Amendments in Insurance Policies Benefit Nominees

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Insurance policy is a boon to the people left behind in the unfortunate event of someone’s death. It is a good financial product that works as a means to alleviate a lion’s share of the economic troubles that might befall loved ones after one dies. So it is imperative for the policy holder to name a nominee while making the insurance policy. This will ascertain that nominee’s right to the money left behind by the policy holder. But earlier rules created a little confusion in this regard where the nominee mentioned in the policy would simply mean that he or she had the right to distribute the insurance money to the legal heirs if that person is not one. However, new rules with incurred amendments entitle the nominee him/herself to be benefited with the insurance money. This amendment of the Insurance Laws Act took place in 2015 and according to this all nominees, spouses, parents and children the direct beneficiary of the insurance money in the event of the death of the policy holder. So the nominees are the intended recipient of the insurance money and there is no confusion regarding this.

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So with this amendment to the Insurance Act comes the concept of beneficial nominee whereby the nominee(s) of the policy holder who can be among parents, spouse or children will be entitled to the entire amount that was payable by the policyholder or the insurer. In this case, any other legal heir, simply by the virtue of law, cannot have any sort of claim on the insurance money. This deletes all confusion and also gives a greater sense of monetary security to the nominee, thereby making the nomination process spotless. This also gives the insurer a peace of mind knowing that the person(s) he or she has nominated only will get the intended money. And this rule of the beneficial nominee will be applicable for all insurances having a maturity date post-March 2015 according to experts.

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There is yet another benefit of the new rules. With the new rules, the nominees can now collect the insurance money in the event of the insurer’s death even after the policy has matured. Earlier, the rules stated that the nominee could collect the money but only if the insurer dies before the policy matures. The previous rule prohibited the nominee from collecting the policy money if the insurer lived till policy maturity but died before the maturing corpus was received. But now things have improved in this aspect and other legal heirs cannot have any claim on the maturity proceeds state experts.

There have also been changes that make possible what is called a policy assignment. It is by the virtue of this that you can pledge your insurance policy to a bank in times of taking a loan as collateral security. Following this the policy owner is now the bank while it is the original policyholder’s life that is being insured. So at times of the original policy holder’s death, the bank will receive the money. But previously, the nominee was completely deprived of receiving any money. Now, the bank gets paid the outstanding dues with the balance being received by the nominee. You can also assign the policy partially, if you want, to the bank. In fact, this assignment is possible for purposes other than loans, as well.

Shailesh Kumar

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