A beneficiary is a person (or entity) named to receive the advantages or guaranteed death benefit of your insurance policy. A beneficiary can be anyone who you trust and holds a financial interest in your life. This means a legal representative; an institution or bank can be a beneficiary.
Nobody enjoys considering a situation where they are no longer around with their loved ones. However disheartening it might sound, but it becomes crucial to discuss as it is about the financial stability of your loved ones after your passing. A life insurance policy that offers life cover and guarantees to care for your loved ones in your absence, is a trusty asset in this respect.
In the event of the your untimely death, a life insurance policy will offer financial support to your family members or loved ones. But to avoid confusion, you must designate beneficiary(ies) before your policy commences.
What Information is required to become a Beneficiary?
- Beneficiary Name
- Contact Number
- Valid Identity Proof
How to Select the Beneficiary?
To ensure that the legal heirs of a policyholder cannot collect the death benefit unless they are designated as beneficiaries in the life insurance policy, the Government of India introduced the idea of a beneficial nominee in 2015.
Any individual that you trust can be the beneficiary. There aren't any restrictions on who you can designate as your beneficiary. Any member of your family, acquaintances, or coworkers are possible candidates. The insurance providers, however, prefer that your beneficiary comes from your close relatives. Otherwise, the nominee and your family may get into legal dispute later.
As a policyholder, you can change the nominated person(s) at any time, if necessary. However, if your beneficiary or nominee is a minor, you must choose a custodian. After becoming 18 years old, the minor is eligible to collect the benefits of your policy. Make sure your beneficiary has copies of the life insurance policy so they can use them to collect the death benefit whenever necessary.
Your term life insurance policy must have at least one primary beneficiary, at the very least. Depending on the insurance policy you select, you may also be able to designate a secondary beneficiary, also known as a contingency beneficiary.
What Happens If There Is No Beneficiary Listed on The Policy?
The insurer must abide by certain rules depending on the circumstance if you fail to name a beneficiary for your life insurance. These rules are also applicable if the beneficiary you appointed dies during the policy term and the policy is not modified promptly.
The insured payment is allocated in accordance with the will. However, a succession certificate must be issued by the court. Additionally, the beneficiaries must provide the insurer an indemnity or renunciation of legal proof.
If you don't have a will designating a beneficiary, your immediate legal heirs will receive the death benefit. In such a case, only your spouse, kids, and parents are considered.
If you neither have a will nor a legal heir, then the policy will become a part of legal estate. This means that according to the different laws that prevail in India namely Hindu Succession Act or, Indian Succession Act, 1925 will follow.
Hence, it is recommended to appoint a contingency beneficiary or, a second line of beneficiary. In case your primary beneficiary dies before you, then your contingent beneficiary will receive the death benefits of your policy.
Will is not there, Hindu Succession Act, Indian Succession Laws, MoM acts etc. If nominee and policy holder is not there then it goes to the legal heir, legal heirship certificate. In case of no legal heirs, then it goes as per the wills, if there are no wills, then the policy will become a part of the estate of the policy holder., ‘estate’ – part of their property.
How Do I Appoint a Beneficiary for my Policy?
When choosing a life insurance policy, you must include the beneficiary's information. Upon approval of your application, the nominee will be regarded as the beneficiary by law. Later, you can change or add the beneficiary by reaching out to the insurer. You can obtain the necessary form for this purpose from the insurer's office or website.
As needed, you can modify the beneficiary several times. To avoid confusion in the future, you must, however, make sure that both the old and new beneficiaries are informed of the nomination. You must ensure that the recipients of your life insurance payouts are appropriate. Always keep your beneficiaries updated.
Aastha Mestry - Portfolio Manager
An Author and a Full-Time Portfolio Manager, Aastha has 6 years of experience working in the Insurance Industry with businesses globally. With a profound interest in traveling, Aastha also loves to blog in her free time.