A nominee in a term insurance plan ensures that the policy benefits are received by the preferred individual in case of the policyholder’s demise. Assigning a nominee helps simplify the claim process and provides clarity regarding the rightful recipient of the policy proceeds. It is also essential to keep the nominee's details updated. In this article, we explain who a nominee is, how can we change nominee in term insurance, common errors to avoid, and the significance of keeping nominee information accurate.
Who is a nominee?
A nominee is a person you select to receive the policy’s death benefits in case of your untimely death. The nominee can be any person of your choice or someone who is financially dependent on you, like your family member. The person can be anyone, including your wife, your child, or your parents.
At the time of policy purchase, you have to provide the details of the nominee with whom the insurance company will get in touch for claiming in case of your death. If you are not able to decide on the nominee at the time of buying the policy, you can add the nominee later. However, you need to inform the insurance company of the name of the nominee in due course. You should note that multiple nominees can be added to a policy to receive the sum assured.
Benefits of having a nominee for term insurance
Having a nominee for your term plan has multiple benefits. These are:
- Simplification of claim settlement: Having a nominee for your term insurance policy simplifies the claim settlement process in the event of your demise. The insurer does not have to find who your legal heir is if you have a nominee in the policy. Thus, the nominee can easily get access to the funds, and the process is smooth for them.
- Family goals: Providing a nominee in the policy helps you to allocate sufficient funds to fulfil various goals of your family. For example, if you have children and you want to leave the funds for their studies or other goals, then you can name them as the nominee in your term policy.
- Legal complications: If you do not have a nominee, there can be multiple family members who make a claim towards the policy. To avoid these legal complications, it is better to have a nominee in the term policy so there are no complications later on.
How to change the nominee in term insurance?
Yes, the nominee in the term insurance policy can be changed at any time during the tenure of the policy. It's quite easy and ensures that the policy benefits reach the right recipient. In case of marriage, birth, or in the event of the demise of the currently named nominee, it is vital to revise the nominee details. Ensuring the accuracy of nominee details is actually one of the most important ways to avoid claim-related problems in the future.
Step-by-step procedure to change nominee in term insurance:
Step 1: Go to the official website of your insurer or their nearest branch to get the nominee change form.
Step 2: Provide the necessary details, including your policy number, updated nominee information, and the nominee's relationship to you.
Step 3: Include the required documents, like the valid ID proof of both the policyholder and the new nominee.
Step 4: Hand over the filled form and documents to the insurer either online or offline.
Step 5: The insurer will, after verification, update the chosen nominee's information and send the confirmation to the contact details registered in their system.
Errors people make while choosing a nominee
Let's see some mistakes people make while they choose a nominee.
- Appointing a single nominee: If the nominee of the policy passes away before the completion of the policy, the insurer will have to find out your legal heir so that they can provide the funds. This can cause unnecessary stress to your family, and there can be a delay in claim settlement.
- Not informing the nominee: It is essential to inform the nominee about the minute details of the insurance policy. You can also provide a copy of the insurance policy document to them. This will ensure that the claim settlement process remains smooth and there is no confusion for them later on.
- Minor nominee without a guardian: A lot of people tend to choose their children as nominees in the policy. While this is a thoughtful decision, if your child is less than 18 years of age, it becomes compulsory to declare a guardian to the nominee. The guardian will receive the death benefits on behalf of the minor nominee. If you do not mention a guardian, the entire death benefit will be withheld, which may cause delays.
These are some common term insurance nominee mistakes that you must avoid so that your policy’s death benefit is easily accessible for the nominee.
Conclusion
Choosing a nominee is an important decision while purchasing a term insurance plan. You must make a responsible decision while choosing a nominee. Having a term insurance policy will help the nominee fulfil their dreams, and you will be satisfied knowing that they are financially secure in your absence. Ensure you inform the nominee about all the important details about the insurance policy so they do not face problems when the need arises.
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