Can a Life Insurance Policy be Transferred?
Portability or the option to transfer your life insurance policy from one provider to another is possible and it gives the policyholders an option to switch insurers to explore better offers. This way policyholders can have the flexibility to choose a plan that suits their interests best. Let’s find out more about the option of transferring a life insurance policy in India in this post.
Transferring a life insurance policy to someone else
Although many policyholders are not aware of this, transferring your life insurance policy to someone else is very much possible. As you are transferring your life insurance policy, you also transfer title, rights, and interest.
One of the most common reasons for transferring a life insurance policy to some other person is to provide security for a loan. In one such case, the borrower assign allocates the policy to the lender. And in this case, the lender is called the assignee. As the life insurance policy is transferred, the assignee receives all the benefits from the policy.
How to transfer a life insurance policy in India – Step by Step Guide?
To know the actual steps of transferring your life insurance policy to someone else, you have to contact your life insurance provider. Every life insurance company has its own set of procedures. Nevertheless, here is a general step-by-step guide mentioned below that will give you an idea about it.
- The first thing you need to do to transfer the policy is to download the necessary form from the website of company. You can even get it from the branch office of the insurance company.
- At this point, you have to duly fill the form with relevant details. The details may include the name, address, signature of the assignee, your relationship with the assignee, and the reason for which you are transferring the policy.
- As the form is completely filled, you have to submit it to the insurance company either online or by visiting their branch office.
- You need to ensure to submit all the other documents that the insurance company may need, apart from the form that you will fill out.
- Once the application for transfer is submitted, the insurance company may take some days to process the request. Once it is approved, the transfer process will be completed.
Also Read: Documents Required to Buy a Life Insurance Policy in India
What are the documents you need to transfer your insurance policy?
Although it may vary from one insurance company to the other, some of the common documents that are mostly asked by all insurance providers are mentioned herein below:
- KYC documents
- Original policy documents
- KYC documents of the assignee
Why do you need to transfer your insurance policy?
The reason for transferring insurance policies can be many. Here are some of them mentioned below:
Advantageous for Income Tax
The income tax payout due to the death of the policyholder is exempted from any kind of income tax to be levied on the amount. In case, the policy is surrendered by the policyholder, the cash payout of the policy will incur tax that is payable. In such cases, transferring the policy may allow the policyholder to receive the cash payout without burdening themselves with paying additional income tax.
Loan collateral
An income tax policy can be used by the policyholder as collateral for securing a loan from a bank. While the bank may need traditional collateral such as real estate or investments, in lack of these an income tax policy can be used as collateral for a loan. As a term of the bank offering the loan, the income tax policy may be transferred to the name of the bank. In case the policyholder dies before the loan is completely paid off, the insurance payout for the death would be first paid to the bank which can then use it to close the loan by paying off the outstanding loan amount. After that, the remaining amount would be transferred to the nominee of the life insurance policy.
Need of money
Another reason to transfer a life insurance policy could be that you are in urgent and dire need of money. By transferring the policy to someone else, you give away the rights to make changes to the policy that would usually be reserved for the policy owner.
An insurance policy is a real asset that can help you a lot in securing your and your family’s financial future. You can head to the website of your insurance provider to find more details about how can you make the most of your existing policy by transferring it to someone else.
Author Bio
Paybima Team
Paybima is an Indian insurance aggregator on a mission to make insurance simple for people. Paybima is the Digital arm of the already established and trusted Mahindra Insurance Brokers Ltd., a reputed name in the insurance broking industry with 17 years of experience. Paybima promises you the easy-to-access online platform to buy insurance policies, and also extend their unrelented assistance with all your policy related queries and services.
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