What is section 39 in the Insurance Act, 1938

Nomination in life insurance and all the processes around life insurance nomination play a key role in ensuring ease for your loved ones after you are gone. Whether it is updating nominee details or reviewing nomination regularly, ensuring proper nomination for your life insurance becomes crucial if you want the benefits passed into the right hands without any hassles or qualms.

But even if your intentions are supported by your actions, there may be some conflicts that arise over the life insurance benefits after you are gone. What happens in such cases is usually dictated by Section 39 of the Insurance Act, 1938. Whether you are a policyholder, a life assured, or a nominee, knowing about Section 39 may help you gather a clear understanding of life insurance.

What is Section 39 of the Insurance Act?

Section 39 of the Insurance Act, 1938 governs nomination in life insurance policies. A nomination lets you name a person to receive your policy proceeds after your death. The law recognises that choice. It ensures insurers pay the right person without needless delays or disputes

Why Was it Introduced?

There are multiple issues surrounding nomination in life insurance that may arise during a claim process. A lack of nominee details being up-to-date, nominee passing away before the claim is processed, challenges from legal heirs, and more. Section 39 of the Insurance Act, 1938 provides a clear framework to deal with these issues. 

By legally recording your nominee, the insurer knows precisely who to pay. The section adds guidelines to deal with any discrepancies or issues that may arise. This can help reduce conflict, speeds up settlements and eases the burden on grieving families.

Who Can Be Nominated?

Section 39 of the Insurance Act, 1938, allows any policyholder to nominate one or more persons to receive the policy proceeds on their death. Key details are:

Eligible Persons


You may nominate your spouse, child (including an adopted child), parent or indeed any other individual by name.

Timing of Nomination


A nomination may be made when the policy is first taken out or at any time before it becomes payable.

Form and Registration


Unless noted on the policy itself, nominations must be made by endorsement on the policy document, communicated to and registered by the insurer.

Minor Nominees


If a nominee is under 18, you must appoint—in the prescribed manner—a guardian to receive the proceeds on the minor’s behalf until they reach majority.

Cancellation or Change


You may cancel or vary a nomination at any time before payment by further endorsement or by will. The insurer is only bound by changes of which they have received written notice.

Effect of Transfer


Any lawful transfer or assignment of the policy automatically cancels a nomination, except where the policy has been assigned to the insurer as loan security—here, the original nomination continues, subject to the insurer’s interest.

Death and Survival


• If all nominees die before you, the proceeds revert to your estate or heirs.

• If one or more nominees survive you, the share of a deceased nominee passes to the surviving nominee(s).

Statutory Exception


Section 39 does not apply to policies governed by section 6 of the Married Women’s Property Act, 1874, except where a nomination in favour of a wife or children expressly overrides that Act.

Beneficial Nominee

In 2015, the concept of a beneficial nominee was introduced. A beneficial nominee not only receives the funds but also becomes the legal owner. Previously, nominees acted merely as trustees, holding proceeds on behalf of legal heirs. Now, if you clearly declare your nominee as “beneficial,” they alone inherit the payout—no further division among heirs.

Implications of Section 39 on Claim Settlement

Section 39 can help make claim settlement process clearer and smoother.

Clear Entitlement


Insurers refer to the nomination register. They pay the proceeds to the nominated person without waiting for a court order.

Reduced Disputes


With a valid nomination, legal heirs cannot contest the insurer’s payment decision.

Guidance in the Absence of Nomination


Section 39 also outlines the process when no nominee is registered. In such cases, insurers may seek legal direction or pay the claim into the policyholder’s estate. This ensures that even in the absence of nomination, there is a defined legal path, though it may delay settlement.

Why Policyholders Should Review and Update Their Nomination Regularly

Life evolves. Marriages, births, divorces and deaths all affect your choice of nominee. With all the changes that happens over time, it is necessary to update your nomination as and when necessary.

Review Annually


At each policy anniversary, confirm your nomination still reflects your wishes.

Update After Major Events


If you marry, have a child, or experience a loss in the family, revisit your nomination.

Use Formal Channels


Submit any change in writing to your insurer. Keep acknowledgment records.

Regular updates ensure your policy proceeds reach the right hands without legal hurdles.

 

Section 39 of the Insurance Act, 1938, protects your nomination in life insurance. It gives nominees a clear, legal claim to policy proceeds and, with the beneficial nominee option, full ownership rights. By understanding this section and keeping your nomination current, you can ease the claim process for those you care about most.

Check your policy schedule. Verify your nomination and consider designating a beneficial nominee. This simple step can save your loved ones from unnecessary stress during an already difficult time.