As a breadwinner, you want to ensure your family’s future even when you are not around. A term insurance policy will cover your family’s financial requirements even after you have passed away. As a death benefit, the plan pays a predetermined sum to your family. But who is entitled to the death benefit?
When applying for the term plan, the policyholder chooses who will get the death benefit. Nomination is the process of permitting someone to receive the money as a beneficiary of the insurance, and the beneficiary is known as the nominee. In other words, if the insured dies, the insurer pays the death claim amount to the nominee. During the policy’s implementation, a candidate must be appointed. A policyholder may designate numerous candidates, and the death benefit is split among all nominees.
Who Could Be Your Nominee?
After the insured’s death, a nominee is responsible for claiming the money promised. He/she might be anybody who is reliant on you or the person you trust to look after your family in your absence, such as direct family, friends, or relatives. There are three categories in which you may nominate someone.
Beneficial Nominees – A beneficial nominee is someone who is a member of the candidate’s immediate family, such as parents, spouses, or children. The beneficiary nominee receives the death benefit, not any other person or legal heir.
Minor Nominee – In many cases, individuals name their children as nominees in their term plans. Young minors under the age of 18 are called minor candidates. Because minor nominees are ineligible to receive the claim account, the policyholder must designate an appointee. The appointee receives and administers the claim amount on the minor nominee’s behalf.
Non-Family Nominees – A non-family nominee might be a close acquaintance or a distant relative. It is vital to highlight that if you pick a non-family candidate, you must present an obvious explanation for doing so in addition to all of the evidence. Otherwise, your application may be rejected by the insurer.
Why Should Your Term Plan Include Multiple Nominees?
Generally, while applying for a term plan, a policyholder picks a single nominee, which is not optimal. There is usually more than one dependent person in a household that is qualified to receive claim benefits. If you choose just one nominee and he or she also dies, the claim settlement procedure gets rather hard since it is difficult for the insurer to determine who is the insured’s legal successor. A family conflict may emerge if the survivors need legal assistance to designate an heir.
To prevent this, always nominate numerous nominees and disclose the proportion of the amount guaranteed that each one gets as a claim benefit. The dead nominee’s share is shared proportionately among the surviving candidates. This guarantees that everyone receives their fair portion without any complications. When you designate numerous nominees, remember to notify all of them and discuss the policy information as well as their claim percentage.
Important Considerations
- Remember to notify the insurer of any changes in nominee information and to examine your policy once a year.
- If no nomination is made, or if the nominee dies during the tenure without an update to the policy, the claim benefit is given to the legal heir, such as a spouse, children, or parents.
- The nominee may be changed by the policyholder. Simply complete a nomination form and submit all relevant documentation to your insurer, and the candidate data will be updated.
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A term plan’s only objective is to safeguard your family’s financial future. As a result, nomination is a critical component of the application process. A nominee assures that someone will be present to collect and receive the insurance benefit. He or she will handle the claim amount to guarantee that your family’s demands are met. A nominee must also be informed of the policy contents and the claim settlement procedure, as well as hold a copy of the policy, in order to make a claim when necessary.