomination’ are two most common terms used in a life insurance policy document. Let us understand the importance of these two terms in-detail.

By Future Generali. Updated On Oct 06, 2022

Your life insurance policy is a contract between you (insured) and the insurance company (insurer). The contract is filled with jargon. To the extent possible, we must understand all the terms mentioned in the policy bond (certificate). ‘Assignment’ and ‘Nomination’ are two most common terms used in the insurance world.

For instance, in the event that you plan to apply for a home loan, your home loan provider will surely use these terms. Hence, it is best to be sure and understand exactly what the terms mean before you make a decision to buy the policy.

What is assignment in life insurance?

A life insurance policy can be assigned when rights of one person are transferred to another. The rights to your insurance policy can be transferred to someone else for various reasons. The process is known as assignment.

An “assignor” (policyholder) is the person who assigns the insurance policy. An “assignee” is the person to whom the policy rights have been transferred, i.e. the person to whom the policy has been assigned.

In the event rights are transferred from an Assignor to an Assignee, the rights of the policyholder are canceled, and the Assignee becomes the owner of the insurance policy.

People often assign their life insurance policies to banks. A bank becomes the policy owner in this case, while the original policyholder continues to be the life assured whose death may be claimed by either the bank or the policy owner.

Types of Assignment

There are two ways to assign an insurance policy. They are as follows:

1. Absolute Assignment

During this process, the rights of the assignor (policyholder) will be completely transferred to the assignee (person to whom the policy rights have been transferred). It is not subject to any conditions.

As an example, Mr. Rajiv Tripathi owns a Rs 1 Crore life insurance policy. Mr. Tripathi wants to gift his wife this policy. Specifically, he wants to make “absolute assignment” of the policy in his wife's name, so that the death benefit (or maturity proceeds) can be paid directly to her. After the absolute assignment has been made, Mrs. Tripathi will own this policy, and she will be able to transfer it to someone else again.

2. Conditional Assignment

As part of this type of assignment, certain conditions must be met before the transfer of rights occurs from the Assignor to the Assignee. The Policy will only be transferred to the Assignee if all conditions are met.

For instance, a term insurance policy of Rs 50 Lakh is owned by Mr. Dinesh Pujari. Mr. Pujari is applying for a home loan of Rs 50 Lakh. For the loan, the banker asked him to assign the term policy in their name. To acquire a home loan, Mr. Pujari can assign the insurance policy to the home loan company. In the event of Mr. Pujari’s death (during the loan tenure), the bank can collect the death benefit and get their money back from the insurance company.

Mr. Pujari can get back his term insurance policy if he repays the entire amount of his home loan. As soon as the loan is repaid, the policy will be transferred to Mr. Pujari.

In the event that the insurer receives a death benefit that exceeds the outstanding loan balance, the bank will be paid from the difference between the death benefit and the loan and the balance will be paid directly to the nominee. In the above example, the remaining amount (if any) will be paid to Mr. Pujari’s beneficiaries (legal heirs/nominee).

Key Points to know Note About Assignment

In regards to the assignment, the following points should be noted:

• A policy assignment transfers/changes only the ownership, not the risk associated with it. The person assured thus becomes the insured.
• The assignment may lead to cancellation of the nomination in the policy only when it is done in favour of the insurance company due to a policy loan.
• Assignment for all insurance plans except for the pension plan and the Married Women's Property Act (MWP), can be done.
• A policy contract endorsement is required to effect the assignment.

What is nomination in life insurance?

Upon the death of the life assured, the nominee/ beneficiary (generally a close relative) receives the benefits. Policyholders appoint nominees to receive benefits. Under the Insurance Act, 1938, Section 39 governs the nomination process.

Types of Nominees

In a life insurance policy, the policyholder names someone who will receive the benefits in the event of the life assured's death. Here are a few types of nominees:

1. Beneficial Nominees

In accordance with the law, the beneficiary of the claimed benefits will be any immediate family member nominated by the policyholder (like a spouse, children, or parents). Beneficiary nominees are limited to immediate family members of the beneficiary.

2. Minor Nominees

It is common for individuals to name their children as beneficiaries of their life insurance policies. Minor nominees (under the age of 18) are not allowed to handle claim amounts. Hence, the policyholder needs to designate a custodian or appointee. Payments are made to the appointee until the minor reaches the age of 18.

3. Non-family Nominees

Nominees can include distant relatives or even friends as beneficiaries of a life insurance policy.

4. Changing Nominees

It is okay for policyholders to change their nominees as often as they wish, but the latest nominee should take priority over all previous ones.

Key Points to Note About Nomination

In regards to the nomination, the following points should be noted:

• In order to nominate, the policyholder and life assured must be the same.
• In the case of a different policyholder and life assured, the claim benefits will be paid to the policyholder.
• Nominations cannot be changed or modified.
• The policy can have more than one nominee.
• As part of successive nominations, if the life assured appoints person “A” as the first person to receive benefits. Now, in the event of the life assured’s death after person “A” dies, the claim benefits will be given to person “B”. The benefits will be available to Nominee “C” if Nominee “A” and Nominee “B” have passed away.

What is the difference between nomination and assignment?

Let's talk about the differences between assignment and nomination.

Nomination and Assignment serve different purposes. The nomination protects the interests of the insured as well as an insurer in offering claim benefits under the life insurance policy. On the other hand, assignment protects the interests of an assignee in availing the monetary benefits under the policy. The policyholder should be aware of both of them before buying life insurance.

Connect with our trusted financial advisors right away!

Fill in below details to get a call back

One of our associate will connect with you soon.

Latest Articles

Life Insurance 4 min What is Investment? A Complete guide to start your investment journey.

By Future Generali. Dec 06, 2023

Life Insurance 5 min Endowment Policy: Returns, Benefits & Requirement

By Future Generali. Sep 06, 2023

Life Insurance 4 min Understanding Sum Assured: Significance & Calculation

By Future Generali. Jul 28, 2023

Couldn't find what you are looking for? TRY SEARCH

ARN No.: Comp-April-2022_534.

Easily Organize, Claim and Renew Insurance!

Know About Car Insurance

Compare Car Insurance

Know about Car Insurance

• Third Party Car Insurance
• Comprehensive Car Insurance
• Standalone Own Damage Car Insurance
• Zero Depreciation Car Insurance
• Taxi Car Insurance
• Used Car Insurance

Insurance Knowledge

• Car Insurance Companies
• Car Insurance Premium Calculator
• Car Insurance Claim Process
• Buy, Compare or Renew Car Insurance
• Cashless Garage
• Car Insurance Blogs

Read Our Blogs

Find Advisor

Know About Bike Insurance

Compare Bike Insurance

Know about Bike Insurance

• Third Party Bike Insurance
• Comprehensive Bike Insurance
• Zero Depreciation Bike Insurance
• Add On Cover
• Stand Alone Own Damage
• Bike Insurance Companies
• Bike Insurance Claim Process
• Bike Insurance Premium Calculator
• Buy, Compare & Renew Bike Insurance
• Bike Insurance Blogs

Know About Health Insurance

Compare Health Insurance

Know about Health Insurance

• Health Insurance Plans
• Family Health Insurance Plans
• Senior Citizen Health Insurance
• Critical Illness Insurance
• Mediclaim Policy
• Coronavirus Health Insurance
• Health Insurance Tax Benefit
• Health Insurance Companies
• Health Insurance Claim Process
• Buy, Compare or Renew Health Insurance
• Health Insurance Blogs

Know About Life Insurance

Compare Life Insurance

Know about Life Insurance

• Term Insurance Policy
• Money Back Policy
• Endowment Policy

Life Insurance Companies

• Life Insurance Premium Calculator
• Compare & Buy Life Insurance plan
• Human Life Value Calculator
• Life Insurance Riders
• Life Insurance Blogs

Raise A Claim

Assignment vs Nomination in Life Insurance

Table of Content:

• Difference between nomination and assignment
• What is nomination in life insurance?

1. Beneficial Nominee

• 2. Minor Nominee

3. Non-Family Nominee

4. multiple nominees.

• 4. Changing Nominee
• 6.Successive Nominee
• Important things to know about nominations
• What is an assignment in life insurance?
• Types of assignment in life insurance

Important things to know about assignments

• Differences between nominations and assignments:

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:

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.

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

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. 

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

• Only the owner of the policy is changed in the assignment. The life assured will remain the same.
• 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.
• 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.

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.

Related post:

• LIC Plans for 10 Years with Returns & Alternatives

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.

Found this post informational?

Browse Turtlemint Blogs to read interesting posts related to Health Insurance , Car Insurance , Bike Insurance , and Life Insurance . You can visit Turtlemint to Buy Insurance Online.

Get Best Insurance Quotes For

Health Insurance

Life Insurance

Car Insurance

Bike Insurance

Related Blogs

Top Life Insurance Companies in India (Updated List 2024)

Table of Contents Introduction to Life Insurance What Does Life Insurance Cover? Common Types of Life Insurance…

Ankita Sejpal

Feb 05, 2024

What is Mobile Insurance? Compare Mobile Phone Insurance…

Mobiles have become the part and parcel of the modern generation. It is no longer just a means to talk with people, mobiles today…

Dec 28, 2023

Difference Between Annuity & Life Insurance

Life is full of surprises. Understanding and planning before any unforeseen events give you the benefit of financial stability….

