Things you need to know about Nomination in life insurance

Nomination in life insurance

What are the things you need to know about nomination as an insurance agent?

As a qualified insurance agent, a lot of your job depends on how well you can educate your client on insurance specific topics. Like for instance, what is nomination with regards to life insurance? Who is a nominee? Sometimes clients can get put off by legal terms – but you can easily put their uneasiness to rest by shedding light on thing they ought to know about nomination in life insurance.

When you advise your client to get a life cover for the full family, make sure they name a nominee. That nominee should be made aware of the details of that particular life insurance policy so that in the event of an emergency, they are aware of those documents and aren’t unsure of the next steps to take.  Another important reason why your clients should have a nominee in the policy, is so that there is no stress from the settlement process of the claim – it will be a relatively smooth process when all the affairs are in order plus no one will want to deal with a legal minefield at a time when they have enough on their plate.

So here are a few things your clients should know about nominations and why it is a must for a life insurance policy:

  1. Unless a legal heir, a nominee can’t use the money – A nominee is basically a receiver or a holder of the money unless he or she is recognized as a legal heir. And if they are not legal heirs, they won’t have a right to maturity benefits. If the policyholder dies, all the money and benefits that need to paid, will be given to the nominee or nominees or a legal representative according to directive of a competent court.
  2. However, a beneficial nominee can avail of the money – Your client should obviously be made aware of the stark difference between a nominee and a beneficial nominee and that is that a beneficial nominee can make use of the claim money. It is their right and they are entitled to it and the maturity benefits that come along. Basically the beneficial nominee is the final person who will the receive settlement money.
  3. A minor can also be recognized as a nominee – If your client plans to make a person in the family his or her nominee and that person is a minor, under the age of 18 then the client can go ahead and nominate said minor to receive the claim in the event of his/her untimely death, however said minor will only receive the claim money after he becomes 18 years old.
  4. Alterations and cancellations on nominations are permitted – Your client must know this. If an unexpected situation arises say a husband wants to divorce from his wife, or a family is going through a separation where roles may get changed – the policyholder may want to change the name of the existing nominee or perhaps even cancel it altogether.
  5. In the event of a nominee dying here’s what happens next – When a policyholder dies, and the nominee also dies before being paid the settlement money then that money will be given to the legally recognized heir. In the event of a nominee dying before the policyholder passes away then the maturity benefits will go to the recognized legal heirs or the legal representatives or to the person holding the succession certificate.
  6. When the policyholder does not nominate anyone – In this situation, legal heirs or representatives of the holder of such policy gets the benefit of the policy. But it is always better for everyone involved in the situation, if the holder of insurance policy clearly nominates someone to receive the benefits so that the next of kin does not have to deal with unnecessary hassles of the legal kind. So as any good insurance would, advise your clients to make someone they trust their beneficial nominee.

So finally, a policyholder holding life insurance nominates their parent, their husband/wife, kids or just one of these – then they are entitled as a beneficiary to the settlement claim that is to be paid by the insurance company. However, if there is no specific mention of said nominee being a beneficiary, then that person is just a nominee with no beneficial rights. All this may seem like a lot of extra paper work, but really its just a way to ensure that your client’s family gets what is rightfully theirs at a time when all they will need everything to go smoothly so that they can respectfully mourn the loss of a loved one. You don’t want it to be difficult for the next of kin at a time they should be making arrangements for a funeral and grieving.  So when your client is unsure, always convince them of the right option and that is to have a nominee in place. As an insurance agent, if you have told them this, then you will have done your job well.

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