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CS Professional · Banking and Insurance - Laws and Practice · Functions in Insurance and Compliance related thereto (Part II)

Anil assigned his policy to Bhavna conditionally: proceeds go to his nominee if Bhavna dies before him. Bhavna, after notice was delivered, asks the insurer to grant her a loan on the policy and to surrender it. What is the position?

Bhavna cannot obtain a loan or surrender the policy. The Act validates conditional assignments, such as proceeds reverting if the assignee predeceases the insured, but provides that a conditional assignee is not entitled to a loan or surrender. Only absolute assignees have those rights.

  1. AShe may obtain a loan but not surrender the policy
  2. BShe may surrender but not take a loan
  3. CShe may do both as any assignee
  4. DShe is not entitled to obtain a loan or surrender the policy, as a conditional assigneeCorrect

Explanation

An assignment made on condition that proceeds become payable to the policyholder or nominee if the assignee predeceases the insured is valid, but the proviso says a conditional assignee is not entitled to obtain a loan on the policy or surrender it. An absolute assignee could do both.

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