What Happens When the Nominee Passes Away-Insurance Plan. Choosing someone to get the money from your life insurance is called nomination. It makes sure the right people get the money after you’re not here anymore. Life insurance plans are usually helpful for families when the main earner in the family is no longer around.
Now, these life insurance plans can last a really long time, even up to 99 years! Life is unpredictable, and a lot can happen during this time. The person with the insurance might pass away, or the chosen person (called the nominee) might also pass away.
We know that if the person with the insurance dies, the nominee can get the money. But what if the nominee passes away during the time the insurance is still going on? What happens then?
Understanding Nomination in Term Plans
A nominee is like the person who takes care of the money left behind when someone with insurance passes away. After the person dies, the money goes to their legal heir(s) based on what the person wanted.
What Happens When the Nominee Passes Away
In a sad situation, it could happen that the person you picked as your nominee or the person supposed to get the money if something happens to you, passes away before you do. If that happens, the nomination is cancelled, and you need to choose someone else. But getting the money involves some legal steps, and it takes time. If the nominee dies after you, but before everything is sorted legally to get the money, then the person next in line to inherit it gets the amount.
Understanding Nominee Eligibility
You can select any family member who relies on you for money and would face problems if something happened to you. By law, you can’t pick distant relatives, friends, or people who aren’t part of your family unless you can show they depend on you financially.
Choosing a Special Nominee: The Role of a Beneficial Nominee
A beneficial nominee is someone special who gets the money when the person with the insurance plan passes away, especially if there are no other legal heirs. When you buy a term plan, you need to say who these special people are, and you can choose more than one. Just make sure to mention what percentage of the total money each of them should get.
Appointing a Minor as Your Nominee
Kids can be chosen to get the money from a life insurance policy. Often, the idea is to make sure the kids have a secure future and can follow their dreams, like going to school and becoming independent. But, kids under 18 are considered too young to handle money by law. So, a grown-up, like a guardian, has to take care of the money until the kids turn 18. In these cases, the money doesn’t go straight to the kids but goes to the guardian instead.
Changing Your Nominee
If the person you picked to get the money in case something happens to you dies before you, you can pick someone new, depending on the plan rules. Once you choose a new person, the old choices don’t count anymore. It’s like starting fresh with the new person you pick.
Understanding Important Features of Term Insurance for Nominees
Here are some important benefits for the people who get the money when someone with term insurance passes away:
- Choose How You Get Paid: You can decide how you want to receive the money.
- More Money to Protect: You can increase the amount of money that goes to the people left behind.
- Even if Your Spouse Doesn’t Work: If your partner doesn’t have a job, they can still be covered.
- Easy on Your Wallet: The payments you make for the insurance are affordable.
- Simple to Get: It’s easy to buy term insurance.
- No Need to Pay if Something Happens: You might not have to pay the payments anymore if something happens.
When There’s No Nominee Chosen
If the person with the insurance didn’t pick someone to get the money, there’s a standard way to figure things out. The law says that the father, mother, spouse, and kids are the first in line to get the money. So, even if no one was chosen, the family still gets what’s left behind, following the rules from the Indian Succession Act of 1925.
It’s a good idea to pick someone from your family to get the money when you’re not around. But, it’s not always possible. The person with the insurance can change who gets the money and who’s in charge as many times as they want. Just know, when new choices are made, the old ones don’t count anymore. So, if you switch, make sure to tell the insurance company about it. This way, everyone knows what’s going on, and there won’t be any problems later.
READ MORE: Tax Implications of Life Insurance Policies