Who is a Beneficial Nominee in your Life Insurance

Now there is a big difference,in legal terms, between earlier nomination and a beneficial nomination now. One should clearly understand the implications of a Beneficial Nominee in case of a life insurance policy. It goes without saying that it is better to understand the context of beneficial nomination before one nominates someone for one’s life insurance policy.

How Beneficial Nomination changed the meaning of nomination for Life Insurance.​

Before the recent changes, the nominee of a life insurance policy was supposed to receive the claim amount benefit however the nominee was supposed to distribute the claim amount to the legal heirs if they were different from the nominee which was the main cause of long drawn legal battles in Courts to claim the death claim amount of the insured person.

It is important to add here that earlier if the policy holder died during the policy term but before the maturity of the policy then the death claim of the insurance policy could not be claimed by the nominee.


New Concept and meaning of Beneficial Nominee in your Life Insurance

Thus to avoid these long drawn battles between the legal heirs and the nominees, IRDA has brought in the new rule of Beneficial Nominee.So now as per the new rules the beneficial nominees can directly claim the benefit of claim amount because of their family relationship with the deceased.Only spouse, children and parents  and not siblings are included as Beneficial Nominees since they are the direct dependants of the policy holder. 

In other words, the death claim amount will be payable to the nominee(S) ONLY. The other legal heirs will not be able to claim the amount because the whosoever is  nominated in the life insurance policy will be construed as the Beneficial Nominee. And hence the LIC will pay the death claim benefit accordingly to the nominees. 

Thus it becomes important that while buying a life insurance  one must have clarity about whom would one want to get one’s death claim payable as his genuine legal heirs would not be able to stake claim to the death claim and will not be successful as per the new rules of nominations.

Again, it is important to add here that now the nominee can claim the death claim in case the policy holder dies during the policy term but before the maturity of the policy.

Checklist before you nominate someone as beneficial nominee in your Life Insurance Policy

1. If you nominate a sibling, a friend, or someone who has no insurable interest on your life then such nomination might not be considered as beneficial nomination and can be challenged by genuine legal heirs in the courts of law and claim the death claim money.

2.Nomination can be done at the time of  buying the policy or can be added at a later stage also during the policy period.

3.Nomination can be done for more than one nominee mentioning along with the share of their claim i.e the percentage in which the  claim amount would be shared among all the nominees.

4.If changes are sought to be done then it attracts a cost to change the nominee.

5.The nomination can be in a successive manner in Life Insurance. For eg. if the Nominee A is not alive at the time of the claim then the claim can be paid to Nominee B, if B also not alive then it should go to Nominee C and so on. All the nominees details should be entered at the time of making nomination.

6. The details of nominees are usually printed or endorsed on the certificate of the policy bond, however if the information is not available then the nomination is not considered to be a valid nomination.


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