When you buy term insurance, most of your attention and calculations focus on determining the appropriate coverage amount, the premium you must pay, and purchasing riders and add-ons.
However, while engrossed in these important aspects, it is necessary to pay attention to the nominee details, which need to be provided for the policy to be issued. In addition, having a nominee among your loved ones ensures that they can benefit from the policy in the event of an unforeseen event that occurs to you..
Advantage of having a nominee in your Term Insurance Plan
The primary benefit of including a nominee in a term plan is that it simplifies the claim settlement process. Another advantage is that by selecting the right nominee during the policy tenure, a policyholder can avoid the possibility of legal disputes. Knowing the specifics of your policy is always beneficial. Appointing a nominee is an important step in strengthening your financial plan.
Can you change the nominee of your Term Insurance Policy?
Yes. In fact, nominee changes are permitted multiple times during the policy’s term. Only the life assured has the authority to change the nominee. When you buy term insurance in a hurry or do not pay the required attention to nomination rights, you may make mistakes when naming your nominee. However, once you’ve realized your error, you can fix it by changing the name of the nominee on your term insurance policy. Some common mistakes regarding nominations are:
- Assigning the policy to a single nominee: If your nominee dies unexpectedly and the policy expires, the insurer will have to determine who is the legal heir to all of your assets, thereby causing a delay in the claim settlement procedure.
- Appointing a minor nominee without appointing a custodian: If you choose a minor as your nominee, you must appoint a custodian for the nominee. The claim settlement process will not start without a custodian for a minor, and your nominee will not be eligible for the death benefit.
- Mentioning a nominee who is not your legal heir: If you want to have a nominee who is not your legal successor, you must write a will in which you give your nominee absolute authority in the term policy, over and above your legal heir.
- Failure to advise your nominee of the policy specifics: It is prudent to keep your nominee up to date on the details of the insurance policy you have acquired. They should also have a copy of the policy documents, which should contain all of the details. This will ensure that the claim settlement process runs smoothly and without hiccups.
Procedure to change the nominee
There is a simple procedure for changing the name of the nominee in your term insurance plan. The steps to be followed include:
- Submitting an Application Form: When changing a nominee, one must submit an application form. They should obtain a nominee change form from an insurer’s office or download it from the insurer’s website.
- Filling out the Form: Policyholders should fill out the application form accurately, avoiding errors and typos. The form, along with the necessary documents, should then be submitted to the insurer.
- Receiving An Acknowledgement Card: After changing the nominee, the insurer will send you an acknowledgment card. It is the most important proof an insured person must have to avoid any disputes during the claim settlement process.
How nominees can change with time?
Some of the most common nominees for a life insurance policy include spouses, children, and even parents of the policyholder. You should always choose your nominee based on your life stage and age. For example, suppose someone goes for a term insurance plan in their 20s when they start working. He/she uses a term insurance calculator to determine the right coverage and premium amount and nominates his/her father/mother. This is fine, considering that the life assured is not married.
After that, when this individual gets married, they may want to change the nominee to their spouse, with more financial responsibilities. The coverage amount can also be expanded (based on the insurer’s policies) to reflect evolving financial goals. After that, once the individual has a child, then down the line, they may change their nominee again. This could then be the child in this case. This will naturally be accompanied by an increase in coverage, taking the child’s future goals and financial safety into account.
Hence, you should always be careful regarding your nominee. If you have more than one child, consider separate plans. Suppose you have two children. In that case, you and your spouse may have two individual-term plans. You may each have one child as your nominee. This will ensure the financial security of both the children.
You must take the nomination process seriously when purchasing term insurance to protect your family’s financial future. This is crucial if you have more than one legal heir. If the intended person does not receive the benefit, the purpose of purchasing term insurance is defeated. So pay special attention and give the question of nomination a good deal of consideration.