Updated on October 4, 2023
A nominee is a critical and legally recognized figure who plays a crucial role in ensuring the smooth settlement of insurance claims. Understanding the concept of a nominee is essential for anyone who holds an insurance policy, whether it’s for life, health, or other types of coverage.
What is the role and importance of a nominee in Insurance?
The role and importance of a nominee are explained here.
Claim Settlement – The primary role of a nominee is to receive the insurance proceeds or benefits in the event of the policyholder’s demise or any covered event as per the policy terms. This means that if the insured person passes away or experiences a qualifying event, the insurance company disburses the policy’s financial benefits to the nominee.
Decision-Making – The nominee has the authority to decide how to utilize the insurance proceeds. They can use the money to meet immediate financial needs, pay outstanding debts, cover funeral expenses, or allocate it according to the deceased’s wishes or family requirements.
Legal Recipient – In the absence of a nominee, the insurance claim settlement process can become complex and time-consuming. With a nominee in place, the legal entitlement to the insurance benefits is clear, expediting the disbursement of funds.
Considerations in choosing a nominee
When selecting a nominee for an insurance policy, individuals have the flexibility to choose someone they trust, be it a family member or friend. It’s essential to maintain open communication with the nominee, ensuring they understand their role and responsibilities. Regularly reviewing and updating nominee details, especially in the event of life changes, is advisable. Additionally, policyholders can opt to name multiple nominees with specified benefit percentages for equitable distribution of the insurance proceeds.