Rupanjali Mitra Basu

Dec 27, 2023

Employees’ State Insurance Scheme – All you need to…

Table of Contents What is the ESIS? What is the Employees’ State Insurance Corporation? Employees’ State Insurance…

YSR Pension Kanuka Eligibility Criteria, Benefits &…

Table of Contents What is YSR Pension Kanuka YSR Pension eligibility criteria  Features of YSR Pension…

Dec 21, 2023

Deferred Annuity: Meaning, Benefits, Types & How It…

Financial planning is important in all phases of life. But planning for retirement is vital to secure social status and…

Jul 29, 2022

Is Suicide Covered Under Life Insurance Policy

Life insurances are your safety protocols. They are to support the family after their family member’s demise financially. But…

Jul 19, 2022

Difference Between Participating & Non Participating…

Table of Contents Participating and non participating Life Insurance Plans Participating Life Insurance Plan Working…

Policy Cancellation & Refund

Policy cancellation and refund of the premium shall be as per the terms & conditions of the policy. The refunds are processed by the Insurance Company directly. You are requested to contact the toll free number of your Insurance Company or refer the respective section of your Policy terms and conditions. You can also call us at our toll free number 1800-266-0101 or write a mail to us at [email protected] . We shall be available to guide/assist you.

Confused about insurance? Let’s simplify it together!

Submit your details for expert guidance and hassle-free assistance.

IRDAI certified expert advice

Application assistance

Claim support

Get free advice

Now sit back and relax!

Our advisor will reach out to you shortly!

• Life Insurance
• Assignment Vs Nomination In Life Insurance Know The Difference
• Understanding Nomination and its Types
• Understanding Assignment and its Types
• Key Differences Between Nomination and Assignment

Buy Policy in just 2 mins

2 lakh + Happy Customers

Free Comparison

Customized Term Insurance Plan for you.

Get upto 10% Online Discount*

Select Your City

Popular Cities

Delhi Gurgaon Noida Bengaluru Chennai Ahmedabad Hyderabad Kolkata Mumbai

Select Your Annual Income Your life insurance cover limit will be calculated based on your income. You may be asked to provide income proof at the time of purchase.

15 Lacs+ P.A. 10-15 Lacs P.A. 7-10 Lacs P.A. 5-7 Lacs P.A. 3-5 Lacs P.A. Upto 3 Lacs P.A.

Enter Your Name

Mobile Number

By proceeding you are accepting our T&C and privacy policy

Confused? No Worries, We Are Here To Help!

Health offer, invest offer.

Assignment vs Nomination in Life Insurance

In life insurance plans, Nomination and Assignment are the two important terms that are frequently used. Acknowledging these terms helps the policyholder to extract the benefits available under the life insurance policy without making a hole in his/her pocket.

Policyholders should know the exact difference between the two before making any decision to purchase the policy. It is required that individuals should read terms and conditions carefully so that one doesn't make any mistake and use the policy in the right way.

What is the Nomination?

The nomination is a right given to the policyholder that authorizes him/her to appoint a person (usually a close family member) to receive the benefits in the event of the death of the life assured. The person who is appointed by the policyholder to receive the benefit is called a Nominee. The nomination is governed under Section 39 of the Insurance Act, 1938.

Types of Nominees

Under the life insurance policy , the policyholder nominates a person who is entitled to receive the benefits in case something happens to the life assured. Some of the different types of nominees given below:

Beneficial Nominees

As per the law, any immediate family member (like spouse, children or parents) nominated by the policyholder is entitled to receive the monetary benefits and will be the beneficial owner of the claim benefits. It is important to note that only immediate family members can be termed as Beneficial Nominees.

Minor Nominees

Many individuals appoint their children as beneficiaries of their life insurance policies. Minor nominees (who are less than 18 years of age) are not considered eligible to handle claim amounts. For this, the policyholder needs to assign an appointee or custodian. The claim amount is paid to the appointee until the minor turns 18.

Non-family Nominees

These types of nominees can be distant relatives or even friends as the beneficiary of the life insurance policy.

Changing Nominees

Policyholders can change their nominees as many times as they want, but the latest nominee should supersede all previous ones.

Life Insurance Companies

Compare and buy the most suitable Life Insurance Plan from the below-mentioned IRDAI-approved Life Insurance companies.

• Term Insurance

LIC Of India

Hdfc life insurance, icici prudential life insurance, sbi life insurance, max life insurance, tata aia life insurance, pnb metlife india insurance, bajaj allianz life insurance, bandhan life insurance, kotak mahindra life insurance, canara hsbc life insurance, bharti axa life insurance, aviva life insurance, indiafirst life insurance, exide life insurance, edelweiss tokio life insurance, ageas federal life insurance, future generali life insurance, birla sun life insurance, reliance life insurance, pramerica life insurance limited, shri ram life insurance, sahara india life insurance.

Know More About Life Insurance Companies

LIC Term Insurance

Hdfc term insurance, icici term insurance, sbi life term insurance, max life term insurance, tata aia term insurance, pnb metlife term insurance, bajaj allianz term insurance, bandhan life term insurance, kotak life term insurance, canara hsbc obc term insurance, bharti axa term insurance, aviva term insurance, indiafirst term insurance, exide life term insurance, edelweiss tokio term life insurance, ageas federal term insurance, future generali term insurance, birla sun life term insurance, reliance term insurance, pramerica term insurance.

Know More About Term Insurance Companies

Key Points to Know Regarding Nomination

• The nomination is possible only when the policyholder and life assured are the same. In case, the policyholder and life assured are different, the claim benefits will be availed by the policyholder only.
• The nominee cannot ask for changes/modifications to the policy.
• There can be more than one nominee in the policy.
• In the successive nomination, if the life assured appoints person A to be the first person to receive the claim benefits in case of assured's death and person A is no more, then the claim benefits will be passed to person B. However, if Nominee A and Nominee B have passed away, later Nominee C will be appointed to avail the benefits and so on.

What is Assignment?

Assignment of the policy refers to the transfer of rights, title, and policy ownership from the policyholder to another person or entity. The person involved in assigning/transferring the policy is called assignor, and the person/institution to which it is assigned is called the assignee. The assignment is regulated under Section 38 of the Insurance Act, 1938.

The assignment is categorized under two different types, i.e. Absolute Assignment and Conditional Assignment.

Absolute Assignment

Under the absolute assignment, all rights, title and interest are transferred by the assignor to an assignee without reversion to the assignor (in case of any event). It shifts the ownership of the insurance policy to other parties without any terms and conditions. This assignment is usually done for money consideration such as raising a loan, out of love or affection towards family members.

Conditional Assignment

It means that the transfer of rights will happen from the Assignor to the Assignee subject to certain terms and conditions. If the conditions are fulfilled, only then the policy will be transferred.

Key Points to know Regarding Assignment

• Under the assignment, only the ownership is transferred/changed, not the risk of the policy. This means the life assured is/will be considered as the person insured.
• The assignment may lead to cancellation of the nomination in the policy only when it is done in favour of the insurance company due to a policy loan.
• The assignment applies to all the insurance plans except Pensions Plan and Married Women's Property Act (MWP).
• The assignment is effected through an endorsement on the policy contract.

Difference Between Assignment and Nomination

Let's discuss how assignment differs from nomination.

Nomination and Assignment serve different purposes. The nomination protects the interests of the insured as well as an insurer in offering claim benefits under the life insurance policy. On the other hand, assignment protects the interests of an assignee in availing the monetary benefits under the policy. The policyholder should be aware of both of them before buying life insurance.

Life Insurance Articles

Top 5 Benefits of Life Insurance Jan, 2024

GST On Life Insurance Aug, 2023

Importance of Life Insurance Aug, 2023

Factors That Affect Life Insurance Premiums July, 2023

Life Insurance For Cancer Patients July, 2023

Difference Between ULIP and Traditional Plans July, 2023

Grace Period In Life Insurance Policy July, 2023

Life Insurance With Maturity Benefits July, 2023

Difference Between Life Insurance and Health July, 2023

Benefits of Life Insurance July, 2023

Advantages and Disadvantages Of Life July, 2023

Life Insurance Premium June, 2023

Cash Value Of Life Insurance June, 2023

Free Look Period in Life Insurance June, 2023

Ladli Laxmi Yojana Policy May, 2023

Group Term Life Insurance March, 2023

Bima Sugam Life Insurance December, 2022

Whole Life Insurance Policy September, 2022

Sabse Pehle Life Insurance April, 2022

Life Insurance FAQs September, 2021

Pandemic Challenges in Life Insurance May, 2021

Term Life vs. Traditional Life Insurance- Which Is Better? January, 2021

How to Get Duplicate LIC Policy Bond? October, 2020

How To Check ICICI Prudential Life Insurance Policy Status? May, 2020

What Are Late Payment Charges For LIC Premiums? September, 2020

How To Check SBI Life Insurance Policy Status? April, 2020

Life Insurance Claim Process & Requirements July, 2020

SBI Life Insurance Premium Payment April, 2020

Guaranteed Income Plan June, 2020

ICICI Prudential Life Insurance Login and Registration April, 2020

ICICI Prudential Premium Payment May, 2020

Revival of Lapsed LIC Policy - Steps to Revive It Online December, 2019

See More Life Insurance Articles

Top 10 Indian Life Insurance Companies Jan, 2024

How To Download LIC Premium Receipt Online? December, 2019

Top 10 Pension Plans in India December, 2019

How To Check HDFC Life Policy Status? November, 2019

Sukanya Samriddhi Yojana Vs LIC Kanyadan Policy September, 2019

Best Single Premium Insurance Plans in India December, 2019

How To Update HDFC Life Insurance Policy Online? November, 2019

Max Life Premium Payment November, 2019

What our customers have to say.

Armaan khan

May 17, 2024

I recently purchased a Pramerica term insurance policy from Policyx.com. The customer service team was very helpful in answering all my queries and guiding me through the application process. I...

Rahul Yadav

PolicyX’s dedicated support made renewing my Bandhan Life Insurance policy easy. I’m absolutely delighted with the service offered by PolicyX Insurance Advisor.

