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NISM Certifications · NISM-Series-X-B: Investment Adviser (Level 2) · Tools for Estate Planning

Caselet: Mrs. Kavita Nair (age 60) holds a Rs 1 crore term insurance policy. She has named her son as nominee in the policy and has also written a will leaving all assets equally to her son and daughter. After her death, the insurer pays the proceeds to the son. Which view is correct under the prevailing legal position on insurance nominees, for a policy not taken under the Married Women's Property Act?

The son receives the proceeds as nominee, which discharges the insurer, but he does not become absolute owner. Those entitled under the will or succession law, here including the daughter, can claim their share from him. The nomination is not void.

  1. AThe son is the absolute owner and the daughter has no claim to the proceeds
  2. BThe son receives the money only as a nominee, and the legal heirs or will beneficiaries can claim their share from himCorrect
  3. CThe proceeds must be paid to the daughter because the will overrides the nomination for all insurers
  4. DThe nomination is void because it contradicts the will

Explanation

For life insurance, the insurer pays the nominee and gets a valid discharge. Under the position that nomination under Section 39 of the Insurance Act does not by itself confer beneficial ownership, the nominee holds proceeds for those entitled under the will or succession law. So the daughter can claim her share from the son; the nomination is not void.

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