In a path-breaking judgment, the Karnataka High Court has made it clear that a nominee in an insurance policy will not be eligible for the entire insurance money. Legal heirs of the deceased can also claim the policy proceeds, it said. The ruling has far-reaching implications for policyholders and their families, as it protects the rights of legal heirs.
The Case That Sparked the Ruling
The case was that of a man who had made his mother the nominee in his insurance policy prior to his marriage. Even after his marriage and having a child, he never changed the nominee details. Unfortunately, after his death in 2019, a fight broke out between his mother and wife regarding the insurance claim.
The Karnataka High Court, affirming the lower court ruling, decided that the insurance proceeds would be shared equally by the deceased’s mother, wife, and child. This equates to every party getting a third of the proceeds of the policy. The court noted that the nominee doesn’t have inherent rights to the insurance proceeds by default.
What Did the Court Say?
The court cited Section 39 of the Insurance Act, 1938, explaining that it does not supersede statutes such as the Hindu Succession Act, 1956. The decision in Neelavva alias Neelamma vs Chandravva alias Chandrakala alias Hema determined that the nominee is only a trustee of the insurance proceeds to ensure it goes to the legal heirs of the deceased.