Priyanshu Sharma

I bought a Bandhan Life Insurance through PolicyX, and I must say the level of communication and assistance I have received has been truly impressive.

After getting advice from the PolicyX experts, I chose a Bandhan Life Insurance term plan. Thank you, PolicyX, for helping me buy a term plan at such a low premium.

I was considering buying a life insurance plan when I landed on the PolicX website free comparison service. Thanks to PolicyX, I finally found a Bandhan Life Insurance policy that best fits my ...

May 10, 2024

I was looking for a term plan to secure my family& 039;s future. So I contacted PolicyX and they helped me compare various term plans. So I choose Bharti Axa term plan.

Akshay Khaana

Mr. Suresh from PolicyX helped me get my Bharti AXA term plan approved after it was initially rejected.

I wanted to buy life insurance policy. So I contacted Bharti Axa Life Insurance. They helped me compare and choose the plan that is suitable for me.

Reviewed By: Naval Goel

Naval Goel is the CEO & founder of PolicyX.com. Naval has an expertise in the insurance sector and has professional experience of more than a decade in the Industry and has worked in companies like AIG, New York doing valuation of insurance subsidiaries. He is also an Associate Member of the Indian Institute of Insurance, Pune. He has been authorized by IRDAI to act as a Principal Officer of PolicyX.com Insurance Web Aggregator.

Talk to our Trusted Insurance Advisors for Best Plans

Search Anything

Most Searched:

• Key Differences

Know the Differences & Comparisons

Difference Between Nomination and Assignment

In the nomination, the property or amount secured by the policy remains at the disposal of the assured, till the time he/she is alive and the person appointed as the nominee is only for beneficial interest. On the other hand, in assignment the assets or policy amount passes to the assignee, as he/she gets the title or ownership and interest of the policy. Check out the given article to know the differences between nomination and assignment.

Content: Nomination Vs Assignment

Comparison chart, definition of nomination.

In Life Insurance, nomination can be understood as a facility, which allows the policyholder or say insured to nominate a person, who can claim the policy amount, in the event of death of policyholder. If, in case, a minor is appointed as nominee, then a major should be specified, in order to receive the money secured by the policy, upon the demise of the insured.

The policyholder can make nomination either at the time of purchasing the policy, or anytime before the expiry of the term. The policyholder is allowed to change the nomination, during the term of the policy, by making a fresh nomination, which should be incorporated, either through text in the policy or through an endorsement to the policy, to become effective.

When the policy matures while the insured is alive or when the nominee dies prior to the maturity of the policy, the policy amount is paid to the policyholder, or his/her legal heir or representative.

Definition of Assignment

Assignment, as the name suggest is the legal transfer of rights from the policyholder to the assignee to receive benefits indicated in the insurance agreement. It is usually made out of love and affection with the family members or for adequate consideration to any outside party.

The assignment can be made either through an endorsement upon the policy or separate instrument, duly signed by the assignor or his agent. The signature is required to be witnessed by at least one person competent to contract. It becomes effective from the date when the documents are received by the insurance company in proper order.

In general, space for endorsement is given in the policy document to enable the holder affix the assignment statement, along with reasons for the same.

The benefits in the policy arise as a result of survival and death benefits. All life insurance policies provide death benefits, but survival benefits are concerned with maturity benefits under the policy that involves a hidden investment component.

Key Differences Between Nomination and Assignment

The difference between nomination and assignment can be drawn clearly on the following grounds:

• The appointment of an individual by the assured to receive the amount secured by the policy, upon the demise of the assured is known as a nomination. On the other hand, assignment refers to cede the right, ownership, and interest in the policy to another person.
• In the nomination, there is no requirement of attestation by the witness. Conversely, attestation by at least one witness is required in case of assignment.
• In the nomination, there is no such thing like consideration. In contrast, the assignment can be with or without consideration.
• Nomination does not entitle nominee the right to sue under the policy. On the contrary, assignment entitles the assignee the right to sue under the policy.
• The nomination is made to help beneficiary recover the policy amount when it becomes due for payment. As against this, assignment aims at transferring all rights and interest in favor of the assignee.
• Nomination can be revoked or changed several times, whereas assignment can be canceled only one or two times during the policy term.
• The nomination is made in favor of immediate relatives. As opposed, assignment is made in favor of immediate relatives or to external party.

By and large, a nomination only accentuates the hands, to whom the policy amount is to be paid on the death of the assured, so that the insurance company gets the valid discharge of liabilities, as per the policy. Nevertheless, the amount can be claimed by the legal heirs of the policyholder.

The assignment is generally made by the policyholder out of love for the immediate relatives or even for certain consideration from an external party. Assignment without consideration to an external party is subject to detailed scrutiny, as it is seen as a possible way of money laundering.

You Might Also Like:

Leave a Reply Cancel reply

Your email address will not be published. Required fields are marked *

Save my name, email, and website in this browser for the next time I comment.

Life Insurance Assignment and Nomination

The policy in life insurance can be assigned freely for legal consideration or love and affection. Either the assignment shall be complete and effectual only on the execution of such endorsement on the policy itself or by a separate deed.

Notice for this purpose must be given to the insurer who will acknowledge the assignment.

Once the assignment is completed, it cannot be revoked by the assignor because he ceases to be the owner of the policy unless the assignee makes a reassignment in favor; of the assignor.

An assignee may be the owner of the policy both on the survival of the life assured or 611 his death according to the terms of the transfer.

The life policies are the only policies that can be assigned whether the assignee has an insurable interest or not.

Life policies are frequently charged, assigned, or otherwise dealt with, for they are valuable securities because a fixed sum is undoubtedly paid in life policies except a few, say, pure endowment and temporary policies.

How Nomination Works in Life Insurance

The holder of a policy of life insurance on his own life either may at the time of affecting policy or at any subsequent time before the policy matures, nominate the person or persons to whom the money secured by the policy shall be paid in the event of his death.

A nomination can be canceled before maturity, but unless notice is given of any such cancellation to the insurer, the insurer will not be liable for any “bona fide” payment to a nominee registered in the records.

When the policy matures, or if the nominee dies, the sum shall be paid to the policy-holder or his legal representatives.

The Role of Nomination and Assignment in Life Insurance Policies

Table of Contents

Introduction

Life insurance is a vital financial tool that provides a safety net for our loved ones in times of need. While choosing the right policy is crucial, understanding the nuances of nomination and assignment is equally important. These two elements play a pivotal role in ensuring that the benefits of the life insurance policy are seamlessly transferred to the intended beneficiaries.

Nomination in a life insurance policy refers to the act of appointing a person or persons who will receive the policy proceeds in the event of the policyholder’s demise. It is a simple yet powerful way to express one’s wishes regarding the distribution of the financial benefits.

The nominee can be a family member, a friend, or anyone chosen by the policyholder. In Insurance it is important to define the Nominee as the one who suffer financial loss in the absence of the insured person. During the policy application process, the policyholder has the option to specify the percentage of the sum assured that each nominee is entitled to receive. This ensures a clear and unambiguous distribution of the policy benefits, reducing the chances of disputes among family members.

One of the key advantages of nomination is the expeditious settlement of claims. In the absence of a nominee, the legal heirs may have to go through a lengthy and complicated legal process to establish their claim. Nomination simplifies this process, allowing the insurer to release the funds directly to the nominee, facilitating a smoother transition of financial support.

While nomination dictates who will receive the policy proceeds, assignment empowers the policyholder to transfer the rights and benefits of the policy to another person or entity during their lifetime. This process allows for a more dynamic and flexible approach to managing financial assets.

Assignment can be either conditional or absolute. Conditional assignment involves transferring the benefits to another party with the condition that the rights will revert to the policyholder under specific circumstances. On the other hand, absolute assignment permanently transfers the rights and benefits to another individual or entity, irrevocably changing the ownership of the policy.

One of the common reasons for assignment is to secure a loan. Policyholders can assign their life insurance policy to a lender as collateral, providing a layer of security that benefits both parties. In the unfortunate event of the policyholder’s demise before repaying the loan, the outstanding amount is deducted from the policy proceeds, and the remaining sum is disbursed to the nominee.

Nomination and assignment are not mutually exclusive; in fact, they can complement each other to serve the policyholder’s specific needs. For instance, a policyholder can nominate a family member as the primary beneficiary while assigning the policy to a trust for estate planning purposes.

Understanding the roles of nomination and assignment empowers policyholders to tailor their life insurance policies to their unique circumstances. Regular reviews and updates to nomination details ensure that the policy aligns with the policyholder’s current wishes and financial objectives.

In conclusion, nomination and assignment are integral aspects of life insurance policies that go beyond the conventional perception of safeguarding loved ones. These tools empower policyholders to exercise control over the distribution of benefits and customize their policies to suit changing life situations. As such, a thoughtful approach to nomination and assignment can enhance the efficacy of life insurance as a robust financial planning tool.

By- Shilpa Arora

Click here to register your complaint with Insurance Samadhan

Visit our website:  insurancesamadhan.com

Mail us at  [email protected]

Insurance Samadhan

Leave a reply cancel reply.

Your email address will not be published. Required fields are marked *

Save my name, email, and website in this browser for the next time I comment.

Notify me of follow-up comments by email.

Notify me of new posts by email.

