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Features
Ref. No. KLI/22-23/E-BB/492
Buying a life insurance policy is one of the most essential steps in securing the financial future of your loved ones. These policies provide a pre-determined amount, also referred to as the sum insured, to your nominee to carry on with their financial requirement in case of your unfortunate demise. To serve this purpose efficiently, you need to choose a nominee for insurance. But how exactly can you do it? Read more to learn the complete procedure for choosing a nominee for a life insurance policy.
Nomination is the process of authorizing a person (or people) as a nominee in a life insurance policy to make sure that he or she receives the sum assured if the policyholder passes away during the policy term. The policyholder can select any person for nomination. However, it can be noticed that most people nominate a close relative. The nomination rules are governed by Section 39 of the Insurance Act, 1938.
Here’s everything you need to know regarding life insurance nominee rules.
A nominee can be any person appointed by a life policyholder to receive the cover benefit in case of his or her death. Generally, children, spouses, parents, and siblings are chosen as nominees. Before the regulations were introduced, there was confusion about who can be a nominee in life insurance policy.
Hence, a rule was introduced to streamline the process to decide who can be nominee in life insurance policy. This law mandates that being a legal heir does not automatically make anyone a nominee. The person has to be assigned by the policyholder at the time of purchasing the cover or at a later stage to be eligible to receive the sum insured.
Nominees for insurance can be chosen when the policy is bought or at any later point during the policy tenure. If you want to nominate someone at the initiation of the policy, all you need to do is to mention the same in your policy form. In case you want to add the nominee later, you have to update it in the policy bond and sign it in the presence of a witness.
Choosing a nominee for your life insurance paves the way to financially secure the future of a close one in your absence. Thereby, thoroughly understanding the life insurance nominee rules can be beneficial. Below, we’ve provided the types of nominees for life insurance for better selection:
Policyholder can choose a nominee from their immediate family which is known as beneficiary nominees. It removes any confusion regarding who will be getting the death benefit and ensures a streamlined claim process.
The policyholder can also choose a distant relative or even a close friend to receive the coverage benefits. However, it is often risky and may require clarifications from the insurer regarding the reasons for choosing a non-family member.
Policyholder can also choose their children for insurance nomination. However, children below the age of 18 are not eligible to receive the payouts. In such situations, the policyholders are required to choose someone who will receive the sum insured amount on behalf of the minor nominee, knows as appointee.
The coverage benefits are given to the legal heir of the policyholder, if he or she has not choosen a nominee.
It is suggested that you decide your nominee in insurance very carefully. It should be a person who can be trusted with the money. This is why it is advisable to nominate a close family member.
The purpose of appointing a nominee, who is usually a child, spouse, parent, or a close relative, is to ensure that they can easily claim the payouts in case of your untimely demise and stay financially secure. The claim can be made without any legal obligations and can be used to cover day-to-day expenses, liabilities, or future goals. Thereby, choosing a person as per life insurance nominee rules serves the purpose of easing the claim process and receiving the sum insured.
One of the major highlights of life insurance nominee rules is that the policyholders are allowed to choose multiple nominees to receive the payouts. It facilities the coverage to be shared among the selected nominees as per the percentage chosen by the policyholder.
If the nominee dies before the policyholder, it is the policyholder’s responsibility to inform the insurer and update the same in the policy document. After that, a new nominee should be chosen to receive the coverage benefits.
Moreover, if the nominee is less than 18 years of age, the policyholder is required to choose an appointee, who will receive the coverage benefits on behalf of the minor nominee.
Choosing a nominee for insurance plans holds significant importance, as it facilitates the chosen person to receive the assets to carry on the same standard of living. These financial assets can be used for daily expenses, your children’s education, or any financial goal that you may have planned together. Still wondering about the importance of a nominee? Here are a few more of its important benefits:
Moreover, as per the life insurance nominee rules, you can also choose multiple nominees, allowing fair distribution of assets without any complications.
The nominees can be canceled or changed at any point during the policy period. As a policyholder, you have the right to change your nominee multiple times as per your requirement. The nomination form can be downloaded from your insurance company’s website or you can take it from the nearest branch office. You need to update the personal information of the nominee by filling out the form and submitting it to the insurer.
Once the nominee is changed, request your insurer for a written acknowledgment. It will leave no room for confusion when the nominee needs to file a claim.
If the life insurance nominee dies before the policy term is over, the insurance company cancels the nomination. In this case, the policyholder needs to submit a new nomination to assign a person who will receive the policy benefits. One thing that is to be remembered is that the nominee is eligible to receive the money only if the policyholder passes away before the policy term ends. In case the policyholder outlives the policy term, the insurance company pays the maturity benefit directly to the policyholder.
Choosing the nominee for insurance is not just a formality but rather an important step that ensures they seamlessly get the coverage benefits without any hassle. Thoroughly understanding the procedure for choosing a nominee ensures that your policy benefits reach the right person after your unfortunate demise. You can choose multiple nominees or even a minor nominee to receive the sum insured and, further down the line, can change or cancel the nominations.
1
The policyholder can nominate anyone for their insurance plans, such as their child, spouse, parent, or even a close relative. In the case of minors, the policyholder is needed to choose an appointee.
2
To add a nominee to your policy, you need to contact your insurance provider fill out the nomination form certifying the details of the nominee, and submit it along with supporting documents.
3
Yes, multiple nominations are allowed for a single policy. It allows fair distribution of death benefits among the nominated members as per the percentage decided by the policyholder.
4
To update or change your nomination, you have to obtain a ‘Change of Nomination’ form from your insurer, fill it out accurately, and submit it back to them with all the mandatory supporting documents.
5
To add or change a nominee, you will require a completed nomination form, policy documents, and ID and relationship proof of the nominee.
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.
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
Features
Ref. No. KLI/22-23/E-BB/2435
The information herein is meant only for general reading purposes and the views being expressed only constitute opinions and therefore cannot be considered as guidelines, recommendations or as a professional guide for the readers. The content has been prepared on the basis of publicly available information, internally developed data and other sources believed to be reliable. Recipients of this information are advised to rely on their own analysis, interpretations & investigations. Readers are also advised to seek independent professional advice in order to arrive at an informed investment decision. Further customer is the advised to go through the sales brochure before conducting any sale. Above illustrations are only for understanding, it is not directly or indirectly related to the performance of any product or plans of Kotak Life.
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