Nomination is an important part of financial planning. It is the best way to make sure that the benefits of your insurance or investment plans will be received by the appointed individual after your death. When we talk about term insurance, a nominee is an individual who receives the benefits of your term insurance plan in case of your unforeseen death during the tenure of the policy. However, what if the nominee dies during a term insurance plan?Read more
Let’s try to understand these situations by answering the following questions:
If the nominee passes away while the life assured is alive, in such cases, the nomination process becomes null and void. The life assured has the option to change the nomination. And, if the nominee dies after the demise of the life assured but before getting the claim payout, then the payout would be paid to the legal heirs.
To reduce the stress and disputes in the family, the best way is to update the nomination when needed. The amount should be given to the individual who needs it the most when you are not there with them.
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.
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.
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
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.
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.
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