What If Your Term Insurance Nominee Dies? Know Your Options

Written by : Knowledge Centre Team

2026-02-04

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Nomination is the way to ensure that the intended parties get the benefits of your life insurance plan after your demise. A term insurance plan is generally beneficial for the family to cope with the financial shock after the sole earning member of the family passes away.

However, life is uncertain and a lot can happen during the policy tenure. The policyholder may pass away, or the nominee may pass away during the tenure.

We know that the nominees or beneficiaries can claim the life insurance policy in case the policyholder passes away. But what happens if the nominee passes away during the policy term?

Key Takeaways

An insurance nominee is vital in ensuring your family receives timely financial support after your passing, helping prevent disputes and delays in claim settlements
Policyholders can choose from various nominee types, including beneficial minor, non-family, and multiple nominees, to safeguard their family's financial well-being
If your nominee passes away, promptly updating nominee information with accurate details and required documents can prevent claim complications
You can modify your nominee at anytime during the policy tenure, ensuring your benefits are aligned with your current family structure or financial circumstances
In case the primary nominee passes away, designating a secondary nominee ensures your loved ones still receive the intended financial support

Nominee’s Death in a Term Plan

If the nominee dies while the policyholder is alive during the policy tenure, the nomination lapses. Policyholders should change the nomination. However, there is another commonly asked question: “What happens if the insurer and the nominee both die?

the nominee dies after the policyholder’s death but before receiving the claim amount, the amount would then be paid to the legal heirs. To avoid disputes and reduce any financial challenges for the family, it is best to treat the nomination seriously and update it as and when required. The money should go to the people who need it most when you are not around. Therefore, mentioning the beneficial nominee’s name is tessential.

Learn - How to choose a nominee for your term plan?

Can You Change Nominees in a Term Insurance Plan?

Changing nominees is allowed in a term plan, but the latest beneficial nomination will supersede all older nominations. This means that the previous beneficiary nomination will stand null and void once you change the nomination.

Nominee details should be accurate and updated to avoid legal hassles for your family. Incorrect details will only cause trouble for family in getting the benefits they are entitled to.

So, who can you nominate as a beneficiary? Let us find out.

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Types of Nominees in Insurance Plans

Choosing the right insurance nominee is crucial to ensuring that your term policy benefits are passed on smoothly to your loved ones. However, to do that, you must understand the different types of nominee options available and how they help protect your family's financial security. Here are the key types of nominees you can select:

Beneficial Nominee: A beneficial nominee is a close family member, such as your spouse, children, or parents. If you appoint a beneficial nominee, they act as trustees for the legal heirs, not absolute owners. Nomination simplifies payouts while complying with succession laws. This rule was introduced to prevent disputes and ensure that the rightful beneficiary receives the payout without delays.
For example, suppose you name your spouse as your beneficial nominee. If the unfortunate occurs, the insurance payout will directly go to your spouse, bypassing potential legal complications.
Minor Nominee: In some cases, policyholders may wish to appoint their minor children as nominees. Since minors cannot directly receive the insurance payout, you must assign a trusted guardian to manage the funds until the child turns 18.
A key tip here would be to choose a trusted guardian who’d act in the child's best interest, ensuring the appropriate use of funds for their future.
For instance, if you name your 10-year-old daughter as a nominee, the insurance company will release the payout to the appointed guardian until she turns 18.
Non-family Members as Nominee: In certain cases, you may want to nominate someone outside your immediate family, such as a close friend, business partner, or charitable organisation. While this is legally permissible, you may need to provide valid reasoning for this choice.
Often insurers may seek clarification to ensure there’s a genuine financial interest when naming a non-family member as your nominee. Moreover, this may involve additional paperwork to establish their relationship and financial dependence on you.
Selecting Multiple People as Nominees: To reduce the risk of disputes or financial uncertainty, you can designate multiple nominees to distribute the insurance payout proportionally. When doing this, you must specify the percentage share for each individual to avoid confusion.
For example, you can allocate 50% of the benefit to your spouse and 25% each to your two children. Clearly specifying these percentages ensures your family’s financial security is well-managed.

Nomination in Policies Under the MWP Act

A married man (divorcee or widower) can buy a life insurance policy under the Married Women’s Property Act 1874. Only the policyholder's legally wedded wife and children can claim the policy's benefits. It doesn’t allow any relatives, heirs, or creditors to make the claim.

For example, Mr. X is married to Ms. Y, and after getting married, they purchased a home, keeping in mind their future needs. To make the purchase, they opted for a home loan with a 10-year repayment period. To protect his home, he bought a term insurance plan, too. After eight years of repayment, Mr. X passed away. In this case, the creditors cannot make a claim on the death benefits of the term insurance policy bought by Mr X.

Did You Know?

Section 39 of the Insurance Act, 1938, allows a life insurance policyholder to nominate someone to receive the policy amount in case of their death.

Source: Indiankanoon

What Happens in the Case of No Nomination?

