Appointing a nominee

A nominee is the person who will receive the proceeds of the policy if the insured person dies during the term of the policy. A nominee has no rights to the proceeds of the policy,except as a trustee holding the proceeds on behalf of the legal heirs of the insured. A nominee exists only for convenience purposes — so that the proceeds can be transferred to the legitimate beneficiaries. If a nominee is also one of the legal heirs,then the nominee can take the proportionate share to which he is entitled under the prevailing law,and pass on the balance to the other legal heirs.

It is recommended that you should appoint someone as a nominee at the time of buying the policy,though you can do so later as well.

Can I only nominate my immediate family members?

The proceeds of the policy are meant for the welfare of your family in your absence. Usually,insurance companies prefer that your immediate family members be your nominees (like spouse and children). However,you can choose even non-family members as a nominee. If you choose a non-family member,you will in all likelihood be required to show to the insurance company that your chosen nominee has an insurable interest in your life (simply put,demonstrate that their life will be financially affected if you are not around).

What if I want to nominate my child who is a minor?

If you wish to nominate your minor child,you will need to name another person as an appointee. Your child’s date of birth,the name of his or her guardian,and the nature of the relationship with the guardian will have to be specified.

How can I select a nominee? What details are required?

At the time of applying for a policy,the insurance company will ask you to fill up a nomination form. In that form,you have to give all the details of the nominee. The details of the nominee typically include his or her name (provide any alias that he or she has also so that there will be no ambiguity in case two people in the family share the same name),age,address and his or her relationship with you.

Can I appoint more than one person as a nominee?

You can appoint multiple nominees such as your parents,spouse and children. If they are also your legal heirs,you can specify their percentage share in the policy proceeds as well.

Can I change my nominee?

You can change your nominee till the maturity date of the policy. To do this,you need to fill up “Change of Nomination Form” provided by the life insurance company. Also,you are not obliged to give prior notice to the previous nominee.

What if I don’t have a nominee?

In case you do not have a nominee,then the usual personal laws of succession applicable to your family will apply.

What if I have a Will? Who will get the insurance proceeds?

In case you have a Will in which you have specified the beneficiary of your insurance proceeds,then the Will takes precedence over any nomination that might have been made. As stated above,the nominee is a mere trustee holding the proceeds on behalf of the legal heirs. A nomination is not a mode of making a bequest.

What if I don’t have a Will? Can my legal heirs claim the proceeds?

Sure. If you don’t have a Will,your legal heirs can still lay a claim on the proceeds from your policy. As stated above,your nominee is a mere trustee holding the proceeds of the policy on behalf of the legal heirs.

What rights does a nominee have?

A nominee receives the proceeds in his capacity as the trustee for the legal heirs of the insured. The proceeds don’t belong to the nominee unless the nominee is also a legal heir. A nominee is entitled to receive benefits from the policy only after the insured’s death. If the insured outlives the policy term,the nomination will stand cancelled. u

The authors are co-founders of Delhi-based iTrust Financial Advisors (www.iTrust.in)