ROLE of a nominee in life insurance

A NOMINEE is the person who has been proposed by the policy-holder 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 policy-holder. 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.