BENEFICIAL NOMINEES

An amendment to the Insurance Act in 2015 introduced the concept of Beneficial Nominees. The concept of beneficial nominee came into existence to check any fraudulent use of life insurance, where a nominee could be from outside the immediate family. As life insurance is taken to protect the financial interests of the family, a policy in which the proceeds are for non-family members does open up a can of worms. Technically, a nominee is just the receiver of the money; he has to eventually hand over the monies to the legal heirs and he himself cannot consume the money unless he is the legal heir.

With the amendment, a policyholder’s spouse, children or parents, individually or in combination, as mentioned in the nomination form, are the beneficial nominees. This means that a policyholder cannot have nominees outside this set. In this manner, an individual can leave clear instructions on who would eventually receive the policy proceeds and in what proportion. The scope for dispute in life insurance payout is significantly avoided. So, the beneficial nominee is the end consumer of the money received under the insurance policy claim. Therefore, if you have made someone a beneficial nominee during the issuance of policy, then in such case that person (beneficial nominee) has the right to use the policy proceeds from the claim.