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Nomination In Life Insurance

IndianMoney.com Research Team | Updated On Friday, May 10,2019, 06:21 PM

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Nomination In Life Insurance

 

 

The nominee receives and holds property of the deceased, till he is legally bound to distribute this property to legal heirs. Similarly in life insurance, a beneficiary is a person whom you nominate to receive the proceeds of your life insurance policy (sum assured) on death. You can nominate more than one beneficiary and specify their shares in the policy proceeds.

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Nomination In Life Insurance

Differences Between Nominee and Beneficiary in life Insurance

Nominee is the person with the legal rights to distribute the proceeds of the life insurance policy to the legal heirs, when the insured dies. This has led to many legal disputes between the legal heirs and nominees of life insurance policies.

As per new rules, only the person(s) mentioned as the beneficial nominee, would receive the proceeds of the life insurance policy. Other persons, be it parents, children or spouse, cannot claim from the proceeds of the life insurance policy, unless they are mentioned as beneficial nominees.

Hence, make sure you nominate the right person as the beneficial nominee when filling the application form of a life insurance policy, if not the proceeds would go into the wrong hands. 

Claims made by the legal heirs would not be honored, if they are not nominated as the beneficial nominee. This has made life easy for insurers as they don’t have to get into unnecessary legal battles, which consume a lot of time.

SEE ALSO: What is a Term Life Insurance Policy?

Points to Note When you Nominate Someone for a Life Insurance Policy

  • You can nominate beneficiaries at the time of availing a life insurance policy and are allowed to change the nominee anytime during the term of the life insurance policy.
  • You can nominate more than one person and mention their share in the death benefit. This would make things clear and avoid legal battles.
  • If you have nominated a friend or someone who is no way connected to your life insurance plan (They have no insurable interest), then such nominees would not be considered as beneficial nominees. In such situations, your legal heirs can prove that the nominee is in no way connected vis-à-vis insurable interest. They could get the money which may not be what you want.
  • You can utilize the option of successive nomination. Under this, you nominate multiple nominees in a defined order. If the first person in the order dies, then the second person gets the proceeds of the life insurance policy. If both the first and second person die, then the third person in the order gets the proceeds of the policy, and so on. You must declare successive nominees at the time of availing the policy.
  • Modifying or updating the nominee would cost a nominal fee. Generally, insurers charge Rs 100 for each modification.
  • Details of the nominee would be mentioned in the life insurance policy document. If your name is not mentioned in the policy document, then you don’t have any right to make a claim on life insurance policy.
  • It’s extremely important to mention the right person as the beneficial nominee as policy proceeds would be paid out only to the nominated person.

SEE ALSO: Why You Need A Term Insurance Plan?

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IndianMoney.com Research Team

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