Facts About Nominees in Car Insurance
Under Section 39 of the Insurance Act, 1938, a policyholder must assign a nominee when they buy an insurance policy. The nominee will receive the coverage amount if the policyholder passes away. A car insurance policy provides coverage for personal accidents but, if the policyholder dies, the legal heir or the nominee will receive a compensation amount.
Who is a Nominee?
A nominee is somebody appointed by the policyholder, usually a spouse, child, or parent who would acquire the policy benefit in the untimely death of the policyholder during the policy tenure. Earlier there used to be confusion between legal heirs and nominees. The legal heirs used to often make claims on the money that is meant for the nominee, to avoid these kinds of confusions, the concept of Beneficial Nominee was introduced by the Insurance Regulatory and Development Authority of India in 2015.
As per the law, if an immediate family member is made a nominee they automatically become the beneficial owners of the policy benefits and can be referred to as “beneficial nominees”. Even if the legal heir is somebody else, the benefit is paid only to the beneficial nominee. It is always advisable to nominate immediate family as nominees to avoid disputes.
In many cases, the policyholder might select their children as nominees and they will be the sole beneficiary of claim amounts if the policyholder is no more. It is important to note that children below the age of 18 cannot handle the claim amount so, the policyholder would have to appoint a custodian who can handle the claim amount until the minor nominee turns 18 years.
The endorsement in Car Insurance Policy
An endorsement refers to any changes that are made to the existing insurance policy. It is a document that holds proof of all changes made to the policy. Thus, if a policyholder wants to change the nominee of their policy, the insurance company would have to pass an endorsement. The policyholder can request the insurance provider to pass the endorsement at the beginning of the year, mid-year, or at the time of renewal.
Changing the Nominee
Generally, a nominee is chosen when the policy is initially bought but, in case the policyholder wants to change the nominee the following steps can be followed:
- Download the nominee change form from the official website of the insurance company
- Attach a copy of the insurance policy and other documents and mail it to the insurance company
- Get in touch with the customer care service
- They will send a form link which can be filled online
- Documents would have to be uploaded online
- Log into the insurance company’s portal and select the nominee update option
- Once the details are filled in and updated, download the new policy
One must remember that changing the nominee will not affect the insurance policy or its premium but, the nominee that one chooses must be trustworthy and must act with integrity. The person one nominates must agree to be the nominee and be made aware of this. To know more about insurance policies in detail, click here!