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What happens if my term insurance nominee dies?

05 Aug 24      |       | ShareShare Share Blog Or copy link Copy Share this link via

Authored by: Anurag Ainapurapu
Reviewed by: Krupa Kenia

The Long Read


Everything you *need to know* is right above this. Scroll down, only if you'd still like to read more (honestly, why?)

Having a nominee or nominees is very important in a term plan as they will be the ones who will receive the life cover payout on the policyholder’s death during the policy period.

If your nominee passes away, you may think about cancelling the policy, but don’t! In such an unfortunate situation, you need to:

 

  • Inform the insurer about your nominee passing away 

  • Name a new nominee 

 

The new nominee will then get your life cover payout. If your new nominee passes away before getting the payout, then it will go to their legal heir (such as their kid). 

 

Here’s how you can name a new nominee*: 

 

  • Get a change of nomination form from your insurer, either online or offline

  • Submit the form along with a copy of the policy documents and any other documents that your insurer requests 

  • You may need to prove the new nominee’s insurable interest in you with the necessary documents 

  • Get an acknowledgement from your insurer about the change of nominee 

  • Check if your policy document and eIA (E-Insurance account) show the new nomination, once the insurer changes the nomination at their end 

 

Depending on your insurer, change of nomination may not be charged. 

 

*may vary from insurer to insurer 

In such a case, the nominee’s payout will be given to their legal heir (for example, their child) and if there are multiple nominees, the legal heir of that nominee will get the share which was entitled to them. Note that if your deceased nominee has many legal heirs and only one of them plans to claim the payout, then the others will need to provide written consent for the same. 

To claim the payout, a nominee’s legal heir needs to show: 

 

  • Claim form 

  • Legal heirship/Succession certificate issued by a court 

  • Other requested documents 

 

The exact rules will depend on your insurer, so it’s best to check with them once. 

The death benefit i.e., the payout, is exempt from tax, even if your policy had more than ₹ 5 lakhs annual premium. 

 

A nominee in a term insurance policy is a person who receives the policy payout when you pass away. It is not necessary that the nominee is the person who is intended to benefit from the life cover, the beneficiary can be a different person. For example, your policy nominee may be your dad but you intend that your live-in partner should benefit from the payout. In this case, your dad is a recipient only. 

As per term insurance nominee rules, to name someone as a nominee, you need to prove their insurable interest in you, i.e. they may face financial difficulties on your passing away. Proving insurable interest is easy in the case of blood (such as mother, brother, sister, etc.) or legal relationships (such as a business partner). For other kinds of relationships (such as live-in), it can be very difficult to prove insurable interest. 
 

Find out more about naming a nominee on your term policy. 

Yes, you can have multiple nominees for your term plan.

Yes, you can change your term insurance nominee anytime! You may want to do this when your nominee preferences have changed. You can make this change by following these steps:

 
  • Get a change of nomination form from your insurer and fill it. You can get it either online or offline.
  • Submit the form along with a copy of the policy document
  • You may have to prove the insurable interest of your new nominee, i.e., how your death will have a negative financial impact on your new nominee
  • Get a change of nominee acknowledgement from your insurer
     

Find out more about changing your term insurance nominee.

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