Nomination is a right conferred by the section 39 of the Insurance Act 1938, on the â€œholder of aÂ policy of life assurance on his own lifeâ€� to appoint a person/s to receive the policy moneys inÂ the event of the policy becoming a claim by the assuredâ€™s death.Â The term â€œholder of a policyâ€� ordinarily means a proposer or life assured or an absoluteÂ Assignee who has right, title & interest in the policy. But if the holder of the policy is not lifeÂ assured himself, he cannot effect a valid nomination under the policy. In other words, if holderÂ of the policy is life assured, then only he can effect valid nomination under the policy. In otherÂ cases, where proposer and life assured are different persons i.e. policies taken during minorityÂ of life assured OR policies taken by father on major child, nomination is not allowed. In caseÂ policy is absolutely assigned in favour of assignee, though he is a holder of the policy, AssigneeÂ cannot effect valid nomination under the policy. This is because, he is not life assured underÂ the policy.
Policies which are taken during minority of life assured and after policy vests in life assuredÂ automatically by completing the age of majority, provided the premiums up to date of vestingÂ have been paid fully, then life assured can effect valid nomination under the policy. In case,Â where policies which are effected on another life or during majority of life assured, unlessÂ policy is assigned absolutely in favour of life assured by proposer, nomination by life assured isÂ not possible.
In short, Nominee is statutorily recognized as a payee who can give valid discharge to theÂ insurance company for payment of policy money in case of death of life assured before expiry of theÂ term of contract. The nomination enables the nominee to receive the policy proceeds withoutÂ necessity of producing any legal evidence of title to the estate of deceased life assured. butÂ such nominee is liable to account for the moneys to all legal heirs of the deceased life assured.
The proposer/ life assured i.e. holder of the policy may appoint a nominee/ies while submittingÂ the proposal on his own life by giving suitable reply to the appropriate question in the proposalÂ form. Even if the proposal has already been submitted, the life assured can write letter statingÂ that he desires to appoint a nominee under sec 39 of the insurance Act 1938.
After issue of policy, nomination can be made only by an endorsement on the back of policyÂ itself and such a nomination is required to be notified to the insurance company and registered in itsÂ records. Nomination on separate sheet of paper would be invalid. Since Assignment of policyÂ except in favour of insurance comapany, cancels the nomination, after reassignment, fresh nomination will be required.
When a nominee is a minor, an appointee may be appointed to receive the policy moneys in theÂ of death of the life assured during the minority of the nominee. The appointee should beÂ major person. The appointment of the appointee is valid under the Indian InsuranceÂ Amendment act 1950. The person so appointed as appointee should not be necessarily asÂ Guardian of the minor nominee.
The appointee must affix his signature to the endorsement in token of his having consented toÂ act as an appointee and a responsible person must witness his signature. The appointer viz. theÂ life assured has a right to revoke the appointment of appointee. Where the nominee is a minorÂ & no appointment of an appointee has made, in the event of assuredâ€™s death during theÂ minority of the nominee, claim amount should not be paid to guardian of minor â€˜s nominee, butÂ it should be paid to the legal heirs of the life assured. The appointment of a person asÂ appointee doesnâ€™t make him a guardian of the minor under related law of guardians, butÂ merely confers on him the right to receive the policy money. His authority is limited to thatÂ purpose only.
SEC 39(6) of the Insurance Act provides that where there are more nominees than one, theÂ policy money will be payable to them jointly or to the survivors or survivor of them. There is aÂ statutory provision to the effect that on the death of one of the nominees, the money shall toÂ be paid survivor nominee. The legal heirs of deceased nominee cannot claim share in policyÂ money. Therefore, a nomination providing for payment to nominees in distinct shares cannot beÂ regarded as valid. As & when, office receive death intimation under the policy where severalÂ nominees are there, care should be taken that discharge form is signed jointly by all nominees.Â If any signature is missing, then death certificate of said deceased nominee should be called forÂ verification. The claim cheque can be issued in name of one of the nominees whose name hasÂ been given in note of authority.
When life assured writes nominee as â€œwife & childrenâ€� and not naming specifically names ofÂ existing wife & children, then such nomination will not be valid, as it defeats the purpose ofÂ nomination. Therefore, life assured should be advised to mention the names of existing wife &Â children without specifying the share of nominees. Successive or Alternative Nominee. Nomination is a right conferred by Section 39 of the Insurance Act 1938, on the â€œholder of aÂ policy of life assurance on his own lifeâ€� to appoint a person/s to receive the policy moneys inÂ the event of the policy becoming a claim by the assuredâ€™s death. Hence, nomination can beÂ effected by the life assured only and not by any other title holder or beneficiary of the policy.
Nominee is statutorily recognized as a payee who can give valid discharge to the Insurance companyÂ for payment of policy money without the hassles of establishing the title to receive the same,Â in case of death of life assured before expiry of the term of contract. Nomination can beÂ effected at proposal stage or after issue of policy. At present, there are three ways to effectÂ nomination namely single nomination, joint/ multiple nomination and successive or alternativeÂ nomination.