In case the policyholder has not nominated anyone for their policy, there is an established legal procedure that the insurer follows to avoid any legal disputes in the future. The policyholder’s spouse, children, or parents, classified as Class I legal heirs, are first entitled to receive the claim amount. If the policyholder has left a will, the distribution will be in accordance with the applicable succession laws, such as the Hindu Succession Act, Muslim Personal Law, the Indian Succession Act, 1925, or others based on the deceased policyholder's religion and domicile. After the court issues the succession certificate and the insurer indemnifies itself against any disputes.

The process of nominating beneficiaries is free and life insurers do not charge any fees for the same. A policyholder is allowed to make fresh nomination or update their nominees anytime before the maturity of their life insurance policy, but changes to nominees (cancellation/update) can incur a small fee (around ₹50-₹100) as per IRDAI rules in India.

How to Select the Right Nominee?

Selecting the right insurance nominee is a crucial decision that requires careful thought and planning. Here’s how you can make the best choice:

Understand Family Dynamics: Identify the individuals most dependent on your income. Prioritise immediate family members such as your spouse, children, or parents to ensure financial security for your household.
Consider Financial Needs: Choose someone who will require financial support in your absence. For instance, if your spouse is a homemaker or your children are still in school, they may need the payout most.
Plan for Future Changes: Life circumstances change, so choose someone whose dependency on you is likely to remain significant for a long time.
Specify Details Clearly: Provide accurate information about the nominee, including their full name, date of birth, and relationship to you, to prevent complications during claims.
Appoint a Secondary Nominee: As a backup, designate a secondary (contingent) nominee in case your primary nominee is unable to claim the benefit.

What Steps to Take if the Nominee Passes Away?

Staying proactive about updating nominee details ensures your loved ones receive the intended financial support without complications. If you have concerns like "what happens if nominee dies in term insurance," it’s important to review your policy regularly and update nominee information promptly to ensure a smooth, dispute-free claim process.

If your insurance nominee passes away untimely, the following are the steps to be taken:

Updating the Nominee Information:

The first thing to do in case the nominee passes away is to update your policy details.

Follow these steps to update your nominee:

Contact your insurance provider immediately
Request a Nominee Change Form and fill in the required details
Hand in the form after completion, along with the required documents

Required Documents for Nominee Change:

The following documents are generally required when changing a nominee:

Duly filled nominee change form
Identity proof of the new nominee
Relationship proof with the new nominee (if applicable)
Death certificate of the previous nominee (if applicable)

Before We Part!

A nominee in a term insurance plan is the person designated by the policyholder to receive the death benefit in the event of the policyholder's passing. Selecting the right nominee is crucial, as they receive proceeds as trustee for legal heirs and dependents. Policyholders should choose someone they trust, who is financially responsible, and who has the family's best interests in mind.

If the nominated beneficiary predeceases the policyholder, the death benefit will typically be paid to the policyholder's legal heirs as per the applicable succession laws. To avoid complications, policyholders should consider naming contingent nominees who can step in if the primary nominee is unavailable. Keeping the nominee information up-to-date is also important, as failing to do so can lead to delays or disputes during the claims settlement process.

Glossary:

Class I legal heirs: Under the Hindu Succession Act, family members of the deceased: mother, the widow, and the children.
Claim Settlement: Insurers pay the death benefit to the nominee/legal heirs after verifying the claim documents
Nominee: Person designated to receive insurance death benefits as trustee for legal heirs
MWP Act: Married Women’s Property Act, 1874: Protects policy benefits for wife/children from creditors
Section 39: Insurance Act provision governing nomination, changes, and claim payouts to nominees

FAQs

In insurance, a nominee means a person designated by the policyholder or policy buyer to receive the death benefit, often known as the sum assured. Common choices arespouses, children, or parents.

The nomination lapses in term insurance if the nominee dies before the policyholder. You can easily update the policy's nomination information if the nominee predeceases the policyholder. You can speak with the insurer and submit a new nomination form with the most recent information.

In term insurance, you can switch the nominee as often as you would like or as the insurance company specifies. Knowing how to change a nominee on a term insurance policy can be helpful when necessary.

You can select more than one nominee. The benefit is awarded to the second nominee if the first does not survive the duration of the insurance. It is also possible to make arrangements for more than one candidate to share the death benefit.

Fill out the nomination change form. You may perform this online or by going to your insurer's branch office. This form is readily available and just needs a few basic data points about your policy and the nominee you wish to designate.

Disclaimer - This article is issued in the general public interest and meant for general information purposes only. The views expressed in this blog are solely those of the writer and do not necessarily reflect the official policy or position of Canara HSBC Life Insurance Company Limited or any affiliated entity. We make no representations or warranties of any kind, express or implied, about the completeness, accuracy, reliability, suitability, or availability with respect to the blog or the information, products, services, or related graphics contained in the blog for any purpose. Any reliance you place on such information is therefore strictly at your own risk. You should consult with a qualified professional regarding your specific circumstances before taking any action based on the content provided herein.