Who is an Assignee in Life Insurance?

An assignee in life insurance is someone or an entity to whom the rights of a life insurance policy are legally transferred. Depending on the type of assignment, the assignee may receive some or all policyholder rights, such as receiving benefits or, in certain cases, controlling the policy. If you’re using your life insurance policy to secure a loan or gifting it to a loved one, you’re making them the assignee. Understanding who an assignee is, and what that role means, helps ensure your policy is used the way you intend.

An assignee in life insurance is someone or an entity to whom the...

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Key Takeaways

An assignee is the person or organisation to whom a life insurance policy is transferred.
Assignment is the process that legally transfers policy rights from the policyholder to the assignee.
There are two main types of assignment: absolute (full transfer) and collateral (used as loan security).
Once assigned, the assignee receives policy benefits as per the assignment terms.

Who Can Be an Assignee in Life Insurance?

An assignee can be:

A family member, such as a spouse or child
A financial institution, like a bank or NBFC, in case of loans
A trust or legal heir, for estate planning purposes
A business partner, in case of keyman or business-related policies

The only requirement is that the assignee must be legally competent to enter into a contract.

Rights and Responsibilities of an Assignee

When someone becomes an assignee, they gain certain rights and also take on specific responsibilities:

Rights

Receive the policy benefits as per the assignment terms
Be informed of any changes to the policy
Take legal action to claim the benefits if needed

Responsibilities

Maintain documentation of the assignment
Ensure the policy remains in force, especially in collateral cases
Notify the insurer if the assignment ends or needs to be altered

How to Assign a Policy

Assigning a life insurance policy is a formal process. Here's how it usually works:

Endorsement on Policy Document

The policyholder submits a written request to the insurer with details of the assignment and the assignee.

Submission of Required Documents

This typically includes the original policy document, ID proof of the assignee, and a duly signed assignment form.

Insurer Acknowledgement

The insurer updates the records and issues an endorsement confirming the assignment.

This process must be completed with the insurer's formal acknowledgement for the assignment to be legally valid.

Real-Life Example Scenario

Suppose Sunita takes a life insurance policy worth ₹40 lakhs and later takes a loan of ₹15 lakhs from a bank. She assigns her policy to the bank through a collateral assignment.

If Sunita passes away before repaying the loan:

The bank, being the assignee, will first receive ₹15 lakhs from the insurer.
The remaining ₹25 lakhs will go to her nominee.

If she repays the loan during her lifetime, the assignment ends and all rights revert to her.

Difference Between Assignee and Nominee

In life insurance, the terms assignee and nominee are often confused. Although both are connected to the policy, their responsibilities and legal rights are not the same. Here’s how they differ.

Assignee	Nominee

Legally owns the policy after assignment	Is named to receive the benefit after death
Can be a bank, family member or any other person	Usually a family member or close relation
Has legal rights over the policy	Has no legal rights if policy is assigned
Cannot be changed unless mutually agreed	Can be changed anytime by the policyholder
Gets policy benefits as per assignment terms	Gets benefits only if there is no assignment

Why Knowing the Assignee Matters in Life Insurance

Knowing who the assignee is and whether a policy has been assigned is important for both the policyholder and the nominee. For example:

If the policy is assigned to a bank, the bank will receive the amount first in case of a claim.
If you want to transfer ownership of your policy to your child, an absolute assignment ensures this legally.
If you are a nominee but the policy has been assigned, you may not get the money directly.

Conclusion

The role of an assignee in life insurance is more than just a formality. It can impact how benefits are paid and who receives them. Whether you want to use your policy as loan security or gift it to someone, understanding assignment helps you avoid confusion later.

Always inform your insurer in writing when making or cancelling an assignment. It is also important to keep your nominee and family aware of the policy status to ensure a smooth claims process.

Frequently Asked Questions (FAQs)

Can a nominee and assignee be the same person?

Yes, but their roles are legally different. The assignee owns the policy rights, while the nominee is entitled to receive benefits only if there is no assignment.

Can I cancel an assignment once made?

In case of collateral assignment, it can be cancelled after the loan is repaid. Absolute assignments usually require the assignee’s consent to reverse.

Do all policies allow assignment?

Most traditional and ULIP policies allow assignment. It is best to confirm with your insurer before proceeding.

How do I make an assignment?

You must fill out an assignment form and submit it along with any required documents. The insurer will update the records accordingly.

Does assignment affect tax benefits?

Assignment does not change the tax benefits of the policy unless the assignee is a business entity. In most personal cases, tax treatment remains the same.

Written by Neviya Laishram

1.7K Linkedin Followers

Reviewed by Vaibhav Kumar Kaushik

A senior editor with years of expertise, she fine-tunes content that connects, converts, and builds trust. She transforms heavy life insurance concepts into clear, aha-moment reads. Writing is her passion, and thinking ahead is second nature. When not wrangling words, she’s crushing game levels because every challenge is a puzzle waiting to be solved.