Nomination merely gives the nominee the right to receive the policy moneys in the event ofÂ death of the life assured. The nomination does not pass the right of the property in the policy toÂ the nominee. The nominee has no right to deal with the policy. The policy continues to be part ofÂ the estate of life assured and he can deal with the policy in any manner without the consent ofÂ the nominee. Life assured can revoke/cancel the existing nomination or effect a change ofÂ nomination without the consent of the nominee. Nominee is answerable to all the natural heirsÂ left by the deceased, in case of rival claim is lodged by other natural heirs. Nominee cannotÂ commute the annuity installment under multipurpose or other allied plan.
In the event of the death of the nominee, the nomination becomes ineffective and the nomineeâ€™sÂ heirs do not have the right to the policy monies. In such case, life assured has the right to make aÂ fresh nomination. In case, the nominee dies after the death of life assured but before receivingÂ the policy money, the nomination would be ineffective and the policy monies will becomeÂ payable to the legal heirs of the life assured. This is because as per sub-section 1,2,4,5 & 6 ofÂ sect 39 of insurance act, the proceeds of the policy do not vest in the nominee though they areÂ payable to the nominee in the event of the death of the holder of policy.
The nomination will have no effect on & after date of maturity. Thus, if life assured expires afterÂ date of maturity & maturity claim is not settled, then claim should be settled in favour of legalÂ heirs of deceased life assured and not in favour of nominee.
A nomination may be cancelled or changed by an endorsement or a further endorsement as theÂ case may be or by a will also. However, notice of such cancellation or change should beÂ delivered to insurance company. Where it is proposed to cancel a nomination by will, the provisions ofÂ the will should show clearly either by express words or by implication, the intention of the lifeÂ assured to cancel the nomination e.g. by a gift of the policy moneys to another party.
If cancellation or change of nomination is made in will, notice of such nomination or changeÂ would be required from the executors of the will after the death of the life assured andÂ therefore such cancellation or change of nomination can take place only from that date.Â An assignment whether absolute or conditional, cancels the nomination. Text of assignmentÂ duly signed by life assured but not registered with insurance company also cancels the nomination.
Notice of Nomination
Nomination if not incorporated in the text of the policy, must be made only by a specialÂ endorsement on the policy. But said nomination will not be effectual unless & until it has beenÂ communicated to & registered by insurance company. When there is no nomination at proposal stageÂ e.g. during minority or proposal taken on another life and such a nomination is made for theÂ first time, notice of nomination is not required. However, notice of nomination is required inÂ respect of any endorsement of nomination subsequent to the first or in respect of cancellationÂ or change of nomination.
Nomination after reassignment of policy will also require notice of nomination, but form of firstÂ nomination will be used.Â When notice in writing is necessary in respect of nomination, only the life assured or the personÂ whom power of attorney is given should give it. Notice given by anybody elseÂ is not sufficient. Even a notice from nominee is also not acceptable. As regards cancellation orÂ change of a nomination made by a will, such cancellation or change can take effect on death ofÂ assured & as such notice by the executors of the will after death of life assured will beÂ required. Any notice of cancellation or change of nomination by will give by assured himselfÂ may also be acceptable. However, a notice by the executor of the will, will also be required.
It is important that for a will to cancel a nomination, there must either be an express clauseÂ therein cancelling the nomination specifically or else there must be a bequest of the sameÂ policy to a party other than the nominee.
In accordance with Sec 39 of the Insurance Act,1938, the holder of a policy of life insurance onÂ his own life, may, when effecting the policy or at any time before the policy matures forÂ payment, nominate a person or persons to whom the money secured by the policy shall be paidÂ in the event of his death. Where under a proposal, the proposer contemplates nominating, asÂ Nominee a person who is apparently a stranger, enquiry should be made so as to ascertain theÂ purpose of insurance. If the reply is satisfactory from view point of insurable interest and moralÂ hazard, the consideration of proposal may be proceeded with.
In view of certain malpractices observed in the nomination process, it has been decided to issueÂ the following guidelines regarding nomination:-
In case of first nomination under the policy, where notice for nomination is not required, theÂ date of receipt of the policy by the servicing office of insurance company will be effective date of registrationÂ of nomination. In other cases like change of nomination, cancellation of nomination, the dateÂ of receipt of notice will be effective date of registration.
Nomination in Policies under MWP or HUF
Policies which are issued under section 6 of Married womenâ€™s property act, are out of perviewÂ of sec 39 of insurance act. Hence nomination under MWP act policies is not possible. PoliciesÂ having nomination, subsequently converted in to married womenâ€™s property act, cancels theÂ nomination.
If policy is financed from HUF, it would belong to the HUF entirely & policy moneys would beÂ payable only to the karta of HUF. Hence nomination cannot be made under a policy financedÂ from HUF fund.