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Know All About Nominee For Life Insurance Plan

dateKnowledge Centre Team dateDecember 15, 2020 views145 Views
Know All About Nominee For Life Insurance Plan

A Life Insurance Plan is devised to secure a person’s life and her/his family’s. The insured person pays certain amounts at intervals of time to the insurance company during the tenure of the policy. After the end of the tenure, the sum of money deposited, along with other benefits are given to the person(s), i.e. the nominee on behalf of the deceased. But, who is a nominee? What role she/he plays in a life insurance plan of the policyholder? How a nominee should be related and are there any restrictions to nominating? We will find answers to all the questions about a nominee in a Life Insurance Plan in this article.

What is the objective of a Life Insurance Plan and who is a nominee?

A Life Insurance Plan involves two parties: the policyholder and an insurance company. It is a financial agreement where the insurance company guarantees to pay the nominated person on behalf of the policyholder, called the nominee, due to the demise of the policyholder or after a stipulated time period. Meanwhile, the insurer or the policyholder has to deposit a predefined amount to the insurance company till the specified time. This amount will be received by the nominee after the end of the tenure of the policy or after the sudden death of the policyholder. Life Insurance Corporation of India had issued over 21 million fresh new policies in the year 2019.

What is the role of a Nominee in a Life Insurance Plan?

We can understand from above that the nominee has a vital role to play in the provision of a Life Insurance Plan. After the death of the policyholder, the cumulative amount will be given to the nominated person under the plan. The nominee is chosen by the policyholder while filling documents for the Life Insurance Plan. They can also be assigned anytime but before the tenure of the term.

Who can nominate the nominee in a Life Insurance Plan?

Only the policyholder, whose life has been insured by an insurance company, can nominate a person. The nominee can be a minor, an adult, or a senior citizen.

For example, if person A insures his life, only he can nominate a person (let person B), whom he relies upon for the matured amount after his death. And the nominee, person B, will receive the cumulative amount after maturity or demise of person A. Due to the policy, person B has the right to receive money on behalf of person A.

Who is eligible for a Nominee in a Life Insurance Plan?

  • The Nominee for a Life Insurance Plan may or may not be related to the policyholder by blood. Thus, apart from your family members, you can nominate anyone from your friends, colleagues, or work.
  • The nominated person can be a minor, an adult, or a senior citizen at the time of issuing the Life Insurance Plan. While nominating an adult is the most secure and less fussy, nominating minors and senior citizens have some regulations to be taken care of.
  • In the case of a minor, an attendee is assigned. In case the policyholder dies when the nominee is still a minor, the attendee will receive the matured amount. It is because the minor is ineligible for legal transactions.
  • Nominees can be changed before the term matures. Thus, if the nominee dies before the term closes, the policyholder can nominate another person instead of the nominee. The policyholder needs to undergo paperwork for nominating the other person.
  • A Life Insurance Plan can be benefitted by more than one nominee. For example, in a family, if the father insures his life and nominates his wife and three children, all the four can avail the insurance amount after maturity. The matured amount will be equally divided among the nominees by the insurance company.

What are the types of Nominees?

It is obvious that a nominee is needed while applying for a Life Insurance Plan. While anyone can be nominated by the policyholder, there are some important laws to keep in mind while nominating and regarding the types of persons who can be nominated.

  • Beneficial Nominees

    If the nominee appointed is an immediate relative (parent, spouse, children) of the policyholder, then the nominee will be referred to as "Beneficial Nominee". Here, the matured amount will be given to the beneficial nominee only.

  • Minor Nominees

    A policyholder can nominate a person under 18 years of age. Such nominees are called minor nominees. Here, an attendee is assigned on behalf of the nominee. In cases where the policyholder dies, and the nominee is still a minor, then the attendee receives the matured amount.

  • Changing Nominees

    A policyholder can change the nominee of the Life Insurance Plan if they desire to. For this, the policyholder has to undergo paperwork for changing the nominee before the insurance plan matures.

Frequently Asked Questions:

  • Can a nominee be other than blood relations?

    Yes. The policyholder can nominate anyone as a nominee and is not limited to blood relations. The nominees may range from friends, colleagues, business partners, etc.

  • What happens if a nominee dies before the maturity of the insurance?

