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What is Nominee and Who should be Your Nominee

One of the best ways to secure the financial future of your loved ones is by getting a term insurance plan. A term plan is the most affordable life insurance product that offers a lump sum benefit to your dependents in the event of your unfortunate death.

You decide the amount received by your beneficiaries at the time of purchasing the policy. Therefore, it is mandatory to enlist nominee(s) in your term insurance application. In this section, we will be discussing everything you need to know about term insurance nominee(s).

What is a nominee?

A nominee is an individual appointed by the insured to receive the policy benefits in the event of a death claim. In other words, if anything were to happen to the term insurance policyholder, the insurer will proceed to pay the death benefit to the nominee. Typically, you can appoint one or more people as nominees in your term insurance plan.

Who can be the nominee?

Ideally, it is observed that most people enlist their partner, children, and/or parents as the nominee. 

Previously, there was no clarity on the status of nominees. The legal heirs were usually eligible to make a claim on life insurance plans. However, to solve this issue and ensure that the death benefit is given to the right recipient, the concept of beneficial nominee came into existence in 2015. 

Purpose of the nominee

When buying a life insurance product, such as a term plan, it is necessary to enlist and provide details on the nominee as well. The individual you appoint as the nominee can be a family member or your close friend. 

The purpose of having a nominee will ensure that the benefits of the term policy are directed towards the individual you trust the most to take care of your family and finances after your death.

Different types of nominees

There are three types of nominees that you can enlist under your term insurance plan -

  1. Beneficial nominees

  2. Minor nominees

  3. Non-family nominees

Beneficial Nominees

Beneficial nominees are the individuals who are your immediate family members, such as your spouse, children or parents. So, in case of your untimely death during the policy tenure, the death benefits will be paid to the beneficial nominees and not to any other legal heirs. Make sure that you enlist all your immediate family members under the beneficial nominees to avoid future family disputes after your death.

Minor Nominees

It is quite usual for people to appoint their young children as beneficiaries of their term insurance plan.  After all, the policy is purchased to secure their financial future in your absence. However, children below the age of 18 years old are not considered eligible to manage the claim settlement received on the policy. Hence, you (the policyholder) needs to appoint a custodian as well.

Non-Family Nominees

Although the chances of appointing a stranger as the nominee of the life insurance policy are low, some people still do. These include individuals who are friends and distant relatives. In case you enlist a close friend as the nominee, you need to fulfil the essential documentation for their successful inclusion under the term policy. Here, you need to convey your agenda correctly when choosing a distant relative or friend as your nominee. Failing to establish this agenda will lead to rejection of your term insurance application.

Benefits of nomination facility in term insurance

The benefits of enlisting nominees in your term insurance plan are as follows -

  • Appointing the nominee serves the purpose of the term insurance plan. In case of your death during the policy tenure, the beneficiaries will receive the death benefit.

  • You (the policyholder) have the liberty to nominate any individual under the nominee list. It can be your immediate family members, friends, or distant relatives.

  • You also get the liberty to nominate multiple people. After your death, the benefit amount will be shared among the enlisted individuals.

  • You can cancel or change the nominees any number of times.

Nominee Particulars

When enlisting the nominees under your term insurance plan, you have to submit the following details to the insurer -

  • Name of the nominee

  • Age of the nominee

  • Residential address of the nominee

  • Your relationship with the nominee

Along with the details, you also need to submit supporting documents as proof to the insurer.

Multiple Nomination 

You can appoint multiple people as the beneficiaries of your term insurance plan. However, the death benefits received will be shared equally among the listed people. On the other hand, you can decide to dedicate a certain percentage of the benefit amount to each individual as per your will. 

Change in Nomination

Even after buying the term insurance plan, you can make changes to the nominee list. All you have to do is obtain the nomination form from your insurer and fill it out. Then submit the necessary documents, and the said details will be updated under your policy in no time. 

Moreover, you will receive a written acknowledgement from the insurer regarding the change in nomination to avoid future discrepancies. There is no limit set on how many times you can change the nominee list. 

What if there is no nomination found?

In case you do not have any nominee enlisted under your term insurance plan, the following rules will be applied when executing your term plan after your death. The insurer will pay the death benefits to the Class I legal heir. The following people qualify as Class I legal heir:

  • Your spouse

  • Your son

  • Your father

  • Your mother

In case you have a legal will in place, the following process will be followed -

  • The insurance plan will be processed as per the Indian Succession Act of 1925.

  • The insurance amount will be distributed as per the will agreement.

  • The court will issue a succession certificate. As per the court’s decision, the insurance payout will be distributed among the surviving dependents.

Nomination Oversight

When enlisting the nominee, make sure you avoid making the following mistakes as it can cause trouble when claiming in future.

  • Ensure that the nominees you enlist are informed about the nomination before sharing their details with your insurer. In case the nominee is unaware of his/her right to make a claim on your term insurance plan, nobody will benefit from the said investment.

  • Review the details of the nominee properly when submitting the nomination form. If the nominee dies before you (the policyholder), make changes to your plan immediately.

  • When appointing minors as your nominee, also enlist a custodian. Otherwise, the minor will not receive any financial benefit upon your death.

  • Make sure that you appoint at least one person as your nominee when buying term insurance.

Conclusion

Having the right person listed as the nominee will give you much-needed peace of mind when planning your family’s financial future. 

Besides this, you need to buy your term insurance plan from a reliable insurance provider. You can browse the term insurance plans available on Finserv MARKETS and benefit from features such as extensive coverage, affordable plans, a high sum assured amount, quick claim settlements, and more.

Additionally, you can read the term insurance benefits in detail by visiting Finserv MARKETS online.

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