Nomination is the way to ensure that the intended parties get the benefits of your life insurance plan after your demise. A term insurance plan is generally beneficial for the family to cope with the financial shock after the sole earning member of the family passes away.
However, term life insurance plans also offer whole life cover that lasts till 99 years of age. Life is uncertain and a lot can happen during the policy tenure. The policyholder may pass away or the nominee may pass away during the tenure.
We know that the nominees or beneficiaries can claim the life insurance policy in case the policyholder passes away. But what happens if the nominee passes away during the policy term?
If the nominee dies while the policyholder is alive during the policy tenure, the nomination becomes null and void. Policyholders can change the nomination. However, if the nominee dies after the policyholder’s death but before receiving the claim amount, the amount would then be paid to the legal heirs. To avoid disputes and reduce any financial challenges for the family, it is best to treat nomination seriously and update it as and when required. The money should go to the people who need it most when you are not around. Ergo, mentioning the beneficial nominee’s name is quintessential.
Changing nominees is allowed in a term plan, but the latest beneficial nomination will supersede and all older nominations. The previous beneficiary nomination will stand null and void once you change the nomination.
Nominee details should be accurate and updated to avoid legal hassles for your family. Incorrect details will only add to the trauma of your family and make them run pillar to post for getting the benefits they are entitled for.
So, who can you nominate as a beneficiary? Let us find out.
A married man (divorcee or widower) can buy a life insurance policy under the Married Women’s Property Act 1874. Only the policyholder's legally wedded wife and children can claim the policy's benefits. It doesn’t allow any relatives, heirs, or creditors to make the claim.
For example, Mr. X is married to Ms. Y, and after getting married, they purchased a home, keeping in mind their future needs. To make the purchase, they opted for a home loan with a 10-year repayment period. To protect his home, he bought a term insurance plan, too. After eight years of repayment, Mr. X passed away. In this case, the creditors cannot make a claim on the death benefits of the term insurance policy bought by Mr X.
In case the policyholder has not nominated anyone for their policy, there is an established legal procedure that the insurer follows to avoid any legal disputes in the future. The policyholder’s spouse, son, father or mother, classified as Class I legal heirs, are (in that order) first entitled to receive the claim amount. If the policyholder has left a will, then the distribution will be as per the Indian Succession Act, 1925, after the court issues the succession certificate and the insurer indemnifies itself against any disputes.
The process of nominating beneficiaries is free and life insurers do not charge any fees for the same. A policyholder is allowed to make fresh nomination or update their nominees anytime before the maturity of their life insurance policy.
A nominee in a term insurance plan is the person designated by the policyholder to receive the death benefit in the event of the policyholder's passing. Selecting the right nominee is crucial, as they will be responsible for managing the insurance proceeds on behalf of the policyholder's dependents. Policyholders should choose someone they trust, who is financially responsible, and who has the family's best interests in mind.
If the nominated beneficiary predeceases the policyholder, the death benefit will typically be paid to the policyholder's legal heirs as per the applicable laws. To avoid complications, policyholders should consider naming contingent nominees who can step in if the primary nominee is unavailable. Keeping the nominee information up-to-date is also important, as failing to do so can lead to delays or disputes during the claims settlement process.
Canara HSBC Life Insurance offers online term insurance plans to secure your family financially in your absence.
In insurance, a nominee is a person designated by the policyholder or policy buyer to receive the death benefit, often known as the sum assured. Nominees such as spouses, children, or parents are appointed.
The nominee's involvement is based on the policyholder's inability to receive insurance benefits in the case of a death claim. As a result, you can easily alter the policy's nomination information if the nominee passes away before the policyholder. You can speak with the insurer and send in a fresh nomination form with the most recent information.
In term insurance, you can switch the nominee as often as you would like or as the insurance company specifies. Knowing how to change a nominee in a term insurance policy effectively might be helpful when necessary.
You may also suggest a friend or a distant relative if you can demonstrate insurable interest. You can select more than one nominee. The benefit is awarded to the second nominee in the event that the first does not survive the duration of the insurance. It is also possible to make arrangements for more than one candidate to share the death benefit.
Fill out the nomination change form. You may perform this online or by going to your insurer's branch office. This form is readily available and just needs a few basic data about your policy and the nominee you wish to designate.
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Absolutely, in a life insurance policy, minors can be designated as nominees or beneficiaries. But, you must be careful about a few things when designating minors as beneficiaries of your life insurance policies:
For the benefit amount, include guardian or custodial details.
Once the child reaches majority, alter or remove the guardian from nomination.
The guardian or custodian of the kid will receive the benefit amount from the life insurer if a claim is made while the nominee is still a minor. In order to utilise the funds for the benefit of the minor beneficiaries, the custodian must invest them safely.
The main reason for nominating someone in term insurance is to ensure that the intended beneficiaries of the policy receive the financial stability it provides after the policyholder passes away.
The death benefit payable under the policy will be paid to your authorised legal representatives or legal heirs if you haven't designated a nominee or if the nominee you previously chose is no longer living.
