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.

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 of 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.

If you want a non-family member as your nominee, you can always appoint someone. It can be anyone, a friend or a distant relative.

The need to appoint a nominee ensures 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 benefits, which created confusion. 

Regardless, 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 the policyholder.
• Claim intimation letter.
• Post-mortem report or hospital record for unnatural death.

The first thing to remember while opting for a nominee is that they should be of legal age and of sound mind. Other than these two factors, the nominee has to fulfil the following criteria:

• Has to be a Legal Heir: Enlists spouse or children. 
• Has to be an Immediate Family Member: Enlists parents, siblings, and or other family members.
• Has to be an Extended Family Member: Enlists relatives, cousins, friends or relatives.

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

• Legal heirs – Your legal heirs, like children or wives, can be your nominee.
• Immediate family member – Your parents, siblings, or family members are suitable as 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 friend as a nominee. However, you have to get the approval of your insurance company to appoint such a nominee.

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. Following are the details of the five types of nominees -

1. Beneficial Nominees

If the nominee is your immediate family member, they are a Beneficial Nominee. They can become a beneficial owner of this policy. Apart from immediate family members, only some people 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 the 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, who, on failing, will successively carry on this process.

5. Multiple Nominees

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

It is evident now who can be a nominee in insurance. However, electing a nominee is a valid question if you do not nominate a legal heir or immediate family member. Therefore, in such a case:

• You have to establish the insurance interest to the policy provider. The nominee's approval will only be accepted if you give a proper reason, as insuring a non-family member sounds unfamiliar.
• When making 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.
• You can modify and submit a nominee form by filling out a nominee form to the insurance company. You must also submit the last approved nominee form to do this. Always take an approval letter from your insurance company to make sure everything is clear.
• In case nominees expire before the duration of the policy is completed, you have to reassign someone else.

If you are still wondering who can be a term insurance or life insurance nominee, select your trustworthy. An insurance policy is for the security of your family; hence, select the nominee in insurance prudently.

The benefits of adding a nominee to an Insurance policy are mentioned in the following section:

• Legal Protection: A nominee can dismiss all potential disputes related to the insurance policy, and the nominee can claim the benefits without difficulty. If an immediate family member is a nominee, they can directly claim the benefits over a legal heir without any legal problems.
• Smooth Settlement Process: The delays and complications in disbursing the policy proceedings can be avoided if the policyholder chooses a nominee. However, the nominee should hold proper papers to claim the benefits. 
• Ease of Transfer of Assets: Having a nominee in an Insurance policy makes the transfer process easy. The nominee directly receives the insurance proceeds without any court hassle. 
• Financial Security: Having a nominee provides extra security when the insurance proceedings are to be received by specific beneficiaries, such as family members. 

Suppose there is no nominee after the policyholder's death. In that case, the policy's benefits are to be transferred to the legal heirs, legal representatives, or the person holding the succession certificate from a competent court. However, if there is a will, the policy's benefits will be divided according to the terms mentioned in the will. 

Appointing a nominee is a significant step to ensure the benefits go to the right person. Moreover, it also adds legal security and simple transfer of benefits. So, choose a trustworthy person to be your nominee! 

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