Consider this: Suresh had a term life insurance policy of Rs. 1 crore. He paid premiums diligently for fifteen years. When he passed away suddenly, his family went to claim the amount, only to discover the nomination was in the name of his mother, who had already passed away years ago. The claim process became a lengthy legal ordeal for his wife and children at a time when they needed financial support the most.
This is not an uncommon situation. Many policyholders fill in the nomination field as a formality when they buy a policy and never revisit it again. But nomination in life insurance is not a formality,it is a critical part of ensuring your insurance actually serves its purpose.
What Is a Nominee in Life Insurance?
A nominee is the person designated to receive the insurance claim amount in the event of the policyholder’s death. The nominee acts as the recipient of the death benefit, allowing the claim to be settled without the need to go through lengthy legal processes.
It is important to understand that under the Insurance Laws (Amendment) Act, 2015, a beneficial nominee, which includes spouse, children, and parents, has the right to receive the claim amount directly as a beneficial interest, not merely as a trustee. Other nominees (such as siblings) receive the amount as trustees, and legal heirs may still have rights over the proceeds.
Why So Many Nominations Go Wrong
There are several common nomination mistakes policyholders make. First: naming a deceased person as nominee. Life changes, and nominations do not update themselves. Second: naming a minor as the sole nominee without appointing an appointee. If the nominee is below 18, an adult appointee, who will receive the claim on the minor’s behalf, must be named. Without one, the claim settlement can be complicated. Third: not updating the nomination after major life events, marriage, divorce, the birth of a child, or the death of a previous nominee.
How to Update Your Nomination
Updating your nomination is generally a straightforward process. For policies held directly with an insurer, you can visit the branch or access the insurer’s online portal to submit a nomination change request. You will typically need to provide your policy number, the nominee’s name, relationship, date of birth, and address.
Policyholders can often name multiple nominees with defined percentages. This is advisable for families with multiple dependents, ensuring each person receives a defined share of the benefit.
The Importance of Keeping Nomination Updated
Think of nomination as a living part of your policy. Just as you review your coverage amount periodically, review your nomination every two to three years or immediately after a significant life event. Ask yourself: Is the nominee still alive? If there is a minor nominee, has an appointee been named? Does the nomination reflect your current family situation?
What Should You Do Now?
Log in to your insurer’s portal or call their helpline and check the nomination details on each of your life insurance policies. If anything is outdated or incorrect, initiate a change today. Your insurance policy is a promise to your family. Nomination is the address label on that promise, without the right address, it may never reach them.
Please consult your insurer or a qualified insurance advisor for specific guidance on nomination rules applicable to your policy. Nomination rules and procedures may vary by policy type and insurer.
NavNirvana IMF – The right nomination. At the right time. For the right person.
| About the AuthorNirmal Jain is the Managing Director of NavNirvana IMF Pvt Ltd, an IRDAI-registered Insurance Marketing Firm. With deep expertise in the BFSI sector, he is committed to simplifying insurance concepts and helping Indian families and businesses make informed financial protection decisions.Visit: www.navnirvana.com for more insurance education resources. |
