What is the importance of nomination in insurance policy?

By | October 3, 2016

During a lifetime of a person, he makes various financial decisions such as investing in banks, life insurance policies and many more. These are important financial investments but appointing a nominee is equally significant. We know life is very short and unpredictable also. The catastrophe of the death of a family member is incompatible but by appointing a nominee when you make pecuniary investments it allows you to posthumously take care of financial condition of your family. This is principally vital in the case of insurance policies which are largely bought to make sure the dependents of the policyholder are well taken care of post his or her death.

Preferably, you must nominate your reliant who would be permitted to receive the death benefit. However, appointing a nominee merely make sure legal discharge for the life insurer. While the insurance organization has to hand over the death benefit to the nominee, other legal beneficiaries can bet their claim to the sum. Nominees are just selected as trustees and receivers of insurance earnings on behalf of the policyholder legal beneficiaries.

Features of a nominee in life insurance

  • An insured person may nominate a person to whom the amount secured by the insurance policy may be paid in the event of his death.
  • In life insurance nomination is allowed only when the person applying for the policy is similar as the person whose life is insured.
  • If a nominee is below the age of 18 years a caretaker needs to be declared who will in the event of death of policyholder receive the amount in behalf of the nominee.

If there is a nominee who is also a legal beneficiary then he would be entitles to the get a portion of the insurance proceeds according to the succession law or will if it has been already made. If heir for the insurance policy is named in the will then lawfully speaking the nominee should hand over the proceeds to this heir. But if the heir is not particularly named in the will or in absence of will, then gradually the heir would be depend on the legal explanation of the will.

According to the insurance act, while the nominee shall be remunerated, but the nominee may not be legal beneficiary to the amount. A nominee is supposed for holding the amount on behalf of the legal beneficiary who would be named in the will or determined by the rules of sequence. The nomination is essential as it can save your family and dear ones a world of trouble. It is organizationally a superior practice to have nominees allocated for life insurance, motor policies where the claim advantage may occur after the death of the insured person. If in case, an insured person died without making a nomination then the insurance company has to make the efforts for indentifying the legal beneficiary to compensate the proceedings. In addition to this, these types of situations can also give rise to the numerous claimants and protracted lawful battles.

 

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