Things a Nominee Must Know About Your Life Insurance Policy

A nominee is the individual you appoint to receive the benefits from your life insurance policy in the event of your demise. It could be your spouse, children, parents, or even a trusted friend. Nomination makes sure the money goes to the right person without any legal trouble.

Regardless of whether it's term insurance or another type of life insurance, it's important that your nominee understands what to expect. Let’s break down the most important things your nominee should be aware of.

Important Factors that Every Nominee Should Know

Existence and Type of Policy

First of all, the nominee should be aware that the life insurance policy exists. It sounds obvious, but many people don’t share this vital information with their families.

Also, tell your nominee which kind of plan it is. Is it a simple term insurance plan? A ULIP with investment benefits? A guaranteed income plan with payouts over time, or an endowment policy combining savings and insurance?

Each plan comes with its own features, and knowing the type helps the nominee handle things better.

Policy Details and Documentation

Your nominee should have access to the following:

• Policy number.
   
• Insurer name (like Edelweiss Life, for example).
   
• Policyholder name and contact details.
   
• Premium payment receipts.
   
• Identity and address proof of the nominee.

Encourage your nominee to create a folder (physical or digital) for all key documents.

Claim Filing Procedure

Filing a claim doesn’t need to be difficult—but only if the nominee is prepared.

Here’s a simple 3-step process to follow:

1. Kindly inform the insurance company about the policyholder’s death at the earliest possible time.
2. Submit the required documents (we’ll list them below).
    
3. Wait for the claim settlement; most insurers settle valid claims within 30 days.

For those who buy policy online, the entire claim process can also be done digitally on the insurer’s website or app.

List of Required Documents

To ensure a smooth claim process, the nominee will typically need:

• Original life insurance policy document.
   
• Death certificate.
   
• Claim form (available on the insurer’s website).
   
• KYC documents (ID and address proof of nominee).
   
• Medical reports or hospital records (if applicable).
   
• Bank account details for payout.

If you have a ULIP, additional documents related to fund value or NAV might be required.

Nominee’s Rights and Legal Position

The nominee is legally entitled to receive the death benefit under the life insurance term plan. But here are a some primary things need to consider:

• If there’s a Will and it mentions someone else as the beneficiary, legal heirs may contest the claim.
   
• In a term life insurance policy, the nominee only receives the sum assured, not any investment value.

So, it’s important for both the policyholder and the nominee to be on the same page and update the nomination regularly.

Unique Scenarios Every Nominee Should Understand

There are a few unique cases where things can get tricky:

• Minor Nominee: If your nominee is under 18, a guardian must be assigned to receive the payout.
   
• Multiple Nominees: If you have more than one nominee, mention the percentage share for each.
   
• Nominee Dies Before the Policyholder: Update the nomination immediately to avoid legal confusion.

Tax Implications for Nominees

In a ULIP, if the premium is above ₹2.5 lakh per year (as per 2021 changes), the returns might be taxable.
 

• Nominees don’t have to pay tax on term policy payouts.
   
• However, if your policy includes bonuses or maturity value (as in endowment life insurance), check the tax status with a financial advisor.

Knowing the tax saving investment benefits and ULIP tax benefit rules helps avoid last-minute surprises.

Tips for Policyholders to Empower Their Nominee

Here’s what you can do as a policyholder:

• Share the policy details with your nominee.
   
• Write down the steps they need to follow if you’re not around.
   
• Tell them about your online term plan and how to access it.
   
• Explain what type of policy it is – ULIP, term insurance, or a saving insurance plan.
   
• Keep documents in a secure place and let them know where they are.
   
• Mention the tax benefits you’re using, like tax saving insurance or term insurance tax benefit.

This small effort can save your family from financial stress later.

Takeaway

Purchasing a life insurance policy is a responsible step towards securing your family's future. But don’t stop there. Make sure your nominee knows the details, the process, and their rights.

Whether you’ve chosen a term insurance plan, a ULIP, or any other life insurance plan, your nominee should be fully aware of how to claim it and what they’re entitled to.