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Open title in Insurance policy

What is Open title and its effect on claim payment time?

Sometimes when a legal heir of a diseased life assured approaches the life insurer for payment of death claim in a particular policy, they are asked to bring the succession certificate to make the payment due to open title in policy.

What is Open title in life Insurance policy?

Open title is absence of valid nomination or assignment in life insurance policy. Open title in a life insurance policy may arrise due:

  • Not affecting nomination in a policy: At the time of taking the policy a policy holder may not have chosen the nominee and in this case if life assured died in between the policy term, life insurance company is unable to make the claim until succession certificate is received from claimant.
  • Not adding a nominee in child policy when he/she become adult: Policy taken on a name of minor do not have a nomination. But when he/she become adult they must register the nomination in policy.
  • Reassignment of policy: When a policy holder assign (Absolute assignment) a policy to someone or institution (Bank/other financial institution other than the insurer) then nomination under policy cancels automatically, and when policy holder repays the loan then person/institution reassign the policy to life assured. At this time policy do not have nominee and  life assured/policy holder have to register a nominee again in policy.
  • Death of Nominee before life assured: If a policy have single nominee and nominee dies before the life assured, then life assured/policy holder have to register a new nominee. If he/she fails to do so, then in event of death of life assured policy claims leads to open title.

insurance-nomination and open title

How open title delays claim payment?

Open title majority of time delays the payment of death claim to legal heirs. Due to absence of valid nomination and assignment, insurer is unable to make claim payment. And merely by  making claim in policy does not make someone actual beneficiary in the policy. To make payment to actual legal heir of life assured, a insurer require a valid document of succession or will made by the life assured mentioning policy details. In absence of any will, succession certificate is issued by court mentioning legal heir of life assured, issuance of succession certificate is a time taking process. So until a succession certificate is issued and submitted to insurer, insurer do not make payment in policy having open title thus delays the payment. In case of absence of Class I legal heir (As per The Hindu Succession Act, 1956) or dispute among the legal heir may further delays the payment of death claim.

Things to remember related to nomination:

As I have discussed above how a policy may result into open title and its effects on claim payment, a policy holder must remember following things during policy term or while taking policy:

  1. Always make a valid nominee while taking a life insurance policy, try to keep a Class I legal heir (As per The Hindu Succession Act, 1956) as your nominee to avoid any problem later on.
  2. If a assigned policy is reassigned to you, then register a nominee again.
  3. As I have mentioned that policy taken on name of minor do not have nominee, but policy holder/life assured must register a valid nominee when the minor become adult.
  4. If nominee registered in a policy dies before the life assured then life assured/policy holder must register a new nominee in policy.
  5. Avoid making nomination of a distant relative.

Keeping these things in mind will help your rightful nominee to get the claim payment on time. To know more about Nomination please Click Here

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