We all know about the key purpose of buying life insurance policy is to pass the benefit of your life cover to your loved ones, if you are no longer around. It could then, be possible, if you had assigned a rightful person who has insurable interest in the life of assured while buying an insurance policy. Let me remind you again, the whole purpose of buying insurance is to ensure that your loved ones may face the minimum possible hardship if something happens to you.
For starters, let‘s assume that the policy holder does not appoint a nominee in the policy.  In the event of his death, his legal heirs would get the benefit of the policy in the absence of nominee details, but not before furnishing a succession certificate or probate of Will, which is a cumbersome process.  Therefore, the whole purpose of buying the policy is defeated, if you do not provide the nominee or supply wrong and incomplete information. Also Read: What will happen to your Wealth? After you!
For hassle-free and timely settlement of claims, you must avoid nomination pitfalls and wrong notions you should dispel.
Choosing the Right Nominee
Generally, while buying an insurance policy, most people nominate their- blood relatives, such as parents, wife, children and siblings, instances of nominating close friends are not rare. While choosing the rightful nominee in such a way that there is least possible chance of a contest over the insurance proceeds. A nominee should be someone who has insurable interest in the life of the assured, say a husband or wife. As a part of the risk assessment process, insurers may deny a policy if the relationship between them doesn’t have any insurable interest. 
Since, insurance is a long-term contract and nominees can be changed over the policy term. A boy or girl, before his/her marriage, may appoint his/her father or mother as a nominee, but must change it to his/her spouse after their marriage.
Multiple Nominees
Many people, in a hurry  fill up the form, appoint just one nominee even if they have multiple options as they can nominate more than an individual, in which case he needs to specify the percentage share of each nominee in the payout by mentioning their full names, addresses, ages and relationships to you. This could lead to complications.
However, it can be justified as suppose, a person appoints just his mother as a nominee, even when he has the option of nominating his father too. Now, if the mother dies before the policy-holder, with no change in nomination, there would be unnecessary delays in settlement on the death of the policyholder. So, one should appoint multiple people as nominees, if possible.
Updating Nominee Details
All precautions that you must take while filling up the proposal form to get update your nominee details from time to time. Keep always informing your nominees about your policy documents. Often, nominees are not aware of the existence of a policy due to refrain from telling them about the policy either out of a feeling of insecurity or ignorance. This may lead depriving them of the money when they need it the most in a worst-case scenario.
Absolute rights of Nominee

A nominee does not have absolute rights to the proceeds from a life insurer received by a nominee can be attached if a court passes an order to that effect. Legal heirs can claim the money from your nominees through a court settlement. If you want to pass on absolute rights to a nominee, prepare a Will and mention the beneficiaries. Otherwise, you can issue a policy  under the Married Woman’s Property Act (MWP) where all proceeds under a life insurance policy  bought by husband, for the benefit of  his wife, or children, or any of them, shall be payable only to the wife or child.

Setting rightful nominee details in the policy on your part could prevent a lot of heartburn for your near ones, if you are no longer around.  Also Read: Educate your Spouse and Children about your Financial Life!
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Suresh Kumar Narula

SEBI Investment Advisor, Founder & Principal Financial Planner at Prudent Financial Planners
Suresh K Narula is founder and Principal Financial Planner at Prudent Financial Planners. He has earned the professional CERITIFIED FINANCIAL PLANNER and got registered with SEBI as Investment Advisor. He writes on personal and financial planning articles and got published in Dainik Bhaskar, Business Bhaskar and The Financial Planner's Guild, India. He is also a member of Financial Planner's Guild India ( An association of practicing SEBI registered Investment advisers) to create awareness about Financial Planning in general public, promote professional excellence and ensure high quality practice standards. Suresh received his an M.com from Himachal Pardesh University and an MFC from Punjab University, Chandigarh. He can be reached at info@prudentfp.in
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