Purchasing a life insurance policy is a comprehensive process. It requires a proper understanding of every term and condition and the benefits and clauses of the plan. The requirements of opting for a policy plan also requires you to designate single or multiple beneficiaries to receive the bonus in case of an unfortunate incident. Generally, the policies have no restrictions, and one can pick whoever he wants to. The insurance providers also allow you to change your beneficiaries, for instance, in divorce. However, there is a slight restriction in case one wants to name a minor as a nominee. You need to have an assignee till the nominee gets 18 years old. The policyholder should notify the nominated beneficiary to be aware of the further formalities to attain the claim in certain circumstances.
Choosing a Life Insurance Beneficiary
The only restrictions an insurance provider might have is when you want to nominate a minor. In such cases, the policyholder must have an assignee till the nominee attains eligible age. Other than that, you can name anyone as your beneficiary. However, if a claim arises when the nominee is still minor, the assured sum is paid to the assignee, as declared by the policyholder. One must also know that the recipients chosen in your life insurance policy are entirely unrelated to those listed in your will. It entirely depends on the individual whom he wants to name in these documents.
The nominated beneficiary can be a person or a trust, a charity, or a business. People do name their mother, spouse, father, spouse, or children of legal age. One can also call a relative or a trusted friend for the beneficiary.
We recommend that you nominate your family members as the beneficiary, as it will be ideal to decide on the benefit received. Whether to pay the mortgage, spend it on other expenses, or save it for further use, they can choose better.
When does the policy not have a beneficiary?
In case you fail to provide relevant information of the nominee, or if the nominee dies during the policy tenure, and the insurance provider does not update, the company then allots the assured sum to the legal heir.
If the policyholder leaves a will, then the insurance company follows the Indian Succession Act, 1925. The assured claim is allocated according to the terms of the will after the court issues the succession certificate. The court's decision pays the claim amount.
How Beneficiaries Can Claim a Life Insurance Policy
To claim the insurance policy, the beneficiaries will need to provide a particular set of documents that include:
Death certificate of the policyholder
The life insurance policy (or a copy)
A claim form (from the insurer)
The primary beneficiary's death certificate (if contingent beneficiary)
Insurer's Age proof
Medical Certificate of the policyholder
Hospital discharge form
In case of unnatural death, a copy of Police FIR and post-mortem report
In case the policyholder died due to illness, the hospital records are needed
In case of early death, cremation certificate and employer certificate are needed
If no nominee is appointed, the claimant must attach proof stating that he is legally entitled to make a claim. In case there are multiple nominees, then the claim amount is divided between all of them according to the percentage decided by the policyholder.
Once the beneficiary has submitted the essential paperwork correctly, the insurance company will provide the death benefit to them; that is the sum assured chosen by the policyholder while taking a policy. There are two options to receive the money:
- Lump-sum: This option gives you the entire amount all at once. It is tax-free and can be used to cover immediate expenses.
- Installment or annuity: this option provides the benefits in monthly or annual payments. This option can act as a substitute for the loss of monthly income or certain expenses.
One can select a minor as a nominee. In such cases, the policyholder should appoint an appointee. In case the claim arises when the nominee is small, then the sum which is assured will be paid to the appointee which is herein declared by the policyholder.