What is term insurance?
A term insurance is a type of life insurance plan, which provides life coverage in case of the policyholder’s unfortunate death. This enables one’s family to continue to afford a decent standard of living even if any unforeseen miss happening occurs in the life of the policyholder. Term insurance plan is purely an insurance plan and does not have any savings component in it. Hence, a term insurance plan cannot be used for investment purposes.
In a term insurance plan, the nominee receives the death benefit either in lump sum amount or in instalments if the policyholder dies during the policy term as per the product terms and conditions. However, term insurance plans do not offer any maturity benefit. Term insurance plan premiums are comparatively lower, hence making it a highly affordable option to secure the life of your family and your wealth.
A term life insurance takes care of the lives of your dependents through a predetermined sum paid to your nominee/beneficiary in case of any untoward situation.
There are several benefits of availing a term insurance plan. Since there is no maturity benefit in a term insurance plan, the entire premium goes into covering the lives of the policyholder and his/her family. In a term insurance plan, one gets higher coverage with a low premium. The amount insured, which is chosen by the policyholder in a term insurance plan, can help cover outstanding loan or liabilities, if any, in case of any unexpected circumstances. This takes care of the ability of your family members to repay the loans with the sum assured amount and that they do not face financial obstacles in meeting their life goals in your absence.
What is a Term Insurance Nominee?
In all life insurance plans, including a term insurance plan, a policyholder has the right to appoint a nominee or nominees. A nominee is a person who will receive the money assured under the policy in case of the policyholder’s death.
You can nominate multiple names in your proposal form by specifying a definite percentage of the sum assured between the multiple nominees. The policyholder endorses a nominee in the proposal form of the term policy when he/she purchases the term insurance plan. You need to submit the following nominee details to the insurance company: full name of the nominee, address, age, and the relationship between you and the nominee.
Can we change nominee in term insurance?
For all insurance plans, one has the option of changing the nominee or nominees. You can change the nominee details even during the policy term. Let us have a look at how one can change the nominee in case of a term insurance plan.
Process to Change Nominee for your Term Insurance Policy
You can change the nominee in your term insurance policy by following three simple steps:
- The policyholder needs to fill up the change of nomination form that is accessible from the insurance provider, either online or offline. • The filled up nomination form must be submitted to the insurance provider for updating the new nominee information. The policyholder is accountable to the insurer of informing about the relationship between him/her and the new nominee, which he/she wishes to appoint.
- The policyholder needs to receive a written acknowledgement from the insurance company for modification in the nominee name to avoid any discrepancy during the claim settlement process in the future.
- Like all types of life insurance plans, term insurance plans offer you the provision to change your nominee. You need to take care that you do not make one of the following mistakes while appointing a new nominee in your term insurance plan -
Most policyholders commit the mistake of appointing a single nominee. If the policyholder does not update the nominee details in the event of the existing nominee’s unforeseen death, the claim settlement process can hit a roadblock with the insurer trying to identify the legal heir of the insured. This time-consuming process can be prevented by naming more than one nominee and allotting a certain percentage of sum assured to each of the nominees.
If the policyholder does not appoint a custodian to a minor nominee (of less than 18 years age), the claim process cannot proceed, and the minor will not be able to avail any financial death benefit under the policy. Therefore, the policyholder should not only appoint a custodian but also submit fully verified details of the custodian to the insurance company.
Details Not Updated
The policyholder must update the nominee’s existing details such as name, address and other relevant information regularly. This is more important in the case of the present nominee’s demise during the policy tenure.
Nominee Not Informed
The nominee must be informed and the insured must share the policy documents with the nominee, so that the nominee is able to submit the claims to the insurer within the stipulated time.
Now that you have answers to the questions how can we change nominee in term insurance and what is term insurance, you can update your nominee details after keeping in mind that you do not commit one of the above-mentioned mistakes.