Page 92 - BFSI CHRONICLE 10 th Issue (2nd Annual Issue ) .indd

BFSI Chronicle, 2 Annual Issue, 10 Edition July 2022
th
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to act on such an endorsement of assignment Provided that, where any nominee is a minor,
or transfer, the aggrieved party may prefer a it shall be lawful for the policyholder to
claim to the IRDAI. appoint any person in the manner laid down
by the insurer, to receive the money secured by
Section 38 [10] deals with conditional the policy in the event of his death during the
assignment and permits conditional assignment minority of the nominee. “
and the relevant section reads:
It is necessary to observe that the holder of a
“Notwithstanding any law or custom having
the force of law to the contrary, an assignment policy of life insurance on his own life may
in favour of a person made upon the condition nominate. Thus, an Assignee or Transferee of
that— a policy of life insurance, [who is not the life
assured himself or herself,] cannot nominate as
(a) the proceeds under the policy shall per the provisions of the Act.
become payable to the policyholder or In terms of Section 39[4] “A transfer or
the nominee or nominees in the event assignment of a policy made in accordance
of either the assignee or transferee with section 38 shall automatically cancel a
predeceasing the insured; or
nomination” except under the following cases:
(b) the insured surviving the term of the
policy, shall be valid:  In case of assignment of a policy to
the insurer who bears the risk on the
Provided that a conditional assignee shall not policy at the time of the assignment,
be entitled to obtain a loan on the policy or in consideration of a loan granted
surrender a policy.” by that insurer on the security of the
policy within its surrender value, or its
It may be noted that conditional assignment reassignment on repayment of the loan
shall be valid even if there is any other law or shall not cancel a nomination, but shall
custom having the force of law to the contrary. affect the rights of the nominee only to

It has to be noted that there cannot be more than the extent of the insurer's interest in the
one assignment under a policy of insurance, in policy.
terms of Section 38[11] of the Act [Amended  The transfer or assignment of a
Act]. policy, whether wholly or in part, in

C. Section 39 of the Act deals with consideration of a loan advanced by the
Nomination. The provisions of this transferee or assignee to the policyholder,
section have also been widely amended shall not cancel the nomination but shall
in 2015. affect the rights of the nominee only to
the extent of the interest of the transferee
“39. (1) The holder of a policy of life insurance or assignee, as the case may be, in the
on his own life may, when effecting the policy policy.
or at any time before the policy matures for
payment, nominate the person or persons to  The nomination, which has been
whom the money secured by the policy shall automatically cancelled consequent upon
be paid in the event of his death: the transfer or assignment, the same

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