Who Should Be Your Term Insurance Nominee?
Updated On Jul 03, 2021
Table of Contents
- How Do You Choose a Term Insurance Nominee?
- The Importance of Having A Nominee
- What Factors Should You Consider Before Naming A Nominee?
- What Happens When A Nominee Is Not Appointed?
- Take Away
You must have come across the terms nominee, dependent, or beneficiary when purchasing a term insurance policy. These three words are essential to the term insurance policy. A term insurance policy is intended to help your family if something were to happen to you in the future. It is a comprehensive protection plan with a predetermined payout amount. One of the benefits of a term plan is that you can take one even if your earnings are low at the start of your career. In exchange, your family receives a payout if you die within the policy's term. You must designate a specific member of your family for this purpose. In this article, you can understand how you can choose your nominee for your term insurance policy.
How Do You Choose a Term Insurance Nominee?
As previously stated, every term insurance policy requires you to name a nominee. It is mandatory that you provide as much information about your nominee as possible. Your nominee can be a family member or members of your family (spouse, children, or parents, or the entire family). Some insurance plans also allow nominees to be parents-in-law, uncles, aunts, adopted dependents, and distant relatives. In the case of distant non-blood relatives, it is critical to provide the insurance company with the necessary documentation as proof. If this is not done, the claim may be rejected.
The Importance of Having A Nominee
The following are the reasons why you need a nominee for your term insurance policy-
1. The Essence of An Insurance Policy
The essence of life insurance is to leave a financial legacy for someone in the event of your death. This is accomplished through nomination.
2. Anyone Can Be Nominated.
Typically, policyholders name their spouse, children, or another family member as a nominee for an insurance policy. Another advantage of a term plan is that almost anyone can be nominated. You could also nominate a friend or distant relative if you can demonstrate insurable interest.
3. There Are Several Nominees.
You may select more than one nominee. If the first nominee does not live the policy term, the benefit is passed on to the second.
4. Benefit Sharing
You can also arrange for the death benefit to be divided among multiple nominees. In this case, the benefit can be divided among the appointed nominees based on the allocation you decide.
Another significant benefit of a term plan is the ability to cancel and change your nominee as and when you want and as many times as you want.
What Factors Should You Consider Before Naming A Nominee?
Whether it's your spouse, sibling, or a friend, your term insurance nominee should be someone you completely trust to look after your family after you die. It should also be someone who understands your family's financial situation and can make sound decisions about expenses such as education, marriage, and so on.
What Happens When A Nominee Is Not Appointed?
There are two possibilities if no nominee is appointed or if the appointed nominee dies. If the insured died without a will, the sum assured plus bonuses are allocated to a Class I legal heir, which includes the insured's spouse, son, father, and mother.
If the insured has left a will, the death benefit is distributed to the will's heirs. The Indian Succession Act of 1925 explains the procedure.
Purchasing a term insurance policy is an excellent way to financially protect your loved ones. Every member of the family who works should think about getting term insurance when they are young. If you survive the term plan, you may never see your money again, but the assistance it provides is well worth it. Compare various insurance plans and select the one that best meets your needs.
You may also like to read:- How To Choose A Right Term Insurance Policy?
Disclaimer: This article is issued in the general public interest and meant for general information purposes only. Readers are advised not to rely on the contents of the article as conclusive in nature and should research further or consult an expert in this regard.