Who is a beneficiary candidate?


NEW DELHI: While a nominee is likely to receive money on the death of an insured, the funds cannot be used unless the nominee is also a legal heir. However, if the insured has named a beneficiary when the policy is taken out, that person becomes the final consumer of the money received under the insurance policy, when a loss occurs.

Therefore, it is essential to nominate candidates for assets, investments and insurance policies. This practice ensures that the proceeds will go to the rightful recipient.

According to the rules, when buying life insurance, the appointment is mandatory. Applicants, such as parents, spouses and children, are now considered recipient applicants, whereas previously they were categorized as receivers. Thus, when the insured mentions the beneficial owners in the application form, the proceeds of the claim are uncontested.

The Insurance Law added the category of “nominee beneficiary”, which only includes the immediate relatives of the policyholder. As mentioned above, a beneficiary can be the spouse, children or parents of the insured. Thus, if an insured names one of them as nominee in a policy, he automatically becomes the beneficial owner of the claims benefits. It also means that they are the final and undisputed beneficiaries, unlike ordinary applicants (eg siblings).

This new clause also gives the insured the possibility of appointing several nominees and of specifying their exact contribution to the policy. Previously in India, life insurance companies could provide the proceeds of the claim to the attorney, after which the other rightful heir could claim the attorney’s benefits. If the legal heir claims the benefits, the insurer now only pays the benefits to the beneficial owners. The main source of litigation is formed by other legal heirs asserting their rights to the proceeds of the insurance policy. Thus, it is prudent to understand the importance of the “nominees beneficiaries” of life insurance and to appoint one to avoid this conflict.

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