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Importance of making the nomination in an insurance policy

By: Makemymoney

Insurance policies are one of the mandatory documents of a financial portfolio. But many of us overlook nomination details in insurance policies considering it’s just another formality. We don’t understand the importance of making the nomination in an insurance policy. Lot of us overlook thinking it’s not that compulsory. However, the proper nomination is extremely important to ensure so that your loved one can claim it without any hassle.

For enabling fast processing of claims in the hour of need we should understand the importance of making the nomination in an insurance policy. There are various types of insurances available according to the needs. Be it life insurance or vehicle or health one should always fulfil the authentic and correct details of the nominee. Failing to do it, claim settlement can become a difficult process. Companies always assume that the information provided by the policyholder is true to his knowledge declaration. Insurance laws further protect policyholders’ interests by ensuring that an insurance policy shall not be called in question on the ground of misstatement after three years.

Let’s talk about some facts to understand the importance of making the nomination in an insurance policy:-

Who is a nominee and what does it mean? Well, a nominee is a person who receives the money on behalf of the policyholder. A nominee can be anyone spouse, children, relative or maybe the friend. A nominee cannot consume money unless he is the legal heir. While claiming for an insurance policy, the beneficial nominee is the end consumer of the money received under the claim. That’s why there is an importance of making the nomination in an insurance policy. The only beneficial nominee has right to claim for money during the settlement, so choose the correct nominee and avoid last minute hassle.

What are the new nomination rules in life insurance policy?

To make the process of claiming money via nominee new insurance rule has been introduced. Under the new Insurance act, children, Spouse and parents will get the direct benefit. According to the new rule, if any one of the following is the nominee in the policy, they automatically become the Beneficial Nominee. This means they can consume the monies too.

If the nominee is minor, the policyholder can appoint any other person to receive the money secured by the policy in the event of policy holder’s death during the minority of the nominee. Another impactful change is that the nomination can be cancelled or changed at any time before the policy matures.

The proceeds are payable to policyholder’s holder of succession certificate or to policyholder’s heirs or to the legal representative if the nominee dies before policyholder. If the nominee dies after policyholder, his share of an amount is paid and it shall be payable to the heirs or legal representative of the nominee.

The above mentioned explains the importance of making the nomination in an insurance policy. Let’s check what all are the documents required by insurance companies for processing the claim by the nominee.

  • Original Policy Document
  • Death certificate of policyholder issued by the local municipal authority
  • All other document or information mentioned by the insurance company for processing claim amount depending on the cause of death.
  • The cancelled cheque is required for completing the electronic payment.

 

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