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Nomination in Insurance Policies
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Nomination in Insurance Policies

Created by
@AdequateGyrolite413

Questions and Answers

What happens to the nomination if a policy is assigned to another party?

  • The nominee retains rights even after assignment.
  • The assignment and nomination must be submitted simultaneously.
  • The nomination automatically gets cancelled. (correct)
  • The nomination remains valid unless revoked.

    • Who can benefit from the death claim in the event of the life assured's death?

  • Only the legal heirs of the policyholder.
  • The nominee only.
  • The nominee holds the benefits on behalf of the legal heirs. (correct)
  • The policyholder has the sole right to claim the death benefit.

    • If a nominee dies before the life assured, who receives the death claim?

  • The estate of the deceased nominee.
  • The legal representatives of the deceased nominee.
  • The other nominees alive as of the date of death. (correct)
  • The insurer retains the death claim.

    • What happens to the nomination if the policyholder revokes it?

    <p>It is annulled immediately.</p> Signup and view all the answers

    When can a nominee influence the insurance policy?

    <p>Nominees have no influence over the policy at any time.</p> Signup and view all the answers

    Which of the following statements is true regarding loans against insurance policies?

    <p>A loan cannot be secured against an assigned policy.</p> Signup and view all the answers

    What determines the legal heirs of the life assured?

    <p>Relationships with the life assured.</p> Signup and view all the answers

    In the case of maturity amounts payable in installments, what happens if the life assured passes away?

    <p>Remaining installments are paid to the nominees.</p> Signup and view all the answers

    What is the Surrender Value of an insurance policy?

    <p>The amount refunded to the policyholder if they cancel the policy after a certain period</p> Signup and view all the answers

    How can a policyholder utilize an insurance policy for financial assistance?

    <p>By assigning the policy as collateral to secure a loan</p> Signup and view all the answers

    What is the primary difference between policy assignment and nomination?

    <p>A nomination only allows the beneficiary to receive the policy benefits, while assignment transfers ownership rights</p> Signup and view all the answers

    Which factor impacts the interest rates on loans taken against insurance policies?

    <p>The type of insurance product</p> Signup and view all the answers

    What is an adverse selection in the context of insurance?

    <p>The phenomenon where unhealthy individuals are more likely to purchase insurance</p> Signup and view all the answers

    What is a common reason for policyholders to surrender their insurance policies?

    <p>To receive immediate liquidity from the Surrender Value</p> Signup and view all the answers

    Which characteristic makes a policy eligible for a loan against it?

    <p>The policy must be active and have accrued sufficient Surrender Value</p> Signup and view all the answers

    What could happen if a policyholder fails to repay a loan taken against an insurance policy?

    <p>The outstanding loan amount will be deducted from the death benefit</p> Signup and view all the answers

    What is the term used for the amount payable to a policyholder when they withdraw their life insurance policy before maturity?

    <p>Surrender value</p> Signup and view all the answers

    What can affect the surrender value of a life insurance policy in a financial emergency?

    <p>Surrender clause details</p> Signup and view all the answers

    In the context of policy assignment and nomination, what happens if the nominee dies after the life assured but before the death claim payment?

    <p>Claim is paid to the life assured's legal heirs</p> Signup and view all the answers

    Which statement about the rights of nominees is correct?

    <p>Nominees have no right over the policy</p> Signup and view all the answers

    What is a common misconception regarding creditors and insurance policies?

    <p>Creditors can attach the policy if there is no assignment made</p> Signup and view all the answers

    What is typically required if the nominee of a life insurance policy is a minor?

    <p>An appointee must be designated</p> Signup and view all the answers

    What is a distinct advantage of having the surrender feature in an insurance policy?

    <p>Immediate liquidity in emergencies</p> Signup and view all the answers

    Which factor is least likely to influence the interest rates on loans against insurance policies?

    <p>Policy surrender value</p> Signup and view all the answers

    Study Notes

    Nomination in Insurance Policies

    • A notice for nomination must be served to the insurer by the policyholder or the life assured if they are different individuals.
    • Section 39 of the Insurance Act 1938 governs the nomination of policies.
    • Policyholders can revoke or cancel nominations anytime during the policy term for policies on their own life.
    • If the policyholder and insured are different, nominees cannot be appointed by the policyholder.
    • Nominees cannot influence policy terms; their benefits arise only upon the life assured's death during the policy term.
    • Multiple nominees can be appointed; surviving nominees receive benefits if one dies before the life assured.
    • Nominees act on behalf of the legal heirs, holding benefits until heirs are determined by relationship to the life assured.
    • If a will is present, those named in it become entitled to the death claim.
    • If a nominee dies after the policyholder but before the claim is settled, benefits go to the life assured's legal representatives.
    • Installments of maturity amounts are paid to nominees in case of policies with installment features.
    • Assignment of a policy automatically cancels any existing nomination, except assignments made as security for loans.

    Assignment of Insurance Policies

    • Assignment involves transferring title and rights of assets from one person to another.
    • A scenario illustrates how a person can use an insurance policy as collateral for a loan without affecting other key assets.
    • Creditors may attach a nominated policy unless assignment fraudulently defrauds them.

    Surrender of Insurance Policies

    • Surrendering an insurance policy allows for withdrawal before maturity, known as 'surrender of policy.'
    • Surrender value or cash value is the amount payable upon surrender, providing liquidity to policyholders during emergencies.
    • Insurance companies specify surrender values for various years of the policy term to inform policyholders.
    • This feature addresses liquidity, enabling policyholders to withdraw benefits if necessary, subject to specific conditions.

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    Description

    This quiz covers the essential aspects of nomination in insurance policies as per Section 39 of the Insurance Act 1938. Understand the rights of policyholders and nominees, as well as the implications of revoking nominations and how benefits are distributed. Test your knowledge on the complex relationships between policyholders, nominees, and legal heirs.

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