A term policy is one of the simplest ways to protect your family in case of your untimely demise. As you progress through the different phases in life, your financial commitments are bound to increase. A term plan is a safety net that ensures that your family’s dreams and aspirations can be fulfilled even when you are not around anymore. In your absence, the nominee of the policy can claim the death benefits under the policy as a lump sum, monthly income, or a mix of both.
For instance, with TATA AIA term insurance, the nominee of the policy can receive the death benefits under the policy as a lump sum, regular income (up to 120 months), or both.
When choosing a nominee for the policy, people generally have many questions. One of the most important questions is whether you can change the nominee of the term policy. If you have a similar question, read ahead to find the answer.
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 members. The person can be anyone, including your wife, your child, and your parents.
When purchasing the policy, you must provide the details of the nominee to the insurer so that they know whom to contact in case of your demise. If you are unable to decide the nominee at the time of purchasing the policy, you can add the nominee at a later date but you have to inform the insurer about the name of the nominee. You must note that you can add more than one nominee to the policy to receive the assured sum.
Benefits of Having a Nominee for Term Insurance
Having a nominee for your term plan has a lot of benefits. These are:
- Simplification of claim settlement: Having a nominee for your term 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 the nominee in the policy. Also, the nominee can easily get access to the funds and the process is simplified.
- Family goals: Providing a nominee in the policy helps you in assigning the funds to fulfil the 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.
Is it Possible to Change a Nominee in the Term Policy?
Term insurance has a long duration, so a situation can occur in which you might need to change the nominee of your policy. There are several reasons you might want to change your nominee. For instance, the unexpected demise of your nominee before you, change in your relationship with the nominee, or loss of trust between you and the nominee. If any such situation arises, it is important to know the process of changing your nominee.
The steps to change the nominee of your term policy are listed below:
- Change in nomination form: The first step is to fill the change in the nomination form. You can fill the form either by visiting your insurer’s website or by visiting the branch of your insurer. The form is easily available, and you are required to fill in the details regarding your policy and the nominee you want to include in the policy.
- Fill the form: The form needs to be duly filled, and you must also inform the insurer about the reason for changing the nominee.
- Acknowledgement: After completing the process, you need to obtain written confirmation from the insurer regarding the change in the nominee. This ensures that the insurer is in agreement with your decision.
If you change the nominee of your policy, it is advisable to inform the family about your decision. It is also essential to give all the details to your family about the policy and any changes you make in it.
Term insurance nominee change is a fairly easy process, and you must do so if the need arises. Do not hesitate. Just follow the simple steps, and you will be able to complete the process without any complications.
Errors People Make While Choosing a Nominee
A lapse in the decision of appointing the nominee of your term insurance policy can cost you and your family in the long run. This is the list of errors that you must avoid during the process of adding a term insurance 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 will be a delay in claim settlement. Thus, it is advisable to distribute the death benefit among multiple nominees.
- 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 are no hiccups.
- Minor nominee without custodian: As a general rule, 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 custodian to the nominee. The custodian will receive the death benefit on behalf of the minor nominee. If you do not mention a custodian, the entire death benefit will be withheld from the minor nominee, which can cause problems.
These are some common term insurance nominee rules that you must keep in mind so that your policy’s death benefit is easily accessible for the nominee.
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.