Nominations, Assignments & Claims
How nomination under section 39 and assignment under section 38 of the Insurance Act, 1938 decide who is paid under a life policy, and the time limits IRDAI now sets for settling death and maturity claims.
Nomination: who receives the money
Nomination lets a policyholder name the person who will receive the policy money on death. It is governed by section 39 of the Insurance Act, 1938. A nomination can be changed by a written request to the insurer, and the consent of the existing nominee is not needed.
Since the amendment effective 26 December 2014, the nominee's position depends on who it is. Where a person holding a policy on their own life nominates a parent, spouse or child, that nominee is beneficially entitled to the money. Any other nominee, a friend or a sibling for instance, receives the money from the insurer but holds it for the legal heirs, who take it under the succession law that applies to them.
Assignment: transferring the policy
Assignment, under section 38, transfers the rights in a policy to someone else. It needs an endorsement on the policy or a separate instrument, signed and witnessed, and notice to the insurer. The insurer may refuse to register it, giving reasons within 30 days.
An absolute assignment is a complete and unconditional transfer of all rights, title and interest: the original policyholder keeps none. A conditional assignment transfers the rights subject to a condition stated in it. Assignment is commonly used to give a lender security for a loan.
When nomination and assignment meet
An assignment cancels an existing nomination, with one exception. Under section 39(4), an assignment made as security for a loan, whether to the insurer for a policy loan or to another lender such as a bank, does not cancel it. The nominee's rights then rank after the lender's interest: on death the lender is paid first, up to what it is owed, and the balance goes to the nominee.
Claims and their time limits
A death claim is supported by the claim form, the death certificate, the policy document and the claimant's identity and bank details, with medical or hospital records where relevant.
Under IRDAI's Master Circular of 5 September 2024, a death claim that needs no investigation must be settled within 15 days of intimation; where investigation is needed, the insurer must complete it and settle within 45 days of intimation. Older material quotes 30 days from receipt of all documents and 90 days or more for investigation. A maturity claim is paid on the due date, and the insurer intimates the policyholder at least one month ahead. For delay beyond the time allowed, the insurer pays interest at 2% above the bank rate.
Rules at a glance
A friend as nominee
Illustration: Suresh, who is unmarried, names a close friend as nominee and dies without a will. The insurer pays the claim to the friend. The friend is not a parent, spouse or child, so he holds the money for Suresh's legal heirs under the succession law that applies to them. Had Suresh nominated his mother, she would have been beneficially entitled to it.
A policy assigned to a bank, and a claim timeline
- Assumptions, for arithmetic only: sum assured ₹50,00,000; policy assigned to a bank as security for a loan; amount owed to the bank at death ₹12,00,000; the nominee is the policyholder's wife.
- The bank, as assignee, is paid first: ₹12,00,000.
- Balance to the nominee = ₹50,00,000 − ₹12,00,000 = ₹38,00,000.
- Timeline: the death is intimated on 1 August. With no investigation, 15 days end on 16 August. If investigation is needed, 45 days end on 15 September.
Result. The bank receives ₹12,00,000 and the nominee ₹38,00,000. Settlement is due by 16 August, or by 15 September if the claim is investigated.
Key points
- Section 39 governs nomination; section 38 governs assignment.
- A parent, spouse or child nominated by a person holding a policy on their own life is a beneficial nominee; any other nominee receives for the legal heirs.
- An assignment cancels a nomination unless it is made as security for a loan; the lender is then paid first.
- Death claims: 15 days from intimation, or 45 days where investigation is needed; maturity claims on the due date.
Common misunderstandings
- A nominee is not always the final owner: only a parent, spouse or child nominated by the life assured is beneficially entitled.
- Nomination and assignment are not the same: nomination names who receives the money on death, while assignment transfers rights in the policy now.
- An assignment to a lender does not wipe out the nomination: the nominee still takes whatever is left after the lender is paid.
Questions people ask
Does the present nominee have to agree to a change?
No. A change of nomination needs only the policyholder's written request to the insurer.
What does the insurer owe if it settles a claim late?
Interest at 2% above the bank rate for the delay beyond the time IRDAI allows.
Are the deceased's income-tax returns needed for a death claim?
No. They are not among the standard documents listed above.
What this lesson relies on
- Insurance Act, 1938 — sections 38 and 39 (as amended with effect from 26 December 2014)
- IRDAI Master Circular on Protection of Policyholders' Interests (5 September 2024) — claim settlement timelines
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.