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Term Insurance Nomination Related FAQs | Bajaj Allianz Life

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What happens if the nominee dies before the policyholder in term insurance? - Nomination Related FAQs


Aug 10, 2022

By : Bajaj Allianz Life

By choosing a nominee for your term insurance plan, you ensure that after your demise, the death benefit pay-out from the policy reaches the people it was intended for. While this basic benefit of nomination in insurance is well-known, there are quite a few grey areas that still need to be clarified for the benefit of the policyholder. To help you understand these aspects better, in this article, we cover some of the most important term insurance FAQs related to the nomination process.


Who is a Term Insurance Nominee?


A nominee is an individual who is designated by the policyholder to receive the death benefit pay-out under an insurance plan if anything untoward were to happen to the insured during the policy term.


Who is a Beneficiary Nominee?


When an immediate member of the policyholder’s family like a spouse, children or parents are made nominees for a term plan, they automatically become beneficial nominees. This helps eliminate disputes between legal heirs and those nominated to receive the claim amount after the policyholder’s demise.

Similarly, when listing beneficial nominees, you can name multiple nominees and ascertain the percentage of the pay-out they stand to receive.


What If the Nominee Dies Before the Policyholder in a Term Insurance?


Given the generally long tenure of term plans, anything untoward can happen to both the insured and the nominee. If the nominee of a term plan passes away before the demise of the insured, the nomination stands cancelled. In such cases, policyholders will be allowed to change the nomination in their insurance plans.


What Happens If the Policyholder and Nominee Both Die?


In some cases, it may so happen that the nominee dies after the insured’s death but before receiving the death benefit pay-out. In such a situation, the claim amount secured by the policy shall be payable to the policy-holder’s heirs or legal representatives or the holder of a succession certificate.


How Will the Benefits of My Term Plan be Distributed in Case of No Nomination?


If the policyholder does not designated a nominee under the term insurance plan and if he dies intestate, then the death benefits will be paid by the insurer to the legal heir based on the documents produced by them at the time of claim/maturity.

If you have a legal will, the following procedure will be followed:

  • The insurance plan will be handled in accordance with the Indian Succession Act of 1925.
  • The insurance proceeds will be divided in accordance with the terms of the will.
  • A succession certificate will be issued by the court. According to the court's decision, the insurance money would be divided among the surviving dependents.

    Is Nomination in Insurance Policies under the Married Women Property Act (MWP) Possible?


    As per the guidelines of the Married Women Property (MWP) Act of 1874, only the wife and child/children of the policyholder are entitled to the death benefit pay-out.

    For instance, if you are a salaried individual with outstanding debts in the form of personal or home loans, your creditors will have the first claim to your insurance pay-out proceeds in the event of your untimely death. This will put the financial well-being of your wife and children in jeopardy.

    However, you can prevent this by opting for a term insurance plan under the MWP Act, wherein only your wife and children will have sole access to the claim amount.


    How Often Can I Change Nominees for my Term Insurance Plan?


    You can change the nomination in your insurance plan as many times as needed. It is generally advised to review your nomination list after every major life event.

    For instance, you may have purchased a term plan a few years ago. Back then, you decided to name your parents as your beneficial nominees. However, now that you are married, you may want to secure both your parents and spouse. This would need you to amend the nomination listing on your term plan.


    Summing Up


    A term plan can be a useful safety net for your loved ones in your absence. The sum assured from such plans can help your family meet their daily expenses as well as achieve their future life goals. However, to ensure that the needs of your family are sufficiently met and that they get the death benefit pay-out without much hassle, you must take the nomination process seriously. The term insurance FAQs discussed above can help you better understand how this process works and plan your future accordingly.

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2Above illustration is considering Male aged 25 years | Non-Smoker | Life Cover Variant | Policy term (PT)– 30 years | Premium Payment Term (PPT) – 30 years | Sum Assured opted is Rs. 1,00,00,000 | Online Channel | medical rates | Annual Premium Payment Mode | Premium shown above is exclusive of Goods & Service Tax/any other applicable tax levied, subject to changes in tax laws, and any extra premium and is for illustrative purpose only.

The above information is for general understanding and is meant to educate the general public at large. The reader will have to verify the facts, law and content with the prevailing tax statutes and seek appropriate professional advice before acting on the basis of the above information. 

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