Can We Change Nominees In Term Insurance Policy?

Who Is A Nominee?

A nominee is a person you can select to receive the death benefit of your term insurance policy. It can be any person of your choice, or someone who is financially dependent on you, like family members. The individual can be anyone, such as your partner, child, or parent. 

You must provide the details of your nominee when purchasing the policy so that the company knows whom to contact in the event of your demise. If you cannot decide the nominee while buying the policy, you can always choose someone later and inform your insurer of your decision. It must be noted that you can also opt for more than one nominee to distribute the sum assured or life cover.

What are the Benefits of Having A Nominee in Term Insurance Policy?

Some advantages of nominating a person for a term insurance policy are:

Easy Claim Settlement: It simplifies the claim settlement process as the insurer does not need to figure out who your legal heir is if you already have a nominee. This also ensures that the beneficiary can smoothly access the funds that you intended to pass.

Legal Complications: If you don’t have a nominee, various family members can file a claim for the plan. Having a nominee in the term plan is good to avoid these legal complications. 

Family Goals: You can assign funds to complete your family's goals. For example, if you die within the policy period and are the only breadwinner, the death benefit can help your family continue their lifestyle or help your children continue higher education.

How to Change Nominee in Term Insurance?

Term insurance is a long-term protection plan. There are several reasons you may find yourself in a position where you wish to switch your nominee. For example, the unexpected death of the nominee before you, change in your relationship or loss of trust. In such a situation, a thorough knowledge of the procedure required to change the nominee is essential.

Listed below is the stepwise process to ensure a successful switch of your nominees:

• Change in nomination form. This can be done online or by visiting your insurer's branch office. This form is easily available and requires only a few simple details regarding your policy and the person you want as your nominee.

• Fill the form: You must then submit this duly filled form to your insurer and inform the company about the reason for changing the nominee. 

• Acknowledgement: The insurer must then provide a written acknowledgement confirming that it agrees with your decision.

It is always advised to keep your immediate family members updated with all information regarding your purchased policies and any changes that you make to them. If you decide to change the nominee of your term insurance policy, you can also update the same information in your will to avoid confusion. 

Note: Will creation of a person and term insurance are 2 separate policies/documents.

Many assume that changing a nominee in a term insurance policy is complicated. However, you should not hesitate to do so if needed.

Note: Know what is term insurance first and then buy a term plan for your loved ones.

Errors Commonly Committed While Choosing A Nominee

Lapses in decision-making can cost policyholders and their families in the long run. Here is a list of a few mistakes that are commonly observed during the nomination process:

• Assigning a single nominee to the policy: If your nominee unexpectedly passes away and the policy completes its term only afterwards, the insurer will have to determine who the legal heir is to all your funds. This will delay the claim settlement process and cause unnecessary stress to your insurer and your family. Distributing your prospective death fund among multiple nominees can easily avoid this situation.

• Appointing a minor nominee without a custodian: If you choose a minor to be your nominee, it becomes compulsory to appoint a custodian to the nominee. You are then required to update your insurer with the verified details of the custodian. Without a custodian for a minor, the claim settlement process will not be initiated, and your nominee will not be allowed the death benefit. You should also bear in mind that if the insurance company does not have the verified details of the custodian, the entire death fund will still be withheld from the minor nominee.

• Mentioning a legal heir who is not your nominee: Assuming that you want your nominee in a term insurance policy to be a person who is not your legal heir in the policy documents. Then your legal heir will have the right to claim the death funds over the nominee. If you wish to have a nominee different from your legal heir, you need to draw up a will in which you give absolute authority to your nominee in the term policy, over and above your legal heir.

• Not informing your nominee of the policy details: It is wise to keep your nominee acquainted with the know-how of the insurance policy you have purchased. They should also have a copy of the policy documents containing all the details. This will ensure that the claim settlement process is smooth and unhindered.

Note: It is suggested that the term plan premium be calculated using the term insurance calculator online tool by Policybazaar before buying the plan.

In Conclusion

The process of being able to provide for your family and loved ones even after your passing is a privilege. You can be assured that they will be well looked after and have something to fall back on. You must carefully purchase a term insurance policy and appoint a nominee to avoid misappropriation of your funds in your absence. However, all insurers advise extreme caution while selecting a nominee.

Note: Check all the best term insurance plan in India.

Note: You should also check the benefits of term life insurance if you are planning to purchase the term insurance plan.

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