Normally, the claim money related to insurance linked to loan is received by bank directly and they adjust it to the loan account.You are informing Nominee received the claim amount.
In any case, it is the bounden duty of the Legal Heirs/Nominee to repay the loan immediately. Please contact the bank branch concerned and act as per their guidance.
If entire loan is cleared by legal heir/s, title deeds shall be released to the lega heirs after they are identified as such as per bank procedure.
In case the legal heit/s is/are eligible for a loan as per bank norms, bank may permit the loan transferred to such legal heir/s. It's the discretion of the bank.
If you do not take any action, bank may initiate recovery steps by filing a mortgage suit, as the house purchased with the loan surely must be under their mortgage and title deeds are with bank.