How Can I Change the Nominee in Life Insurance?
How Can I Change The Nominee in Life Insurance?
You take an Insurance policy with the intention of securing the future of your loved ones. It is needless to say, that you want to entrust this task of managing all nuances of your family, in case of your unfortunate absence, to a person whom you can wholeheartedly rely upon. Hence, it is mandatory to mention the name of your nominee in the policy document, with a death benefit, to ensure fast and effortless claim settlement process, when the need arises.
Who Is A Nominee?
A nominee is none other than that responsible person whom the policyholder endorses officially in the policy document as a bona fide claimant to the death benefit in case of the untimely demise of the insured person. In a term life insurance policy, the sum assured or the lump sum amount is a predetermined amount, which is handed over to the nominee in the instance of the unfortunate demise of the policyholder. It is extremely important that the right person is nominated by the policyholder who will be able to handle the financial needs of the family seamlessly in case of the demise of the policyholder.
Making A Right Choice!
It is the sole discretion of the policyholder in choosing the nominee. The nomination details need to be filled even in case of buying an online life insurance policy. Your nominee can be your husband/wife, son, daughter, father, mother and in some cases your distant relatives you can trust completely. However, the necessary documentation needs to be filed by the policyholder to include the distant relative. The policy application may be rejected by the insurance company in case the insurance interest is not established to their satisfaction.
Some key pointers to be kept in mind while choosing a nominee
- Nomination serves the main purpose of the insurance: The interests of the policyholder is safeguarded by the insurance contract. The nominee, who is the beneficiary of the insurance policy, gets the final claim amount which comprises the sum assured and the applicable bonuses at the time of the death claim settlement. Once the death claim is settled, the contract ceases.
- Right to choose the nominee: The policyholder has the sole decision-making power as to whom he wants to nominate for his policy. He has the right to choose his nominee, on the basis of his trust on the appointed person regarding fulfilling the requirements of his family in his/her absence.
- Multiple nominations: Multiple nominees can be chosen by the policyholder. In case one nominee does not survive the policy term, the other nominee receives the death benefit.
- Sharing option of death benefit: The policyholder gets the option of allocating the death benefit to more than one nominee if he chooses so. In such a case, the death benefit will be shared among the nominees as per the allocation made by the policyholder.
- Cancellation of nomination: Nomination can be cancelled or changed at any point, as many times as required by the policyholder during his lifetime.
- Nomination details on the insurance cover: The details of the nominee is mentioned on the policy document itself. The formalities of claim settlement are completed in presence of the nominee as mentioned on the policy document.
Need to change the nominee
The policyholder may change the nomination in his chosen insurance policy as many times as he wishes. The need to change the policy may arise owing to some triggers like the loss of faith/trust in the current nominee by the policyholder or the nominee expires before the policyholder. Nominations may also be changed or updated in order to avoid any family rifts. The absolute rights of the nominees (in case of multiple ones) may be sealed by the policyholder in a will that he may make as per his wishes. A simple procedure needs to be followed in order to change or update the nominee details.
Let’s take a step by step look at the process to change the nomination details:
Step 1: The nomination form, available with the insurer, either online or offline, needs to be duly filled by the policyholder and submitted.
Step 2: The completed nomination form along with necessary documentation and a copy of the policy need to be submitted to the insurer for updating the nomination details. Here, you need to keep in mind that, the policyholder is bound to establish his relationship with the new nominee to the satisfaction of the insurer.
Step 3: A copy of acknowledgement needs to be obtained by the policyholder, mandatorily, from the insurance company, to avoid any discrepancy at the time of the claim settlement process, in the future.
Once the nominee change details are updated, it will automatically override the previous nominations. It is the responsibility of the policyholder to update the change of nominee as and when he feels the necessity of doing so.
It is important to understand that in case of no nomination being filed for a particular life insurance policy, or the nominee details are not updated/changed in case the nominee expires within the term of the policy, then the claim amount will be dispatched to the Class I Legal Heir of the policyholder, by the insurance company. Class, I legal heir include the insured’s spouse, son, father and mother.
In case the policyholder leaves behind a will, the process under the Indian Succession Act, 1925 is followed and the claim is distributed as per the terms of the will.
Common Errors To Be Avoided In Nominee Change
- Nominee not informed: The nominee should be made aware of the nomination details of the policy and should hold a copy of the policy document. It is unwise on the part of the policyholder not to do so.
- Details not updated: All details pertaining to the nominee in regards to his/her name, age, address, relationship with the insured must be updated periodically.
- Minor nominee: If the policyholder must have a minor nominee (age less than 18 years), he should also provide complete and verified details of an appointee for the nominee, failing which, the nominee would face difficulty in getting the death claim settled.
- Single nominee syndrome: In case of the sudden demise of the existing single nominee, and the policyholder fails to change nomination details, then the death claim settlement process becomes complicated and time-consuming. It is prudent to keep more than one nominee with the allocation being clearly mentioned in the nomination form.
- Misconception of legal rights: In most cases, nominees are unaware that if the nominee name and the name of a legal heir as mentioned in the will of the policyholder differs, then the legal heir gets the first priority at the time of claim settlement unless the name of the nominee is also included in the will.
It is extremely important for you to realise how important the nomination facility is, as it protects the rights of the insured and the nominee alike. Thus, it is definitely prudent to opt for the nomination facility to your life insurance policy, today, if you still haven’t done so!