HomeLife InsuranceAssignment under Life Insurance

Assignment under Life Insurance

Insurance is a type of a contract between the policy holder and the insurance company. Under which the bond known as a certificate contains the details of the benefits, sum assured and the type of premium processes executed for the certain period.

In case you are trying to apply for a home loan, then your home loan service provider will surely going to use this particular term plan. Term insurance is given a new meaning under the category of assignment but before you proceed and take its advantages, it is vital to understand its difference, usage and credibility.

What is an Assignment?

The Assignment of a life insurance policy means that the transfers of rights from one human to another are given. You as a policy holder give rights on your insurance plan to the other person or the entity for different reasons and this entire processing is known as the “assignment”.

However, the member who assigns the life insurance policy is known as the assignor or the policy holder and the person whom the policy is transferred or being assigned is known as the assignee.

So, once the assignee receives the transfer papers of the policy, then the rights are automatically transferred from assignor to the assignee. All the rights which were earlier with the policy holder will be cancelled and the assignee becomes its new owner.

Is it Common?

These days’ people are willing to take loan for home or car with the assignment process. The bank with which you are tying up for the home loan will become the policy owner and the original policyholder continues to enjoy the life assured benefits.

Types of Assignment

There are term insurance plans which can be transferred under the head of assignment and these are later divided into different types-

Absolute Assignment of the Policy

This is the process in which the complete rights are transferred from the assignor to the bank or the assignee. Hence, no hidden conditions are applied in future or in present. For an instance, Mr. Malik had enrolled into a term insurance plan of INR 1 crore. He wanted to gift the policy to his beloved wife.

Now he makes absolute assignment over the policy he bought on his wife’s name so in that case the benefits after death and the maturity period what so ever is first can be directly delivered to her. After the payment for absolute assignment is completed then the policy ownership will be given to Mrs., Malik and she can again make transfers to someone else in future until the policy meets its end term.

Conditional Assignment

This is the type of an assignment in which the rights transferred to the assignee will contain some conditions. In case the conditions are fulfilled then only the policy will be transferred from the assignor to assignee. For instance, Mrs. Dhingra owns a term insurance of Rs 50 lakh. She wants to apply for a loan to build home of Rs 50 lakh. Her renowned banker has requested her to assign the life insurance policy that she owns to the bank on behalf of loan.

Mrs dhingra on certain conditions assign the policy to the home loan providing bank in order to obtain the loan successfully. In case Mrs. Dhingra meets an unfortunate death while the home loan is not repaid completely then the bank manager can hold the death benefits sum assured amount and retain their home loan back without bothering the family members.

What is the Process for Assigning the Policy?

Life insurance policy can be assigned in writing a notice. An agreement is prepared after the application is submitted by the policy holder. He or she has to file an application to the bank who will provide loan and to the company which has offered the policy. An endorsement is made as per the documents provided and then the home loan value is evaluated. Both the assignor and the assignee need to attest the document of assignment by using the one witness during the signing period.

Ajeet Sharma, the founder of Financegab and a well-known name in the field of financial blogging. Blogging since 2017, he has the expertise and excellent knowledge about personal finance. Financegab is all about personal finance which aims to create awareness among people about personal finance and help them to make smart, well-informed financial decisions.


  1. I think that life insurance is very important. I think that business owners must know the importance of this. I definitely find this article very informative. Thanks for sharing this article. I will share this to my other business owner friends too. Thanks for sharing this.


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