    If the nominee passes away before the policy matures, the policyholder can change the nominee. For that, s/he will have to consult the insurance provider and undergo paperwork.

  • Can a whole family be nominated?

    Yes. A policyholder can nominate more than one person at a time. The insurance amount will be divided evenly among the nominees, and each of them gets their share legally.

    Life Insurance Plan is beneficial and valuable. They act as a protective shield for your family when you are in dire need of financial stability. But one thing you need to remember while signing the documents is that you should be well-informed regarding the terms and conditions and other benefits of the policy.

    In short, a nominee is crucial when applying for insurance. It is the nominee who gets the insured amount after maturity. Also, the amount is financially beneficial to the nominee after the death of the policyholder. While there are no restrictions on nominating someone who is not related to the insurer by blood, for seamless paperwork in future, the nomination of a blood-relative is suggested.

    Also, there are many regulations regarding nominations. The interested policyholders should check the documents carefully and discuss the same from the insurance provider officials before proceeding for the same.

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Frequently Asked Questions (FAQs) Related to Life Insurance Policies

The premium is one of the most important factors to consider before buying a life insurance policy. Many people buy a life insurance policy with a high sum assured but are unable to process the premiums for the entire premium payment tenure. You can get a better idea of the premium outgo with the premium calculator available in the 'Tools and Calculator' section of www.canarahsbclife.com.

Life insurance plans come with several riders which increase the efficiency of the policy for the buyer. For instance, if you have a history of terminal illness in your family it would be advisable to opt for terminal illness rider with your term insurance plan. Riders or add-ons help in customising the standard policy benefits for the requirement of different families. The iSelect term insurance plan comes with a built-in cover for terminal illness, and option for protection against accidental death or disability. You can also opt to cover your spouse's life under the same policy by paying an additional premium.

Life insurance companies calculate the premiums based on several factors such as age, gender and occupation.

Age: It is one of the biggest factors that influence life insurance premiums. Premiums tend to be low when the life insured is younger as the chance of contracting diseases is low. Young people also opt for the best life insurance policies with longer tenures and pay premiums for a longer duration, which makes the policy cheaper for young people.

Gender: The insurance premium for women is generally lower when it comes to life insurance plans. Women live longer and pose a lesser risk of a claim leading to lower premiums for them.

Lifestyle habits: The premiums for people who smoke or drink is always higher due to higher health risks.

Policy term: Policy terms are also taken into consideration by insurers while deciding the premium amount. Life insurance policies with longer tenure are cheaper as compared to short-duration policies.

Mode of purchase: The platform that you use to buy the best life insurance policy also determines how much you will have to pay for the plan. People who buy life insurance policies online have to pay lower premiums as compared to offline policies.

Occupation: The nature of your work is an important factor that influences the premium amount. Certain occupations like shipping and mining are considered more dangerous as compared to jobs in services industries. The insurance premium rises with the risk profile.

Processing life insurance claim is a transparent and smooth process with Canara HSBC Oriental Bank of Commerce Life Insurance.

In case of the death of the life insured, the nominee will have to intimate the company by filling a Death Claim Form and sending it to the nearest branch office.

Once the form is received, the claim is registered by the insurer.

After the registration of the claim, the company will send the claims pack along with the related forms such as physician’s statement form and employer certificate that need to be filled.

Along with the duly filled forms a few documents such as original [policy document, death certificate, copy of bank passbook, hospital or treatment records, photo identification and address proof have to be provided.

The claim is processed on the submission of relevant documents. Once the documents are verified, the claim amount is released post all due diligence.

Household expenses rise with age. The cost of children's education increases along with other lifestyle expenses. The iSelect term plan offers an option to increase the cover according to the life stage. If opted, the insurance cover increases by 25% at every 5-year terminal till the 20th policy year.

Even though a life insurance policy is bought to protect your family in your absence, there are chances of the claim being rejected due to several factors.

False information: If the policyholder provides false information or conceals important information while buying the life insurance policy, the insurer has the right to reject the claim after his/her death.

Type of death: Deaths due to suicide in first policy year, intoxication or pre-existing disease is not covered under life insurance plan.

