14 Differences between Nomination and Assignment in Insurance
The following are the major differences between nomination and assignment:
1. How made: Nomination can be made either by mentioning the name of the nominees in the policy or by an endorsement thereon. Separate instrument is not required. On the contrary, assignment may be made either by an endorsement on the policy itself or by the execution of separate instrument in writing.
2. Purpose: A nomination is made to provide facility to the beneficiary so that he can recover the money when the policy matures for payment after the death of the assured but the assignment is meant for transferring all the rights and interests under the policy in favour of the assignee.
3. Effect: In nomination, the property in the policy remains at the disposal of the assured during his life time. A nominee only has a beneficial interest in the policy, whereas in the case of assignment, the property in the policy passes to the assignee, who gets the rights of the owner of the policy.
4. Right of disposal: In nomination, the nominee gets the right of disposal only on the death of the assured, whereas in assignment, the assignee can dispose of the policy in any way he likes.
5. Revocability: Nomination can be revoked anytime before the maturity of the policy but assignment is irrevocable and shall amount to the cancellation of nomination except when it is made in respect of a loan granted on the security of the policy by the insurer. However, there can be re-assignment in favour of the policyholder.
6. Consideration: Nomination need not be supported by a consideration but assignment must be supported by a consideration.
7. Witness: Witness is not required for nomination but assignment must be witnessed otherwise it will be invalidated.
8. Right to sue: Nominee has no right to sue under the policy, but the assignee has right to sue under the policy.
9. Minor: In nomination, where nominee is a minor, appointment of an appointee by the life assured only is required, whereas in assignment, where assignee is a minor, guardian is to be appointed by the father of the assignee.
10. Creditors: In nomination, creditors of the life assured can attach the policy moneys, whereas in assignment, creditors cannot attach the property unless the assignment was made to defraud the creditors.
11. Execution: Nomination is effected where Insurance Act 1938 applies i.e., India or similar enactment apply viz in Pakistan and Ceylon but assignment can be executed anywhere in the world according to the law of the country.
12. Vested interest: No vested interest in favour of nominee is created but vested interest is created in favour of assignee.
13. Policy amount: In case of nomination, money is to be paid to the nominee only when he survives the assured, whereas in case of assignment, the policy money is to be paid to the assignee.
14. Death: Nomination becomes ineffective at the death of the nominee. If a conditional assignee dies, the right under the policy reverts to the life assured depending upon the terms of assignment. If an absolute assignee dies, the right devolves upon his / her heirs.