When you buy a life insurance policy, you will have to select a nominee for the plan. A nominee is a person who would receive the death benefit if you die within the policy period. A nominee in life insurance is also known as a beneficiary. You can have a single nominee or multiple nominees for your life insurance cover. Commonly, policyholders nominate their closest family members such as their spouse, child, or parents as nominees. You need to choose your nominees carefully. This is because fights can break out within the family after your death in regards to who receives the death benefit money. Avoid this by choosing your nominees carefully. Here are some easy tips for you:
- See Who is Financially Dependent on You
Start off by seeing who is most dependent upon you. If your spouse is not earning a salary, you need to ensure he or she receives a large chunk of the death benefit as that will be needed as your income replacement. Your spouse will take over all the responsibilities of the house and he/she will also have to pay the bills, so make sure the financial support is always there. You thus need to see who is dependent on you financially and then choose your nominee.
- Look for Your Family’s Income
If the other members of your family have their own sources of income, you need not mention them as your life insurance nominees.
For example, if your children are working and not dependent on you financially, you need not include them in your nominee list. If your parents receive regular rent from an apartment they own, they may not need the proceeds from your life insurance plan. You should take the income factor into consideration and then select the nominees for your life cover.
- Divide the Share Properly
If you have multiple family members who you need to support, make sure you divide the share properly. If you feel your spouse will need more financial assistance to pay rent, EMIs, fees, etc, assign a larger share to her and a smaller share to your parents whom your siblings also support. Assess your family situation and then make the correct decision.
Keep these tips in mind and your job of coming up with a suitable list of life insurance nominees will become a lot simpler.
Possible Nominee List
These are the people you could consider keeping as your nominees in the life insurance plan:
- Your Spouse
Most people nominate their spouses as their primary life insurance beneficiary. This is because the spouse automatically takes over the financial reins after the partner’s demise. He or she is then responsible to pay the bills, take care of the other dependents, etc. If you feel your spouse will take over your role after you die, do nominate him or her as your primary beneficiary.
- Your Kids
If you have small children who will need money for their education, marriage, etc, you need to nominate them in your life plan as well. Allocate a part of your fund to them to ensure all their financial milestones are met with ease.
- Your Parents
Many parents depend on your adult children for their day-to-day expenses and other major expenses such as surgeries and rent. If your parents depend on you financially, you need to ensure they get a substantial share of your life insurance cover after your demise. If however they have their own source of income or they depend on someone else financially (your sibling, for example), you can allocate a smaller share of your life cover to them.
- Your Siblings
In the absence of a spouse and kids, you can allocate your life fund to your siblings who may be dependent on you.
- Your Business Partner
If you have taken a large business loan, you could consider nominating your business partner in your life plan as well. If you die before you repay the loan, your business partner can use the sum assured to clear the loan and carry on with the business, rather than shutting the place down altogether.
Choose the names very carefully to ensure the proceeds received from the policy after your demise are used properly and not wasted away. Also, allocate the funds in such a way that there are minimal fights and disputes about you are gone.
The Bottom Line
At certain times, you need to put the emotions aside and be practical when taking certain decisions. Deciding upon the final list of life insurance nominees is one such task. Do not get carried away by emotions and your love for a certain person when nominating them as a life insurance beneficiary. Rather, look at the duties and responsibilities they need to carry out after your demise and make sure they have the financial provisions for everything. This will help you to come up with the best and most effective list of life insurance nominees.