Do insurers charge fees for assigning a policy, and is there a limit on how many times it can be assigned?

Insurers generally do not charge fees for registering an assignment, though administrative processes vary. There is no strict legal limit on how many times a policy can be assigned, but repeated assignments are uncommon because the assignee holds rights until a formal re-assignment or release is registered.

Policy Assignment in Life Insurance Explained

Q: What does it mean to assign a life insurance policy?

Assigning a life insurance policy means legally transferring certain rights under the policy to another person or entity (the assignee). The assignee gains priority over policy benefits to the extent of the assignment, for example to secure a loan or transfer economic interest.

Q: Why would someone assign their life insurance policy?

Policyholders assign policies to secure loans, meet lender requirements, or transfer ownership or financial interest to a spouse, child, or business partner. Assignment lets you use an existing policy for collateral without buying additional insurance.

Q: Does the assignment change or replace my nominee?

Yes. An active assignment takes legal priority over nomination. The nominee receives the claim proceeds only after the assignee's rights are satisfied or released. Always check your policy records and the assignment instrument before claim settlement.

Q: How do I assign my policy?

To assign a policy, complete an assignment deed or endorsement form, sign it in the presence of a witness, and submit it to the insurer for registration. The assignment becomes effective only after the insurer records it in their systems. Keep copies of the registered document for your records.

Q: What happens after I repay the loan used for the assignment?

After you repay the loan, the lender (for example, a bank) should issue a re-assignment or a release document to restore full rights to you. Without this re-assignment, claim settlement can be delayed because the assignee's recorded interest remains active.

Q: Can the insurer refuse my assignment?

In most cases no. Under Section 38 of the Insurance Act, if you submit the correct documents and notify the insurer, the insurer must register the assignment. They may seek clarifications or refuse only in rare situations where the assignment violates law, public policy, or the policy terms.

Q: What policies can be assigned?

Most savings-based life plans — like endowment policies, money-back plans, ULIPs, and whole-life policies — can usually be assigned. Many term plans permit assignment for loan security, while pension or annuity products may have product-specific restrictions depending on contract terms and policy stage.

Quick Overview

Policy assignment in life insurance simply means transferring some or all rights of your policy to someone else, like a bank or a family member.

The person giving the rights is the assignor, and the one receiving them is the assignee. Once the insurer officially registers the assignment, the assignee gets the right to claim policy benefits as per the transfer. The process is governed by Section 38 of the Insurance Act, 1938, which explains how assignments should be signed, witnessed, and recorded.

In life insurance, assignment is a way to pass certain rights of your policy to another person or institution when needed. People usually do this to secure a loan or to gift the policy to a spouse, child, or business partner.

For the assignment to be valid, it must be:

Documented through an endorsement or a separate deed
Signed by the policyholder and a witness
Registered with the insurer

Once registered, the insurer recognises the assignee, whether a bank or a family member, as the person entitled to policy benefits to the extent of the assignment.

Types of Policy Assignments in Life Insurance

Absolute Assignment
Absolute assignment means you transfer 100% of the policy rights to someone else. As a result, the assignee becomes the new owner, and you no longer have any financial rights over the policy.

For example, a parent assigns their life insurance policy to their adult child as a long-term gift. From that point on, the child controls the policy and will receive the full benefits. This type of assignment is permanent unless the assignee reassigns it back to you.

Collateral (Conditional) Assignment
Collateral assignment is a partial transfer of rights, typically used when taking a loan. You continue to be the policy owner, but the lender (usually a bank) gets the first right to claim the policy benefits only up to the outstanding loan amount.

For example, you take a ₹40 lakh home loan. Instead of buying the bank’s expensive group insurance, you assign your existing term plan to the authorities. If something happens to you, the bank takes only the remaining loan amount from the policy payout. Any leftover amount goes to your nominee.

Common uses include securing home, car, or business loans, or any situation where a lender requires financial security. This is the most common form of assignment at Ditto because it’s cost-effective and avoids unnecessary lender-linked insurance.

How to Assign a Life Insurance Policy?

Step 1: Decide the Purpose

First, determine why you’re assigning the policy. This helps you choose between collateral assignment for loans or absolute assignment when transferring full ownership.

Step 2: Prepare the Assignment Document

Create an endorsement on the policy or a separate deed. It should mention that it is an assignment, the reason, the assignee’s details, any loan amount involved, the terms, and must be signed by you and a witness.

Step 3: Submit the Request to the Insurer

Send the assignment document and a written request to the insurer. The assignment is not valid until the insurer receives your documents and verifies them.

Step 4: Insurer Registers the Assignment

After reviewing the request, the insurer records the assignment in its system. Once registered, the assignee’s rights become official and recognized.

