Home » Who Is Your Ideal Term Insurance Nominee- Here’s What You Should Know

Who Is Your Ideal Term Insurance Nominee- Here’s What You Should Know

by Sonal Shukla

The popularity of term insurance plans in India has grown in recent years, and rightly so! People now realize how the financial security of their loved ones matters more than anything else, especially with the unpredictability of life staring them in the face. The good part is that more people now choose term insurance for financially securing their nominees and dependents. Yet, there continue to be questions posed by policyholders on an ideal nominee and some other essential processes related to the same. Here is a closer look at these aspects in this article.

Who Is Your Ideal Nominee- Looking At Some Options

The main reason behind buying term insurance plans in India is to ensure a layer of financial security for the family in the event of a policyholder’s demise. A nomination means choosing one or multiple nominees for your policy. The nominee will receive the sum assured or death benefits upon the policyholder’s demise. It could be your spouse, children, parents, distant relatives, and even friends in some cases.

Here are a few options that you should always consider:

Beneficial Nominee- There was a typical situation earlier where policyholders used to select nominees for their insurance policies. Still, legal heirs would challenge the same and file claims for death benefits, leading to disputes. The IRDAI has fixed this issue by clarifying the concept of a Beneficial Nominee. Whenever the policyholder appoints any immediate or close family member like children, spouse, or parents as the nominee, this individual will automatically become the Beneficial nominee. Other legal heirs cannot make claims on the death benefits.
Non-Family Members Policyholders can choose non-family members as their nominees. They may select distant relatives or friends as policy nominees. Yet, experts do not recommend this since the beneficial nominee concept will not have legal applicability in this scenario, leading to legal disputes between legal heirs and the actual nominees.
Choosing Multiple Nominees Policyholders may choose multiple nominees without any hassles while mentioning the percentage of the death benefit to be paid to each individual. If these instructions are not given, the insurance company will distribute the proceeds among the nominees equally. For any nominee below 18, the policyholder will have to furnish an appointee or custodian. This person will receive the proceeds on behalf of the nominee in question.

You can seamlessly change your nominee multiple times throughout the policy period and anytime you wish. You will have to fill up the nominee form and submit it to make these changes. It can be done both offline and online. You will also receive an acknowledgement letter from the insurance company confirming the changes. Keep this written acknowledgement carefully since it will help bypass multiple hassles in the future. Nomination is possible at any point, including when you purchase the policy from the insurer or even later in the policy period. You will have to provide a few basic nominee details in your form.

In case of an unfortunate scenario where the nominee passes away before the expiry of the policy period, the insurance company will cancel the nomination in question. In such a situation, the policyholder has to furnish a new nomination for assigning an individual to receive all the benefits of the policy. Nominees only have eligibility to get the funds if the policyholder dies before the conclusion of the policy period. If the policyholder outlives the policy tenure, then there is no payout by the insurance company.

Term insurance plans do not have any maturity benefits in the conventional structure. Therefore, choose your nominee carefully and compare the term plan before signing on the dotted line. Be aware of the policy features, key inclusions and exclusions, and also applicable term insurance tax benefits.

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