What is a nominee in insurance: A complete guide

It is a common misconception that policy benefits automatically get transferred to the family in the unfortunate event of a policyholder’s death. While there are laws that govern un-nominated policy claims, it is always better to have a clear nomination on a term insurance policy.

Here is everything you need to know about the concept of a nominee and its impact on your insurance policy.

Who is a nominee?

Can you have more than one nominee?

Yes, a policyholder is allowed to have more than one nominee. The policyholder can also define the percentage share for each nominee. However, if the policyholder does not define the percentage share for each nominee, each nominee will get an equal share.

For instance, if there are four nominees and no percentage is assigned, each would receive 25% of the policy proceeds.

Can a minor be a nominee?

A minor (a person under the age of 18 years) can be named a nominee in a term insurance policy. However, the policyholder will then have to appoint a guardian on behalf of the minor.

What if the nominee dies before the policyholder?

If the nominee dies before the policyholder, the nomination becomes void. In such cases, the policyholder must update the nomination details with the insurance company. It is a straightforward procedure that requires the policyholder to submit a fresh nomination form and the previous nominee's death certificate.

Does nomination automatically shift to a spouse after marriage?

Marriage is not considered to invalidate the nomination made in a term insurance policy before the marriage. So, if you want to include your spouse as a nominee in your insurance policy, you must update the nomination formally with the insurance company.

Is a nominee required to be a blood relative?

There is no legal requirement for a nominee to be a blood relative. A policyholder can nominate anyone they wish. So to say, anyone can be a nominee for your term insurance policy, including family, friends, colleagues, or even a charitable organization.

Can a will override nomination?

Can you change the nominees over the years?

You can change nominees multiple times during the policy or investment term. The latest nomination registered will be considered valid. To make the change, you must submit a new nomination form and provide policy details and valid identification. Though rare, some insurers may also require the previous nomination acknowledgement.

Do you need the consent of the person before naming them the nominee?

As nomination is the policyholder's sole decision, they are not required to attain the person's consent before naming them the nominee. However, discussing these matters with the nominee beforehand is advisable, especially if the nominee is a close person. It helps to avoid any confusion in claim filing later.

Can a nominee withdraw their nomination?

Again, as nomination is the policyholder's sole decision, nominees cannot withdraw their nomination. The nomination is a declaration by the policyholder, and the nominee does not have the authority to revoke it.

What happens if the policyholder does not appoint a nominee?

Suppose the policyholder does not appoint a nominee. In that case, the policy's benefits will be distributed to the legal heirs per the succession laws applicable to the policyholder's law (e.g., Hindu Succession Act, Muslim Personal Law, or Indian Succession Act). It may lead to delays as legal heirs must provide documents like a succession certificate or court order to claim the benefits.

Can the nomination be contested? If so, then on what grounds?

Yes, a nomination can be contested in certain situations, such as:

Courts generally uphold the rights of legal heirs in such cases unless the policy explicitly states otherwise.