Who Can Be Nomineed In Term Plan
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In simple words, a nomination is a process of selecting one or more nominees for your policy. It will be the nominee who will receive the proceeds of your life insurance policy on your demise. It could be your spouse, parents, children, distant relative, or even a friend.
However, there are a few important things you should know about the nomination process so that you select the right individual/s to receive the death benefit of your policy.
Who Can You Nominate?
Five things are discussed below-
1. Beneficial Nominee
In the past, even when a policyholder had selected a nominee for his/her insurance policy, their legal heir often used to make claims on the death benefit. This resulted in a lot of legal disputes.
So, to avoid this problem, the IRDAI introduced the concept of ‘Beneficial Nominee’ in 2015. According to this new rule, when a policyholder has appointed an immediate family member, like spouse, parents, or children, as their nominee, then the nominee would automatically be the ‘Beneficial Nominee’ of the policy. No other legal heir could then make claims on the death proceeds of the policy. But note that this option is only available when you select an immediate family member as the nominee.
2. Non-Family Member as Nominee
It is also possible to choose a non-family member as the nominee of your life insurance policy. For instance, you can select your friend or a very distant relative as your nominee. But this should be avoided due to several reasons.
For example, the concept of Beneficial Nominee would not be applicable as you have not selected an immediate family member as the nominee. This could result in legal disputes between your nominee and your legal heirs. Moreover, there could also be a moral hazard when you appoint a non-family member as the policy nominee. Because of these reasons, most insurers generally do not allow the policyholders to select a non-family member as their nominee.
3. Selecting Multiple Nominees
It is possible to select more than one nominee for your policy. You are also allowed to specify the percentage of the death benefit that should go to each nominee. If no such specifications are provided, the insurer will equally divide the amount among the nominees.
In case if any of the nominees are below 18 years, then the policyholder needs to provide an appointee (custodian). Nominees below 18 years are not allowed to receive the policy proceeds. The appointee will receive the proceeds and will then transfer the same to the nominee when he/she is above 18 years.
4. Changing Nominees
Policyholders are free to change the nominee/s as many times as they like as long as the premiums are paid and the life insurance policy is active. Note that the latest selection will supersede all of the previous changes.
To change the nominee, a policyholder needs to fill and submit the nominee form. This could either be done online or offline. The insurer will then send an acknowledgement letter to confirm the changes.
Conclusion
It is your responsibility as a life insurance policyholder to make sure that the proceeds of your policy reach the right person/s. Be very careful about the nomination process and update the nominee as and when needed to make sure that your life insurance policy is able to fulfil its duty on your demise.
Also read- Types Of Investment Plans In India
