Assignment to a bank, nomination, and a claim paid after the time limit
Vijay, 45, a flour-mill owner, took a ₹60 lakh pure term policy from DEF Life in August 2019 and nominated his wife, Kavita. In 2022 he took a ₹35 lakh home loan from a bank and executed a conditional assignment of the policy in the bank's favour, which the insurer registered. He died in a road accident in September 2025, when ₹22 lakh of the loan was outstanding. The insurer received intimation in October 2025 and the bank's outstanding-dues certificate in January 2026; it settled in April 2026, paying ₹22 lakh to the bank and the balance to Kavita, with no interest for the delay. Vijay's mother has now written to the insurer claiming a share, saying she had paid some of the premiums. Kavita calls the POSP: she wants to know why she did not receive ₹60 lakh, why no interest was paid, and whether the POSP can 'fight' the insurer for her.
1. Why did Kavita receive only part of the ₹60 lakh, and what is the position of Vijay's mother?
Read the worked answer
Two different instruments are at work, and they are often confused.
Assignment (Section 38, Insurance Act, 1938) transfers the rights of the policyholder to the assignee. A conditional or mortgage assignment in favour of a lender secures the debt, and the lender's entitlement is limited to the amount outstanding under the loan as certified by it. The bank certified ₹22 lakh, so ₹22 lakh to the bank is correct.
Nomination (Section 39) only names the person who may receive the money. The nominee collects it for the legal heirs; nomination alone does not make the nominee the owner of the proceeds. So the ₹38 lakh balance was payable to Kavita as nominee, subject to any heirship claim.
The mother's position. Paying some premiums does not create ownership of the policy or the proceeds. If she asserts an heir's share, she must establish it through the insurer's prescribed succession documentation or a court; the insurer cannot split the money on an oral claim. The POSP should explain this neutrally and should not encourage either woman to litigate over money the documents already allocate.
2. Was the settlement timeline compliant, and is Kavita entitled to interest for the delay?
Read the worked answer
The timeline was not compliant.
Under the policyholder-protection regulations, a death claim must be settled within 15 days of receipt of the last necessary document where no field investigation is required, and within 45 days where investigation is needed. The clock here starts from the bank's outstanding-dues certificate received in January 2026, because until that certificate arrived the insurer could not know how the ₹60 lakh had to be split between the bank and the nominee. Payment in April 2026 is roughly three months after that document - well past 45 days.
For the period of delay beyond the permitted 45 days the insurer must pay interest on the claim amount at the rate prescribed in the regulations - under the 2017 regulations, 2% above the bank rate - and it should do so without the family having to sue.
The practical step is a written letter to the insurer's Grievance Redressal Officer asking for a claim-timeline statement (date each document was received) and the interest calculation. If the reply is unsatisfactory, the route is Bima Bharosa, then the Insurance Ombudsman within one year of rejection.
3. What can the POSP properly do for Kavita - and what must he not do?
Read the worked answer
His role is facilitation, not representation.
What he can do: help her assemble the death certificate, post-mortem and police reports, the bank's certificate, her KYC and the policy document; track the file with the claims desk; and draft the grievance letter with her, in her name, for her signature. He can explain the assignment-versus-nomination split so she understands why ₹22 lakh went to the bank.
What he must not do: charge her a fee - his remuneration comes from the insurer; promise a claim outcome; threaten the insurer on her behalf; or sign documents as her representative without written authority accepted by the insurer. He should also stay out of the dispute with Vijay's mother, pointing both women to the insurer's heirship process rather than taking sides.
Escalation path: Grievance Redressal Officer, then Bima Bharosa, then the Insurance Ombudsman within one year. Honest expectations now - the bank's ₹22 lakh, the balance to Kavita subject to any heirship claim, plus interest for the delay - protect the family and protect him.