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Absolute Assignment: Complete and Permanent Transfer of Policy Rights
Neviya LaishramDec 22, 2025
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Definition: Absolute assignment in life insurance means the permanent transfer of all ownership, rights, and benefits of an insurance policy from the policyholder (assignor) to another person or entity (assignee).
Contents
- What is an Absolute Assignment in Life Insurance?
- Key Takeaways
- Terms You Should Know
- Why Opt for Absolute Assignment in Life Insurance?
- Example of Absolute Assignment in Life Insurance
- Step-by-Step Guide for the Execution of Policy Assignment
- Conditional Assignment vs Absolute Assignment
- Who Should Consider Absolute Assignment?
- Conclusion
What is an Absolute Assignment in Life Insurance?
Absolute Assignment in life insurance is a legal transfer in which the policyholder gives up all rights, ownership, and control of the policy to another person or entity. Once recorded and accepted by the insurer, the assignee becomes the sole owner and is entitled to all benefits, including maturity and death benefits. In India, absolute assignment is governed by Section 38 of the Insurance Act, 1938, and becomes effective only after the insurer records and registers the assignment.
Key Takeaways
Absolute assignment of life insurance policy is a permanent transfer of all policy rights, title, and interest.
After the policy assignment, only the assignee can claim benefits and make changes to the policy.
Once executed, the assignment of policy cannot be revoked unless the assignee proceeds with a fresh assignment.
The difference between assignment and nomination is that nomination names a beneficiary, and assignment transfers full ownership.
Often used to gift the insurance policy to someone else, making the recipient the new policy owner.
Terms You Should Know
Assignor: This is the person who owns the life insurance policy and decides to transfer their rights to someone else.
Assignee: This is the person or institution that receives those rights. Once the assignment is complete, the assignee gets full control of the policy.
Why Opt for Absolute Assignment in Life Insurance?
Policyholders usually opt for absolute assignment of a life insurance policy in situations where a complete and irreversible transfer is required, such as:
Gifting a life insurance policy: Absolute assignment allows a policyholder to gift the policy to a spouse, child, or family member, making them the legal owner entitled to all policy benefits.
Succession and estate planning: Many individuals use absolute assignment to ensure a smooth transfer of life insurance ownership to the next generation without future disputes.
Loan or financial arrangements: In some cases, a life insurance policy is absolutely assigned to a lender or institution, giving them full control over the policy until the obligation is settled.
Permanent change in ownership: When the original policyholder no longer wishes to manage the policy or pay premiums, absolute assignment ensures the responsibility is fully transferred.
Example of Absolute Assignment in Life Insurance
An absolute assignment fully transfers your life insurance policy ownership to someone else. Think of an absolute assignment as handing over your life insurance policy.
For example, Arjun owns a life insurance policy worth ₹1 crore. He transfers full ownership and rights to his son, Ram, through an absolute assignment. After the insurer processes and registers the assignment, Arjun has no rights over the policy. Ram becomes the single policyholder, entitled to receive the full ₹1 crore benefit, whether as maturity proceeds or a death claim, along with any applicable bonuses.
Step-by-Step Guide for the Execution of Policy Assignment
To proceed with an absolute assignment of life insurance policy, the following steps are followed:
1. Decide Whom to Transfer Ownership: The policyholder or assignor chooses an assignee. It can be a family member, lender, or business partner to whom full rights are transferred.
2. Fill out the Assignment Form or Deed: The assignor enters the assignee’s details with the reason for the transfer. The reason can be a gift, collateral, business buy-sell, etc., and the assignor signs on stamped paper.
3. Witness the Signature: Two witnesses must witness the signature, confirming the policy transfer is voluntary and lawful.
4. Submit Documents to the Insurer: The completed form and original policy are submitted to the insurance company.
5. Insurer Registers the Assignment: Under Section 38 of the Insurance Act, 1938, the insurer transfers the policy, records the change, and provides a confirmation letter.
6. Rights Shift Immediately: After transfer, only the assignee can pay premiums, borrow against the policy, change nominees, or claim maturity and death benefits from the transfer date.
7. Permanent Unless Re-assigned: Once an absolute assignment is registered with the insurer, the original policyholder cannot reverse it. Only the assignee has the right to execute a fresh assignment.
Conditional Assignment vs Absolute Assignment
Absolute Assignment is often confused with a similar term, ‘Conditional Assignment’; however, they both serve a distinct purpose in life insurance contracts. Here’s how:
| Feature | Absolute Assignment | Conditional Assignment |
|---|---|---|
| Transfer of ownership | Permanent transfer of policy ownership and rights | Transfer of ownership under specific terms and conditions |
| Revocability | Irrevocable once executed | Revocable if the specified condition is not met |
| Purpose | Gifting the policy, business transfer, or loan collateral | Often used as collateral for loans, ownership reverts after repayment |
| Who Holds Rights Post Assignment | Assignee has all rights and benefits | The assignee has rights only until the condition is fulfilled or invalidated |
| Assignor’s Rights After Assignment | Assignor loses all rights permanently | Assignor may regain rights if the condition is not met |
Who Should Consider Absolute Assignment?
Anyone thinking of shifting ownership for financing, gifting, or succession should consider assignment in insurance, especially these groups:
Borrowers: Mortgage a policy to secure lower-interest loans.
Parents or Guardians: Gift future benefits to children.
Business partners: Transfer cover when buying or selling a stake.
High-net-worth Individuals: Shift assets to the next generation in a tax-friendly way.
Conclusion
Absolute assignment permanently transfers ownership of a life insurance policy, making the assignee the sole decision-maker and beneficiary. Since the transfer is irreversible, it should be used carefully for purposes such as gifting, succession planning, or securing loans.
Below are some of the frequently asked questions on Absolute Assignment
Explain the Difference between assignment and nomination in insurance?
Nomination refers to nominating a beneficiary to receive policy benefits upon the policyholder's death or other specified event. On the other hand, insurance assignment refers to transferring the policyholder's rights to another person or entity.
What are the benefits of assignment in life insurance?
Assignment of life insurance is used as a tool for securing loans, transferring assets, or gifting the policy, unlocking cash, securing loved ones, and streamlining succession without any roadblocks.
What is an assignee in insurance?
In insurance, an assignee is the person or entity to whom the rights and benefits of an insurance policy are transferred. The person transferring the policy is called the assignor.
What are the different types of assignments?
In life insurance, the main assignments are: absolute, conditional, and collateral.
When Can You Opt for an Absolute Assignment?
You can opt for an absolute assignment anytime after your life insurance policy is issued. All it takes is a mutual agreement between you (the assignor) and the person you’re transferring the rights to (the assignee).
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