Why Multiple Nominees are Important for Your Term Insurance Plan

A term insurance plan can help in critical situations. People now understand the need for a contingency strategy due to the coronavirus pandemic, which claimed the lives of millions of individuals worldwide.

The loss of a family income earner affects the other family members emotionally and causes major financial concerns. Hence, it is crucial to pick term life insurance plans in India that offer a support system for your household to be ready for such eventualities.

Indian families can have many financially dependent members, and we should identify the opportunities of having multiple nominees in a term insurance plan.

What is term insurance, and why should you buy it?

Term insurance is a specific life insurance category that offers a high coverage amount to the dependents in case of the policyholder’s demise and at a significantly small premium amount. For instance, a 30-year-old in India can purchase a policy of Rs 1 Crore (sum assured or the guaranteed payout in case of the policyholder’s demise within the policy tenure) for only a monthly premium of Rs 1000-1200 (only estimates, your specific amount may vary) to safeguard their close ones financially.

You can also enjoy the term insurance tax benefits under Sections 80C and 10(10D). Additionally, term insurance plans offer financial security to the dependents in case of the family earner’s death and provide financial assistance for critical diseases if you select the right rider.

For example, suppose you choose a critical illness rider. In that case, you will receive a financial reimbursement if you are found to have any of the serious illnesses that are listed, such as cancer, kidney failure, heart disease etc.

In this method, the insurance amount ensures that the expense of critical treatment and related costs is covered, preventing your life ambitions from being derailed because of such an ailment.

To receive the death benefit, a nominee should be appointed when applying for any life insurance policy, including term insurance. The policyholder may name multiple nominees, and the death claim can be split among all candidates.

Who can be your nominee in a term insurance plan?

Following the insured’s passing, a nominee is in charge of collecting the sum assured. They could be dependent, someone you trust to care for your family while you are away, a member of your direct family, a friend, or even a relative. You can choose a nomination from one of three categories.

  • Beneficial nominees- A beneficial nominee is a member of the nominee’s immediate family, such as parents, spouses, or children. The beneficial nominee will get the death benefit, not any other person or legal heir.
  • Minor nominees- People frequently name their kids as nominees in their term plans. Children who are less than 18 are regarded as minor nominees. While minor nominees are still not authorised to receive the claim fund, the policyholder must authorise an appointee. On account of the juvenile candidate, the appointee obtains and controls the claim amount on their behalf.
  • Non-family nominees- A non-family nominee can be a close acquaintance or a distant relative. The fact that you must clearly explain your choice of non-family nominee besides the required documents is crucial to remember. If not, the insurer can deny your request.

Now that we know who can be the nominees of the policyholder let’s find out the opportunities of having multiple nominees in term insurance.

Why should multiple nominees be included in your term plan?

When a household income earner passes away, multiple dependents are frequently left behind. Money is frequently cited as the primary driver of family disputes. While this may not always be the case, it is preferable to take measures to prevent such circumstances from arising.

In such cases, it is frequently appropriate to name more than one nominee to safeguard the candidates’ financial futures and prevent family conflicts. In this way, the financial advantages might be divided among all the nominees listed in the policy. Also, as an insured, you can select the distribution of benefits among the candidates in terms of a specific proportion.

It is typical for policyholders to name just one nominee, thinking that person will look out for the entire family. This is the case particularly when the policyholder names their spouse as the nominee. Yet, it can also be an expensive error in a few rare situations. For example, suppose only one nominee is named, and they unluckily pass away simultaneously as the policyholder.

In that case, it may become too difficult for the insurer to determine the insured’s legitimate successor, which would complicate the claim settlement procedure. In addition, the survivors in such a scenario would have to navigate a challenging legal procedure for identifying the legal appointee who can claim the policy benefits.

While it might not be entirely prevented, this difficulty can be reduced by designating many candidates and distributing a particular portion of the sum assured among the nominees. For example, if one of the candidates passes away, provided there is no alternative competing will or legal heir, the share of that nominee would be dispersed proportionately among the remaining nominees according to the allotted percentage. This guarantees that, in most instances, if not all, beneficiaries receive their share without difficulty.


In conclusion, to safeguard the insured’s family, the nomination procedure is essential in term insurance plans in India. Furthermore, you should appoint more than one nominee if your family structure demands so. Informing the nominees and giving them access to policy documents are also crucial. If required, you can periodically change your nominees too.

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Tirupati Gumpula

Tirupati Gumpula is an Internet geek, Work from Home dad, and founder of this website. He loves to share his experience in Business, Marketing, and personal finance topics. For more details Email: [email protected].

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