Common Errors Committed When Choosing A Nominee in Term Insurance
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Term insurance is a type of life insurance cover where the nominee or family of the policyholder is given financial protection in case of a misfortunate event of death of the policyholder. It offers security and hence it is important to make the right choices when choosing a term insurance policy or choosing a nominee for the same. However, people often make some mistakes when choosing a nominee. Read this article to know those mistakes so that you can avoid them next time you plan to buy a term insurance policy.
1. Assigning a Single Nominee
If you have selected one nominee for your term insurance, and he/she dies unexpectedly, and the policy term gets completed after that, then then the insurance company will have to figure out who will be the legal heir for your funds. This will delay the claim settlement process which may make the situation stressful for your family after you. To avoid such a scenario, it is recommended to distribute your prospective death fund among more than one nominee.
2. Selecting a Minor Nominee Without a Custodian
When choosing a minor as your nominee, you are required to assign a custodian to the nominee. In this case, you must provide your insurance company the details of the custodian. Many people make a mistake of not selecting a minor nominee without a custodian, due to which the claim settlement process is not initiated and the death benefit is not provided to the nominee. So, it is recommended to provide custodian details to the insurer, otherwise the minor nominee will not receive any benefit.
3. Selecting a Legal Heir Who is Not The Nominee
If you select a legal heir who is not your nominee, then your legal heir will have the right to claim death benefits over the nominee. In this scenario, you are required to draw a will through which you give the nominee complete authority over and above the legal heir.
4. Not Informing The Nominee About Policy Details
The last mistake you can make is not informing the nominee about the policy details. It is important to keep your nominee informed with the details of your term insurance policy. They should have a copy of policy documents which keeps them informed. This will ensure a hassle-free claim settlement process.
Also Read: Money back policy & term insurance: which one to buy?
Bottom Line
It is a privilege to be able to take care of your family even after your passing away. But you will be able to do this with a reliable term insurance policy only if you make the right choices when choosing the coverage as well as the nominee. Hence, it is recommended to carefully appoint a nominee to avoid misappropriation of funds after you.
Do not forget to read: Considering Rs. 75 Lakh Term Insurance? Here's What You Must Know About It
Disclaimer: This article is issued in the general public interest and meant for general information purposes only. Readers are advised not to rely on the contents of the article as conclusive in nature and should research further or consult an expert in this regard.
