Buying term insurance can be viewed as a single, complex process comprising several smaller yet important procedures. For example, selecting your sum assured and policy tenure are some of them.
Another significant procedure when buying term life insurance is nomination. This is the part of the term insurance buying process where you get to decide who the recipient/s of the benefits of your policy will be after you.
Today, the nomination is a relatively simple process and a necessary part of every life insurance purchase, if you want your policy to be used to its full potential. Without nomination, your policy may end up being wasted and not benefit anyone.
Nonetheless, several people are not fully aware of the details of policy nomination. Let’s take a look at what nomination is in term insurance, who can be a nominee, and the rules regarding nominee change.
What is Nomination?
For someone who has little to no idea of how term life plans function, it may not be easy to understand what nomination is, or what purpose it serves. Let’s first take a look at how term insurance works. When you buy such a plan, it is a way to offer a financial security net to your family to fall back on, when facing some unforeseen circumstances as covered by the policy.
In the case of term plans, you pay a premium to primarily secure a death benefit for your loved ones. You may be able to boost your plan with additional riders that may help you and your loved ones. The way to ensure that the benefits from your policy reach the right set of people, or the right person, is nomination.
Given its significance, nomination may sound like a complicated process, but it is quite simple. It is to be conducted when you are buying the policy. You will be required to give the name and some other personal details of the person you are nominating when giving your term insurance application.
Can you Name Multiple Nominees?
It is possible for a policyholder to name multiple term insurance nominees. Moreover, it is also possible for them to define what share of the benefit should each nominee receive. If there is no provision to name multiple nominees when buying term life insurance, you can consult your insurance agent or your insurance provider, and they may be able to help you with the process.
Changes in Nomination
There may be several instances where you may want to change your nominee or add to the list of nominees. For example, you may become a parent and want to ensure that all benefits of your term insurance plan go to your new-born. You may also get married and want your husband as well as your parents to benefit from your policy. It may also happen that you may need to nominate a new person because your previous nominee has passed away.
Know that it is possible to change your nominee as well as add more nominees. This can be done any time your policy is in force. All you may need to do is consult your insurance provider, fill out a nomination change form with the right details, and submit it to them.
When Nominating a Minor
It is possible that you may want all the benefits of your term insurance plan to be received by your child. However, if you are naming your child a nominee, for as long as they are a minor, you will need to assign a custodian or an appointee. This should be a trustworthy person who will be able to handle the claim process on behalf of your minor child.
Are Non-Family Nominees Allowed?
While it may be commonly expected, especially by insurance providers and authorities, that a policyholder names only family members as their term insurance nominee, it is not against the rules to nominate a non-family member. This could be a close friend or a distant relative.
However, remember that it may prove difficult for such a nominee to prove their claim. The insurance provider may ask them for further proof and explanation. They may also end up refusing to fulfil the claim of such nominees.
When naming a term insurance nominee, remember that you need to provide accurate personal details of the person being nominated. Moreover, your nominee should also know all the key details of the policy, including how to make a claim, so they may be able to make the claim and receive the benefit.