Who should be your nominee? How to decide

A term life insurance product protects the financial needs of your dependents after your untimely demise. The lump sum, known as the sum assured, is a pre-determined amount on your policy that is handed over to a nominee as mentioned on the proposal form by the policy holder. If you purchase an insurance policy with a death benefit, you have to include a nominee without fail.

Let’s take you through the procedures, do’s and don’ts of appointing a nominee

How to nominate

You will have to include the details of the nominee while you apply for a policy both online or offline.

Who can be nominee

The nominee can be either a family member like mother, father, wife/husband, son/daughter; or any distant relative such as nephew, uncle/aunt. It is important to prove the insurance interest if you choose a distant relative as you nominee. If you fail to establish this, the company may reject your application.

Purpose of a nominee

By appointing a nominee, the policyholder makes the person responsible for claiming all sum assured as well as any other bonus upon death claim. Therefore, a policy holder should opt for a responsible person who can take the responsibility of the family in their absence.

Multiple nominations

Most importantly, there can be multiple nominees as per the policy holder’s decision. The death benefit can be shared among the nominees as per the percentage chosen by the policyholder.

If the nominee’s is less than 18 years, the policyholder should provide an appointee. The sum assured will then be paid to the appointee as declared by the policyholder.

If the nominee dies before the policy term, it is the policyholder’s responsibility to update the nominee’s particulars as per the changes in the status of the nominee.

If there’s no nomination

If the policyholder fails to provide the details of the nominee, and the poliholder or the nominee dies during the policy term without any updates to the company, the following rules are applied:

The insurance company will dispatch the claim amount to the Class I legal heir: spouse, son, father, mother.

If the policyholder leaves a will, the following procedure is followed:

• The process as per the Indian Succession Act, 1925.
• The claim amount is distributed as per the terms of the will.
• The court issues the succession certificate and based on the court’s decision, the claim amount will be handed over by the insurance company.
• The insurance company may demand an indemnity bond, joint discharge statement or waiver of legal evidence.

Thus, all as a policyholder you have to ensure is, you have updated your nominee while applying for insurance, and in case, there are any changes to the nominee, you have to duly inform the insurance company with the particulars. This will help your family in your absence.

HDFC Life offers various term insurance plans for the guaranteed financial benefits of your family. For details, click on the mentioned link: https://www.hdfclife.com/term-insurance-plans.