What Should You Do If Your Term Insurance Nominee Is No Longer Alive?

If the insured dies during the policy period, a guaranteed payment is provided to the insured's family.

But, in the absence of the life insured, who obtains the benefit? Who is the policyholder, or who is the nominee?

There may be some confusion over who is entitled to the death benefit from a term insurance policy. While many of you are probably aware that the benefit is paid to the nominee, there is also an option for the policyholder. Furthermore, legitimate heirs may file a claim for the death benefit. So, let's get this straight.

Who receives a term insurance policy's death benefit?

A term plan's death benefit is usually paid to the nominee. However, some cases may be unique. Let us clarify -

1. If you purchase the insurance for yourself

When you purchase a life insurance plan on your own life, the nominee named in the policy receives the death benefit if the insured event occurs during the policy term. However, if you did not name a nominee, your legal heirs are entitled to the death benefit. In such instances, your legal heirs must submit a succession certificate in order to file a claim.

2. If you purchase the coverage on behalf of someone else

You become the policyholder if you purchase a term plan on the life of your spouse or children and pay the premium. If the life insured dies, you will receive the death benefit.

Life insurance nomination:

A life assured nominates an individual or corporation to be the nominee who will receive the death benefit in the event of the life assured's untimely death during the policy term.

A term insurance plan allows you to name numerous nominees. In that situation, you must state each nominee's portion.

You can even nominate a minor, such as your child. However, in this scenario, you must nominate someone to act on the minor's behalf until the nominee achieves adulthood.

During the policy duration, the nominee can be replaced.

The consequences of the nominee's death during the policy period

In some cases, the nominee may die during the policy's term. You have the ability to modify the nominee in that scenario. You can change the nominee by notifying the insurance company. The change in nominee would be documented by an endorsement of the previous policy.

Choosing a minor to be the nominee

It is possible to appoint a minor, or someone under the age of 18, as a nominee. In that instance, you would have to nominate another person to function as an appointee2. The appointee must be at least 18 years old. The appointee would serve on behalf of the minor nominee until the nominee reached the age of majority. If the policyholder dies while the nominee is still a minor, the appointee must collect the death benefit on behalf of the minor.

The consequences of not having a nominee under the plan

Having a nominee is advantageous since it facilitates claim settlement. In the absence of a nominee, your legal heirs may obtain the death benefit. Your rightful heirs, on the other hand, would be required to provide the succession certificate. The court issues this certificate, which establishes the claimant's entitlement to the death benefit.

The legal heirs would need to visit a competent court, provide the necessary documentation, and then obtain the certificate. As a result, having a term insurance nominee is a preferable option.

Conclusion

The nominee facilitates claim settlement. If you name your immediate family as beneficiaries, the nominee may also become a beneficiary and use the death benefit to meet the family's financial requirements and obligations. So, when purchasing a life insurance policy, name a candidate. You can also nominate during the plan's duration and amend your nomination if necessary.

If the nominee meets an untimely demise during the policy term, the policyholder may appoint a replacement nominee to make the claim procedure easier for your family while you are away.