The Buyt Desk
Naming one or more nominees is the policyholder’s responsibility so that the nominee(s) can get an insurance claim /insured amount when the insured is no more.
Since the COVID19 pandemic, the world has been full of uncertainty. So it becomes crucial for all of us to ensure the future of our family. For our loved ones we work hard to earn good money and also do some savings and investments to get good returns. Moreover, we do everything in our power to give the best to our family. Until you are there, you will make sure that your family is safe. But to make sure that your loved ones are secure even after your death you should have term life insurance. The death of an earning family member will just have an emotional impact but also causes financial troubles and insecurities in the family.
What is Term Life Insurance?
Term insurance is a life insurance policy which offers a big cover for a small premium. It offers financial security for the insured family in case of death of the insured and also one can get extra cover for critical illness through riders. On the death of the insured, the sum insured is paid to the nominees who were assigned by the insurer. And this money received can be used to pay the everyday needs of the insured family and major expenditures like education, loan repayment or children’s wedding. While buying the insurance or at a later stage the insured can decide who the insured money will be given to in case of the death of the insured.
Who are the nominees and their importance to policyholders?
Every policyholder should go through the nomination process. This is where he/she decides as to who will receive the plan benefits after their death. This appointed person is known as a nominee. This process is necessary for having a smooth legal process of receiving the sum insured. When the nominees are listed in the policy, the claim amount will be immediately transferred to the nominee account soon after the claim is filed. The nominee will usually be a spouse, kids, parents or someone from the family-like uncle, aunt, nephew or niece. When the nominee is a minor, it is necessary to have an appointee who will manage the financial benefits till the minor grows into an adult. When nominees are distant relatives, the policyholder needs to do extra documentation. It becomes important for the policyholder to prove the insurance interest when a distant relative or friend is chosen as the nominee. If the policyholder fails to establish the interest satisfactorily, the insurance company will reject the application.
Should policyholders have more than one nominee?
To protect the interests of the policyholder’s family after his/ her death, the nomination process while buying the life insurance is key. What most do is appoint only one nominee for all financial instruments. And this nominee will be mostly the spouse. This is not advised and having more than one nominee is always a good idea. And also policyholders should inform the nominee of the policy and details of the same. If possible, policyholders should review the policy and the nominee details annually, as relationship equations change. And changes to be done should be informed to the insurance company.
When there is the death of an earning family member, often there is conflict in the dependents left behind as to who will get how much share of the money. When the policyholder does not specify the nominees correctly and the share of the money they get, he/she will be creating fights in the family for the money left behind. Policyholders should consider everybody’s interest in the family while creating a nominee list and accordingly distribute the money. So having more than one nominee is always advisable. Even minors can be nominees.
The policyholder cannot be sure that the single nominee appointed will ensure the needs of the whole family. And most of them add a spouse as the single nominee and that can be a costly mistake. In some unfortunate event, both the policyholder and the spouse may die. In such cases, there will be no nominee. Now the dependents should prove the legal heir and then file a claim. Only if verified, the claim will be settled, else rejected. And there can be many legal heirs. This will make the payout more difficult as there are more dependents. It would be tough for survivors to go through complicated and time-consuming processes. So it is advised to never just add a spouse as a nominee. But you can definitely give more share of the benefit to the spouse and less to other nominees.
Summing up
One can avoid all this hassle and complications just by not having a single nominee. The process of claiming life insurance benefits can be simplified to a large extent by having multiple nominees. Also do not forget to add the percentage of the sum assured that each one of them will receive. This will ensure that there is no conflict among family members or dependents. Even the nominees will get their share of money just by submitting a few documents, which will be hassle-free.
