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Nominee in insurance - A Complete Guide on nomination in insurance

Nomination in insurance is crucial for policyholders, as it involves designating individuals or entities to receive benefits in case of the policyholder's demise.

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Amit Raje
Written By :
Amit Raje

Amit Raje is an experienced marketer who has worked in various Fintechs and leading Financial companies in India. With focused experience in Digital, Amit has pioneered multiple digital commerce in India. Now, close to two decades later, he is the vice president and head of the D2C business department. He masters the skill of strategic management, also being certified in it from IIMA. He has challenged his challenges and contributed his efforts in this journey of digital transformation.

Amit Raje
Reviewed By :
Prasad Pimple

Prasad Pimple has a decade-long experience in the Life insurance sector and as EVP, Kotak Life heads Digital Business. He is responsible for developing user friendly product journeys, creating consumer awareness and helping consumers in identifying need for life insurance solutions. He has 20+ years of experience in creating and building business verticals across Insurance, Telecom and Banking sectors

Nomination in insurance is a vital aspect of financial planning that ensures the intended beneficiaries receive the benefits seamlessly. Understanding the process and considerations associated with nomination helps policyholders to make informed decisions, safeguarding the financial well-being of their loved ones.

Key Takeaways

  • Nomination clarifies the distribution of insurance proceeds, who will be the right recipient of the sum assured, and other benefits.
  • Policyholders must fill out a nomination form provided by the insurance company, including details such as the nominee’s name, relationship, and percentage share of benefits.
  • Depending on the insurance policy, the nominee’s consent may be required. Policyholders should be aware of specific requirements regarding nominee consent.
  • Policyholders can designate multiple nominees and specify the percentage share each should receive, providing flexibility in complex family structures.
  • If a nominee is a minor, appointing a trustee is advisable. The trustee manages the funds until the minor reaches the legal age, ensuring responsible financial management.

As part of responsible financial management, policyholders are encouraged to regularly review and update their nominations to align with changing life circumstances and evolving relationships. In essence, the nomination is not just a procedural requirement but a compassionate act that facilitates a smoother transition of financial support to those who matter most in times of need.

What is Nomination in Insurance?

Nomination in insurance refers to the act of appointing someone as the beneficiary (nominee) who will receive the policy proceeds in the event of the policyholder’s death. This process ensures that the insurance policy’s benefits are seamlessly transferred to the nominated individual(s) without unnecessary complications.

Who is a Nominee in Insurance?

A nominee is a person who holds the property of the deceased until he has to distribute this property to the legal heirs. In a life insurance policy, the beneficiary is an individual you nominate to receive the policy proceeds after an unfortunate incident occurs. One policyholder can designate more than one beneficiary and mention their share in the policy proceeds.

Who is Eligible to be Your Nominee in Life Insurance?

Your life insurance policy allows the nomination of individuals falling into the following categories:

Legal heirs: Nominate your legal heirs, such as children or spouses, to ensure they receive the insured sum and can safeguard the financial future of the person you wish to secure.

Immediate family members: Designate your parents, siblings, or other family members as nominees. They can receive and manage the insured sum for the person you aim to protect financially.


Extended family members or Friends: Nominating cousins, relatives, or friends is possible. However, approval from your insurance company is necessary to appoint such a nominee.

How Many Types of Nominees are There?

Understanding the various types of nominees in insurance is crucial for policyholders making decisions about their beneficiaries. In the realm of insurance, different categories of nominees cater to specific needs and circumstances. Here’s a breakdown of the key types of nominees and their significance:

1. General, Specific, Successive, and Contingent Nominees

General Nominees: Individuals designated without specifying a share in the benefits.

Specific Nominees: Designated individuals with a specified share in the benefits.

Successive Nominees: Nominees nominated by other nominees, ensuring continuity.

Contingent Nominees: Individuals appointed to receive benefits if primary nominees are unable.

2. Beneficial Nominees

  • Immediate family members are eligible to become beneficial owners of a term insurance policy.
  • Only spouses, children, and parents can be appointed as beneficial nominees.
  • Ensures full rights to the policy, including changes and payout upon the policyholder’s demise.

3. Minor Nominees

  • Individuals who meet most eligibility requirements but may lack one, such as being below the age of majority.
  • Requires careful consideration of eligibility criteria to select the most suitable nominee for the insurance policy.

4. Non-family Nominees

  • Experienced individuals like directors, officers, or employees of the insurer with expertise in the insurance field.
  • Chosen for their ability to handle responsibilities related to the policy, such as claims and payouts.
  • Eligibility criteria include financial and professional qualifications, ethical behavior, and responsible history.

5. Successive Nominees

  • Individuals or groups nominated by other nominees to receive benefits.
  • No pre-defined limit to the number of consecutive nominations.
  • Each nominee must meet eligibility requirements set by the policyholder and the insurer.

6. Multiple Nominees

  • Life insurance policies allow the designation of multiple nominees, each receiving a portion of the death benefit.
  • Common in policies where the death benefit is divided among family members or other individuals.
  • Offers flexibility in choosing and assigning appropriate nominees based on the policyholder’s preferences.

What is the Difference Between Nominee and Beneficiary?

In the vast world of insurance, the terms “nominee” and “beneficiary” often coexist, yet they represent distinct roles in the claims and benefits process.

Aspect

Nominee

Beneficiary

Definition

An individual appointed to receive assets or benefits on behalf of the deceased.

A person entitled to receive assets or benefits from a policy, will, or trust.

Role

Primarily responsible for receiving the assets and ensuring their distribution to other heirs or as per the deceased’s wishes.

Directly entitled to inherit or receive benefits, often with fewer obligations than a nominee.

Appointment Process

Appointed by the account holder, policyholder, or testator in the relevant documents.

Designated by the account holder, policyholder, or testator in legal documents such as a will, insurance policy, or retirement plan.

Types

Can be appointed for various assets, including bank accounts, investments, and properties.

Commonly associated with insurance policies, retirement plans, wills, and trusts.

Succession Planning

Nominee roles may not be passed on to the nominee’s heirs; the deceased’s instructions or legal procedures prevail.

Beneficiary designations can involve secondary beneficiaries, ensuring a smoother transfer of assets if the primary beneficiary is unable to receive them.

Final Thoughts

Nomination in insurance is a critical component of financial planning, ensuring that the benefits reach the intended recipients when they are most needed. By comprehensively navigating the nomination process, policyholders can contribute to the financial security and well-being of their loved ones. Regular reviews and a clear understanding of the different aspects of nomination empower individuals to make informed decisions, reinforcing the protective shield that insurance aims to provide.

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- A Consumer Education Initiative series by Kotak Life