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Assignment of an Insurance Policy - Meaning
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Assignment of an Insurance Policy – Meaning


On the other hand, assignment of an insurance policy is a transfer or assignment of all rights, title and interest and liabilities of the life insurance policy in favour of the assignee. Assignor is the policyholder who transfers the title, and ‘assignee’ is the person who derives the title from the assignor. The assignment is of two types-conditional and absolute. An absolute assignment is done for money consideration.

  1. Conditional assignment

In such cases, the assignor and the assignee may agree that on the happening of a specified event which does not depend on the will of the assignor, the assignment will be suspended or revoked, wholly or in part.

  1. Absolute assignment

In case of an absolute assignment, all the rights, title and interest which the assignor has in the policy passes on to the assignee without reversion to the assignor or his estate in any event.

One can typically come across an assignment where the policyholder is trying to use the life insurance policy as collateral against a loan he intends to raise. However, one must note that the assignment must be fin writing and a notice to that effect must be given to the insurer. The assignee acquires the complete title of the policy and can sue under the policy. He can further assign the policy and can surrender the policy if he so desires. The assignment once effected cannot be cancelled. In case of death of the absolute assignee the rights under the policy look into on the legal heirs of the assignee. It can only be reassigned.

Section 38 of Insurance Act deals with the provisions of the assignment.

It is a transfer of interest in a policy. It is resorted to when loans are taken by a policyholder. Assignment offers a security for the repayment of a loan or fulfillment of a contract. An assignment transfers the rights of the transferor in respect of the property transferred. Immediately on the execution of an assignment of a life assurance policy: the assignor forgoes all his rights, title and interest in thee policy to the assignee. In such cases, the premium/loan interest notices etc. are sent to the assignee.

An assignment of a life insurance policy, once validly executed, cannot be cancelled or rendered ineffectual by the assignor. Scoring the assignment or super scribing words like ‘cancelled’ do not annul the assignment. The only way to cancel it is to get it reassigned by .the assignee in favour of the assignor.

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