Can You Change Nominees in Term Insurance?

When providing financial security to your loved ones, availing a term insurance plan can be an excellent choice. However, to ensure they get this benefit in your absence, you must set the right individuals as the nominees.

But what if you need to change the nominee's name down the line? They may either have become financially independent, or someone else might be in greater need of the policy coverage. In this regard, can we change the nominee in term insurance?

Keep reading to find out!

When buying a term plan, it is customary that you choose a nominee or multiple nominees. This is required for the following reasons:

• It lets the insurance company know whom to contact during your unfortunate demise within the policy period.
• It helps avoid the complications of finding your legal heir to provide the death benefit.
• Choosing a nominee negates delays in claim settlement.

If the policyholder does not have a nominee, there can be two outcomes. If the individual has a will, the death benefit will go to the successor. Otherwise, the payout will automatically go to a Class 1 legal heir, like the spouse, son, mother, or father.

1. Beneficial Nominees

The Insurance Laws (Amendment) Act, 2015 states that if you choose your immediate family members, like children, spouse, parents, etc., as your term insurance nominees, they shall be beneficially entitled to receive the death benefit over any other legal heir.

Thus, such nominees are known as beneficial nominees and should be your ideal pick if you want your family members to receive the sum assured over anyone else.

2. Minor Nominees

If you wish to financially safeguard your children's future (aged below 18 years), you can appoint them as minor nominees to your policy. In this regard, you also need to appoint a guardian to handle all the matters related to claim settlement and receiving the proceeds on behalf of the minor nominees.

Thus, at the time of claim settlement, if your children are under 18 years old, the guardian will receive the death benefit and will be legally obligated to pay the amount to your children once they turn 18.

3. Non-Family Members as Nominees

If you are unmarried, do not have any family members or close relatives, or for any other reason, you can appoint non-family members as your nominee. This can be a distant relative or even a friend. However, they will receive the death benefit as a custodian.

Thus, your legal heir/heirs will have the right to apply for a claim over the sum assured.

4. Choosing Multiple People as the Nominee

You may need to change the nominee to your term insurance policy for several reasons. Your nominee may unfortunately pass away before you, or there can be a change in your relationship with that person or a loss of trust.

Under such circumstances, here’s how you can change the nominee in your term plan:

• Step 1: The first step is to fill out the change in nomination form. You can fill out the form in person at your insurer's branch or online. The form is readily available, and you must provide information about your insurance and the nominee you wish to add.
• Step 2: Fill in the policy details and the updated nominee information.
• Step 3: Provide the reason why you want to change the nominee and submit the form.

After you complete the process, you will receive a written acknowledgement from the insurer confirming that the nominee details have been updated.

If you are wondering how to choose the correct nominee for your term plan, keep in mind the following pointers:

• Have a clear idea of the available options when selecting a nominee. You can choose your immediate family members (spouse, children, or parents), relatives, or friends (as custodians) as the policy nominee.
• If you wish to add your distant relatives as the nominee, you must prove insurance interest. Otherwise, their claim may be rejected in the future.
• Keep in mind the purpose of the nominee about the sum assured. For instance, if you have multiple financial dependents, choose the individual who can use the death benefit to cater to your family’s financial requirements.
• If you have multiple nominees, you need to set the percentage of the death benefit that they must get.
• In case your chosen nominee is a minor (aged below 18 years), you must select an appointee who will receive and handle the sum on the individual’s behalf.

Providing Inaccurate Information

Not Updating the Nominee Details

Forgetting to Inform the Nominee

Not Assigning a Custodian for the Minor Nominee