Step 5: Get the Policy Re-assigned After Loan Closure

If the assignment was linked to a loan, the bank must reassign the policy back to you once the loan is repaid. This ensures your nominee can receive the full benefits at claim time.

CTA

Note: Assignment forms are readily available with insurers, such as the Conditional Assignment Form from Axis Max Life and the assignment support page provided by ICICI Prudential Life.

Difference Between Assignment and Nomination

Factor	Assignment	Nomination
Purpose	Used to transfer policy rights to another person or institution, such as a bank or a family member.	Used to specify who should receive the policy benefits if the policyholder passes away.
Who Controls the Policy?	The assignee controls the policy to the extent of the rights transferred.	The policyholder retains full control. The nominee has no rights while the policyholder is alive.
Who Receives the Payout?	The assignee receives the payout first, but only up to their financial interest (like an outstanding loan).	The nominee receives the payout after the assignee’s claim is settled, or when no assignment exists.
How They Affect Each Other?	Assignment takes priority. The insurer must honour the assignee’s claim before the nominee’s.	Nomination comes into effect only after any active assignment is cleared.
Ability to Make Changes	Can be altered only through re-assignment by the assignee.	Can be added, updated, or changed by the policyholder anytime during the policy term.

Benefits of Opting for 1 Crore Term Insurance

Assignment Overrides Nomination

Once a policy is assigned, the nominee cannot receive any benefit until the assignment is cancelled.

Premiums Remain Your Responsibility

Even after assignment, you must continue paying premiums to keep the policy active.

Re-assignment After Loan Closure is Essential

Many people forget to cancel the assignment after repaying a loan, which can delay claim settlements later.

Check the Lender’s Requirements

Some lenders request an absolute assignment, though a collateral assignment is usually enough for most loans.

Keep the Documentation Clear

A simple, correctly worded assignment deed or endorsement is typically sufficient under Section 38.

Why Choose Ditto for Insurance?

At Ditto, we’ve assisted over 8,00,000 customers with choosing the right insurance policy. Why customers like Aaron below love us:

No-Spam & No Salesmen
Rated 4.9/5 on Google Reviews by 15,000+ happy customers
Backed by Zerodha
100% Free Consultation

You can book a FREE consultation. Slots are running out, so make sure you book a call now!

How Does Ditto Help With Policy Assignment?

At Ditto, we frequently assist customers who are applying for home loans and are pressured by banks to purchase expensive lender-linked insurance. In most cases, this isn’t required, and assigning an existing term plan works perfectly well.

Here’s how we help:

Assess whether assignment is actually needed and suggest the right type (usually collateral assignment).
Provide the required forms and help prepare the documentation.
Raise and track the assignment request with the insurer so the loan process isn’t delayed.
Coordinate with both insurer and bank to ensure smooth approval.
Assist with re-assignment once the loan is repaid, so full policy rights return to you.

This helps you keep your loan secured without paying for expensive bundled insurance.

If you’re unsure whether you should assign your policy, book a free call with our advisors for quick guidance.

Frequently Asked Questions

What does it mean to assign a life insurance policy?

It means transferring certain rights of your policy to someone else, such as a bank or family member. The assignee then gets priority over policy benefits to the extent of the assignment.

Why would someone assign their life insurance policy?

People usually assign policies to secure loans or to transfer ownership to a spouse, child, or business partner. It helps meet lender requirements without buying additional insurance.

Does the assignment change or replace my nominee?

Yes, assignment takes priority over nomination as long as it is active. The nominee receives the payout only after the assignee’s rights are settled.

How do I assign my policy?

You must fill out an assignment deed or endorsement, sign it with a witness, and submit it to the insurer. The assignment becomes valid only after the insurer registers it.

What happens after I repay the loan used for the assignment?

The bank must issue a re-assignment to return full rights to you. Without this step, your nominee may face delays during claim settlement.

Can the insurer refuse my assignment?

In most cases, no. Under Section 38, once you submit the correct documents and notify the insurer, they must register the assignment. They can ask for clarifications, but they can refuse only in rare situations where the assignment violates the law or public policy.

What policies can be assigned?

Most savings-based life insurance plans, such as endowment, money-back, ULIPs, and whole-life policies, can usually be assigned. Many term plans also allow assignment for loan security, while pension or annuity products may have restrictions depending on their terms and stage of the policy.

Do insurers charge any fees for assigning the policy, and is there a limit on how many times it can be assigned?

Insurers generally do not charge any fees for registering an assignment. While there’s no strict limit on the number of times you can assign a policy, it typically happens only once because the assignee holds the rights until the assignment is formally reversed.

Last updated on: 14 Dec, 2025

How Does Policy Assignment Work in Life Insurance?