We all know about the key
purpose of buying life insurance policy is to pass the benefit of your life
cover to your loved ones, if you are no longer around. It could then, be
possible, if you had assigned a rightful person who has insurable interest in
the life of assured while buying an insurance policy. Let me remind you again,
the whole purpose of buying insurance is to ensure that your loved ones may face
the minimum possible hardship if something happens to you.
For starters, let‘s assume that
the policy holder does not appoint a nominee in the policy. In the event of his death, his legal heirs
would get the benefit of the policy in the absence of nominee details, but not
before furnishing a succession certificate or probate of Will, which is a
cumbersome process. Therefore, the whole
purpose of buying the policy is defeated, if you do not provide the nominee or
supply wrong and incomplete information. Also Read: What will happen to your Wealth? After you!
For hassle-free and timely
settlement of claims, you must avoid nomination pitfalls and wrong notions you
should dispel.
Choosing
the Right Nominee
Generally, while buying an
insurance policy, most people nominate their- blood relatives, such as parents,
wife, children and siblings, instances of nominating close friends are not
rare. While choosing the rightful nominee in such a way that there is least
possible chance of a contest over the insurance proceeds. A nominee should be
someone who has insurable interest in the life of the assured, say a husband or
wife. As a part of the risk assessment process, insurers may deny a policy if
the relationship between them doesn't have any insurable interest.
Since, insurance is a long-term
contract and nominees can be changed over the policy term. A boy or girl,
before his/her marriage, may appoint his/her father or mother as a nominee, but
must change it to his/her spouse after their marriage.
Multiple
Nominees
Many people, in a hurry fill up the form, appoint just one nominee
even if they have multiple options as they can nominate more than an
individual, in which case he needs to specify the percentage share of each
nominee in the payout by mentioning their full names, addresses, ages and
relationships to you. This could lead to complications.
However, it can be justified as
suppose, a person appoints just his mother as a nominee, even when he has the
option of nominating his father too. Now, if the mother dies before the
policy-holder, with no change in nomination, there would be unnecessary delays
in settlement on the death of the policyholder. So, one should appoint multiple
people as nominees, if possible.
Updating
Nominee Details
All precautions that you must
take while filling up the proposal form to get update your nominee details from
time to time. Keep always informing your nominees about your policy documents.
Often, nominees are not aware of the existence of a policy due to refrain from
telling them about the policy either out of a feeling of insecurity or
ignorance. This may lead depriving them of the money when they need it the most
in a worst-case scenario.
Absolute
rights of Nominee
A nominee does not have
absolute rights to the proceeds from a life insurer received by a nominee can
be attached if a court passes an order to that effect. Legal heirs can claim
the money from your nominees through a court settlement. If you want to pass on
absolute rights to a nominee, prepare a Will and mention the beneficiaries.
Otherwise, you can issue a policy under
the Married Woman’s Property Act (MWP) where all proceeds under a life
insurance policy bought by husband, for
the benefit of his wife, or children, or
any of them, shall be payable only to the wife or child.
Setting rightful nominee
details in the policy on your part could prevent a lot of heartburn for your
near ones, if you are no longer around. Also Read: Educate your Spouse and Children about your Financial Life!
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