• Mutual Fund Research
• Premium Services
• Financial Planning
• PersonalFN Direct
• Certified Financial Guardian
• Mutual Fund News
• Fund Category

Financial Health Checkup

• PPF Calculator
• HLV Calculator
• SIP Calculator
• Mutual Fund Calculator
• STP Calculator
• EPF Calculator
• EMI Calculator
• Home Loan Calculator
• Personal Loan Calculator
• Car Loan Calculator
• Real Return Calculator
• Retirement Calculator
• Best Retirement Funds for 2024
• 5 Best Mutual Fund Types for Long-Term
• Sensex @65,000: The Mutual Fund Investment Strategy to Follow Now
• 5 Top-Performing Mid Cap Funds with High Return Potential
• Guide to Capital Gains Tax When You Sell Your Property
• How to File Income Tax Return Online for AY 2023-24
• What Are Equity Mutual Funds: Meaning, Benefits, Types, FAQs
• 3 Best Dividend Yield Mutual Funds to Invest in 2023
• 5 Best Aggressive Hybrid Funds to Invest in 2023
• Best Multi Asset Allocation Funds to Invest in 2023
• Best Large & Mid Cap Mutual Funds to Invest in 2023
• Definitive Guide To Successful Equity Investing
• The HelpYourNGO Giving Guide 2014

Money Simplified Videos

Infographics.

• Knowledge Center

What Is Nomination And Assignment in Life Insurance?

Listen to What Is Nomination And Assignment in Life Insurance?

Life insurance is a contract between an insurer and a policyholder. An insurer guarantees a sum assured to the beneficiary/nominee on the policyholder's unfortunate demise in return for the premiums paid. When entering into any contract, it is necessary that both parties read and understand the fine print. While buying a life insurance policy, a potential policyholder may come across certain jargon that is difficult to understand for a layman. Entering into a contract without thoroughly reading or understanding the exact meaning of these terms can lead to disappointments in the future. Hence, before making a buying decision, it is best to read the fine print and know the exact meaning of all the terms. Nomination and assignment are two terms that many policyholders get perplexed with, but you must understand them before buying life insurance.

What is Nomination?

You might be familiar with the nomination facility in Savings Bank Account. Nomination in life insurance works in the same way. While buying a life insurance policy, the policyholder appoints a nominee to receive the insurance benefits. Upon the insured's death, the nominee receives the sum insured by the life insurance policy. Section 39 of the Insurance Act 1938 governs the nomination process.

So, a nomination is a right given to the policyholder/ insured to appoint a person (nominee), usually a close family member, to receive the insurance benefits in the event of the demise of the insured.

What are the types of Nominees?

Here are some of the types of Nominees:

1. Beneficial Nominees:

The Insurance Regulatory and Development Authority of India has introduced the new term 'beneficiary nominee' instead of 'nominee'. The policyholder has a right to make any of his/her close relatives, i.e., parent, guardian, child, or spouse, a nominee. Appointing the nominee eliminates the chances of any disputes arising at the time of claim settlement. Bear in mind that only your immediate family members can become beneficial nominees.

2. Minor Nominees:

Many policyholders prefer appointing their child/children as nominees for their life insurance policies. However, if the child has not completed 18 years and is still a minor, he/she does not meet the eligibility criteria to handle the claim amount. So, in case of an unfortunate demise of the insured, the claim amount is payable to the legal custodian or the child's appointee. The legal custodian hands over the sum to the child when he/she turns 18 years old.

Join Now: PersonalFN is now on Telegram. Join FREE Today to get 'Daily Wealth Letter' and Exclusive Updates on Mutual Funds

3. Non-family Nominees:

In certain exceptional situations, the nominee can choose a non-family member as his/her nominee. However, you should check the terms pertaining to the nomination with your insurer and know that appointing a non-family nominee is generally not recommended.

4. Changing Nominees:

The policyholder has the right to change the nominees as many times as he/she wants. But bear in mind that the latest nominee will supersede all the previous nominees.

5. Multiple Nominees:

The policyholder can choose to appoint more than one nominee to his/her life insurance policy. In the case of multiple nominees, the policyholder divides the share of the total amount between multiple nominees. If the policyholder has not divided the share/percentage of the policy, the claim amount is equally divided between nominees.

6. Successive Nominees:

The successive nomination allows the policyholder to choose more than one nominee in a successive manner. So, in case of the demise of the policyholder, the claim amount will go to the first nominee. In case of the demise of the first nominee, the claim amount will go to the second nominee, and so on.

What are the key points to note about the Nomination?

In order to appoint a nominee, the policyholder and insured must be the same.

If the policyholder and insured are different individuals, the claim benefits are paid to the policyholder.

Certain life insurance plans do not allow any change or modification in the nominee unless the demise of the nominee.

The policyholders are allowed to appoint more than one nominee.

What is an Assignment?

An assignment is transferring the rights, title, and ownership of the life insurance policy to another individual or entity. The policy can be assigned when the rights of one person are transferred to another.

The person who transfers the policy is called an assignor, and the person to whom the policy is transferred is called the assignee. The assignment is governed under Section 38 of the Insurance Act 1938.

There could be many reasons why a policyholder wants to transfer his/her policy to someone else. For example, in the case of a Loan Against a Life Insurance Policy, the policyholder assigns his/her life insurance policy to the bank. So, the bank becomes the policy owner, and in case of the demise of the assignor, the bank claims the insurance benefits.

What are the types of Assignments?

1. Absolute Assignment:

Under absolute assignment, the assignor transfers all the rights, titles, ownership, and interest to another person or entity. The ownership of the policy is transferred to the other party without any terms and conditions. This type of assignment is generally done for raising loans against life insurance policies.

2. Conditional Assignment:

As the name suggests, under conditional assignment, the assignor transfers the rights to the assignee depending on the terms and conditions. So, the policy is assigned only if the conditions are fulfilled.

What are the key points to note about an Assignment?

The assignment of the life insurance policy transfers only the ownership and not the risk associated with it.

The assignment may lead to cancellation of the nomination only when it is done in favour of the insurance company due to the policy loan.

The policyholder can assign any policy except a pension plan and a Married Women's Property Act (MWP).

In order to effect the assignment, a policy contract endorsement is required.

What are the key differences between Nomination and Assignment?

To conclude:

The basic difference between Nomination and Assignment is the purpose for which it is undertaken. While a nomination helps in protecting the interest of the policyholder and insurer in providing the claim benefits under a life insurance policy, an assignment helps in protecting the interest of an assignee for availing of the financial benefits under a life insurance policy. Knowing all such terms will help you choose the best-suited option for you and make the most of your life insurance policy.

Warm Regards, Ketki Jadhav Content Writer

PersonalFN' requests your view! Post a comment on " What Is Nomination And Assignment in Life Insurance? ". Click here!

Add Comments

• Phone Number

Most Related Articles

Hdfc ergo withdraws three health insurance plans hdfc ergo's recent decision to withdraw three health insurance policies signals strategic adjustments in their product line-up, impacting policyholders. may 15, 2024, how to port your health insurance policy discover essential guidelines on health insurance portability and making informed decisions to safeguard your financial and emotional well-being in times of medical emergencies. may 13, 2024, irdai removes age limits on health insurance purchase discover how irdai's ground-breaking decision to remove age limits in health insurance is revolutionising accessibility and coverage options for all. apr 17, 2024, 8 life insurance riders you should consider buying enhance your life insurance coverage with our guide to 8 essential riders you should consider buying. apr 03, 2024, health insurance portability: benefits and how to transfer discover the advantages and steps involved in transferring your health insurance with our comprehensive guide on health insurance portability. apr 02, 2024, most popular, manufacturing mutual funds shine. are they worthy of your investment portfolio currently contributing around 17% to the gdp, the manufacturing sector is expected to grow to 21% in the next 6-7 years. may 06, 2024, 6 equity mutual funds to benefit from india’s defence sector the potential to benefit by sensibly taking exposure to defence sector stocks is huge apr 17, 2024, top 5 mutual funds with high exposure to ev revolution this article will evaluate the top mutual funds to invest in 2024 that have a high allocation to ev stocks. feb 06, 2024, top 5 mutual funds that are betting on the manufacturing boom this article will evaluate the top mutual funds to invest in 2023 that have a high allocation to manufacturing stocks. sep 01, 2023, hdfc mutual fund launches hdfc manufacturing fund hdfc mutual fund launches hdfc manufacturing fund may 08, 2024.

Information Page On Difference Between Assignment Vs Nomination In Life Insurance

Buy Life Insurance in under 5 minutes and Save upto 75%*

Our Partners

ICICI Lombard

Bajaj Allianz

Star Health

And many others..

Nomination and assignment difference  

The words, assignment and nomination, are commonly used in life insurance policies . While not everyone understands them, it is critical to know the meaning and distinction between the two before acquiring any insurance plan.  

The primary distinction is one of policy ownership. The policy owner remains constant while under nomination. An assignment, on the other hand, transfers policy possession from one individual to another. The advantage is paid to the nominee (as in nomination) post the demise of the life assured, but the advantage is paid to the assignee (as in assignment) when the life guaranteed passes the rights and possession of his/her plan to the assignee. There are some fundamental and prevalent distinctions between the nomination and assignment. 

This article will elaborate some more about assignment and nomination, and the role played by them in insurance. 

What exactly is life insurance nomination?  

Among the most important aspects of a life insurance policy is nominating. The policyholder must designate a family member as their own nominee. If the insured person dies, the nominee is regarded as being qualified to receive the advantages of the life insurance policy. In this method, the insurance company makes sure that the insured’s family does not face financial difficulties even if a salaried member of the family dies. As a result, the insured should exercise caution while selecting the candidate for his or her insurance policy. 

Nominee types in life insurance  

The policyholder has the option of selecting one out of the five sorts of nominees. Let’s take a closer look at them. The five distinct kinds of nominees in life insurance are as follows: 

1. Beneficial Nominee  

Instead of the nominee, IRDA has coined the term “beneficiary nominee.” It indicates that the owner of the policy has the authority to appoint anyone as their nominee. The property owner’s guardian/parent, kid, or partner can be chosen as the nominee. If the insured has already picked a nominee, there will be no conflict in receiving the claim. 

