Page 93 - BFSI CHRONICLE 10 th Issue (2nd Annual Issue ) .indd

BFSI Chronicle, 2 Annual Issue, 10 Edition July 2022
nd
th
nomination shall stand automatically “that a mere nomination made under section 39
revived when the policy is reassigned of the Act does not have the effect of conferring
by the assignee or retransferred by the on the nominee any benefi cial interest in the
transferee in favour of the policyholder amount payable under the life insurance policy
on repayment of loan other than on a on the death of the assured. The nomination
security of policy to the insurer. only indicates the hand which is authorised to
Prior to the Amendment, if the Policyholder dies receive the amount, on the payment of which
after the date of maturity but prior to the date the insurer gets a valid discharge of its liability
of payment of maturity value, the nomination under the policy. The amount, however, can be
used to be invalid and the title under the policy claimed by the heirs of the assured in accordance
in such a case was considered to be an open title with the law of succession governing them.”
and this used to cause difficulties in proving D. Insurance is a contract of utmost Good
the title under the policy for payment of policy Faith and the insured is expected to
value. Section 38 [11] removed this difficulty. not to suppress any material facts in
Section 38 [11] reads: “Where a policyholder the proposal form while proposing
dies after the maturity of the policy but the for insurance. If the Insured does not
proceeds and benefit of his policy has not been disclose complete facts in the proposal,

made to him because of his death, in such a the Insurance Company is well within
case, his nominee shall be entitled to the
its rights to rescind the contract and not
proceeds and benefi t of his policy.” Thus, the to honour any claim under such policy
Nominee is entitled to maturity proceeds under
if the Insurance Company comes to
a policy if the policyholder dies after the date know about non-disclosure of material
of maturity but before the payment of maturity facts at a later stage. A material fact is
value.
any information that may influence
There is a reference to the Beneficial Nominees the judgement of a prudent insurance
who are classified as parents, or spouse, or underwriter in deciding whether to
children, or spouse and children, or any of accept a risk or not and if to accept the
them. risk, at what premium and terms and
conditions. The insurer may call the
Section 39 contains 11 sub-sections and it is policy in question at any time within 3
recommended that the Act may be referred years from the date of the policy, if there
to for understanding the provisions of is evidence to prove that the life insured
Nomination completely. has suppressed material facts.

Though a holder of a life insurance policy on his Section 45 of the Insurance Act states that
own life may name any person as the nominee no policy shall be called in question on the
under the policy, it may be understood that the grounds of misstatement after 3 years. The
rights of a nominee are not absolute and it is Section 45 [1] reads:
necessary to refer to the judgment of the Apex
Court in Civil Appeal No. 96 of 1972 in a case “45. (1) No policy of life insurance shall be
titled as Sarabati Devi vs Usha Devi in their called in question on any ground whatsoever
order dated 06.12.1983, the Apex Court held: after the expiry of three years from the date of

The Institute Of Cost Accountants Of India

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