The importance of having nominations when it comes to your finances

 

The aim of financial planning is to secure the future for you and your family. So, you list down your goals, the timelines and the investment tools that can give you maximum returns. However, most of us tend to miss out on listing a nominee. 

Nominations have often been associated with bank accounts and property. This is because most of us tend to assume financial matters are related to only bank accounts and property. We usually do not account for investments and other assets such as jewellery, mutual funds, provident funds, vehicles, etc. 

The idea is to secure your family’s future, and nominations are one way to make sure that happen. However, failing to add a nominee has often been known to land many families and individuals in financial uncertainties and legal complications.

Leaving a Legacy

All of us would want to leave behind a legacy for our loved ones. This is why we invest in insurance policies. It acts as an umbrella against financial instability. For instance, you could consider a plan like HDFC Life Click 2 Protect Super that would help insure your family’s future while adjusting to their changing needs. 

Having insurance will help, yet when it comes to your financial portfolio, nominations are an extremely important aspect. They can help safeguard your loved ones in case of an unfortunate event. 

While it is important to assign a nominee, it is equally important that your loved ones know or find out that you have nominated them in your various financial assets or instruments when the time arises.   

Beyond the Obvious

Ensuring a nominee is mentioned for all your financial assets is important. However, there needs to be one individual or person who needs to be aware of all these details. This will help your family members to make a claim when the time comes. 

For this purpose, there needs to be a will in place. The will should have details of all of your assets and finances and how you wish to endow it in parts or full to your loved ones. 

Of course, having a will without an executor can still make it difficult for your loved ones to claim or know all the details of your assets. Thus, having an executor of the will, usually a responsible person or a loved one, makes leaving behind your legacy far smoother for your loved ones in case of an unfortunate event. 

Parts and portions 

Leaving a legacy is a well-thought-out strategy that covers all angles and ensures that asset distribution is done as you wish. This not only streamlines the process of asset distribution but also mitigates the risk of legal disputes.

A will, nominations, and an executor of the will can help make sure your financial assets are distributed as per your wishes. Yet, despite having all this in place, there may be a situation where your loved ones may not get anything. 

This is possible in a situation where you have any ongoing debt associated. Creditors can lay claim to any and all financial assets in lieu of the debt. This includes the sum assured you may have from your term insurance policy as well. 

The umbrella of insurance with MWPA and nominations

Insurance, as the word suggests, is a safety net against uncertainties. Term insurance is meant to provide a financial safety net to your loved ones in case of an unfortunate event. With a plan like HDFC Life Click 2 Protect Super, you can secure your family’s future against any ambiguity that life may bring. What’s more, you can also get the flexibility to choose from multiple coverage options, the option to increase your coverage at key life stages and the option to extend the policy term. Additional riders¹ and benefits are also available depending on the option selected during purchase. 

It also makes sense to opt for the Married Women's Property (MWP) Act, which offers an additional layer of financial security. This option makes sure that the sum assured goes only towards the nominees of the policy and not to any creditor. 

The beneficiaries defined in a policy that is covered under the MWPA can be your wife alone, just your child or children, or your wife and children together. As a policyholder, you can assign specific percentages of the sum assured to each beneficiary or divide it into equal amounts. All you need to do is fill out an addendum along with your insurance application at the time of taking the policy.

Protecting your family

Being able to provide financial independence is part of leaving a legacy. Insurance and understanding the importance of nominations are crucial for financial well-being. So, while you provide for and have an umbrella in the form of insurance, be sure to update your nominations towards all your financial assets and instruments to safeguard your family and loved ones.

Related Articles:

• Who Should Be Your Nominee? - Tips to Help You Decide
• What Does Grace Period Mean in Term Insurance?
• Differences between Participating and Non-Participating Term Insurance
• Should You Buy Term Insurance For Senior Citizens?

ARN: ED/02/24/9169