2. Minor Nominee  

To ensure the future of the kid in their absence, a policyholder may designate his or her younger child the chosen beneficiary of his or her life insurance policy. However, if the insured person dies prematurely, the amount claimed will be paid to the child’s official guardian or an appointee. When the child reaches the age of 18, the caretaker transfers the money to him or her. 

3. Non-Family Nominee  

The insured may also select an outsider as his or her candidate. However, this is not usually advised. 

4. Multiple Nominees  

According to the insurance policy of multiple nominees, the policyholder may choose two or more people. In this situation, the owner of the policy splits the total sum among the two nominees. In case the policyholder fails to split the amount when filling out the nomination form, the insurance company divides the claim sum equally among the nominees. 

5. Changing Nominee  

The policy owner can choose his or her candidate under this sort of nominee during the term of the life insurance policy. 

6. Successive Nominee  

In many cases, people want to select multiple nominee; in consecutive nominations, one might select a maximum of three nominees. The benefit for death will be paid to the first candidate upon the demise of the insured. If the first nominee dies, the benefit for death will be paid to the second nominee, and so on. 

What you must know about nominations?  

There are quite a few fundamental aspects of nominations which any policyholder should be aware of. The following are the most crucial facts concerning nominations:  

• For the purpose of nominating, the life guaranteed and the insured should be the same under the life insurance contract. If they are two separate people, the claim for rewards will be utilized by the insurance scheme’s policyholder. 
• The candidate has no authority to propose changes to the insurance policy. 

What is a life insurance assignment?  

There exists an opportunity for assignment in life insurance as per Section 38 of the Insurance Act of 1938 . The policyholder transfers his or her policy owner’s rights to a different individual. The assignor is the individual that transfers the rights, and the assignee is the person to whomever the policy rights are passed. The assignee thereby acquires the legal proprietor of the policy of insurance.  

People typically select banks to assign their policy rights. The bank replaces the policyholder, while the insurance policy’s life assured remains same. The bank receives the advantages of the claim (policy owner). 

Life insurance assignment types  

In life insurance, there are two types of assignments: absolute assignment and conditional assignment. 

• Absolute Assignment   

The entitlements to a life insurance policy are granted to another individual (assignee) without any limitations and conditions in a complete assignment. In general, policyholders perform this type of task to express their affection for somebody or to return a bank debt. 

• Conditional Assignment  

The policy owner (assignor) assigns the entitlements to the life insurance coverage to another individual (assignee) according to the particular terms and conditions in a conditional assignment. Only when the terms and circumstances are met will the rights to the policy pass on. 

What you must know about assignments?  

Look at the most important aspects of the assignment you must always remember: 

• The assignment solely impacts the insurance policy’s owner. The life assurance will remain unchanged. 
• Each insurance plan’s owner has the option to transfer the rights to an assignee. Solely the insurance policies and pension plans that were purchased under the Married Women’s Property Act (MWP) are exempted. 
• If the policyholder transfers the entitlements to his or her insurance coverage to the insurance company in order to repay the insurance company’s loan, the authorization of the insurance policy is terminated. 

Nominations and assignments variances  

The table provided below offers a quick overview of the various distinctions between nominations and assignments.  

Conclusion   

It is critical for a policyholder to understand assignment and nomination. This is due to the fact that both nomination and assignment possess their own set of advantages that the policyholder can take advantage of immediately. As a result, with the assistance of this post, a whole piece of knowledge has been delivered. It is advised that policyholders get the correct life insurance coverage that will benefit their family members even if they are not present. 

Get Best Insurance Plan For

Read more blogs, the top posp insurance companies redefining the indian market, what does it mean when life insurance is paid up.

Difference Between Annuity & Life Insurance

Get Insured

• Car Insurance
• Bike Insurance
• Life Insurance
• Health Insurance
• Term Insurance
• Travel Insurance

Quick Links

• Policy Cancellation & Refund
• POSP Agreement
• Grievance Policy
• Privacy & Policy
• Annual Return

Ginteja Insurance Brokers Private Limited

• IRDAI Broker Registration Code:
• IRDAI/DB918/2022
• Registration No: 828
• Direct Broker (Life & General)
• Valid upto: 03/07/2025
• CIN No. - U66000WB2021PTC243249

Insurance is the subject matter of the solicitation. For more details on policy terms, conditions, exclusions, limitations, please refer/read policy brochure carefully before concluding sale.

Ginteja Insurance Brokers Private Limited. All rights Reserved Copyright © 2024

Policy Statements

Terms & Conditions

• Submit Article for Publication

Nomination and Assignment under Insurance Contracts

Published by siri k reddy on 30/01/2021 30/01/2021, introduction:.

The term assignment itself means you assign something to someone else. In term life insurance, the assignment of the policy describes the action of assigning legal rights as well as policy ownership to someone else. The person who assigns the policy is known as an Assignor and the person who has been assigned the policy is known as an Assignee.

Nomination under the insurance contract refers to nominate someone on your behalf in order to collect the benefit in your absence. A person who is trustworthy can be nominated upon the death of a person. The trustworthy person could be from the dead person’s family or close friends. Then that person is the nominee of the policy.

However in most of the cases, people choose their family member as the nominee of the policy but as per the insurance act of 1938, under section 39, the nomination of a particular person is not restricted to a family only. Any person who is considered as trustworthy and any person who will not misuse the policy are considered to be an ideal nominee of that particular policy.

Types of Assignment

There are two types of assignment of policies:

• Absolute assignment: under this particular type of assignment, the assignor is bound to transfer the ownership, title, legal interests and all the rights of the policy to the assignee. This type of transfer of the policy does not include the terms and conditions on the part of the assignee. The exact purpose of the absolute assignment is to repay the debts or to show affection to loved ones.
• Collateral assignment: collateral assignment refers to that particular assignment in which the policyholder assigns the policy on terms and conditions, and the assignee is restricted to avail the benefits of all the terms and conditions. The main purpose of the collateral assignment is to repay loans and liabilities.

Types of Nomination

There are three types of nominations, such as:

• Beneficiary nominee: in this particular nomination a particular person can be made beneficiary to the immediate family members like parents, children, and spouse. The beneficiary will be entitled to receive all the benefits of the policy legally only in case of unfavourable conditions.
• Minor nominee: since it is considered that a minor cannot deal with financial conditions, the guardian of that particular minor has to give the details of their selves only when the policyholder chooses his/her child as the nominee.
• Non-family nominee: a non-family member is that person who does not have blood relation with the policyholder such as close friends, a distant relative, a neighbour, etc. under section 39 of the insurance act of 1938; any trustworthy person can be a policy nominee.

Nomination and Assignment in Life Insurance Plans

As it is already known that insurance is a legal contract between the insurance company who is also called the insurer and the policyholder. An assignee is a person to whom the rights have been transverse to. An example of an absolute assignment is as follows: Mr Bharath owns a life insurance policy of 1 crore and he wants to gift this particular policy to his wife as ‘absolute assignment’ to her name. Once this absolute assignment is made to his wife’s name, she will be the owner of the policy. She also has the right to transfer this policy to someone else.

An example of a conditional assignment is as follows: Ms Supriya owns a term insurance policy of 900,000. She wants a home loan of the same amount. Hence her banker asked her to assign the term policy in their name in order to get the loan.  If Supriya meets an untimely death the banker is entitled to enjoy their money. An assignment deed or deed of assignment [DOA] is that deed through which rights can be transferred from one person to another.

Sections and Policies

SECTION 38- ASSIGNMENT AND TRANSFER OF INSURANCE POLICIES

The provisions under section 38 of the Insurance Law Act, 2015. The provisions of this particular section are as follows:

• This policy allows itself to be transferred with or without consideration.
• An assignment has a high chance of being affected by an endorsement upon the policy or by a separate instrument to the insurer.
• The instruments should reflect the assignment and the reasons for the transfer.
• An authorized agent or the transferor should sign the assignment.
• The transferor of the assignment should not be operative against an insurer until prior notice is issued
• The authority has the right to specify the fees that is paid for the transfer
• The insurer is also expected to give a written acknowledgement of receipt of the notice. Such notice acts as evidence for the future.
•  The notices shall be delivered only at one place where the policy is being served in order to avoid confusions. This arrangement is made as the insurer is involved in managing more than one business place.
• The insurer has the right to accept or deny acting upon any transfer or endorsement only if it is not bonafide or not in the public interest.
• Before denying the endorsement, the insurer should make a note of the reasons for the same.

SECTION 39- NOMINATION BY POLICYHOLDER

The provisions of this particular section are as follows:

• The policyholder can nominate a person to whom money secured by the policy shall be paid during the death.
• When in case of a minor, the policyholder can appoint any person to receive the money in the event of policyholder’s death during the minority of the nominee.
• Nomination can be made at any time before the maturity of the policy.
• The nomination can be incorporated or endorsed to the insurer.
• The provisions of section 39 are not applicable to any life insurance policy to which section 6 of the Married Women’s Property Act, 1874 applies.
• If the nominee dies before the policyholder, the money is payable to the legal representatives or the holder of succession certificate.

SECTION 45- Policy shall not be called in question on the ground of misstatement after three years

Provisions of this section are as follow:

• Any policy of life insurance shall not be called in question after the expiry of three years from the date of issuance of the policy, the date of commencement of risk, the date of revival, the date rider coming to the policy.
• Silence is not considered to be fraud unless it depends on the circumstances of the case.
• The insurer can call for age proof at any time only if he is entitled.
• No insurer can reject a life insurance policy on the grounds of fraud if the beneficiary can prove that the fraud was true to the best of his knowledge.

