Things You Need to Know About Life Insurance Policy Nomination
Updated On Aug 25, 2021
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A life insurance plan is designed to financially protect a person's life and the lives of his/her family. During the policy's duration, the insured person pays the insurance company a certain premium amount at regular intervals. The sum of money deposited, as well as additional benefits, are paid to the person(s), i.e. the nominee, as death benefits if the life assured dies within the policy term. Let us learn about the role of a nominee in a life insurance policy in detail.
What is a Nomination?
A nomination is a process of choosing one or more nominees for your policy. When you pass away, the proceeds of your life insurance policy will go to your nominee. It might be your partner, parents, kids, distant relatives, or even a friend.
What is the Eligibility Criteria of Nomination?
Since the nominee for a life insurance plan can and can not be related to the life assured by blood, you can even nominate anyone from your friends or colleagues. While nominating an adult is the most secure way, you can even have a minor, an adult, or a senior citizen as your nominee. In the case of a minor, an attendee is assigned who receives the death benefits if the life assured dies, as the minor is ineligible for legal transactions.
What are the Different Types of Nominees for Your Policy?
There are mainly 3 types of nominees for your life insurance policy.
- Beneficial Nominee - Your spouse, children and parents are regarded as the beneficial nominee.
- Minor Nominee - A below 18 years old child or dependents is known as the minor nominee. Since the nominee may not be able to handle the lump sum, you have to appoint a custodian who will receive the sum assured after your death.
- Non-Family Member Nominee - A distant relative or a friend comes under this category. It is often advised not to appoint a non-family member as the nominee to avoid any legal disputes between your heirs and the nominee.
Can You Change the Nominees of Your Policy?
You can change your nominees before the term matures if the nominee dies before the policy term ends. The policyholder can easily nominate another person as the nominee through some paperwork.
Can There Be More Than One Nominee of Your Policy?
A life insurance plan can have more than one nominee. Suppose, if you purchase a life insurance plan and nominate your wife and two children in a family, all three can avail the insurance amount after maturity. The death benefits are divided equally among the nominees by the insurance provider.
The appointment of the nominee is an essential step in the process of getting a life insurance plan. Hence, you must make a wise choice by appointing a responsible nominee and keeping him/her in the loop while obtaining the policy. This way, you can ensure that the nominee will know about all the policy details, and the possibility of claim denial can be reduced. As mentioned above, you can choose your spouse, children, immediate family member or even a non-family member as a nominee.
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.