Do you know the difference between Nominee and Beneficial Nominee? What is the meaning of Beneficial Nominee in case of Life Insurance? It is best to understand how the rules work before you nominate someone for your life insurance policies.
The earlier meaning of Nomination for Life Insurance
Before proceeding further let us understand the earlier meaning of nomination for Life Insurance. Earlier, if you nominate someone, then such nominee used to act as a trustee but not ownership of the claim amount he or she will receive the death claim.
Hence, earlier nomination means not an ownership of claim amount. The nominee has to distribute the claim amount as per the legal heir rules or WILL.
This was lead to many legal battles between nominees and legal heirs to claim the death claim amount of the insured person.
What is the meaning of Beneficial Nominee in your Life Insurance?
To avoid the long legal battle between legal heirs or nominees, IRDA introduced the concept of Beneficial Nominee.
Now as per the new rules, suppose you nominated your parents, spouse or children, then the death claim amount will be payable to the nominee ONLY. Other legal heirs can’t claim the amount. Becuase now whoever you nominate in your Life Insurance will be considered as Beneficial Nominee. Accordingly, Life Insurance Company will pay the death claim benefit to the nominees.
This created the life easy for Life Insurance Companies and also the real beneficiaries whom the insured planning that death claim amount be payable in his absence.
Hence, while buying a life insurance, you must have a clarity in mind that to whom the death claim amount be payable in your absence.
Even if legal heirs try to claim the death claim amount, they will not be successful as per the new rules of nomination.
Hence now NOMINEE=BENEFICIAL NOMINEE to whom the death benefits will be payable irrespective of legal heirs claim.
One more point to be noted here. Suppose Mr.A applied for maturity claim amount. However, he died before he receives the claim amount from Life Insurance Company. In such a situation, the nominee can claim such amount as a beneficial nominee without any hurdle.
Few points to consider before you nominate someone to Life Insurance
# You can nominate during Life Insurance purchase or can change the nomination during the policy period.
# You add more than one nominee to your Life Insurance along with mentioning the % of the benefit to be shared among nominees.
# Suppose you nominated your friend or someone who has no insurable interest on your life, then such non-relative will not be treated as the beneficial nominee. In such a situation, your actual beneficial nominees or legal heirs can prove that he or she is not a beneficial nominee and can get the claim amount from the nominated person.
# You can use the option of successive/alternate nomination in life insurance. This is nothing but the nomination order. For example, nominate the claim amount to person A. If he is not alive at the time of death claim, it can go to person B. If B is not alive as well, it can go to person C. All the names of A, B and C need to be declared upfront at the time of successive nomination in life insurance.
# Change or cancellation of nomination will cost you Rs.100 for such each alternation.
# The nominees’ details are generally printed or endorsed on the policy certificate. If such information is not available on policy document, then the nomination is not valid.
# A valid WILL still can negate the rights of beneficial owner and money can be disbursed according to the WILL of the insured.
Hope, this will clear the rights a beneficial nominee have over legal heirs when it comes to Life Insurance claim amount.