When you buy term insurance, you’re purchasing financial protection for your loved ones. If something happens to you and you pass away, they’ll get the death benefit, and they can use the money for their future expenses.
To simplify the process of remitting the death benefit to the policyholder’s family, insurers ask them to provide nominee details in the application form. The nominee is the person who you appoint to receive the policy benefits during claim settlement. Though you can change the nominee in term insurance, you must choose the nominee wisely while buying the policy. As the insurance company will hand out the entire sum assured to the nominee.
Why is a nominee needed?
Losing a loved one can be a distressing experience. At this crucial time, financial requirements can accumulate quickly, especially if the lost family member was the family’s sole breadwinner.
At this time, the entire focus must be on providing a swift claim process so that the death benefit is paid out to the intended person as quickly as possible. If a nominee is specified in the term insurance document, the insurer can promptly disburse the amount so that the family can put it to good use.
On the other hand, if no nominee is mentioned, the claims process can get complicated since the insurer has to find out who the legal heir is to the policyholder, which can stretch out the claims process.
Nominee Reduces the Chance of Legal Disputes
Unfortunately, legal disputes over insurance claims are common in term insurance. If no nominee is specified, many family members come forward to claim the death benefit amount.
This can turn into an ugly legal battle that may go on for years, and eventually, the people who were the rightful owners of the amount may suffer. When you mention a nominee, the chances of legal disputes are close to zero since the insurer knows exactly who gets the pay-out.
Multiple Nominees
Term insurance plans also allow you to appoint multiple nominees. You can also specifically mention the percentage of death benefits that you want each nominee to receive. For example, if you have chosen your mother and spouse as the nominee, you can specify in the term application that the death benefit be paid in 50-50 ratio to each nominee.
Having multiple nominees can be beneficial if you want different people in the family to get monetary benefits.
How To Change a Nominee?
Many times, you may feel the need to change the nominee in your term insurance plan. This may happen if your original nominee does not survive the policy term or just because you have second thoughts about your nominee being responsible enough.
If you feel that way, you can always approach your insurer and submit a change of nomination form. Let us look at the steps required to change the nominee
- Get the change in nomination form from your insurer’s website or physically from their branch office.
- Fill the form accurately and submit it to your insurer. Specify all details of the new nominee correctly.
- As a policyholder, you’re liable to convince the insurer of the authenticity of your relationship with the new nominee.
- Once the insurer updates the nominee details, get an acknowledgement from them specifying the same to avoid any future disputes.
You can easily change the nominee for your term insurance plan. If you’re yet to specify a nominee for your plan, do so that your family does not face any legal issues during claim settlement.