Difference between Nomination and Assignment

Assignment of policies- impact on existing nomination.

• According to section 39(4) of the insurance act, 938, the assignment of an insurance policy automatically cancels the nomination.
• Here are the few circumstances under which the assignment does not automatically cancel nomination :

When the policy loan is taken from the life insurer who issues the policy, the policy has to be assigned in favour of the life insurer. Under such circumstances, assignments in favour of the life insurer do not automatically cancel the nomination.

On the other hand, where the policy is assigned by a debtor to creditor acts as collateral security for the loan taken by the policyholder from the assignee.

The nomination and assignments have their own uses and benefits as a separate topic under the insurance contracts. I have gained in-depth knowledge of what exactly is nomination and assignment along with minute differences between them. The differences between them have helped me gain much more understanding of the topic. Nomination protects the interests of the insured and the insurer. Whereas the assignment strives to protect the interests of the assignee in availing all the benefits.

References:

• INSURANCE LAWS IN INDIA- VARDHAMAN MAHAVEER, pg. 32. 54.
• RAJIV JAIN: INSURANCE LAW AND PRACTICE, pg. 44
• https://m.economictimes.com/nomination-and-assignment/articleshow/3320189.cms
• https://accountlearning.com/difference-nomination-assignment/
• https://accountlearning.com/assignment-in-insurance-policy-meaning-explanation-types/
• https://life.futuregenerali.in/life-insurance-made-simple/life-insurance/change-nominee-in-term-insurance

Share this:

Leave a reply cancel reply.

Your email address will not be published. Required fields are marked *

Save my name, email, and website in this browser for the next time I comment.

Related Posts

Common Law Principles

Utmost good faith under english insurance law.

Importance of “utmost” good faith is not to be ignored as it gives the doctrine a pillar of necessity to be followed in insurance contracts.

Case Law Analysis

Tukeshwari devi vs royal sundaram alliance insurance company ltd & ors.

The deceased Shashi Kumar Mahato was killed in an accident by an unnamed Omni van which was driven by the negligent driving.

Insurance Law

Hospital management and medical insurance laws.

Health is a part of the State List with each state retaining sole jurisdiction over the formulation of policies in this regard.

To join our WhatsApp community

Assignment in Life Insurance: All You Need to Know

Life insurance policies are designed to provide financial security to policyholders and their beneficiaries. However, circumstances may arise where policyholders need to transfer the ownership or rights of their policy to another individual or entity. This could be due to reasons like securing a loan, settling debts, or transferring assets. In such cases, assignment of a life insurance policy becomes necessary. It involves legally transferring the rights and benefits of the policy from the assignor (policyholder) to the assignee (new owner), subject to certain terms and conditions.

To navigate through this aspect effectively, it is important to grasp what it entails, the types of assignments, considerations involved, and how it differs from nomination.

What is an assignment of life insurance policy?

An assignment of a life insurance policy refers to the transfer of the ownership rights, title, and benefits of the policy from the original policyholder (assignor) to another party (assignee). The assignee becomes the new owner of the policy and is entitled to receive the death cover or maturity proceeds, as per the terms of the policy. The assignment is usually irrevocable, meaning it cannot be reversed without the consent of the assignee.

Types of assignments of life insurance policy

Following are the different types of assignments of life insurance policy:

• Absolute assignment: In an absolute assignment, the policyholder transfers all rights, title, and interest in the policy to the assignee without any conditions. The assignee becomes the new owner of the policy and is entitled to receive the policy benefits.
• Conditional assignment: A conditional assignment involves transferring the policy rights to the assignee subject to certain conditions or requirements. These conditions may include repayment of a loan, fulfilment of a debt obligation, or meeting specific criteria set forth in the assignment agreement.
• Collateral assignment: In a collateral assignment, the policyholder assigns the policy as security for a loan or debt. The assignee (lender) becomes the beneficiary of the policy proceeds to the extent of the outstanding loan amount. Once the loan is repaid, the assignment is released, and the policy reverts to the original owner.

Factors to consider when assigning life insurance policy

Following are some of the key points to consider in assignment of life insurance:

• Purpose of assignment: Determine the reason for assigning the policy, whether it is for securing a loan, transferring assets, or gifting the policy to another individual.
• Legal implications: Understand the legal implications and consequences of assigning the policy, including any tax implications or potential impact on policy benefits.
• Rights and responsibilities: Clearly define the rights and responsibilities of both the assignor and assignee in the assignment agreement, including the extent of policy benefits and any conditions or restrictions.
• Policy terms and conditions: Review the terms and conditions of the policy to ensure compliance with the assignment requirements and any limitations imposed by the insurance company.
• Consultation with experts: Seek advice from legal and financial experts to understand the implications of the assignment and ensure that it aligns with your overall financial goals and objectives.

Difference between nomination and assignment

Here is an overview of the difference between a nominee and assignee.

In conclusion, the assignment of a life insurance policy is a significant financial decision that requires careful consideration and understanding of its implications. Whether it is transferring ownership rights, securing a loan, or settling debts, assigning a life insurance policy can have far-reaching consequences for both the assignor and assignee. By comprehending the nuances of policy assignment, considering the relevant factors, and seeking expert advice when needed, individuals can navigate through this aspect effectively and make informed decisions to meet their financial objectives.

Frequently asked questions

A release of assignment of life insurance policy refers to the cancellation or termination of the assignment arrangement between the original policyholder (assignor) and the assignee. This release may be initiated by the assignor once the conditions of the assignment have been fulfilled, such as repayment of a loan or settlement of debts. Once the release is executed, the ownership rights and benefits of the policy revert back to the assignor, and the assignee's interest in the policy is extinguished.

Bajaj Finserv App for All Your Financial Needs and Goals

Trusted by 50 million+ customers in India, Bajaj Finserv App is a one-stop solution for all your financial needs and goals.

You can use the Bajaj Finserv App to:

• Apply for loans online, such as Instant Personal Loan, Home Loan, Business Loan, Gold Loan, and more.
• Explore and apply for co-branded credit cards online.
• Invest in fixed deposits and mutual funds on the app.
• Choose from multiple insurance for your health, motor and even pocket insurance, from various insurance providers.
• Pay and manage your bills and recharges using the BBPS platform. Use Bajaj Pay and Bajaj Wallet for quick and simple money transfers and transactions.
• Apply for Insta EMI Card and get a pre-approved limit on the app. Explore over 1 million products on the app that can be purchased from a partner store on No Cost EMIs.
• Shop from over 100+ brand partners that offer a diverse range of products and services.
• Use specialised tools like EMI calculators, SIP Calculators
• Check your credit score, download loan statements and even get quick customer support—all on the app.

Download the Bajaj Finserv App today and experience the convenience of managing your finances on one app.

Do more with the Bajaj Finserv App!

UPI, Wallet, Loans, Investments, Cards, Shopping and more

*T&C Apply - Bajaj Finance Limited (‘BFL’) is a registered corporate agent of third party insurance products of Bajaj Allianz Life Insurance Company Limited, HDFC Life Insurance Company Limited, Future Generali Life Insurance Company Limited, Bajaj Allianz General Insurance Company Limited, SBI General Insurance Company Limited, ACKO General Insurance Limited, ICICI Lombard General Insurance Company Limited, HDFC ERGO General Insurance Company Limited, Tata AIG General Insurance Company Limited, The New India Assurance Company Limited, Cholamandalam MS General Insurance Company Limited, Niva Bupa Health Insurance Company Limited , Aditya Birla Health Insurance Company Limited, Manipal Cigna Health Insurance Company Limited and Care Health Insurance Company Limited under the IRDAI composite CA registration number CA0101. Please note that, BFL does not underwrite the risk or act as an insurer. Your purchase of an insurance product is purely on a voluntary basis after your exercise of an independent due diligence on the suitability, viability of any insurance product. Any decision to purchase insurance product is solely at your own risk and responsibility and BFL shall not be liable for any loss or damage that any person may suffer, whether directly or indirectly. Please refer insurer's website for Policy Wordings. For more details on risk factors, terms and conditions and exclusions please read the product sales brochure carefully before concluding a sale. Tax benefits applicable if any, will be as per the prevailing tax laws. Tax laws are subject to change. Tax laws are subject to change. BFL does NOT provide Tax/Investment advisory services. Please consult your advisors before proceeding to purchase an insurance product. Visitors are hereby informed that their information submitted on the website may also be shared with insurers. BFL is also a distributor of other third-party products from Assistance Services providers such as CPP Assistance Services Pvt. Ltd., Bajaj Finserv Health Ltd. etc. All product information such as premium, benefits, exclusions, sum insured, value added services, etc. are authentic and solely based on the information received from the respective insurance company or the respective Assistance service provider company.

Note – While we have made all efforts and taken utmost care in gathering precise information about the products, features, benefits, etc. However, BFL cannot be held liable for any direct or indirect damage/loss. We request our customers to conduct their research about these products and refer to the respective product’s sales brochures before concluding their sale.

Please wait

Your page is almost ready

• Share full article

For more audio journalism and storytelling, download New York Times Audio , a new iOS app available for news subscribers.

The Possible Collapse of the U.S. Home Insurance System

A times investigation found climate change may now be a concern for every homeowner in the country..

This transcript was created using speech recognition software. While it has been reviewed by human transcribers, it may contain errors. Please review the episode audio before quoting from this transcript and email [email protected] with any questions.

From “The New York Times,” I’m Sabrina Tavernise. And this is “The Daily.”

[MUSIC PLAYING]

Today, my colleague, Christopher Flavelle, on a “Times” investigation into one of the least known and most consequential effects of climate change — insurance — and why it may now be a concern for every homeowner in the country.

