Nomination vs Legal Heir — Disputes & Resolution
What a nomination under section 39 of the Insurance Act does, who is a beneficial nominee since 2015, how nomination interacts with assignment and with succession law, and how a claim is paid when there is no nominee.
What nomination does
Nomination, under section 39 of the Insurance Act, 1938, lets the holder of a policy on their own life name the person who is to receive the money on death. The section also covers how a nominee is changed or cancelled. Its practical effect is that the insurer knows whom to pay.
Where the nominee is a minor, the policyholder must name an appointee: an adult who receives the proceeds on the minor's behalf until the minor reaches 18.
Receiving the money and owning it
Whether the nominee also owns the money was settled by the Supreme Court in Sarbati Devi v. Usha Devi (1984). The Court held that a nomination only names the person who receives the money; the nominee holds it for those entitled under succession law.
The 2015 amendment to section 39 changed this for the closest family. Parents, spouse and children who are nominated by the holder of a policy on their own life are beneficial nominees, entitled to the money themselves. For any other nominee, such as a brother, business partner or friend, the earlier position continues: that person receives the money, and succession law decides who is finally entitled to it.
Assignment and nomination
An assignment under section 38 transfers rights in the policy to another person, the assignee. It is made by a signed and witnessed endorsement or instrument, with notice to the insurer. Under section 39(4) an assignment generally cancels an existing nomination, so the assignee ranks ahead of the nominee.
There is one exception. An assignment made in consideration of a loan, to the insurer or to another lender, does not cancel the nomination; the nominee's rights are then subject to the lender's interest.
Policies under section 6 of the Married Women's Property Act, 1874 fall outside section 39 altogether. Such a policy, taken by a married man on his own life and expressed to be for the benefit of his wife, or wife and children, is a trust for them.
When there is no nominee
Without a nominee, the insurer pays those who prove their title to the money. Legal heirs usually do this through a succession certificate from a civil court or a probate of the will. For smaller claims some insurers accept simpler papers, such as an indemnity bond, within limits they set themselves.
Obtaining these papers takes time, which a valid nomination avoids.
Rules at a glance
Two nominations, two results
Illustration: Ramesh holds a policy on his own life and names his brother as nominee. He dies leaving a wife and a daughter. The insurer pays the brother, but the brother is not a beneficial nominee. He holds the money for those entitled under the succession law that applies to Ramesh, and they can claim it from him.
Had Ramesh nominated his wife, she would be a beneficial nominee under section 39 as amended in 2015 and entitled to the money herself. Had he named his eight-year-old daughter, he would also have had to name an appointee to receive the money for her.
Key points
- Section 39 of the Insurance Act, 1938 deals with nomination by the holder of a policy on their own life.
- Since the 2015 amendment, nominated parents, spouse and children are beneficial nominees, entitled to the money themselves.
- Any other nominee receives the money and holds it for those entitled under succession law, as held in Sarbati Devi v. Usha Devi (1984).
- An assignment generally cancels a nomination and the assignee ranks first; an assignment for a loan does not cancel it.
- With no nominee, legal heirs usually need a succession certificate or probate.
Common misunderstandings
- A nominee is not always the owner of the money: only nominated parents, spouse and children are beneficial nominees.
- Sarbati Devi is not the whole law today: the 2015 amendment to section 39 changed the position for parents, spouse and children.
- An assignment does not always cancel a nomination: an assignment for a loan leaves it in place, subject to the lender's interest.
- A succession certificate is not needed in every claim: it is the usual requirement where there is no nominee.
Questions people ask
A policy has been assigned outright and also has a nominee. Who has the prior claim?
The assignee. An assignment under section 38 transfers rights in the policy and, under section 39(4), generally cancels an existing nomination.
Is a friend named as nominee entitled to keep the money?
Not by the nomination alone. A friend is not a beneficial nominee, so succession law decides who is finally entitled.
Does section 39 apply to a policy taken under the Married Women's Property Act?
No. Policies under section 6 of the Married Women's Property Act, 1874 fall outside section 39; the policy is a trust for the wife, or wife and children, named in it.
What this lesson relies on
- Insurance Act, 1938 — sections 38 and 39
- Sarbati Devi v. Usha Devi (Supreme Court, 1984)
- Insurance Laws (Amendment) Act, 2015
- Married Women's Property Act, 1874 — section 6
This lesson was reviewed independently against these sources on 8 October 2026. Rules change: check the current regulation, scheme document or policy wording before relying on any figure. This is education, not advice.