Mr Raghu approached a life insurance company to buy a term insurance policy, as he wants to ensure financial safety to dependents in his absence. The insurance company collects the requisite details to offer him the best term insurance policy.
The insurer also asked him to produce the beneficial nominee details, but Mr Raghu was confused. He is not clear on who is a beneficial nominee. He also wants to understand the difference between a nominee and a beneficial nominee. Here is a piece of information for people with such concerns.
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A nominee is a person nominated or appointed by the policyholder. He or she is just the receiver of the death benefit under the term insurance plan, if the policyholder expires within the policy period. The nominee has no legal rights over the money. He just hands over the death benefit to the legal heir.
A beneficial nominee gets to enjoy the death benefit. Benefits are payable to both nominees and beneficial nominees in case of demise of the policyholder, within the term of the plan.
See Also: Nomination In Life Insurance
See Also: How Much Term Insurance Should I Buy?
If you are expecting your spouse to enjoy the death benefits, he or she must be the beneficial nominee of the term life plan. If you want your son to enjoy the death benefit, he has to be the beneficial nominee.
If you appoint your brother as a nominee to your term insurance policy, he has to hand over the death benefits to legal heirs. The choice is yours. The insurance company gives you the freedom to choose the right beneficial nominee.
It is worth mentioning that only the immediate members of the family can be chosen as beneficial nominees. What about non-family members? Even though you intend to appoint a non-family member as your beneficial nominee, it is very complicated to prove the insurable interest. The insurer might deny the nomination. When you choose multiple beneficial nominees, the benefits must be allocated in terms of percentages while availing term life insurance plan.
The policyholder has to furnish the following details related to the beneficial nominee, while availing the term insurance plan:
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