It’s Wednesday, May 15.

So, Chris, you and I talked a while ago about how climate change was really wreaking havoc in the insurance market in Florida. You’ve just done an investigation that takes a look into the insurance markets more broadly and more deeply. Tell us about it.

Yeah, so I cover climate change, in particular the way climate shocks affect different parts of American life. And insurance has become a really big part of that coverage. And Florida is a great example. As hurricanes have gotten worse and more frequent, insurers are paying out more and more money to rebuild people’s homes. And that’s driving up insurance costs and ultimately driving up the cost of owning a home in Florida.

So we’re already seeing that climate impact on the housing market in Florida. My colleagues and I started to think, well, could it be that that kind of disruption is also happening in other states, not just in the obvious coastal states but maybe even through the middle of the US? So we set out to find out just how much it is happening, how much that Florida turmoil has, in fact, become really a contagion that is spreading across the country.

So how did you go about reporting this? I mean, where did you start?

All we knew at the start of this was that there was reason to think this might be a problem. If you just look at how the federal government tracks disasters around the country, there’s been a big increase almost every year in the number and severity of all kinds of disasters around the country. So we thought, OK, it’s worth trying to find out, what does that mean for insurers?

The problem is getting data on the insurance industry is actually really hard. There’s no federal regulation. There’s no government agency you can go to that holds this data. If you talk to the insurers directly, they tend to be a little reluctant to share information about what they’re going through. So we weren’t sure where to go until, finally, we realized the best people to ask are the people whose job it is to gauge the financial health of insurance companies.

Those are rating agencies. In particular, there’s one rating company called AM Best, whose whole purpose is to tell investors how healthy an insurance company is.

Whoa. So this is way down in the nuts and bolts of the US insurance industry.

Right. This is a part of the broader economy that most people would never experience. But we asked them to do something special for us. We said, hey, can you help us find the one number that would tell us reporters just how healthy or unhealthy this insurance market is state by state over time? And it turns out, there is just such a number. It’s called a combined ratio.

OK, plain English?

Plain English, it is the ratio of revenue to costs, how much money these guys take in for homeowner’s insurance and how much they pay out in costs and losses. You want your revenue to be higher than your costs. If not, you’re in trouble.

So what did you find out?

Well, we got that number for every state, going back more than a decade. And what it showed us was our suspicions were right. This market turmoil that we were seeing in Florida and California has indeed been spreading across the country. And in fact, it turns out that in 18 states, last year, the homeowner’s insurance market lost money. And that’s a big jump from 5 or 10 years ago and spells real trouble for insurance and for homeowners and for almost every part of the economy.

So the contagion was real.

Right. This is our first window showing us just how far that contagion had spread. And one of the really striking things about this data was it showed the contagion had spread to places that I wouldn’t have thought of as especially prone to climate shocks — for example, a lot of the Midwest, a lot of the Southeast. In fact, if you think of a map of the country, there was no state between Pennsylvania and the Dakotas that didn’t lose money on homeowner’s insurance last year.

So just huge parts of the middle of the US have become unprofitable for homeowner’s insurance. This market is starting to buckle under the cost of climate change.

And this is all happening really fast. When we did the Florida episode two years ago, it was a completely new phenomenon and really only in Florida. And now it’s everywhere.

Yeah. And that’s exactly what’s so striking here. The rate at which this is becoming, again, a contagion and spreading across the country is just demolishing the expectations of anyone I’ve spoken to. No one thought that this problem would affect so much of the US so quickly.

So in these states, these new places that the contagion has spread to, what exactly is happening that’s causing the insurance companies to fold up shop?

Yeah. Something really particular is happening in a lot of these states. And it’s worth noting how it’s surprised everyone. And what that is, is formally unimportant weather events, like hailstorms or windstorms, those didn’t used to be the kind of thing that would scare insurance companies. Obviously, a big problem if it destroys your home or damages your home. But for insurers, it wasn’t going to wipe them out financially.

Right. It wasn’t just a complete and utter wipeout that the company would then have to pony up a lot of money for.

Exactly. And insurers call them secondary perils, sort of a belittling term, something other than a big deal, like a hurricane.

These minor league weather events.

Right. But those are becoming so frequent and so much more intense that they can cause existential threats for insurance companies. And insurers are now fleeing states not because of hurricanes but because those former things that were small are now big. Hailstorms, wildfires in some places, previous annoyances are becoming real threats to insurers.

Chris, what’s the big picture on what insurers are actually facing? What’s happening out there numbers-wise?

This is a huge threat. In terms of the number of states where this industry is losing money, it’s more than doubled from 10 years ago to basically a third of the country. The amount they’re losing is enormous. In some states, insurers are paying out $1.25 or even $1.50 for every dollar they bring in, in revenue, which is totally unsustainable.

And the result is insurers are making changes. They are pulling back from these markets. They’re hiking premiums. And often, they’re just dropping customers. And that’s where this becomes real, not just for people who surf balance sheets and trade in the stock market. This is becoming real for homeowners around the country, who all of a sudden increasingly can’t get insurance.

So, Chris, what’s the actual implication? I mean, what happens when people in a state can’t get insurance for their homes?

Getting insurance for a home is crucial if you want to sell or buy a home. Most people can’t buy a home without a mortgage. And banks won’t issue a mortgage without home insurance. So if you’ve got a home that insurance company doesn’t want to cover, you got a real problem. You need to find insurance, or that home becomes very close to unsellable.

And as you get fewer buyers, the price goes down. So this doesn’t just hurt people who are paying for these insurance premiums. It hurts people who want to sell their homes. It even could hurt, at some point, whole local economies. If home values fall, governments take in less tax revenue. That means less money for schools and police. It also means people who get hit by disasters and have to rebuild their homes all of a sudden can’t, because their insurance isn’t available anymore. It’s hard to overstate just how big a deal this is.

And is that actually happening, Chris? I mean, are housing markets being dragged down because of this problem with the insurance markets right now?

Anecdotally, we’ve got reports that in places like Florida and Louisiana and maybe in parts of California, the difficulty of getting insurance, the crazy high cost of insurance is starting to depress demand because not everyone can afford to pay these really high costs, even if they have insurance. But what we wanted to focus on with this story was also, OK, we know where this goes eventually. But where is it beginning? What are the places that are just starting to feel these shocks from the insurance market?

And so I called around and asked insurance agents, who are the front lines of this. They’re the ones who are struggling to find insurance for homeowners. And I said, hey, is there one place that I should go if I want to understand what it looks like to homeowners when all of a sudden insurance becomes really expensive or you can’t even find it? And those insurance agents told me, if you want to see what this looks like in real life, go to a little town called Marshalltown in the middle of Iowa.

We’ll be right back.

So, Chris, you went to Marshalltown, Iowa. What did you find?

Even before I got to Marshalltown, I had some idea I was in the right spot. When I landed in Des Moines and went to rent a car, the nice woman at the desk who rented me a car, she said, what are you doing here? I said, I’m here to write a story about people in Iowa who can’t get insurance because of storms. She said, oh, yeah, I know all about that. That’s a big problem here.

Even the rental car lady.

Even the rental car lady knew something was going on. And so I got into my rental car and drove about an hour northeast of Des Moines, through some rolling hills, to this lovely little town of Marshalltown. Marshalltown is a really cute, little Midwestern town with old homes and a beautiful courthouse in the town square. And when I drove through, I couldn’t help noticing all the roofs looked new.

What does that tell you?

Turns out Marshalltown, despite being a pastoral image of Midwestern easy living, was hit by two really bad disasters in recent years — first, a devastating tornado in 2018 and then, in 2020, what’s called a derecho, a straight-line wind event that’s also just enormously damaging. And the result was lots of homes in this small town got severely damaged in a short period of time. And so when you drive down, you see all these new roofs that give you the sense that something’s going on.

So climate had come to Marshalltown?

Exactly. A place that had previously seemed maybe safe from climate change, if there is such a thing, all of a sudden was not. So I found an insurance agent in Marshalltown —

We talked to other agents but haven’t talked to many homeowners.

— named Bobby Shomo. And he invited me to his office early one morning and said, come meet some people. And so I parked on a quiet street outside of his office, across the street from the courthouse, which also had a new roof, and went into his conference room and met a procession of clients who all had versions of the same horror story.

It was more — well more of double.

A huge reduction in coverage with a huge price increase.

Some people had faced big premium hikes.

I’m just a little, small business owner. So every little bit I do feel.

They had so much trouble with their insurance company.

I was with IMT Insurance forever. And then when I moved in 2020, Bobby said they won’t insure a pool.

Some people had gotten dropped.

Where we used to see carriers canceling someone for frequency of three or four or five claims, it’s one or two now.

Some people couldn’t get the coverage they needed. But it was versions of the same tale, which is all of a sudden, having homeowner’s insurance in Marshalltown was really difficult. But I wanted to see if it was bigger than just Marshalltown. So the next day, I got back in my car and drove east to Cedar Rapids, where I met another person having a version of the same problem, a guy named Dave Langston.

Tell me about Dave.

Dave lives in a handsome, modest, little townhouse on a quiet cul-de-sac on a hill at the edge of Cedar Rapids. He’s the president of his homeowners association. There’s 17 homes on this little street. And this is just as far as you could get from a danger zone. It looks as safe as could be. But in January, they got a letter from the company that insures him and his neighbors, saying his policy was being canceled, even though it wasn’t as though they’d just been hit by some giant storm.

So then what was the reason they gave?

They didn’t give a reason. And I think people might not realize, insurers don’t have to give a reason. Insurance policies are year to year. And if your insurance company decides that you’re too much of a risk or your neighborhood is too much of a risk or your state is too much of a risk, they can just leave. They can send you a letter saying, forget it. We’re canceling your insurance. There’s almost no protection people have.

