Question: I took a home loan 5 years ago and the bank made me assign my term insurance policy to them. I've now repaid the loan fully. Is my policy still assigned to the bank? Does my wife get the money if something happens to me, or will the bank take it?
Answer: Insurance Act Section 38: Assignment transfers policy rights to the assignee (bank). Assignee has priority over nominee. After full loan repayment, assignment should be released but this is NOT automatic.

Supporting evidence:
title: indiacode.nic.in/2304
quote: recognise the transferee or assignee named in the notice as the absolute transferee or assignee entitled to benefit under the policy transfer or assignment of a policy, whether wholly or in part, in consideration of a loan advanced by the transferee or assignee to the policyholder, shall not cancel the nomination but shall affect the rights of the nominee or its reassignment on repayment of the loan shall not cancel a nomination
context: or assignee, on payment of such fee as may be specified by the regulations, grant a written acknowledgement of the receipt of such notice; and any such acknowledgement shall be conclusive evidence against the insurer that 1 [it] has duly received the notice to which such acknowledgement relates.

ASSGNMENT OR TRANFER OF POLICIES AND NOMINATIONS

( 8 ) Subject to the terms and conditions of the transfer or assignment, the insurer shall, from the date of the receipt of the notice referred to in sub-section ( 5 ), recognise the transferee or assignee named in the notice as the absolute transferee or assignee entitled to benefit under the policy, and such person shall be subject to all liabilities and equities to which the transferor or assignor was subject at the date of the transfer or assignment and may institute any proceedings in relation to the policy, obtain a loan under the policy or surrender the policy without obtaining the consent of the transferor or assignor or making 1 [it] a party to such proceedings.
1. Subs. by Act 40 of 2025, s. 2, for 'he' (w.e.f. 5 -2-2026).
Explanation. -Except where the endorsement referred to in sub-section ( 1 ) expressly indicates that the assignment or transfer is conditional in terms of sub-section ( 10 ) hereunder, every assignment or transfer shall be deemed to be an absolute assignment or transfer and the assignee or transferee, as the case may be, shall be deemed to be the absolute assignee or transferee respectively.
( 9 ) Any rights and remedies of an assignee or transferee of a policy of life insurance under an assignment or transfer effected prior to the commencement of the Insurance Laws (Amendment) Act, 2015 (5 of 2015) shall not be affected by the provisions of this section.
( 10 ) Notwithstanding any law or custom having the force of law to the contrary, an assignment in favour of a person made upon the condition that -
( a ) the proceeds under the policy shall become payable to the policyholder or the nominee or nominees in the event of either the assignee or transferee predeceasing the insured; or
( b ) the insured surviving the term of the policy, shall be valid:
Provided that a conditional assignee shall not be entitled to obtain a loan on the policy or surrender a policy.

ASSGNMENT OR TRANFER OF POLICIES AND NOMINATIONS

( 11 ) In the case of the partial assignment or transfer of a policy of insurance under sub-section ( 1 ), the liability of the insurer shall be limited to the amount secured by par