Life Insurances 326 views
When it comes to a life insurance policy, in this, the policyholder nominates a person to whom the insurer must pay the insurance policy proceeds in the event of his/her unfortunate demise, and this person is know as nominee. However, it is not compulsory to register a nominee, but it is still important as it helps in preventing the disputes and facilitates quicker claims processing, thus ensuring that the beneficiary will easily get the death benefits without any hassle.
Moreover, one thing that needs to be mentioned here is the fact that a nominee is generally registered in the proposal form, when it comes to buying a life insurance policy itself. Not only this, in fact, it is possible to register a nominee at any time during the tenure of your life insurance policy.
Well, a nominee can be anyone whom you can trust and should be in your close relation such as parents, spouse, children and relatives. In order to register, the insurer must be given the details of the nominee like his/her full name as in official documents, age, residential details and last, but not the least relationship between the policyholder and the nominee.
More to the point, nominating unrelated parties such as those without an insurable interest in the insured's life actually increases the risk for the insurer. This is the reason that many life insurance companies avoid accepting the request for unrelated parties as nominees.
Furthermore, if a nominee is a minor, being a policyholder, you have to assign an appointee or custodian on his/her behalf. And, this is because the minors are considered competent legally in order to enter a contract. And, should the need arise, the amount of the claim is discharged to the appointee until the nominee (minor) turns 18.
In fact, having multiple or successive nominations are also permissible. As far as successive nomination is concerned, it is nothing but a successive nominee. Let's try to understand this thing with an example given below:
If there are three successive nominees say-X, Y and Z, the claim proceeds will first be paid to the nominee X, failing him, the insurer will call upon the nominee Y, and failing Y, the insurer will proceed to the nominee Z and the chain will continue like that.
Whereas, multiple nominations are concerned, the sum assured will be divided among multiple nominees. Furthermore, in a life insurance policy, its better for you to appoint only one nominee as a rightful person so as to get the claim benefits on behalf of the deceased insured surviving dependents.
However, despite of the fact of having the multiple nominees, it would not be wrong to say that the insurers give importance to handle the entire claim amount to just only one of the nominees. And, for this, all the other nominees need to give their consent, and try to avoid multiple nominations as this thing could end up in a legal dispute.
In the event of insured's death, a nominee is needed the most. Thus, if a nominee passes away before the insured during the term of the life insurance policy, the proposer needs to make a fresh or new nomination.
Well, the modification of nominee can be done by providing the details of the new nominee with the help of a simple form. In addition to, the last valid nomination form needs to be presented while on the other hand requesting for these changes. However, one thing that needs to be mentioned here is the fact that the modification for nominee is permitted n number of times during the tenure of the life insurance policy. And, the latest or new nomination made will supersede all your previous nominations.
Once you have filled the application form for change in nomination, it is important to get a written acknowledgement from your life insurance provider, mentioning the same.
Who is a Beneficial Nominee?
Recently a new segment created in the Insurance Act and i.e. Beneficial Nominee, it basically includes the immediate relative of the policyholder only. According to this, if an insured has mentioned his spouse, parents or children as a nominee in the policy, there is no denying on the fact that they will automatically become the beneficial owners of the claim benefits. In fact, this fresh clause also gives the policyholder the flexibility to name many nominees and their contribution in the proceed of the life insurance policy.
However, earlier the life insurance companies in India could not hand over the claim proceeds to the nominee, as a result of which the other rightful legal heir could not claim the benefits from the nominee. But, now if the legal heir claims the benefits, the insurer will give the benefits only to the beneficial nominees.
Furthermore, one of the major reasons for disputes is other legal heirs, demanding the individual rights over the policy proceeds. Thus, it is advisable for you to appoint a beneficial nominee so as to avoid such type of friction or dispute.
In addition to this, the beneficial or collector functions like a trustee who is accountable to all other legal heirs for all the benefits they are entitled under the life insurance policy.
The Importance of Nominating
The insurer always insist in being given the entire details of the nominee along with his/her relation with the policyholder. Well, according to the thumb rule, the nominee should ideally be a close relative who can be relied upon in order to tend to the deceased's family's urgent needs after his/her demise.
Whereas, in the absence of the nomination, the life insurance company will ask the claimant for the succession certificate being issued by the court of law. However, this process is a bit tedious and it can further be avoided by ensuring that the nomination is registered during the proposal stage. Moreover, in the absence of the valid nomination, the objective of offering the immediate relief to the family members of the insured in case with his/her unfortunate demise.
In addition to, the clear nomination gives the undisputed as well as legal discharge to the life insurance company in order to settle down the claim amicably. Since the life insurance serves like a financial shield for the family of the policyholder after his/her demise, so it is important to ensure that complete details, concerning the nomination is provided during the proposal stage.