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New nomination rules in life insurance perfect for our family

As I have often discussed in the past, Nomination is not a Will.

It is merely a provision that enables quick and easy transfer of our assets, to the nominees, after our death.

As per law, nominees hold these assets merely as a trustee or caretaker, till they are transferred to the legal heirs as per the Will or, in the absence of a Will, as per the relevant Succession Laws. [Of course, nominees and legal heirs could be the same persons.]

This applies to our various investments such as bank accounts, fixed deposits, post office small savings schemes, property, insurance, mutual funds, etc. 

The only significant exception to this rule — till date — has been the equity shares. Here the nominees become the legal owners upon death of the original shareholder, if there is no Will. Legal heirs cannot make a claim on the same.

Now, there is one more addition to such exception... insurance.

Recently, as per The Insurance Laws (Amendment) Act, 2015, the rules and regulations with regards to nomination in a life insurance policy have been re-scripted.

As per the same, when a policyholder nominates his parents, spouse and / or children, then they will be "beneficially entitled" to receive the insurance proceeds that become payable pursuant to the death of the policyholder.

Accordingly, henceforth, even if their are claims from other legal heirs, the insurance company will pay the insurance amount only to the above-mentioned "beneficial nominees". Till now, legal heirs had the legal right to ask the nominees to pass on the insurance money to them. 

This makes life simple and hassle-free. All you have to now do is to nominate your spouse, children and/or parents, along with the share that each nominee should receive. This would eliminate many disputes that currently arise due to fight among various legal heirs to claim the insurance money.

So now there is all the more reason that you must diligently follow the nomination rules, if you love your family.

Of course, if the policy has been assigned to any creditor against any loan availed, then the creditor has the first right over the money. Beneficial nominees would be paid only the balance that remains after clearing the dues of the lenders.

By the way, 
a) The aforesaid new rules with respect to nomination in a life insurance policy, shall now apply to all life insurance policies, including the ones issued in the past.
b) You must ensure that the nomination has been duly registered by the insurance company and you have an acknowledgement of the same.

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