Why Nomination is Vital in Life Insurance

A NOMINEE is the person who has been proposed by the policyholder for receiving the claim amount of the life insurance policy, upon his/her death. It is important that the nominee has an insurable interest in the life of the insured.

Thus, insurers insist on full details of the nominee and relationship with the policyholder. An important rule of nomination is that your nominee should preferably be a nearest relative who is expected to take care of the immediate needs of the family members of deceased life assured upon his/her death. In case of the nominee being a minor, the insured is required to appoint a custodian whom the claim amount would be discharged to till the appointed nominee turns 18. Importance of nomination: A nomination serves as an instruction for the insurer as to whom the claim amount needs to be settled in case of death of insured.

In absence of a nomination, the insurer would call for a succession certificate from the claimant, which is issued by the court of law. This tedious procedure can be avoided simply by ensuring nomination at the proposal stage or subsequent change of nomination in case of nominee’s death. Absence of a valid nomination defeats the very purpose of providing immediate relief to the family members in case of untimely death of insured.

Things to keep in mind:

1) Inform the nominee or any other member of your family about the policy and the nomination so that they can make the best use of the sum assured in your absence.

2) In the unfortunate event of the nominee’s death during the term of the policy, it is important that a new nominee is appointed, by informing the insurer.

3) Multiple nominations can generally be avoided as such a situation could end up as a legal dispute.

Since the insurer would prefer to hand over the entire claim amount to only one of the nominees on getting consent from other nominees for doing so, the dispute could come in terms of submission of such consent amongst the various nominees. When taking life insurance, it is important to appoint a nominee who would be the rightful person to receive the claim benefit on behalf of surviving dependents of life assured.

Nomination, thus, gives a legal discharge to the insurance company for settlement of claim. Since life insurance acts as a shield for your family upon your death, you must ensure that complete details concerning the nomination are provided at the proposal stage.

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