Who should be Your Nominee for Your Term Insurance?
A term insurance policy financially protects your dependents after your untimely demise. The sum assured or the payout is a pre-specified amount and is given to a nominee mentioned on your policy. If you opt for a term insurance plan with a death benefit, it is compulsory to include a nominee.
Who can be Your Nominee?
The nominee for your term insurance policy can either be a family member such as your father, mother, wife or husband, son or daughter; or any other distant family relative such as your aunt or uncle. It is important for you to prove the insurance interest to your provider if you choose a distant relative in the form of a nominee. If you cannot establish this, then the insurance provider may reject your application.
Details of Your Nominee
The following details of the nominee are required by the insurance provider:
- Name of the nominee
- Age of the nominee
- Address of the nominee
- The relationship between the policyholder and the nominee
The term insurance provider also requires official documents of the nominee to confirm the above-submitted details.
Advantages of Nomination Facility
The policyholder appoints a nominee or nominees through the nomination facility, who then receives the death benefit while processing a death claim. The following are the benefits of nomination facility:
Caters to the Purpose of Insurance
The nomination facility fulfills the main purpose of holding insurance. The insurance policy aims at protecting the interest of the holder of the policy. In case of an untimely demise of the insured, the beneficiary (i.e. nominee) will receive the death benefit, after which the contract of the policy ends.
Ability to Nominate Anyone
As a policyholder, you can choose any person as the nominee in your policy form. Ideally, you should choose a responsible person who you can trust to take full care of your family when you are not around.
If you can prove the insurance interest to your term insurance policy provider, you can also nominate a friend or a distant relative.
More Than One Nomination
While opting for a term insurance policy, you can also choose multiple people as your nominees. If the first nominee does not survive the term of the policy, then the other nominee is eligible to receive the death benefit.
Sharing the Death Benefit
The death benefit that is paid out as a sum assurance to your beneficiaries can be shared among multiple nominees. You can allocate your death benefit to more than one nominee, and in case of any unfortunate situation, the death benefit will be shared among the multiple nominees.
Canceling the Nominee
The changes or any cancellation of a nominee or nominees can be made at any time.
Nomination Details on Insurance Cover
The details of the nominations are present on your insurance documents. The legal obligations are fulfilled with the name of your nominee present on the documents.
You can opt for multiple people to be your nominees. In such cases, the death benefit is shared among the nominees equally. It is also possible to share the payout in pre-specified percentages set by the policyholder. It is important to be well aware of the insurance provider’s policies so that you can exercise options as per your requirement.
The Final Say
The nomination facility protects the insured person as well as the insurance provider. The insurance company will pay out the death benefit as per the details mentioned in the nomination form. It is important to update any contact details of your nominee in case of any change.