Selling of life insurance policies is not possible as with other assets and herein you need to surrender the policy that entails a costs, however if you wish to liquidate your investment in it, there is an option whereby you can take loan on them. Also, if you have to service some debt to some person or kind, there is a feature called assignment, using which policyholder can transfer the legal right in the life insurance policy to another person. The person making such a transfer is referred as assignor and the person to whom the transfer is being made is the assignee.
This provision also allows gifting in the financial instrument and generally for such gifting the life insurance policies are either of single premium or are close to their maturity.
How to go about the process of assignment?
Assignment is the transfer of rights in a life insurance policy right away and hence is different than nomination. The proper call should be made with a valid endorsement. Some of the accepted reasons for the assignment of life insurance include natural love for blood relations etc., valuable consideration, raising of loan etc.
Process: It can be done in 2 ways:
1. Through endorsement on policy document
2. Through a separate deed
Notably for the registration of assignment of insurance companies do not charge any sum. And herein the assignor has to duly complete all the formalities in respect to the transfer of ownership of life insurance policy or assignment.
The assignment also has to be attested and sent over to the office where it is beign serviced. And the nature of assignment has to be registered with the service branch whether it be a branch office, regional or head office. Also, the concerned person has to be handed over an acknowledgment for the receipt of the notice.
Which policies can be assigned?
Assignment is permitted on all life insurance policies except the policies issued under Married Women's Property Act and annuities /pension plans.
Further, there can be a case also when the institution can deny such assignment if it considers that the assignment shall not be in the interest of the policyholder.