Amidst all the chaos and news blasts in the insurance sector, a major change in the Insurance Laws (Amendment) Act 2015 has been ignored.
Did you know that after the death of the policyholder, the claim goes to the beneficial nominees? If you didn’t, you know now.
And such a change eliminates the possibility of family disputes regarding death benefits.
Through this blog, we’ll acquaint you with this major change in the insurance sector and also familiarize you with terms like “beneficial nominees,” so that you can draw a clear picture of this whole arrangement. So, without any further ado, read on.
What is a Nominee?
Having life insurance is a major financial decision for you and your family. It allows you to build a strong backbone of financial protection for your entire family. Therefore, it’s better to understand the meaning and value of a nominee intricately to reap the proper benefits of your life insurance policy.
Nomination is nothing but the process of assigning a person or persons eligible for the benefits of the insurance policy in times of casualties. A nominee can be anyone you, as the policyholder, deem to see fit to acquire the insurance money after you. Generally, a nominee is a person from your family or a close relative.
There’s ongoing confusion about who gets to claim the policy after the death of the policyholder. While some feel that the legal heirs have the first right to claim the amount, the law permits the nominees of the life insurance to make the claim. Legal heirs cannot make any claims here.
However, in terms of life insurance, there is a concept called “beneficial nominees” that makes this major update easier to follow.
A beneficial nominee is no one but an immediate family member who could be your spouse, kids, or parents.
When you have a beneficial nominee, the immediate claiming right to the insured amount goes to the beneficial nominee, excluding other legal heirs. Nevertheless, it is not mandatory to have a beneficial nominee.
In the absence of a beneficial nominee, the general rule applies which lets the nominee act as a trustee or caretaker for the legal heirs.
It is the policyholder’s responsibility to determine the nominees and the specific amount every nominee should receive. This is one of the most common reasons for disputes among legal heirs in the family.
With the introduction of beneficial nominees, the state intends to reduce the frequency of such family disputes. Nevertheless, if you owe any money to someone, the creditors have the right to recover the amount by attaching your assets, which include your life insurance policies. Their rights do not have to do anything with those of the beneficial nominees.
What happens if the Policyholder did not make a Will?
What if your primary nominee dies? What happens to the insurance money after that? In a case where there is no secondary beneficiary assigned, the insurance money is paid to the deceased’s property.
However, such an action would delay the transfer of profits to the policyholder’s family and the amount is likely to be covered in estate taxes.
The solution to this is to have a Will.
A Will lets you list down all your primary and secondary beneficiaries of your assets - earthly possessions, businesses, organisations, insurance policies, cryptocurrency, etc. Having a Will lets your family know about your wishes as to how you planned the distribution of your assets, including your life insurance policies.
Don’t have any idea about Wills? Talk to our legal experts who are here to guide you throughout the end-to-end process of making your Will.