What Happens if a Nominee Dies in Term Insurance?

Can You Change the Nominees in Term Insurance Plans Within the Policy Term?

Yes, changing the nominee is possible in term insurance plans within the policy term, but the current beneficial nomination will overtake and all the other older nominations will become invalid. 

All the details of the nominee should be updated and right to avoid financial problems for your family. The incorrect information will make your family run here and there to get the benefits that they are eligible for. 

So, who can be a nominee? Let’s understand: 

Who Can Be a Nominee?

Any individual in your family who are financially dependent on you will be affected financially in case of your unforeseen death. You are not allowed to nominate non-family members, distant relatives, strangers, or even friends because they may not be dependent on your financially.

Let’s understand this with the help of an example:

Rahul purchased a term plan at 30 years of age when he was not married. At the time of purchasing the plan, he nominated his 58-year-old mother to receive the life cover amount in case of Rahul’s death. But he forgot to change the details of a nominee even after his marriage or after the passing away of his mother.

Always ensure that the details regarding the nominee should be correct to avoid legal problems for your family.

Types of Nominees in Term Insurance Plans

The types of nominees in term insurance are as follows:

• Beneficial Nominee: The beneficial nominee is the family member whom you want to assign the benefit payout amount. In case of the death of the policyholder, the beneficial nominee will receive the benefit payout instead of the legal heirs. This rule helps avoid any disputes on the claim benefit and make sure that the selected nominee receives the benefit amount.

• Minor Nominee: In some cases, the policyholder might choose kids below 18 years of age as their nominees. But since minors cannot directly receive the insurance payout, you need to assign a trusted guardian as well to help the child manage the benefit payout in your absence. 

• Non-Family as Nominee: Some people choose to nominate someone other than their family members, like close friends, business associates, or a charity organisation. This is legally allowed but you are required to present a valid reason for this choice. Insurers might need some clarification on why you are selecting a non-family member as the nominee. 

• Selecting Multiple Nominees: You can choose to nominate several nominees to make sure that there is no financial dispute on the claim amount and the benefits are paid in exact percentage you wanted to distribute to your loved ones. For example, you can assign 50% of the death benefit to your wife and the remaining 25% for each of your two kids. 

Can I Appoint Minors as Nominees?

Yes, children can also be appointed as beneficial nominees on term insurance plans. Because in various cases, the main aim of buying a term plan is to protect your children’s future and support their dreams to become financially dependent. However, children who are below 18 years are called Minors and legally are not allowed to manage money. A guardian referred to as an appointee or custodian is important till the time children reach 18 years.

Features of Term Plan Beneficial for Nominees

• Option of Claim Payout

• Increasing life cover

• Non-working Spouse Cover

• Affordable premium rates

• Easy to Buy

• Waiver of premium benefit

Note: It is suggested to calculate the term plan premium on the term insurance calculator online tool by Policybazaar before buying the plan.

What Does Happen If You Don’t Declare Nominees in the Term Plan?

If as a policyholder, you have not nominated anyone in your term plan, there is a well-established legal process that you need to follow to avoid any legal problems in the future. The spouse, father, son, or mother of the policyholder are classified as class I legal heirs. They are eligible to receive the death claim amount.

If you have not declared any nominee and left a will, in such a case the distribution will be done according to the Indian Succession Act, 1925.

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

Key Takeaways in Term Insurance if Nominee Dies

• The nominee plays an important role in making sure that your family and loved ones receive the required financial protection in your absence.

• You can choose the type of nominee you want to appoint for your term life insurance, from beneficial nominees, minor nominees, non-family members, or multiple nominees. 

• In term insurance if nominee dies before the policyholder, you should update the new nominee details quickly with the required details and documents to avoid future claim complications. 

• You can change the nominees at any time, making sure that the term plan benefits are in line with your family’s financial protection needs.

• As per the term insurance nominee rules, on the death of the primary nominee, the secondary nominee will receive the death benefit, who will make sure to provide financial security in your absence.

Wrapping It Up!

To prevent any legal disputes in the future between the legal heirs and nominees, it is always recommended to nominate a family member. The life assured has the option to change the nominee as many times as desired. The older nominees are superseded by the newer ones. So, if you are changing your nominee, ensure that your policy with the insurance company is updated to avoid future disputes.

Note: Check out the best term insurance plan in India and choose one that suits your requirements.

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

FAQs