And in this case, the reason was that this insurance company was losing too much money in Iowa and didn’t want to keep on writing homeowner’s insurance in the state. That was the situation that Dave shared with tens of thousands of people across the state that were all getting similar letters.

What made Dave’s situation a little more challenging was that he couldn’t get new insurance. He tried for months through agent after agent after agent. And every company told him the same thing. We won’t cover you. Even though these homes are perfectly safe in a safe part of the state, nobody would say yes. And it took them until basically two days before their insurance policy was going to run out until they finally found new coverage that was far more expensive and far more bare-bones than what they’d had.

But at least it was something.

It was something. But the problem was it wasn’t that good. Under this new policy, if Dave’s street got hit by another big windstorm, the damage from that storm and fixing that damage would wipe out all the savings set aside by these homeowners. The deductible would be crushingly high — $120,000 — to replace those roofs if the worst happened because the insurance money just wouldn’t cover anywhere close to the cost of rebuilding.

He said to me, we didn’t do anything wrong. This is just what insurance looks like today. And today, it’s us in Cedar Rapids. Everyone, though, is going to face a situation like this eventually. And Dave is right. I talked to insurance agents around the country. And they confirmed for me that this kind of a shift towards a new type of insurance, insurance that’s more expensive and doesn’t cover as much and makes it harder to rebuild after a big disaster, it’s becoming more and more common around the country.

So, Chris, if Dave and the people you spoke to in Iowa were really evidence that your hunch was right, that the problem is spreading and rapidly, what are the possible fixes here?

The fix that people seem most hopeful about is this idea that, what if you could reduce the risk and cause there to be less damage in the first place? So what some states are doing is they’re trying to encourage homeowners to spend more money on hardening their home or adding a new roof or, if it’s a wildfire zone, cut back the vegetation, things that can reduce your risk of having really serious losses. And to help pay for that, they’re telling insurers, you’ve got to offer a discount to people who do that.

And everyone who works in this field says, in theory, that’s the right approach. The problem is, number one, hardening a home costs a fantastic amount of money. So doing this at scale is hugely expensive. Number two, it takes a long time to actually get enough homes hardened in this way that you can make a real dent for insurance companies. We’re talking about years or probably decades before that has a real effect, if it ever works.

OK. So that sounds not particularly realistic, given the urgency and the timeline we’re on here. So what else are people looking at?

Option number two is the government gets involved. And instead of most Americans buying home insurance from a private company, they start buying it from government programs that are designed to make sure that people, even in risky places, can still buy insurance. That would be just a gargantuan undertaking. The idea of the government providing homeowner’s insurance because private companies can’t or won’t would lead to one of the biggest government programs that exists, if we could even do it.

So huge change, like the federal government actually trying to write these markets by itself by providing homeowner’s insurance. But is that really feasible?

Well, in some areas, we’re actually already doing it. The government already provides flood insurance because for decades, most private insurers have not wanted to cover flood. It’s too risky. It’s too expensive. But that change, with governments taking over that role, creates a new problem of its own because the government providing flood insurance that you otherwise couldn’t get means people have been building and building in flood-prone areas because they know they can get that guaranteed flood insurance.

Interesting. So that’s a huge new downside. The government would be incentivizing people to move to places that they shouldn’t be.

That’s right. But there’s even one more problem with that approach of using the government to try to solve this problem, which is these costs keep growing. The number of billion-dollar disasters the US experiences every year keeps going up. And at some point, even if the government pays the cost through some sort of subsidized insurance, what happens when that cost is so great that we can no longer afford to pay it? That’s the really hard question that no official can answer.

So that’s pretty doomsday, Chris. Are we looking at the end of insurance?

I think it’s fair to say that we’re looking at the end of insurance as we know it, the end of insurance that means most Americans can rest assured that if they get hit by a disaster, their insurance company will provide enough money they can rebuild. That idea might be going away. And what it shows is maybe the threat of climate change isn’t quite what we thought.

Maybe instead of climate change wrecking communities in the form of a big storm or a wildfire or a flood, maybe even before those things happen, climate change can wreck communities by something as seemingly mundane and even boring as insurance. Maybe the harbinger of doom is not a giant storm but an anodyne letter from your insurance company, saying, we’re sorry to inform you we can no longer cover your home.

Maybe the future of climate change is best seen not by poring over weather data from NOAA but by poring over spreadsheets from rating firms, showing the profitability from insurance companies, and how bit by bit, that money that they’re losing around the country tells its own story. And the story is these shocks are actually already here.

Chris, as always, terrifying to talk to you.

Always a pleasure, Sabrina.

Here’s what else you should know today. On Tuesday, the United Nations has reclassified the number of women and children killed in Gaza, saying that it does not have enough identifying information to know exactly how many of the total dead are women and children. The UN now estimates that about 5,000 women and about 8,000 children have been killed, figures that are about half of what it was previously citing. The UN says the numbers dropped because it is using a more conservative estimate while waiting for information on about 10,000 other dead Gazans who have not yet been identified.

And Mike Johnson, the Speaker of the House, gave a press conference outside the court in Lower Manhattan, where Michael Cohen, the former fixer for Donald Trump, was testifying for a second day, answering questions from Trump’s lawyers. Trump is bound by a gag order. So Johnson joined other stand-ins for the former president to discredit the proceedings. Johnson, one of the most important Republicans in the country, attacked Cohen but also the trial itself, calling it a sham and political theater.

Today’s episode was produced by Nina Feldman, Shannon Lin, and Jessica Cheung. It was edited by MJ Davis Lin, with help from Michael Benoist, contains original music by Dan Powell, Marion Lozano, and Rowan Niemisto, and was engineered by Alyssa Moxley. Our theme music is by Jim Brunberg and Ben Landsverk of Wonderly.

That’s it for “The Daily.” I’m Sabrina Tavernise. See you tomorrow.

• May 19, 2024 The Sunday Read: ‘Why Did This Guy Put a Song About Me on Spotify?’
• May 17, 2024   •   51:10 The Campus Protesters Explain Themselves
• May 16, 2024   •   30:47 The Make-or-Break Testimony of Michael Cohen
• May 15, 2024   •   27:03 The Possible Collapse of the U.S. Home Insurance System
• May 14, 2024   •   35:20 Voters Want Change. In Our Poll, They See It in Trump.
• May 13, 2024   •   27:46 How Biden Adopted Trump’s Trade War With China
• May 10, 2024   •   27:42 Stormy Daniels Takes the Stand
• May 9, 2024   •   34:42 One Strongman, One Billion Voters, and the Future of India
• May 8, 2024   •   28:28 A Plan to Remake the Middle East
• May 7, 2024   •   27:43 How Changing Ocean Temperatures Could Upend Life on Earth
• May 6, 2024   •   29:23 R.F.K. Jr.’s Battle to Get on the Ballot
• May 3, 2024   •   25:33 The Protesters and the President

Hosted by Sabrina Tavernise

Featuring Christopher Flavelle

Produced by Nina Feldman ,  Shannon M. Lin and Jessica Cheung

Edited by MJ Davis Lin

With Michael Benoist

Original music by Dan Powell ,  Marion Lozano and Rowan Niemisto

Engineered by Alyssa Moxley

Listen and follow The Daily Apple Podcasts | Spotify | Amazon Music | YouTube

Across the United States, more frequent extreme weather is starting to cause the home insurance market to buckle, even for those who have paid their premiums dutifully year after year.

Christopher Flavelle, a climate reporter, discusses a Times investigation into one of the most consequential effects of the changes.

On today’s episode

Christopher Flavelle , a climate change reporter for The New York Times.

Background reading

As American insurers bleed cash from climate shocks , homeowners lose.

See how the home insurance crunch affects the market in each state .

Here are four takeaways from The Times’s investigation.

There are a lot of ways to listen to The Daily. Here’s how.

We aim to make transcripts available the next workday after an episode’s publication. You can find them at the top of the page.

Christopher Flavelle contributed reporting.

The Daily is made by Rachel Quester, Lynsea Garrison, Clare Toeniskoetter, Paige Cowett, Michael Simon Johnson, Brad Fisher, Chris Wood, Jessica Cheung, Stella Tan, Alexandra Leigh Young, Lisa Chow, Eric Krupke, Marc Georges, Luke Vander Ploeg, M.J. Davis Lin, Dan Powell, Sydney Harper, Mike Benoist, Liz O. Baylen, Asthaa Chaturvedi, Rachelle Bonja, Diana Nguyen, Marion Lozano, Corey Schreppel, Rob Szypko, Elisheba Ittoop, Mooj Zadie, Patricia Willens, Rowan Niemisto, Jody Becker, Rikki Novetsky, John Ketchum, Nina Feldman, Will Reid, Carlos Prieto, Ben Calhoun, Susan Lee, Lexie Diao, Mary Wilson, Alex Stern, Dan Farrell, Sophia Lanman, Shannon Lin, Diane Wong, Devon Taylor, Alyssa Moxley, Summer Thomad, Olivia Natt, Daniel Ramirez and Brendan Klinkenberg.

Our theme music is by Jim Brunberg and Ben Landsverk of Wonderly. Special thanks to Sam Dolnick, Paula Szuchman, Lisa Tobin, Larissa Anderson, Julia Simon, Sofia Milan, Mahima Chablani, Elizabeth Davis-Moorer, Jeffrey Miranda, Renan Borelli, Maddy Masiello, Isabella Anderson and Nina Lassam.

Christopher Flavelle is a Times reporter who writes about how the United States is trying to adapt to the effects of climate change. More about Christopher Flavelle

Advertisement