Have you ever thought about what would happen if there were no legal heir details mentioned in the insurance policy?
Let’s take two scenarios that would make you think twice that in the absence of legal heir details not mentioned in the insurance policy what could happen?
In the first scenario, if the policyholder passes away and there's no legal heir who can claim the policy benefits, the insurance company will hold the benefits for a certain period known as the "unclaimed benefits" period. The length of this period will depend on the type of policy and the insurance company. During this time, the insurance company will search for the legal heirs or eligible claimants. If no eligible claimant comes forward, the unclaimed benefits may be transferred to an unclaimed benefits fund or the government. If there's a cash value component, the insurance company may use it to pay premiums until it's depleted. Once the cash value is used up, the policy will lapse, and there won't be any further benefits.
In the second scenario, let's say someone has not listed a legal heir in their insurance policy and that person unfortunately passes away. Well, the insurance company will need some solid legal proof that the designated heir is entitled to the policy benefits. This can take a while - we're talking about a lengthy legal process that may even delay payment to the rightful heir. To top it off, if there are any questions about who the legal heirs are, they might have to go through a probate court process which can mean even more legal fees and further delays. Phew, what a headache!
“So that’s when you choose someone to receive the benefits of your insurance policy after you pass away, that person is called a nominee. It's a fancy word, but it just means the person you selected to get all the benefits. The term comes from the Latin word for "name," because this person is named as your legal heir”.
People can make changes if they have an insurance policy. You can update your nominee details anytime during the policy term by sending a written request to your insurance company. It's a good idea to review your nominee details regularly, especially if your personal circumstances change due to marriage, divorce, or the arrival of a new family member.
The nominee isn't the legal heir, keep in mind that your nominee isn't automatically entitled to your assets. The insurance proceeds will be distributed according to your will or applicable laws of inheritance. The nominee's role is to ensure that policy benefits are paid to the rightful claimant(s) after your passing.
Multiple nominees are allowed, you can choose more than one nominee for your insurance policy and even specify how much of the claim amount goes to each nominee. In case of multiple nominees, the insurance company will distribute the claim amount accordingly.
So, it's pretty important to keep your nominee information updated and let your insurance company know if anything changes. Just remember that your nominee will need to provide some documents to claim the benefits, too.
