If you do not wish for your loved ones to suffer any financial difficulties in your absence, then a term insurance plan is vital. What is term insurance? It is an insurance contract in which the policyholder pays premiums throughout a particular duration or term. In return, the insurance company guarantees to provide financial compensation to the selected person/s if the policyholder passes away in conditions prescribed by the policy.
The person who receives the compensation (or the sum assured) is known as the nominee. The policyholder selects the nominee during the purchase of the policy. If they want to, they can also change the nominee later.
Understanding the concept of ‘nominee’
While planning out their term insurance policy purchase, one gets an idea of the premium, thanks to the term insurance plan calculator. In this journey, an important question comes up: who is a nominee and how to choose one?
The nominee can be anyone you know and whom you trust to receive the death benefit payout. Most individuals select their family members, especially dependent ones, as their nominees, to ensure that they have the finances to meet their goals. However, one can also choose a friend, partner, trust, charity, or an organisation as their nominee. It is absolutely vital to choose the right nominee as they are the ones who will be reaping the benefits of your financial planning. If you are paying the term insurance premium regularly, then you would want the benefits to go in the right direction. The concept of a nominee serves this intent.
How to change the nominee in term insurance?
There may be several reasons one would want or would have to change their nominee in their term insurance policy. The nominee they had chosen initially may have passed away, or the relationship between the policyholder and the nominee may have changed, and so on. If one pays the term insurance premium as required, then they have the right to a change in the nominee. Here is the procedure for the same:
- Fill out the appropriate form
You can obtain the nomination form at the branch of your insurance company or on the insurer’s website. Fill out the form with the required details regarding your insurance policy and the change in the nominee you wish to make.
- Submit the form
Now, you can submit the form after having ensured that the information entered is correct. You may be asked for the reasons you wish to make this change. You can explain your decision in your words. Rest assured, the insurer will not stop you from making nominee changes regardless of the reason you give.
- Receive acknowledgment
After the form is submitted, the insurer will verify the information and provide you with a written acknowledgment, stating that they are in agreement with your decision.
Things to remember when choosing a nominee
Now that you have the answer to ‘What is term insurance?’ and know what a nominee is, it is vital to be aware of the following things as well.
Inform the ex-nominees and the new nominees of the changes
Whether you are removing a nominee or adding one, it is better to keep everyone in the loop. Let the nominees know what changes you have made and why. This will prevent issues when a claim is settled.
Assign a reliable custodian for a minor nominee
If your nominee is a minor, then remember to hire a trustworthy custodian. Details regarding the custodian shall also be shared with the insurer. Failure to do so could lead to the nominee losing out on the death benefit payout.
Choose multiple nominees advisably
If you are comfortable with the prospect, then choosing multiple nominees can be a good idea. In such a scenario, if anything unfortunate happens with one nominee, you would not have to make any major changes as such. The percentage distributed to each nominee would change accordingly.
One can change their nominee several times. However, do remember to comply with the guidelines specified by the insurer. Also, ensure to choose a sum assured amount that can help the nominee achieve their goals. If you are not sure how much sum assured you may be able to afford currently and in the years to come, you can take the help of tools such as a term insurance plan calculator.