Can You Change Nominees in Term Life Insurance Policy?

When you buy a term insurance policy, one of the most important decisions you make is picking a nominee to receive the death benefit. The nominee should ideally be a close family member who can best use the funds to secure the financial futures of your loved ones and fulfil all their goals.

But, what if something happens to the nominee? What if both of you are no longer close? Can you change the nominee in such cases?

Let’s see - in this article.

Who is the Nominee?

When you buy term insurance policy, the insurer provides a death benefit (a sum of money) in case you pass away during the policy term. The person you appoint to receive this benefit is called the nominee of the policy. The nominee appointed should be a capable and financially sound person to handle the sum assured they receive. Only then will they be able to make decisions that ensure the family’s financial security.

A nominee can either be your spouse, child, parent, etc. You can nominate one or multiple nominees for the same term insurance policy by allocating a fixed percentage of the sum assured between them.

Can You Change the Nominee of Your Term Insurance Policy?

Yes, you can. When life is unpredictable, so are the people you are with. People grow, change, and can pass away. This can affect your policy.

There are multiple reasons why you may want to change the nominee of the policy like a change in your relationship, the initially assigned nominee passing away, or you simply feel that the person is not trustworthy anymore. In such instances, you can change the nominee of your term life insurance policy.

How Do You Change the Nominee?

When you want to change the nominee of your policy, you will have to contact the insurer either online or offline and duly fill out a “Change of Nomination” form. Once filled, you will have to submit the form to your insurer, along with any documents they may ask. You will also have to explain the relationship between yourself and the newly assigned nominee.

It is necessary to get an acknowledgement for the same from your insurer to avoid any problems if your family makes a claim in the future.

Common Mistakes Related To Term Insurance Policy Nomination

1. Appointing One Nominee Only
   Life is uncertain and that is why you invest in a term insurance policy. Well, life can be unpredictable for your nominee too. If your nominee is no more at the time of term insurance claim, the insurer will have to decide who is the legal heir to your funds. This can cause delays in the claim settlement process, which can in turn, be worrisome for your family. You can avoid such a situation by distributing your death fund among multiple nominees.
   
2. Not Assigning A Custodian While Appointing A Minor Nominee
   Say that you have nominated a minor child as the nominee of the policy who still hasn’t completed 18 years of age. If something is to happen to you, the child (as a minor) cannot proceed to make a claim and therefore, cannot make use of the death benefit. You should appoint a custodian for your minor nominee and also share all their verified details with the insurer for a seamless claim experience. The custodian will receive the death benefit on behalf of the nominee.
   
3. Failing To Update The Nominee’s Details
   All relevant information about your nominee like their name, address, etc., has to be updated regularly. Any changes in such information, or if the nominee passes away, should be promptly updated to the insurance company. Also, in such cases, you will have to assign a new nominee who you think will be able to handle the sum assured in the future. Only this will ensure that the sum assured reaches a person who knows how to make the best use of the amount for better financial stability
   
4. Not Creating a Will while Choosing a Nominee Who is Not Your Legal Heir
   When you want to appoint a person other than the legal heir to be the nominee of the policy, you should leave a will giving the nominee absolute authority over the death benefit. This is because of the fact that your legal heir has supremacy over the claim amount over others
   
5. Missing Out On Updating The Nominee
   You must duly inform your nominee that they have been appointed as the nominee of your policy. You should also share the policy documents with them so they are well-prepared to file a claim in the future if you pass away

To Conclude,

With the end of this article, we hope that you have gained enough insights on how to change the nominee of your policy. In fact, you must be all the more careful in not committing any of the above-mentioned mistakes as it might end in unwanted situations while your family makes a claim. Ensure that your family undergoes a smooth claim process by keeping them and yourself well-informed.