Nominee in Insurance - Meaning, Importance, Eligibility & Types

Insurance policy secures the financial future of a policyholder and their family. However, in case of unforeseen demise during a policy period, who will receive the death benefits? To accomplish this purpose, nominees in insurance play a vital role in processing of policy claims.

Therefore, to help you authorise the right person as a nominee, we will focus on what a nominee name is in insurance and its importance in detail.

Who Is a Nominee in Insurance?

Nominee in insurance means nominating a person to receive an insured amount if the policyholder passes away during their policy period. According to Section 39 of the Insurance Act, 1938, you can nominate one or more family members or relatives as nominees. Moreover, you can change these names multiple times by updating the insurance company about the nominee's personal information.

What Is the Importance of Nominee in Insurance?

The need to appoint a nominee is to ensure that only your nominated person receives policy benefits in your absence and no one else. Due to the lack of regulatory clarity before 2015, both legal heirs and nominees used to claim death benefit and create confusion. Regardless, now your nominee will get the claim without moving to court even if they are not your legal heir. This ensures that the objective of this policy is not defeated even after your death.

Now that you know who is a nominee in insurance, you must be wondering what the role of a nominee in claiming insurance is. In the absence of a policyholder, a nominee has to submit requisite documents like:

Own identity proof.
Death certificate of policyholder.
Claim intimation letter.
Post mortem report or hospital record for unnatural death.

Who Is Eligible to Be Your Nominee in Life Insurance?

Following are the type of relatives who can be a nominee in life insurance:

Legal heirs – Your legal heirs, like children or wife, can be your nominee.
Immediate family member – Your parents, siblings, or family members are suitable to be your nominee. They can receive and hand over your insured sum to the person whose financial future you want to secure.
Extended family member – You can nominate your cousin, relative or any friend as a nominee. However, you have to take approval of your insurance company to appoint such a nominee.

How Many Types of Nominees Are There?

It is essential to know the types of nominees while researching who is a nominee in insurance. This will help you select a nominee for your policy if you have no legal heir. Followings are the details of four types of nominees -

1. Beneficial Nominees

If the nominee is your immediate family member, then they are a Beneficial Nominee. They can become a beneficial owner of this policy. Apart from immediate family members, no one else can be beneficial nominees.

2. Minor Nominees

A legal heir whose age is below 18 years is a minor nominee. A custodian must be appointed as an appointee to receive the insured amount on behalf of a minor nominee. If the policyholder expires during policy duration when the nominee is yet to be an adult, then an appointee will handle the claim amount.

3. Non-family Nominees

Non-family nominees contradict the objective of introducing the concept of a nominee. However, with your insurance company's approval, you can add a relative or friend as a nominee of your policy.

4. Successive Nominees

In this case, a policyholder can assign successive nominees, i.e. multiple numbers of nominees. An insurance company will first pay benefits to the first nominee. If this fails, your insurer will give it to the second nominee, which on failing, will successively carry on this process.

5. Multiple Nominees

More than one nominee can be nominated, who will receive an equal amount as a death benefit.

How to Elect Nominees in Insurance?

It is pretty evident now who can be a nominee in insurance. However, if you do not nominate a legal heir or immediate family member, then electing a nominee is a valid question. In such a case, you have to establish the insurance interest to the policy provider. The nominee's approval will get rejected if you can't give a proper reason, as insuring a non-family member sounds unfamiliar.

During the making of a policy, you can assign a nominee in insurance by stating details in your application form. Later on, at any point in time, you can assign or modify nominees.

By filling up a nominee form, you can modify and submit it to the insurance company. To do this, you also have to submit the last approved nominee form. Always take an approval letter from your insurance company to avoid any confusion.

In case nominees expire before the completion of policy duration, you have to reassign someone else.

Frequently Asked Questions

✓ Is it possible to change the nominee during the maturity of the plan?

No, the nominee cannot be changed during the plan's maturity as that does not serve the purpose. You can assign or modify nominees anytime during the starting or within the policy tenure.

✓ Is it necessary to submit any documents for assigning nominees?

To assign a nominee, you have to give the nominee's full name, relation, and age. To do this, you have to fill up a form and get approval from the insurance company. You don't have to submit any credential of the nominee.