Naming the insurance of a life insurance is considered more or less an easy process if the nominee is related to the life insured in some way. Hence, there are no legal hurdles while naming the spouse, parents or children, as nominees for such policies and the insurance company will also grant the insurance amount to the named person on the demise of the person who has the life insurance. However, on case the person is not a family member and is not related in any way to the life insured, certain problems might arise later. Here are 5 things to check while naming the nominee.
1. Is the person dependent on the life insured for survival?
At times, the nominee, even if not a direct family member could be dependent on the life insured in some financial capacity. The nominee could, for example, be a protégé or dependent on the person in some other way, like a nurse who has brought him or her up and the person insured wants to ensure that the nominee is looking after the nurse at present and also wants the nurse to be looked after his or demise. In such cases, the insurance company will definitely look into the insurable interest to determine whether the nomination can be granted or not.
2. Will the nominee be financially beneficial on the death of the life insured?
One of the reasons why insurance companies are wary of granting nominations to non- family members is that there are very high chances of frauds in such cases. Such scenarios have also resulted in deaths where the nominees have tried to cause the death of the life insured just so that they can get the money allotted to them. Hence, before naming a non family member it is important to be absolutely sure about the intention of the nominee.
3. Do you want the nominee to be the ultimate beneficiary?
It has been seen that the nominees and the ultimate beneficiaries are not the one and same person. A non- family member might be granted the money after the death of the life insured if named nominee, but the amount will still be seen as a part of the total wealth of the life insured, and the money will eventually go to the beneficiary or the legal heir. Hence, the nominees are just custodians of that money and they heirs and nominees often have to fight it out in court to establish to whom the money would eventually go to. Be sure to make a will if you know such a situation might arise after your demise stating who the money would eventually go to.
4. Is the Nominee a minor?
In case the nominee is a minor, like your child, be sure to appoint a legal guardian who will be custodian of the money and who will be responsible for handing over the amount when the child becomes an adult. The insurance company should be notified that the nominee is your child and you should submit the documents regarding the guardian you are appointing.
5. Is the Nominee a very old person?
It might be possible that you have made your parents your nominee and it is obvious that they would very likely be senior citizens. It is absolutely fine if they are named as your nominee to ensure that they do not face financial difficulties in case of your untimely death. However, it could be possible that your parent’s suddenly face grave illness themselves because of which they cannot complete the legal formalities, or they do pass away before you. In such cases, be sure to suggest the name of a second nominee as soon as possible, duly informing the life insurance company.