Term insurance is a policy that is designed to serve the financial needs of a policyholder’s family in case he or she passes away before the policy term is over. This is why you must be very careful when choosing your nominee in insurance so that the insurer can pay the sum assured to the right person. Your nominee should be the person whom to financially cover in case you are not there.  

Importance of having nominees

It is very important to mention a nominee when you are buying a term insurance plan. If there is no nominee, the insurer will not be able to pay the sum assured in case of an unfortunate incident. Your nominee can be your parents, spouse, or children. In certain cases, you can also include a distant relative or friend as a nominee. However, you need to follow the proper procedure set by the insurer in that case. You need to prove the insurable interest or else the insurer will reject your application.  

The importance of setting a nominee

The nomination facility allows the insured to set a nominee or nominees who will receive the death benefits when the insurance claim is made. There are multiple benefits of a nomination facility:

  • Financial security of your dependents

The purpose of a term plan is to provide financial security to the policyholder’s dependent loved ones in case of the insured’s demise. So, if there is no nominee, the purpose cannot be served.

  • You can nominate anyone

One of the best aspects of the life insurance nominee rules is that the policyholder can choose anyone to be their nominee. It is recommended that you select a person who can be completely trusted with the money received from the insurance company.

  • Multiple nominees

The policyholder can select multiple people as their nominees. Hence, if one of the nominees passes away before the policy term, the other nominee will receive the death benefit.

  • The sum insured can be shared

In case the policyholder chooses multiple people to be the nominees, the sum insured paid by the insurer can be shared among them.

  • Change or cancellation of a nominee

It is possible to change your nominees multiple times.

Details to be submitted to the insurance company

When purchasing a term plan, you should submit the following information regarding the nominees:

  • Name
  • Age
  • Address
  • Your relationship with the nominees

In addition, you must provide official documents that prove the above- mentioned information.

Multiple nominees

The nomination facility allows the policyholder to choose multiple nominees in the policy. You can allocate each of the nominees to get a certain percentage of the death benefit or it can be equally divided among them. Make sure to find out what options your insurer offers and act accordingly.

Making changes in a nominee

You can make changes to your life insurance nomination whenever needed. You either can change details regarding your existing nominee or can change the nominee to a new person. You need to use the nomination form available on the insurer’s website or office to make the necessary changes.
A term insurance plan is an important policy that protects your loved ones during your absence. Hence, it is very important that you be careful while choosing your nominees. The future of your family depends on this decision.

By Eddy

Eddy is the editorial columnist in Business Fundas, and oversees partner relationships. He posts articles of partners on various topics related to strategy, marketing, supply chain, technology management, social media, e-business, finance, economics and operations management. The articles posted are copyrighted under a Creative Commons unported license 4.0. To contact him, please direct your emails to [email protected].