Life insurance nomination determines who receives the death benefit when you pass away. Done correctly, it ensures your family receives the payout quickly and without legal complications. Done incorrectly or left outdated, it can delay or complicate the settlement for years. Getting the nomination right is as important as choosing the right policy.
What Nomination Does Under the Insurance Act
Under Section 39 of the Insurance Act 1938, as amended in 2015, a nominee receives the policy proceeds as a claimant. When the nominee is a family member ,spouse, child, or parent — they are classified as a beneficial nominee and receive the money in their own right, not as a conduit for other heirs. A beneficial nominee has the highest-priority claim to the policy proceeds.
If the nominee is not a family member — a sibling, friend, or extended relative , they receive the money but hold it as a trustee for the legal heirs under the deceased’s will or succession law. This creates legal complexity about who the money ultimately belongs to and can delay distribution.
For maximum clarity and speed of claim: always nominate a spouse, child, or parent as the primary nominee. These are treated as beneficial nominees with direct claim rights under Section 39.
The Most Common Nomination Mistakes
Nominating parents and not updating after marriage
Many people nominate their parents when they buy their first policy in their 20s. After marriage, the nomination is often never updated. If you die with your parent as the sole nominee and a surviving spouse, the spouse may face legal complications accessing the claim. Update your nomination after every major life event: marriage, birth of a child, divorce, or death of a nominee.
Nominating a minor without appointing an appointee
A minor (below 18) cannot legally receive insurance proceeds directly. If you nominate a child below 18 without designating an adult appointee, the insurer cannot pay the child and the claim enters a court-supervised process. Always appoint an appointee typically the other parent or a trusted adult when the nominee is a minor.
Not updating after a nominee’s death
If your nominee predeceases you and you have not updated the nomination, the claim is paid to your legal heirs under succession law which may not align with your intentions. Review nominations periodically and after any significant family change.
How to Change or Update a Nominee
Most insurers now allow nomination updates through their website or mobile app. You will need: the policy number, your identification, the new nominee’s details (name, date of birth, relationship, percentage share if multiple nominees), and a declaration. For physical policies, a written request with the policy document may be needed.
Multiple nominees can be named with specified percentage shares, which is useful for distributing proceeds between a spouse and children proportionately.
Draco Insurance provides policy servicing support including nomination updates. Contact us at dracoinsurance.in or call +91 7064106417.
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