Nomination by Policyholder
Life Insurance
Topic Map
1. Meaning of Nomination and its importance
2. Law relating to Nomination in insurance
3. Legal status of Nominee
Collector Nominee v. Beneficial Nominee
What is nomination????
Who is a nominee????
An act –policyholder – authorises another person(s) to receive
money payable under the policy in the event of his death.
The person authorised to receive the benefit under the policy is-
nominee
Section 39 of the Insurance Act, 1938- Nomination
39(1)- Right of the life Insurance policyholder to make a nomination
-Nomination can be made when effecting policy/ any time before the
policy matures for payment.
• Can a policyholder nominate a minor???
- yes. But, a person to be appointed by the policyholder to receive the
policy proceeds during the minority of the nominee (Proviso to Sec
39(1))
Sec 39(2) & Sec 39 (3)- Procedure for making
nomination
-Incorporated in the text of policy. If made by endorsement-
communicated to insurer- registered by insurer in the records
Can policyholder add/ change/remove a nominee???
-notice in writing of cancellation/change by an
endorsement/will- delivered to the insurer
Effect of transfer/ assignment of policy on
nomination- Sec 39(4)
-Assignment of policy shall automatically cancel a nomination.
BUT
Subject to exceptions covered by 3 provisos to Sec 39(4)
Proviso 1- Assignment of the insurance policy to the insurer in
consideration of a loan granted by the insurer on the security of that
policy/ re-assignment- shall not a cancel a nomination.
Assigns the policy
Policyholder A Insurer
3 lakhs Assignee
borrowed Rs. 1,00,000
But rights of nominee affected only to the extent of insurer’s interest
in the policy.
Proviso 2- Assignment in consideration of loan to party other
than insurer
Proviso 3- Revival of automatically cancelled nomination by
reassigning the policy in favour of the policyholder
Can a policyholder appoint more than one person as a
nominee / multiple nominations?
Sec 39(1)- holder of policy ……..nominate person /persons
Sec 39(5)
Policyholder Nominee/
survives date But Nominees die
of maturity of before policy
policy matures
Policy amt. shall be payable to policy holders/
legal heirs of the policy holder.
S.39(6)
Life insured Nominees
dies before survive the
the date of BUT maturity date
maturity of policy
Amount the policy shall be payable to the
survivors ( nominees)
Legal position of nominee
Smt. Sarabati Devi & Anr. v. Smt. Usha Devi 1984 AIR 346
Assured of a life insurance policy dies intestate leaving behind him his mother, his
widow, and a son, but for the purpose of Section 39 has nominated his widow alone
Whether a nominee of a life insurance policy under section 39 of the
Insurance Act, 1938 on the assured dying intestate would become entitled to
the beneficial interest in the amount received under the policy to the
exclusion of the heirs of the assured.
-Nomination didn’t mean that the nominee is the ultimate beneficiary
– meant to receive death benefit from insurance company & distribute
among insured’s legal heirs
-The nomination only indicates the hand which is authorized to receive
the amount, on the payment of which the insurer gets a valid discharge
of its liability under the policy
-the amount, however, can be claimed by the heirs of the assured in
accordance with the law of succession governing them
Legal status of nominee post amendment Act 2015
Sec 39(7)
Beneficial
nominee
Parents, spouse,
children of
policyholder
“beneficial nominee” category- includes policyholder’s parents, spouse,
children- appointed as nominees- beneficially entitled to receive the
amount from insurer.
Sec 39 (7) Subject to the other provisions of this section, where the
holder of a policy of insurance on his own life nominates his parents, or
his spouse, or his children, or his spouse and children, or any of them,
the nominee or nominees shall be beneficially entitled to the amount
payable by the insurer to him or them under sub-section (6) unless it is
proved that the holder of the policy, having regard to the nature of his
title to the policy, could not have conferred any such beneficial title on
the nominee
Sec 39(8)
Policyholder Beneficial
Nominee(s) die
dies before before the
the maturity But encashment of
of policy the policy
Amt. shall be payable to legal heirs of the nominee
Sec 39 (9)
Creditors right supersede rights of beneficial nominees
Sec 39(10)
39(7) applicable to all insurance policies maturing for
payment after the commencement Insurance (Amendment )
Act, 2015.
Sec 39(11)
Policy holder dies
after the maturity of
the policy but the
amount is not
encashed
Nominee shall be paid proceeds
