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Term Insurance 273 views February 1, 2019
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Summary: You would want to buy Term Insurance Plans only when you would like to secure the future of your loved ones financially dependent on your income. Choice of the right Nominee in Term Insurance is important for the insurer to hand over the coverage amount.
Now that you have decided to buy the Best Term insurance Plan that allows you to pay for the desired life cover in return for regular premium payments, it is important that you choose your nominee who would avail the death benefits in the event of your unfortunate demise during the policy period. Since the death benefits would be available as a lump sum amount to keep your loved ones secure, it is important that you mention your nominee’s name in the proposal form. Term insurance is meant to ensure a financial cover to your family, and hence, you must choose your nominee wisely.
In most cases, the policyholders decide their nominee from someone in their family. While filling in details on the policy proposal form, the customer is required to fill in details of the nominee also. Anyone including parents, siblings, wife, children can choose as the nominee in a term insurance plan. In many instances, the term insurance policyholders may choose relatives like nephew, niece, uncle or aunt as their nominees. Some customers also nominate their distant relative or friend after proving their insurable interest. The insurers, however, reserve the right to reject the application claim if the customer is unable to establish the reason for choosing a distant relative as the nominee to the death benefits from term insurance.
The nomination facility enables choice of the nominee(s) or dependent(s) who would be entitled to receive the death benefits, plus added bonuses if any, on the sudden death of the policyholder(s). The nomination facility helps:-
Having a nomination facility in place ensures that the death benefits are received by the one you choose. Term insurance is bought to make up for the loss of income or ensure economic security to your dependents. In term insurance, the insurer is liable to pay the death benefits to the nominee(s) on the death of the policyholder(s). Having a nominee helps in such instances.
No one would like to choose a nominee on ad hoc basis. Any policyholder would like to choose a nominee who can shoulder the responsibilities of the family in his or her absence. Also, since term insurance is bought to make up for the loss of income, policyholders tend to make loved ones as their nominee(s) who had been dependent on his or her earnings. However, if the policyholder can prove insurable interest, he or she can choose a distant relative also as the nominee.
There is scope for multiple nominations too. If Nominee 1 dies before making the insurance claim, then Nominee 2 can claim the death benefits. Also, the policyholder may opt for multiple nominees so that the latter may enjoy the death benefits in the proportion mentioned in the policy proposal. Prior to opting for more than one nominee, it is important that the policyholder checks with the concerned insurance company’s policies to find out if this option can be exercised.
One can cancel the name of the nominee already submitted or change nominations innumerable times. For this, the policyholder can avail the nomination form of the insurer either online or offline. The policyholder after filling in the nomination form with requisite details must submit the same to the insurance company to ensure updation of the information submitted. Also, if the nominee dies while the term insurance policy is still in force, then it is the duty of the policyholder to update the same with details of the new nominee.
Details of the nominee are shared in the proposal form of the term policy document.
It is important to note that the nominee of any insurance policy including term insurance cannot be a nominee. If the minor is less than 18 years old, then the policyholder must choose an appointee to receive the death benefits on behalf of the minor.
In many cases, it has been observed that the policyholder fails to share details of the nominee while the policy is in force, thus, compelling the insurer to hand over the amount of death benefits to Class I legal heir. Heirs stemming from the following relationships are classified as Class I legal heirs:-
Also, if the policyholder leaves behind a will detailing the transfer of property to his or her heirs, the following procedure is followed:-
The policyholder must understand that the nomination facility grants the right to collect death benefits by the nominee. Since term insurance ensures death benefits, it is important that one understands the importance of the nomination facility and chooses his or her nominee accordingly. The insurer is liable to hand over death benefits according to details submitted in the nomination form. If any amendment is required to be made in the details of the nominee inclusive of name and address, the same must be updated accordingly.
Conclusion: Choosing the right nominee in term insurance may not be easy, especially, as it involves entrusting the nominee with the responsibility of the death benefits amount. Insurance companies advise their customers about how to choose the right nominee. However, a lot depends on the policyholder’s sense of judgment and requirements.
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