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A nominee in insurance is a person who receives the proceeds and benefits of the life insurance policy after the demise of the policyholder. Usually, a nominee is registered in the proposal form while buying the life insurance policy but nominees can be added anytime during the policy tenure.
If the policyholder wishes he can add multiple nominees too, specifying the receives he wants each one of them to have. The policyholder can also change the nominee during the premium payment tenure.
A nominee is someone who is trustworthy and close to the policyholder. Hence usually, parents, spouses, children, relatives and close friends are appointed as nominees. Insurers always make sure that the policyholder has provided complete details about the nominee and their relationship with the policyholder during registration.
Legally, minors are not considered to be competent to enter a contract. This means that they are ineligible to receive the claims directly. Hence, when a policyholder wants to nominate a minor, they have to assign a custodian. If a situation arises where the minor nominee needs the money, the insurer discharges the claim amount to the custodian until the nominee turns 18.
Insurers also allow policyholders to have successive or multiple nominees.
For example, if someone nominates three successive nominees, A, B and C, the claim proceeds will first go to nominee A. If nominee A is unable to receive the proceeds, they will go to nominee B, and if nominee B is unable to receive the benefits, they will go to nominee C.
Having multiple nominations means that the benefits will be divided among them. Even if insurers allow multiple nominations, many insurers prefer giving the full claim amount to just one of the nominees. This is done after getting the consent of all other nominees. Hence, to avoid legal disputes, it is better to appoint one reliable nominee.
Many insurers also avoid accepting unrelated parties as nominees, as it increases the risk for the insurer.
The policyholder gets insurance to support his/her dependents in case of unfortunate events. Appointing a nominee fulfills the main purpose of life insurance, that is, it protects the interest of the policyholder. Hence many insurers accept a nominee who is a close relative or someone who will take care of the deceased’s family after his/her death.
If there is no nominee, the insurance company asks the claimant for a succession certificate, which will be issued by the court of law. This process is tiring and it can be easily avoided if the nomination is registered at the proposal stage. If a clear nominee is absent, it beats the purpose of offering immediate financial help to the family of the insured. Stating a clear nomination allows the insurance company to settle the claim quickly without any confusion.
A life insurance acts as the financial shield of the policyholder’s family after his/her death. To make sure that the family does not suffer after an accidental demise, it is very important to have a nominee in insurance.