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How To Choose A Nominee For Your Term Plan?

Term plan nominee

A term insurance plan is one of the most important financial investments in your life. It provides your family with a financial security that no other investment can. It provides a large sum assured at a nominal premium amount.

If you opt for the Canara HSBC life insurance’s iSelect Smart360 Term Plan, you can opt for a sum assured of minimum Rs.25 lakhs and pay your premium yearly or monthly. It also comes with the options of accidental death and accidental disability benefits, which will give your family added protection against medical costs.

One of the advantages of term plan is that it is possible for you to take one even at the beginning of your career when your earnings aren’t a lot. In return, your family receives a payout in the event of your demise within the policy term. For this purpose, you must nominate a specific person from your family.

Who is a nominee?

A nominee is a person who you officially appoint as receiver of sum assured of your term insurance policy while buying the policy. The process of appointing such a person is called nomination.

Why is nomination important?

Essence of insurance policy

The very essence of life insurance is leaving behind a financial cover for someone in the event of your death. This is fulfilled through nomination.

Ability to nominate anyone

Usually, policyholders nominate their spouse, children, or another family member as nominee for an insurance plan. Another one of the advantages of term plan is that you can nominate almost anyone. If you can prove insurable interest , you could also nominate a friend or a distant relative.

Multiple nominees

You can choose more than one nominee. In case the first nominee does not live out the policy term, the second one gets the benefit.

Shared benefit

You can also arrange for sharing of the death benefit amongst multiple nominees. In this case, the benefit can be shared between the appointed nominees according to the allocation decided by you.


Another important one of the advantages of term plan is that you are allowed to cancel and change your nominee as and when you want and how many ever times you want.

What should you consider before appointing a nominee?

Whether it is your spouse, sibling, or a friend, your nominee for term insurance should be someone who you absolutely trust with taking care of your family after your death. It should also be someone who understands the financial status of your family and can make wise decisions for expenses like education, marriage, etc.

What if a nominee for term insurance isn’t appointed?

In the case of no nominee being appointed or the appointed nominee’s death, there are two possibilities.

  • If the insured did not have a will, the sum assured plus bonuses are given to a Class I legal heir, which includes spouse, son, father, and mother.
  • If the insured has left behind a will, the death benefit is given to the successors as per the will. The process for this is explained in the Indian Succession Act, 1925.

What if a minor is appointed as nominee for term insurance?

It is a common practice to appoint a minor child as a nominee for an insurance policy. However, you also have to decide an appointee for the minor. The appointee will receive the money on behalf of the minor until the minor crosses 18 years of age.

What is an assignment?

Assignment for an insurance policy is made through a separate deed, and takes precedence over nomination. If you assign your policy to a person, it cannot be revoked. The assignee does not have to be an immediate family member.

What is a conditional assignment?

You can also opt for a conditional assignment instead of an absolute assignment. For example, say the insured has given their insurance plan as a guarantee for a loan, and they pass away before complete repayment of loan. In this case, the assignee will carry out the necessary procedure of repaying the loan through the insurance policy. Once the loan is fully repaid, the assignment is over.

What if there is a difference between policy nomination and will?

If the person mentioned in the policyholder’s will is different from the nominee, the will assumes higher importance and benefits are carried out as per the will. It is important to make sure that the will mentions the same nominee as the policy documents.

Only with a complete understanding of the procedure and implications of nomination should one appoint a nominee for term insurance. Now that you know most details, you should be able to make a more informed decision.

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