Life insurance is an absolute necessity in today’s day and age. Having a life cover by your side ensures your family’s financial needs are taken care of even when you are not around. While there are several life insurance plans to choose from, a term insurance policy is the most simple form of life insurance plan you can buy.
What are term insurance plans?
Term insurance plans are the purest form of a life insurance policy. Here, the entire premium charged from the policyholder is apportioned towards providing protection for the life. Unlike other life insurance plans that are a blend of investment and insurance covers, term insurance plans are pure insurance products.
With a term insurance policy, the policyholder gets a fixed coverage for a specified tenure. Thus, in the event of the unfortunate demise of the insured, the insurance company compensates the dependents of the policyholder (nominees) with the sum assured as mentioned in the policy.
Let’s understand how to choose your term insurance nominee. But before that let’s look at:
Who is a nominee in your insurance plan?
A nominee is a person appointed by the insured individual to receive any proceeds from the term insurance plan. Thus, in the event of the demise of the policyholder, the insurance company contacts the nominee to claim the policy’s sum assured. The process of appointing a nominee is called nomination.
Why is it essential to list the nominee in your insurance plan?
Mentioning the nominee in your policy is crucial for the following reasons:
- Nomination is the essence of a life insurance plan
Since a life insurance policy secures the life of the insured individual, any nomination made is useful for the dependents of such insured. It helps provide the dependents a financial safety-net to fall back on, ensuring financial stability even in the policyholder’s absence.
- Ability to nominate any individual
Using the nomination facility, a policyholder can nominate almost anyone as a nominee. Such a nominee need not be a blood-relative but, can even be a distant friend whom the policyholder trusts to provide financial safety to their dependents.
- Many nominees and shared nomination
The nomination facility is not limited to one person but can be made for several individuals. Thus, as a policyholder, if you wish to bifurcate a specific percentage to a specified person, it can be done using the shared nomination facility available in term insurance plans. Moreover, having multiple nominees is better, since the first nominee does not outlive the policy, the second nominee can get the policy benefits.
- Change in nomination
The nomination facility can be used time over again to amend any nominations made. Thus, as a policyholder, the nominee appointed at the start of the policy tenure can be changed after a few years, for instance, from your parents to your spouse, as your life stage changes.
What happens in the event a nominee isn’t appointed?
In case no nominee is appointed, there are two possible scenarios:
- Where the insured does not have a will; the proceeds of the term insurance plan will be paid to the legal heirs; which include parents, spouse, and children.
- Where the insured has a will, and it mentions the person who shall be eligible to receive any proceeds of the insurance plan; the successor is paid the sum assured of the policy.
What details are required to file a nomination in your term insurance cover?
When buying a term insurance plan, it is essential to mention the name, the contact details and address of the nominee, and their relationship with the policyholder. For any changes that are required during the interim tenure, the same set of details need to be provided to the insurance company to amend the nominations made.
Similar to selecting a term insurance plan for ensuring protection for your family, it is essential to make a nomination. To select a suitable sum assured, you can make use of a term plan calculator that aids in policy comparison. Other than that, a term plan calculator can also be helpful in selecting an adequate sum assured based on your family’s future requirements. Lastly, do not forget how to choose your term insurance nominee and the different benefits it offers for your dependents in your absence.