In a term insurance plan, the person who is nominated by you to receive the sum assured is called the nominee. When you purchase a term insurance plan, you agree to pay periodic premiums for the entire term of the plan in return for financial protection of your family. You can calculate your term insurance premiums using the term insurance calculator online.
In the event of your untimely demise while the plan is active, your nominee (usually a family member like a spouse or a parent) receives a predetermined sum of money to fulfil their financial needs in your absence.
You may wonder how to choose a nominee for your term plan. Here are a few things to consider while choosing a nominee for your term insurance.
Who All Can Be Nominees?
A nominee is usually a family member like your spouse, parents and/or children who depend on you financially. However, a nominee can be anyone, including your friends and distant relatives, unless there is proven insurable interest, i.e. the nominee is at some proven financial risk in your absence.
It is important to note that the nominee should be someone you believe to be capable of handling the sum assured wisely and for the benefit of your entire family. Hence, choose a nominee who understands both the short-term and long-term financial needs of your entire family and is someone you trust to fulfil those needs responsibly in your absence.
Can a Plan Have Multiple Nominees?
Yes, a term insurance plan allows you to nominate multiple people. You can choose to have multiple nominees wherein each receives a certain portion of the sum assured. For example, you can choose to nominate your spouse and children, each receiving a part of the sum assured in case the policy is triggered; this is known as a shared benefit.
It is also possible to have a secondary nominee receive the sum assured in case the first nominee does not live through the term of the policy. Whether you should have a single nominee or multiple nominees depends entirely on you and your family’s needs.
What if the Nominee is Below the Age of 18?
In case the nominee is a minor, you must also nominate an appointee. Until the nominee reaches the age of 18 years, they are not entitled to receive the sum assured. The appointee will receive the sum assured and hold on to it until the nominee is 18 years old. This point should be kept in mind especially when having your children as the nominees to your term insurance plan. Make sure to choose an appointee that you trust to carry out your will in your absence.
Can I Change Nominees During the Term of the Plan?
Yes, it is possible to change nominees during the term of the plan as many times as you like. In case you wish to change the nominee of your term insurance, you can contact your insurance provider and follow the required procedure.
What if There is No Nomination Found in a Term Plan?
Here, there can be two scenarios. If the insured has left behind a will, the sum assured is given to the successors as per the will.
If there is no will, the sum assured goes to a Class 1 legal heir as per the Indian Succession Act, 1925. A Class 1 legal heir includes your spouse, son, father, and mother. It is also important to note that your will has higher precedence over any nomination given in your term insurance. If, in your will, the name of the beneficiary of the term insurance policy is different from the nominee of the plan, the sum assured will be received by the beneficiary named in the will and not the nominee.
What is an Assignment in Insurance Policy?
The assignment is when the right to the sum assured in the policy is transferred to someone else through a separate contract. It is important to note that assignment takes precedence over nomination given in the insurance plan.
Keep in mind all these points when trying to figure out who to choose as the nominee for your term insurance plans. Calculate your term insurance premiums using the term insurance calculator. Remember that the idea is to provide financial protection to your family, and the nominee should be someone who can use the sum assured in the policy in the right direction.