IRDAI is the Insurance Regulatory and Development Authority of India. They ...
Nomination of Life Insurance Policies is a process whereby if the Life Insured dies within the policy tenure, the Insurer would pay out the proceeds of that policy to the Nominee. The process of selecting that candidate or Nominee is called Nomination. The policy holder has to select a nominee to the life insurance policy at the time of purchase. It works similar to a nominee whom a bank account holder should appoint to receive the money in the bank account in case of the account holder’s death.
Thus, Nomination is a right of the policyholder of the life insurance policy on his own life, to select or appoint a person or persons to receive the proceeds of the insurance policy in event of his death during the policy term, whereby raising a claim to the insurer.
Nomination is only possible if the policyholder has insured his own life, i.e. the policyholder and the life insured is the one and the same person. If they are different people, nomination is not allowed. If the Policyholder and the Life Insured are different, then the policyholder or the payor of the insurance policy automatically becomes the nominee by default if the life insured dies. Hence selecting or designating another person is not allowed under this circumstance.
Nomination can be done at the inception of the policy itself or later. All that a policyholder has to do is to provide the details of the nominee in the proposal form and no relationship proof or documentation of the nominee would be required at that time.
If the process of nomination was not done at the time of inception of the policy, it can also be done at a later date either by an endorsement made at the back of the policy document or by making the endorsement of nomination on a piece of paper pasted on the policy. Nomination can also be cancelled or changed any time by the policyholder. It can be done via telephone, internet or written communication to the insurer. It entirely depends on the procedure of the insurer.
Thus, if A is the Policyholder and B is the Nominee, then the insurance proceeds would be paid out to B only if A dies. If A survives the entire policy term, then there is no requirement of B. Nomination automatically stands cancelled if the policyholder survives the entire policy term, because in that case the maturity proceeds would be paid out to the policyholder or his legal heirs.