Hi Sreekanth,
I am taking out a life insurance and during the process got these questions on nominating beneficiaries. The insurance application does not provide a succession plan in the nominee details page. One can either send the whole death benefit to one nominee or share the benefit between two or more nominees.
Imagine a scenario that an insured person has only 1 nominee in his/her life insurance policy. And unfortunately the death happens for both the insured and the nominee at or around the same time. So, what will happen to the payout from the insurer as the nominee also no more alive? I guess there should be provisions to deal with such scenario, but i don't know what that is. Will the payout be given to any living immediate family members like children, parents etc?
Again, what if parents too are not alive and the insured has no children? And one more similar question as above (may be answer to that might answer this too). Say an insured has 2 individuals nominated to receive death benefit 50% each. If one of the nominee's death happens at or around the same time as the insured, what happens to the portion of the death benefit for the dead nominee? (And I assume that the benefit for the living nominee will be paid his/her 50%). Or can above scenarios be simply solved by creating a Will and detailing the succession plans by the insured? Does a Will legally bind an insurance company to follow such plans? (though such plans wouldn't be known to the Insurance company until after insured's death).
Appreciate your clarification.
3 Answers
Hi,
In such a scenario, the claim amount (if any) will paid to other legal heirs as per the Succession laws. It can be parents/children/relatives.
Kindly note that a WILL can supersede 'nomination' with respect to insurance investments. So, a detailed succession plan can be mentioned in the WILL. Nomination is simply the right to receive whereas a “Will” shall decide who eventually will own the asset.
For example, if a husband has nominated his wife in his life insurance policy. Upon his death, the entire proceed of life insurance will go to the wife, but she cannot own it if husband’s ‘Will’ says that a portion of or the entire asset should go to his parents and children, in that case the wife has to part with that accordingly.
For all investments except company bonds and equity, nomination does not provide ownership of your assets. The nominee will only be the custodian of the asset till it is given to its beneficiary. To ensure the nominee becomes the final beneficiary, you have to ensure there is a will to bequeath your wealth in a hassle- free manner.
Also, read:
Hi Sreekanth, Thank you for taking time to answer my question. Your response highlights the importance of a Will despite a nomination under an insurance policy. I don't have a Will yet, guess it is time to create one! Glad I checked this with you. Your suggestion to read MWPA was informative too. I didn't know such provision exists until today. A quick question on that - Does a Will still supersede an MWPA insurance policy that has wife/children as nominees? Say, the Will states that somebody else (other than wife or kids) be the beneficiary of that MWPA policy death benefits.
Dear,
Yes, I believe that WILL still supersedes the nomination(s) made through MWP.
Also, read:
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