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Apr 30, 2013, 09.49 AM | Source: Moneycontrol.com

Why your nominee must know about your life insurance plan

Your life insurance policy is in place, money is accumulating within the policy and you have listed your spouse or child as the nominee.

Your life insurance policy is in place, money is accumulating within the policy and you have listed your spouse or child as the nominee. You are satisfied that the money that accrues upon your death will be channelled to the right beneficiary.

It does not end there, however. Does your nominee know about this insurance plan and that he/she would be the claimant if you were to pass away? Just as important, is your nominee aware of the procedures involved in claiming the insurance money?

Who is your nominee?
Before moving ahead, let us address the identity of the life insurance nominee. If you have a life insurance plan, your nominee is essentially your beneficiary—the person who receives the proceeds from the insurance policy if you were to die during the term of the policy.

Most often, the beneficiary is the spouse or child of the policyholder, but it could also be a close relative. If your nominee is below the age of 18 years, you will have to name an adult appointee who is trustworthy enough to receive the payout on behalf of the minor child and later pass on the money once the child attains majority age.

Why you must educate your nominee
People pay so much attention to the amount and term of the policy but rarely focus on educating their beneficiaries. Talking about your own death may not be a happy prospect, but it is better to get it out of the way in your lifetime so that your loved ones do not have to run around for money that is rightfully theirs in your absence. This is particularly important if your nominee is not your legal heir. In such a case, your will should mention that the proceeds from your life insurance policy will go to this nominee.

What should your nominee know?
Policyholders frequently depend on life insurance agents to assist their nominees in filing claims. But what if your trusty agent has switched jobs? It certainly helps if your beneficiaries know of their nominee status, and whether you have named additional nominees in your insurance plan. If you have made no nominations, they should be aware that the payment goes to the legal heirs.

Your nominees should have access to your insurance details. A nominee will simply have to call the insurer to find out what documents are required to receive the payout. He/she will need your policy contract, a claim form and a death certificate. Additional documents may include an FIR, a physician's report or a post-mortem certificate depending on the circumstances of your death.

In case you die within the first three years of the policy, the insurer will regard it as an early death. In such a case, further documents may be required, including a medical attendant's certificate, a burial or cremation certificate, a certificate from the deceased's workplace, and a police report in case of an accidental death.

Getting the paperwork together may seem quite a task. But you can help by educating your nominee about such eventualities. If you have not done it yet, get to it right away!

The author is the CEO of MyInsuranceClub.com

READ MORE ON  life insurance policy

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