Choosing Life Insurance Nominees: Family vs Non-Family

Your life insurance nominees are the ones who receive the death benefit/life cover in case of your untimely demise. This is why life insurance nominees are generally close family members who depend on your income to maintain their lifestyle. After all, the main goal of life insurance is to financially secure your loved ones in case of your untimely passing. However, it is important to note that your nominee does not have to be someone related to you.

Having non-family members as nominees is not strictly prohibited, and it is possible to assign your friends or acquaintances as your nominees under certain circumstances. But keep in mind that your nominees have to be approved by your insurance provider as well. Having a non-family nominee is uncommon and you might have to justify your nomination choice to your insurer.

When Can You Have a Non-Family Nominee?

There are multiple scenarios where you might want to nominate someone unrelated to you. Let’s go through some of the common situations where a non-family member can be a viable nominee for your life insurance policy.

When You Have No Close Family

If you have no close relatives, are unmarried, and don’t have any children, then you can opt to nominate a friend or distant relative as your life insurance nominee. Once your nominee is approved, they will be able to make a claim on your policy in case of your untimely death.

When You Have an Unrelated Dependent

Someone who is dependent on your income may not necessarily be related to you. There may be situations where you have to financially provide for a close friend or a distant relative who is unable to provide for themselves. In such cases, you can nominate your dependent even if they aren’t your family member.

Keyman Insurance & Business Partners

Most life insurance plans are meant to financially safeguard your dependents, whether they are your family or not. However, keyman insurance is a unique type of life insurance that is catered towards business owners. Keyman insurance safeguards a business from financial hardship in case an essential employee or owner passes away unexpectedly. In a keyman insurance, you may nominate your business partners so that your organization is secure even when you’re gone.

Downsides of Choosing a Non-Family Member as a Nominee

There are a few hurdles that might come up if you decide to nominate someone who is not your family member:

Insurer May Ask for Additional Verification

An insurance provider may ask you additional questions if you nominate someone who is not your family member. You may have to convince the insurer that your nominee is your dependent/well-wisher and may have to fill additional paperwork to finalise the nomination. However, once the

relevant details have been shared and the identity of the nominee has been confirmed, the insurance provider cannot deny a nominee solely on the fact that they are unrelated to you.

Possible Disputes with Legal Heirs

In India, succession rights take precedence over nomination rights. So, if you have legal heirs, they might be able to dispute your nominee’s claim. Ideally, to avoid such a situation you should keep your legal heir and nominee informed of the policy’s beneficiaries.

Can You Change Your Life Insurance Nominee?

What happens if your current nominee passes away? Or if you get married and want your insurance plan to protect your spouse? Well, the good news is that you can legally change your life insurance nominees whenever you want. Every life insurance provider in India allows you to change your nominee.

Your insurance provider will ask you to fill a nomination change form to initiate the process. You might also have to share any relevant documents that your insurer asks for. Once all documents have been submitted and verified, the nominee change process begins. Your insurer will notify you once the changed has been finalised.

Conclusion

There is no rule that specifies who your life insurance nominee can be. You can choose any person as your nominee, whether they are related to you or not. However, keep the downsides mentioned above in mind while choosing a non-familial nominee. And remember that your legal heirs always have precedent over your nominees, especially if said nominees are unrelated to you. However, if you have no close family or simply need a custodian for your life insurance, then opting to assign a non-familial nominee might be decent alternative.

 

Aastha Mestry - Portfolio Manager 
An Author and a Full-Time Portfolio Manager, Aastha has 6 years of experience working in the Insurance Industry with businesses globally. With a profound interest in traveling, Aastha also loves to blog in her free time.