It is very important to have a nominee when you get an insurance plan in India. While this task is not mandatory, it is definitely a wise move. Unless you have a nominee, many problems can arise if you happen to pass away before the policy period ends. Read on to know more.
Who is a Nominee in An Insurance Plan?
Technically speaking, a nominee is someone who is entitled to receive the proceeds from an insurance plan after the demise of the policyholder. This can be in the form of a sum assured in a life insurance plan or the accidental death benefit claim amount in a health or motor insurance plan. In certain types of special health plans, like cancer health plans, lump sum amounts are paid out if the policyholder dies in the course of the treatment.
1). Selecting a Nominee
It is easy to select a nominee when it comes to a family floater health insurance plan. You can simply make your spouse or parent your nominee. Some other options for nominees include:
2). Beneficial Nominee
The immediate family members of a policyholder are his parents, spouse and child/children. If the person dies without mentioning the name of a nominee, any one of these people can come forward and claim the insurance amount, as they are the nominees who stand to receive the benefits of the insurance coverage.
3). Minor Nominee
The child of a policyholder, under the age of 18, is known as a minor nominee. It is a common practice for policyholders to nominate their children as their nominees on their insurance plans. However, if the policyholder dies before the child attains the age of 18, he or she cannot legally receive the claim amount. It has to be kept safely with another family member and transferred to the nominee after he or she turns 18 years old.
4). Non-related Nominee
There is an option in India to nominate someone who is not a direct relative of the policyholder. This can be a close friend, a work acquaintance or a distant relative. However, if a legal heir claims the insurance amount after the death of the policyholder, there will be an enquiry before handing the amount over to the non-related nominee.
5). Multiple Nominees
It is also possible for a policyholder to have more than one nominee. This commonly happens when the policyholder has two or more children and wants the insurance proceeds to be equally divided among them, after his demise.
6). Can a Nominee be Changed?
When getting any insurance plan, you must be very careful and understand all aspects of the coverage, including details such as the nominee selection. Many people wonder if a nominee can be changed during the course of a policy. The answer here is yes, the nominee can be changed.
Let us understand this with an example. Rahul was 22 years old when he purchased a term life insurance plan with an accidental death benefit rider. Since he was single and unmarried at the time, he chose his father as his nominee. However, five years down the line, he was married and a year after that, he welcomed his twin daughters into this world. At the age of 29, Rahul altered the names, and added his daughters as the joint nominees of the term plan, thereby replacing his father from the role.
You can change your nominees several times within the policy period, but the final name mentioned before the policy matures will be considered as the official nominee.
Facts About Nominees in Insurance Plans
If you have some more questions about insurance nominees, take a look at the facts mentioned below:
1). What happens when no nominee has been selected by the policyholder?
Many times the policyholder does not add the name of a nominee to an insurance plan. In other cases, the nominee dies before the policyholder. In such cases, the proceeds from the insurance plan go to the beneficial nominees. It is also possible for the legal heir of the policyholder to come forward and claim the amount. A succession certificate holder may also be entitled to the claim, provided he or she has all the required documents.
2). What is the difference between a nominee in an insurance plan and a legal heir?
Broadly speaking, there is a huge difference between an insurance nominee and a legal heir. While the former is someone who has been specified by the policyholder to get the claim after his demise, the latter is someone eligible to legally receive all the property and money of a person after his death.
Since the sum assured is a sum of money received, the legal heir has rights to it and can come forward to claim it if there is no nominee mentioned in the insurance policy documents.
3). What are the eligibility criteria to become an insurance nominee?
According to the legal terms, anyone with a sane mind and legal age is eligible to become an insurance nominee. However, you should choose your nominee with a lot of care and consideration. Remember, that the insurance proceeds will be received by the nominees and they should know how to use and utilise the sum for the betterment of the whole family after your demise. It is a good idea to choose someone like your spouse or your parents as they will need the financial assistance the most after you are gone. In case they are unavailable, or are incapable of handling the money (due to any issue such as poor health, etc), you should choose a person such as a trusted friend or a relative who can help sort out the finances in your absence.
In conclusion
As you can clearly see from the points mentioned above, there are many reasons why you should choose and appoint a nominee for your insurance plan. An insurance plan works as a financial backup at the worst of times, so you need to ensure the claim amount will benefit the people it is meant to. Choosing the perfect nominee is a great way to ensure this happens.
