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Every financial planning or investment has a nominee or beneficiary who is appointed to receive the benefits of the plan. By appointing a nominee the insured wants to make sure that the benefits of the investment are gained by the person of their choice after their death. In a term insurance plan, the nominee is the person who receives benefits in the event of sudden death of the insured during the plan term. But, have you ever considered a scenario where the nominee of the policy dies before the life assured. What happens to the policy in that case? Can you rename another nominee during the policy tenure? What will happen if the nominee of the term plan is not declared.
Let’s understand the above questions in different scenarios.
In case the nominee of the policy dies before the life assured, the nominee process no longer stays valid. In this case the life assured can modify the selection. However, in case the nominee pass away after the insured but before getting the claim money, the benefit amount is offered to the lawful heir.
Thus, it is advised to update the nomination whenever required to avoid any kind of dispute so that the amount is received by the person who needs it the most when you are not there with the person.
Yes, term insurance plans allow you to change the nominee of your term insurance during the policy tenure. If you change nominee, the new nomination supersedes all the earlier nominees and makes them invalid.
Read More: Steps Involved in Making a Death Claim On a Life Insurance Policy
Anyone of your family members can be selected as a nominee who is monetarily reliant on you and whose life will be affected monetarily in your absence or in case of your sudden death. However, you cannot propose distant relatives or non-family members.
For example, suppose you bought a policy when you were young and not married and you made your aged father the legal heir. Later, your father died due to old age. So, now you have to change the nominee after his death so that there is no legal hassle later in case of your sudden demise.
Yes, minors can be appointed as nominees of term insurance plans. As such, most people buy term insurance to safeguard the future of their children to financially secure them and their career goals. However, till the child is below 18, he/she is not allowed to manage the funds. In such cases, a guardian called custodian is appointed till the child is 18 years old.
If the policyholder hasn’t declared the nominee at the time of buying the policy and has not nominated anyone, there are legal procedures that can be followed to avoid any legal tussle in the future. In such a scenario, the mother or father of the policyholder along with the spouse or the son is regarded as the class 1 legal heirs to the policy benefits and are eligible to claim it.
On the other hand, if the policyholder has not declared a nominee and has left a will, the fund distribution takes place as per the 1925 Indian Succession Act.
To Conclude
To minimise future legal squabbles between nominees and legal heirs, it is best to nominate a family member. The life assured has the right to change the nominee as many times as he/she wants. In this case, the new nominee supersedes the older ones. However, if you change nominee during the policy tenure, make sure to update it with the insurance company to avoid any issue in the future.
If you are unsure how to select the finest term insurance you may get advice from someone who is knowledgeable. Compare plans and select the finest term insurance to ensure that the user of term insurance receives the highest benefit.
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PayBima Team
PayBima is an Indian insurance aggregator on a mission to make insurance simple for people. PayBima is the Digital arm of the already established and trusted Mahindra Insurance Brokers Ltd., a reputed name in the insurance broking industry with 17 years of experience. PayBima promises you the easy-to-access online platform to buy insurance policies, and also extend their unrelented assistance with all your policy related queries and services.
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