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Sunday, 1 July 2012

Nominee and claim settlement

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In case a non-legal heir is a nominee, writing a will can help

LIFE insurance policies help on maturity or in the event of untimely death of the policyholder. But, to ensure that your loved ones get the money you intended to leave behind for them without any hassle, you must nominate your family or legal heir to receive the proceeds from the life insurance policy.

Nomination can be made in a life insurance policy where the one that proposes and the person whose life has been insured are the same. A nominee is usually chosen while buying a policy by providing details in the proposal form. However, one can nominate someone else or change the nominee during course of the policy.


The process: A nominee can be anyone: Spouse, children, relatives, friends or even people who are not directly related to you. One needs to provide the insurer, the person's details such as full name of the nominee as it appears in his or her official documents, address, age and the relationship between the nominee and the policyholder. Do not assign a nominee as a formality, but, think through and then nominate someone.

Nomination prevents disputes and delays in settlement of death claims. It is important to give correct and valid nomination for the insurance policy so that later on, the family of the policyholder can get sum in sured at the earliest.


Restrictions: As per law, only a legal heir can get proceeds from the policy. So, if you nominate a friend or a partner, who can be very close to you but not your legal heir, then there may be problems at the time of claim settlement. In such a situation, write a will indicating that you would like your friend to get proceeds from your life insurance policy.

In several instances, customers forget to review or change nominations, such as an ex-wife after divorce. In case of untimely demise of the policyholder, despite not being a legal heir, the nominee will get the policy payout. The insurance company generally releases the payment to the nominee, unless informed of the complexities well in advance.

If there is no nominee in the policy, the process of getting a policy payout can be a hassle. In the absence of a will, the claimant will have to get a succession certificate from the court to prove that he/she is the rightful heir to the policy payout.


However, it is a long process and can take between eight to 10 months.

Insurance companies discourage policyholders from nominating people who are not legal heirs. We tell them that in the absence of a right nominee, the whole point of buying an insurance policy to cover risk in the future may be futile.

One can also have multiple or successive nominations. Nomination can be changed by filling up a simple form with information of the new nominee.

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