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A lot of us overlook nomination details in insurance policies and treat them as just another formality. At the time of buying life insurance, filling nomination details may not seem important but it can prove to be your best decision down the line. A wise nomination not only ensures that your loved ones get the benefits of the policy without any hassle but also enables fast processing of claims in the hour of need.
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Insurance (Amendment) Act 2015 has made it easier for dependents of policyholders to claim insurance proceeds after the latter’s death. It eliminates the chance of disputes among family members over death benefits.
These new rules of nominating a kin make life of the beneficiary simple and hassle-free. All you have to do is to nominate your spouse, children and/or parents, along with the share each nominee should receive. By doing this you can eliminate any disputes that might arise due to fight among various legal heirs to claim the insurance money.
Earlier, nominees in life insurance policies were not beneficiaries. They only acted as the receivers of the insurance proceeds on behalf of the legal heirs of the policyholder. Under the new amendment act, a new category of “beneficial nominee” is created, which includes only close relatives of policyholders. For instance, if you nominate your children, spouse, father or mother in an insurance policy, they become beneficial owners of the claim proceeds.
| Before Amendment | After Amendment |
| Nominees were not beneficiaries of life insurance policy proceeds. | A new category called beneficial nominees has been created. |
| Nominees acted as the receivers of the insurance proceeds on behalf of legal heirs of the life assured. | Family members including father, mother, spouse and children can be beneficial nominees. |
| Legal heirs have to claim their share from the nominee. | Even if the other legal heirs claim the amount, insurers will pay the proceeds only to the beneficiary nominees. |
The new clause is applicable to all policies, including the ones that are issued before the act came into effect. Until now, legal heirs have the right to claim the amount from the nominee, but now even if legal heirs make a claim, insurance companies need to pay the amount only to beneficial nominees. As per this clause, the policyholders have the option to specify multiple nominees and their share in the proceeds for each beneficiary beforehand.
While choosing a nominee you should clearly mention the share that each nominee would receive. This can curb down the disputes that take place due to other legal heirs claiming over policy proceeds.
The new insurance amendment act clearly distinguishes beneficial nominee with collector nominee. Collector nominees, for example the sibling of the policyholder, can act as trustees accountable to the legal heirs for the benefits received under the policy. However, as per the succession laws, if a nominee is also a legal heir, he or she will be entitled to the share of the death benefit.
Note: It is suggested to calculate the term plan premium on the term life insurance calculator online tool by Policybazaar before buying.
†Policybazaar does not endorse, rate or recommend any particular insurer or insurance product offered by any insurer. This list of plans listed here comprise of insurance products offered by all the insurance partners of Policybazaar. For a complete list of insurers in India refer to the Insurance Regulatory and Development Authority of India website, www.irdai.gov.in
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