Can You Change The Nominee Of A Life Insurance Policy

There is nothing more devastating than losing a loved one. With the emotional turmoil, comes the burden of financial responsibilities - especially if the lost family member was the primary breadwinner.

During this critical time, the main priority should be to facilitate a hassle-free claim process so that the death benefit can be paid to the intended person as soon as possible. This intended recipient is the person you specify as your nominee when you purchase the policy.

Please keep in mind that buying life insurance won’t serve its purpose unless you have appointed the right family member to receive the claim amount.

Let's say you've appointed a nominee. After a few years, you decide to change the nominee for some reason. For instance, you appointed your child as your nominee under your term insurance plan and now they have started earning and aren’t financially dependent on you. So, you decide to appoint your spouse as the nominee.

Can you do this? Let’s find out.

First, Who Is A Nominee?

A nominee is a person you appoint to receive your life insurance benefits if something unfortunate happens to you. They are also known as the life insurance beneficiary. The nominee should be someone capable of handling the cover amount and protecting your family from facing financial problems ahead. Ideally, your nominee should be your spouse, brother/sister, parent, or relative who you know will take care of your loved ones.

You have to appoint the nominee when buying your life insurance policy. In the event that you don't nominate anyone at the inception of your policy, you can do so later. Additionally, you can nominate more than one nominee to receive the sum assured.

Is It Possible To Change The Nominee Of Your Life Insurance Policy?

Life insurance is a long-term commitment that lasts decades. There are several reasons you may want to switch your nominee such as the existing nominee's untimely death, a change in relationship, or a loss of trust etc. In such cases, you can change the nominee by specifying the reason for the same to your insurer. But, before that, it is essential to know the procedure for replacing a nominee.

Steps To Change The Nominee

To ensure a successful switch of your nominee, follow these steps -

1. Fill out the change of nomination form, available either online or in person, from the insurer.

2. Upon updating the nominee details, submit the completed nomination form and the policy document to the insurer. It is your responsibility to explain to the insurer the relationship between you and the new nominee.

3. To avoid any hassles during future claim settlement processes, you must obtain an acknowledgement from the insurance company regarding the change of nominee name.

Common Mistakes To Avoid While Choosing A Nominee -

Here are some of the most common mistakes you need to avoid when appointing a new nominee for your life insurance policy -

1. Not Updating Nominee’s Details
   You must update the nominee’s existing details such as name, address and other relevant information regularly. in case these details change in the future, you should update the insurer and if the existing nominee passes away during the policy tenure, make sure you update that detail as well and assign a new nominee.

2. Assigning Only One Nominee
   Many people make the mistake of naming only one nominee. The claim settlement process can face a roadblock if you fail to update the nominee details after the existing nominee dies unexpectedly. This is because the insurer may find it difficult to identify the insured's legal heir. Hence, you should update the insurer if the nominee passes away, especially if there's only one nominee. Or you can appoint more than one nominee and also allocate a certain percentage of the sum assured to each - thereby preventing this needless delay in the future.

3. Not Informing the New Nominee
   Make sure you inform the new nominee that they’ve been nominated. Also, share the policy documents with them so they’ll be able to file the claim in the future - with all details upfront.

4. Not Appointing A Custodian
   In the absence of an appointed custodian, the claim process for the minor nominee (less than 18 years old) cannot proceed, and the minor cannot make use of the death benefit. It is therefore crucial that you not only appoint a custodian but also provide the insurance provider with fully verified details of the custodian.

5. Mentioning A Legal Heir Who Is Not Your Nominee
   If you want to appoint a nominee who isn’t your legal heir, your legal heir will have precedence over them to claim the death benefit. Hence, make sure you draw up a will that gives the nominee you appoint absolute authority over the death benefit.

Wrapping up!

Now that you have answers to the questions of how you can change nominees in life insurance, make sure you follow the due process if you need to do so. Also, make sure you don’t commit one of the above-mentioned mistakes - so as to ensure a seamless claim settlement process for your family.