The purchase of life insurance is mainly attributed to providing financial security to your loved ones. The life insurance policy will provide a sum assured to your family in case of your sudden demise, against the regular premiums you pay for a set policy duration. As you take this significant step in life, it is equally important to choose the right nominee for your term policy. Here is everything you need to know regarding the nominee for your life insurance.
Who is a nominee in insurance?
As you apply for the term insurance, you will appoint and declare a person in the policy to receive the death benefit. This person nominated by you is referred to as the nominee. The insurance company will pay the lump sum amount to this nominee in case of any eventuality.
Who can be a nominee for your life insurance?
Life insurance nominee rules have been set to guide the insurance seekers in making the right choice. An online term plan is a good way to apply for the policy and appoint a nominee as it is easy, comfortable, and cost-effective.
The following points will let you know who can be a nominee for your life insurance.
Beneficial Nominees - It is common to choose the immediate family member like the spouse, children, or parents as a nominee. If that is the case, then the declared family member will become the beneficial owner of the death claim and will be called the Beneficial Nominee. The rule clarifies that any other legal heirs will not be considered for the death benefits in the life insurance term plan. Make sure you choose the immediate family member as the Beneficial Nominee to avoid unnecessary dispute among the legal heirs later in the future.
Minor Nominees - As a general practice, you tend to choose your child as a nominee. It is a rightful and thoughtful decision because they have to benefit from the sum assured in your absence. However, if the child is below 18 years, he or she may not be able to handle the lump sum amount paid. In that case, you must declare a custodian or an appointee to receive the death benefit. The custodian will receive the amount on behalf of the minor.
Multiple Nominees: You can opt for multiple nominees for your term policy. Also, you can mention the proportion of death benefits each nominee would receive. As you file the nomination, the insurance company will equally divide the sum assured among the selected nominees if there is no specific percentage provided. If one of the nominees is a minor, you can select an appointee who will receive the amount on behalf of the child and later transfer it once he/she becomes a major.
If you have a lot of people to choose from, you must pick the right person as your nominee. Choose your spouse as your nominee if your parents are employed or receive a pension amount after retirement and don’t need additional help to sustain life. Or, appoint your children if they are capable of making the best use of the lump sum amount provided. If the child is a minor, make a rational decision of choosing the right appointee so that the death claim will be transferred to the child without any loss when he or she comes of age.
Changing nominees in a term policy
You can choose to change the nominees in your term insurance plan as and when required during the policy term, provided you pay the premiums regularly. If you have purchased the term plan online, then you can change the nominee in the same manner by submitting the necessary forms and documents.
If you are changing the nominee in the term policy, ensure to update all the relevant details to avoid inconsistencies during the claim. Also, if the nominee dies during the policy term, you can inform the insurance company and make the necessary changes immediately.
What is the difference between a beneficiary and a nominee?
While considering a life insurance plan, there is always a misconception between the beneficiary and the nominee. A nominee is appointed by the policyholder while applying for the term insurance to receive the death benefit. In comparison, a beneficiary is a person who is eligible for handling the financial properties or aspects of the individual. The beneficiary can be a legal heir or a financial institution such as a bank.
Nomination is an important and essential step in availing of a life insurance term plan. You must make a responsible choice while appointing the nominee. As discussed above, you can choose an immediate family member, your children, or a non-family member as a nominee.
With the help of the Tata AIA term insurance plan, your nominee will be able to file the death claim for the benefits timely and appropriately. The plans provide detailed information on the terms and conditions of the nominee and the required documents. You can change the nominee as and when you feel the necessity. The death benefit from term insurance is the ideal way to secure your family's financial protection in your absence. You must make this benefit serve the right person in the best possible manner in the future!