Premium payment: The payment of premiums on time is of utmost important to avail the benefits of life insurance. Life insurance policy may lapse on the failure to pay the premiums

Nominee details: A life insurance company can put the claim on hold if the nominee details have not been filled or not been updated by the policyholder.

Suicide: If the life insured commits suicide within 12 months of buying the life insurance policy, the insurance companies generally pay 80% of the total premiums paid.

Buying the best life insurance plan online is not only safe but a better option. Online life insurance policies have lower premiums and the individual is not required to visit the insurer's branch or a bank. The best life insurance policies online insurance offer higher benefits. Customers should, however, buy online life insurance policies only from credible insurers and should check for SSL certificate on the website to ensure that the website is legitimate.

The cost of life insurance policies varies depending on factors like age, gender and occupation. The average cost of life insurance plans, especially term plans, is very low compared to the amount of coverage offered.

An individual is allowed to have multiple life insurance policies. People opt for more than one life insurance policy to increase the cover or avoid claim rejection. In case of multiple life insurance policies, even if the claim is rejected by one insurer, the beneficiaries may receive the benefit from a different insurer.

Life insurance policies are of different types. In case of unit-linked or endowment policies the policyholder receives the maturity benefit at the end of the policy term. However, in the case of term insurance plans, there are no maturity benefits. The death benefit is only paid out after the death of the life insured.

When you buy a life insurance policy, the insurance company asks for the nominee details. Only the person named as the nominee in the life insurance plan can cash out in case of death of life insured.

A life insurance policy is generally taken for a specified period. After the policy duration of a term plan gets over, the policy simply terminates and ceases to exist. However, in case of unit-linked plans or endowment, you can use the policy as a tool for retirement planning and the accumulated corpus is used by the insurer to pay you monthly amounts for your entire life.

If a policyholder purchases a term plan for 25 years and dies during the policy term, the beneficiary receives the death benefit. In case of iSelect term plan, the policy provides four payment options to the beneficiaries. If the regular payment option is chosen, the policy works as a source of regular income.

It is a popular misconception that life insurance plans are only for accidental deaths. A term life insurance plan like iSelect Star Term Plan also covers terminal disease along with death. A terminal illness cover is important as health insurance pays only for the cost of treatment and hospitalization, but a terminal illness cover pays you a lump-sum amount which takes care of other expenses. On the other hand, unit-linked policies such as Invest 4G cover death and also provide decent returns for other financial goals such as buying a house of child's education.

It is ideal to buy a life insurance plan in your early 20s because it is the time when people have just started with their professional life and so there are lesser responsibilities and financial liabilities to take care of. Also, if you buy the best life insurance plan at this age, you will be paying relatively lower insurance premiums since it’s a due fact that mortality rate in case of young people is low. And that is why life insurance companies offer lesser premium rates to younger people as they think that they are most likely to be fit and healthier with less chances of filing a claim in future.

Once you have cancelled your life insurance policy, you will instantly lose your life insurance cover. Afterwards, your insurance company will get in touch with you and ask for valid reasons regarding the cancellation of your policy. In case you cancel your life insurance policy within the grace period, i.e. 15 to 30 days, depending on your insurer, then insurance company will reimburse the premium amount paid by you. But, no refunds will be paid to you if the policy is cancelled after the grace period.

Yes, you can take life insurance under Married Women’s Property (MWP) Act, 1984 only if you are a married man and a resident of India. Buying a life insurance plan under MWP Act would be helpful in saving your family’s financial well-being when you are not around. As per this policy, only wife and children would be eligible to receive the death benefits. You can also buy a policy if you are a widower or a divorcee. However, in that case, you can give your child’s name as your beneficiary. It is very simple to buy a life plan under MWP Act. All you need to do is to fill up an MWP addendum while purchasing an insurance policy.

Yes, there are different payment options for you to pay premiums. Here’re some of them

    1. Regular premium payment option – This premium payment option allows you to pay premiums equal to your policy term either monthly, quarterly, half yearly or annually.

    2. Single payment option – Through this premium payment option, you can pay the lump-sum amount in one single payment.

    3. Limited payment option -In this premium payment option, you can pay premiums for a specific period of time less than policy term either monthly, quarterly, half yearly or annually, but benefits of insurance can be enjoyed for a longer period of time.

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