Step by Step Guide on Procedure To Choose a Nomination for an Insurance Policy
The purpose of any insurance policy is to act as a fallback should adverse conditions arise in life. It can act as a financial umbrella for your family during troubling times. This leads to the most basic question; how can the family of an insured person claim the proceeds from a life insurance policy? The key to this is filing the nomination correctly and ensuring it is kept updated at all times.
What is a nominee in an insurance policy?
By definition, a nominee is said to be a person who is appointed by the asset holder to receive an asset or any investment after the death of the holder of the said asset or investment. It is generally assumed to be the legal heir of the person.
A nominee appointed in an insurance policy holds similar status. He/she will receive the benefits of the policy in case of the demise of the policyholder. The policyholder can choose a single nominee or multiple nominees and allot percentages of the proceeds to be split between them.
Who can be a nominee?
The process of choosing a nominee is known as a nomination. When it comes to choosing a nominee for an insurance policy, it is ideally advised that the person nominated be a family member. It can be the spouse, children, parents of the holder.
A minor too can be appointed as a nominee by the policyholder. Any child under the age of 18 years is termed a minor. In case the nominee is a minor, the policyholder will also have to name a legal guardian at the same time. If the policyholder passes away before the minor turns into an adult, the claim will be handed over to the legal guardian.
Why is a nomination necessary?
Many a time, policyholders do not give enough priority when filing a nomination for the insurance policy. However, in case of sudden demise, it is the family members that are left grasping at straws.
Nominations are necessary as they make the process of transferring assets and investments easy and seamless as, the nominee will receive the insurance proceeds upon the demise of the policy holder. The nominee can then use the funds appropriately and quickly without any legal or court hassle. In case of the unfortunate demise of the Policy Owner & Nominee, the legal heir or family members will have to approach the local court to get a legal heir certificate to claim any funds from the insurance policy.
Benefits of nomination
Is it important to have a nominee appointed in your insurance policy? Let’s look at some of the benefits of appointing a nominee:
- When you appoint a family member as a nominee for your insurance policy, you are securing that family member’s future, financially.
- An untimely demise of a sole breadwinner can derail the goals and dreams of family members. When you appoint them as a nominee, it will help them to follow through on their goals, without worrying about money.
- If you have appointed multiple nominees, you can distribute the claim benefit among them and decide how much each person should receive after your demise.
- When your policy does not have a nominee mentioned, the insurance company will not release the claim benefit after your passing. To get any claim benefit, your family member will need to get a certificate from the court stating that they are the legal heir of the deceased. Only once this is certified by the legal authority, the insurance company will release the claim benefit.
The process to choose a nominee
If you are thinking of choosing a nominee for your insurance policy, you will need to follow the below steps:
- Details of the person who will get the claim benefit. You will need to mention the name, age, relationship with Life Assured, date of birth, gender, and address at the time of buying the policy
- If the nominee is a minor, you will be asked to mention a legal guardian or custodian as well
- You may be asked to submit ID proof of the nominee
- If the nominee is a distant relative, proof of relationship may be asked as well
- If you want to change the nominee during the validity of the policy, you will be asked to fill out a nomination form stating the name of the new nominee as well as any mentioned details.
Filing a nomination for your insurance policy is very important. It is equally important to keep the nominee informed about the said nomination in your insurance policy. Adding a nominee to the insurance policy ensures seamless transfer of the proceeds from the policy. The transaction becomes easier as the nominee does not need to go through the hassle of providing a will or probate and can use the funds immediately on receipt. It also helps the policy holder to leave a legacy for them as it can help with providing for the necessities of life as well as fulfilling the family’s ambitions and dreams.
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