LIC Policy Assignment: A Legal Guide for Policyholders

Assignment of an LIC policy means transferring the rights and benefits of the policy to another person or entity. This is different from changing the nominee. When you assign a policy, the assignee becomes the owner of the policy rights.

**Two types of assignment**

Absolute Assignment: You permanently and irrevocably transfer all rights in the policy to the assignee. The assignee becomes the full owner and can receive benefits, surrender the policy, or take a loan against it. This is commonly used when pledging an insurance policy against a bank loan.

Conditional Assignment: The transfer takes effect only when certain conditions are met. For example, a policy may be assigned to a spouse conditionally, taking effect only upon the policyholder's death before maturity. This is used in estate planning contexts.

**When would you assign a policy**

The most common reason I see in my practice: a client takes a home loan and the bank requires the LIC policy to be absolutely assigned in the bank's favour as collateral. If the client dies during the loan tenure, the bank collects the insurance proceeds and the remaining balance (if any) is paid to the nominee.

**How to do the assignment**

Step 1: Fill in the assignment form available at your LIC branch or download it from the LIC website.

Step 2: Get it witnessed. Both the assignor (you) and the assignee must sign. The form requires witness signatures too.

Step 3: Submit to LIC with the original policy bond. LIC stamps the assignment on the policy bond.

Step 4: LIC records the assignment in their system. All future communications and benefits will go to the assignee.

**Re-assignment (getting your policy back)**

If you have assigned your policy absolutely to a bank and you repay the loan, the bank can re-assign the policy back to you. The bank issues a letter confirming the policy is released as collateral, and you submit this to LIC for the re-assignment to be recorded.

**Assignment vs Nomination**

These are very different. A nominee receives the death benefit but has no other rights over the policy during the policyholder's lifetime. An assignee has full ownership rights and can deal with the policy in any way during their ownership period.

**Important legal point**

Under the Married Women's Property Act (MWPA), a policy taken by a husband for the benefit of his wife and children creates a trust and cannot be assigned or attached by creditors. If you have taken a policy under MWPA, assignment is not allowed. This is a crucial detail when banks ask for policy assignment as collateral.

If you have questions about assignment, especially in the context of a home loan or business loan, call me at 9415313434.