A life insurance nominee gets policy benefits after death, but this does not replace legal ownership or estate planning. Shruti Oke said, "Policyholders should therefore not view nomination as a substitute for estate planning." Families should keep nominations updated and choose between lump-sum or instalment payouts to manage financial needs.
Life insurance nomination designates who receives benefits after death but does not replace ownership or estate planning. Policyholders should keep nominations updated, consider lump-sum versus instalment payout options based on family needs, and understand policy terms regarding long-term investmen...
A nominee in a life insurance policy is designated to receive policy benefits after the policyholder's death, but nomination does not automatically settle all questions of ownership or succession.
The rights of a nominee depend on the policy structure, applicable laws and the specific provisions governing the policy.
Shruti Oke, SVP and Head of Product Management at Tata AIA Life Insurance, said nomination and ownership are distinct concepts, and policyholders should understand the rights associated with each.
"Policyholders should therefore not view nomination as a substitute for estate planning or assume that naming a nominee automatically settles questions of ownership or succession," Oke said.
She advised policyholders to keep nominations updated and ensure that family members understand the policy benefits, relevant documentation and arrangements for succession. This can help reduce uncertainty for families when they need to manage financial matters after the policyholder's death.
Lump sum or instalments: How nominees can receive insurance benefits
The way insurance proceeds are paid depends on the policy structure and the settlement options available. A lump-sum payout may help families meet immediate financial needs, including replacing lost income, repaying liabilities or covering major expenses.
An instalment-based payout, meanwhile, can provide a more structured flow of funds over a specified period. The choice depends on the nominee's financial requirements, existing income, liabilities and ability to manage a large corpus, Oke said.
For investment-linked insurance policies, families should also understand the options available after the policyholder's death, particularly where the financial objective extends over several years.
Oke said some long-term insurance products provide eligible nominees with flexibility to continue managing the policy after the policyholder's death. For instance, Tata AIA Life Insurance's Shubh SIP allows eligible nominees to make permitted fund switches and partial withdrawals, subject to the policy's terms and conditions.
She said such features could provide families with greater flexibility in managing a long-term financial plan after the policyholder's death. However, the options available depend on the provisions of the individual policy.
Policyholders should therefore review nomination details, understand the applicable settlement options and consider how insurance proceeds fit into their broader financial and succession plans.