Decoding Insurance

Everything You Need To Know About Nominee For Your Life Insurance Plan

Importance Of Nominee In Life Insurance

The pandemic has created challenges in nearly every aspect of our daily lives. We all are aware, one of the significant impacts of covid-19 has been massive job losses, major pay cuts across all sectors, and of course the uncertainty of life in these trying times. To cope with this uncertainty it is important to keep your loved ones secure. For instance, if you are the sole bread earner of the family, it can be difficult for loved one’s to be able to sustain and take care of their expenses in the event of your demise. This is where life insurance can be a big boon as it will work as a safety net and help them pay their household expenses, children’s education, rent, etc. And most importantly live the lifestyle they are used to without compromising on anything. 

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How does a life insurance policy work

Under a life insurance plan, you are required to pay a specific amount called premiums to the insurance company. This premium can be paid on a monthly or yearly basis as preferred by the policyholder for a specified number of years. In exchange, the insurer pays a death benefit to your appointed nominee. 

In your life insurance policy, the nominee plays a vital role as that registered person will be getting all the financial benefits. Thus, it is important to make sure that the nominee is someone who is trustworthy so that the financial benefit is used responsibly in your absence.

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Adding nominee in life insurance 

While buying a life insurance policy, the insured person chooses his/her nominee or nominees. In case of unfortunate death of the insured person, the nominee receives the death benefits. The nominee can be anyone you believe to be your first relative - your parents, spouse, children, siblings, etc. even people who are not directly related to you. But, insurance companies generally avoid accepting unrelated parties.

Multiple nominations

Further, the death benefit can also be shared if the insured person allocates more than one nominee. The percentage is chosen by the policyholder that each nominee would receive. For instance, if there is a family of four and the insured person appoints the other three members of the family as nominees then all the members can avail themselves of the financial benefits. If in case there is no specified percentage divided by the policyholder the financial benefit is divided equally among the selected nominees.

Minor nominee

In another case, if you plan to choose a nominee who is a minor, the following procedure has to be followed. As minors (below the age of 18) are not considered eligible to handle claim amounts thus, the policyholder needs to assign an appointee. The insured person has to provide verification details of the appointee to the insurance company and if the policyholder fails to provide the details about the appointee, the minor will not get the financial benefit. Also, the minor only gets the benefit when he/she turns 18. Before that, the benefit stays with the appointee.  

Cancellation or change of nominee

The policyholder can change or remove the nominee as and when he/she wants to during the policy term. Also, the insurance company provides a provision where the insured person has the choice to change the nominee as many times as he/she wishes. Further, while changing the nominee, it is the responsibility of the policyholder to update all the relevant details to the insurance company to prevent any inconsistencies during the claim. 

No nomination

Lastly, if the policyholder and the nominees die during the policy term and no further nominee is appointed, the financial benefit will straight away go to the class 1 legal heir. That consists of the insured person’s spouse, children or parents. To claim the financial benefit, the legal heir needs to submit the succession certificate which states the right of the legal heir over the assets of the deceased policyholder.

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