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What is Nominee in Insurance and How to Choose Your Nominee?

 What is Nominee in Insurance and How to Choose Your Nominee?

The Covid-19 pandemic hitting on a global level has made us realise that life can be full of uncertainties and unforeseen events. It has also taught us how crucial it is to be secure and well-prepared in advance. Moreover, the cost of living has also seen a rise. Therefore, it is necessary to be financially prepared in advance to secure yourself and your loved ones. Being prepared in advance ensures that you and your family are secure and are at peace of mind. Investing in an insurance policy has seen a rise, especially in the unprecedented times after Covid-19 and the rising cost of living.

Importance of Investing in an Insurance Policy in Today's Time

An insurance policy is a legal contract between an individual and a policyholder wherein the individual pays a premium to the insurance provider. In return, he or she can enjoy the benefits of the policy.

Investing in an insurance policy financially secure you and your family and ensures that you are at peace of mind even in unprecedented times. Moreover, insurance policies provide death benefits to your loved ones in case of the policyholder's death. With this, your loved ones will not have to go through any financial hassle in your absence and can conveniently continue with their lives.

Moreover, investing in an insurance policy has various other advantages. Let us look at a few of them.

Advantages of Investing in an Insurance Policy

1. Financial Security of You and Your Loved Ones

An insurance policy provides you and your loved ones with financial security in case of unforeseen and unprecedented situations wherein you may face a financial emergency. With this, you and your loved ones can be at peace of mind and can continue with your lives worry-free.

2. Tax Benefits

One of the key benefits of investing in an insurance policy is tax benefits. The premiums paid by the policyholder are eligible for tax benefits under Section 80C of the Income Tax Act, 1961. You can claim upto Rs. 1.5 lakhs of tax benefits under this provision. However, tax laws are subject to change from time to time.

3. You Get to Secure Your Assets

No one knows when they may face a financial emergency. In such cases, we often go for taking a loan or debt. In case of an untimely demise of the policyholder, your family might find it difficult in paying off the loan or the debt. This might result in them paying off the loan against your valuable assets such as a car, house, etc. Investing in an insurance policy secures your assets and ensures that your loved ones do not inconvenience paying off the loan.

4. Premiums are Cheaper When Invested at a Younger Age

The premiums that we pay for the insurance policy are cheaper and much more affordable if we invest in an insurance policy at a younger age than investing at a later stage. Moreover, investing at an early stage helps us save more for the future for our loved ones and us.

When we plan to invest in an insurance policy, we have come across the term nominee. We often think what is a nominee or why you should choose a nominee, right? Let us understand what is a nominee and how should you choose your nominee while investing in an insurance policy.

What is a Nominee?

Whenever we invest in an insurance policy, the first thought that comes to our mind is the financial security of our loved ones, in case we are not there to provide for them. Talking about what is a nominee, in simple language, a nominee is nominated by the policyholder to receive the benefits of the insurance policy in case of unforeseen and untimely death of the policyholder within the policy term. A nominee can be a family member, spouse or someone the policyholder is close to.

While investing in an insurance policy, the policyholder gets to decide whether to nominate a nominee in case of an untimely casualty under Section 39 of the Insurance Act, 1938. In most cases, the policyholder chooses a family member such as parents or siblings or spouse or children as nominees. Moreover, one must know that no one else will be able to avail the insurance policy benefits apart from the nominee.

Knowing how to choose a nominee while investing in an insurance policy is necessary. Let us understand how.

How to Choose Your Nominee in an Insurance Policy?

Usually, a policyholder goes for the immediate family such as parents, spouse, children or siblings when choosing a nominee. While choosing a nominee for your insurance policy, there are a few information/ documents that you need to provide to your insurance provider. They are

  • Name of the nominee
  • Age of the nominee
  • Address of the nominee
  • Relationship of the nominee and the policyholder

In case you fail to provide the documents mentioned above, then the procedure to add a nominee to your insurance policy will fail. Therefore, it is imperative to provide the documents to your insurance provider carefully.

Wrapping Up

After this article, you must now have a brief and conclusive understanding of what is a nominee and how to choose a nominee in insurance. Moreover, choosing a nominee ensures that your loved ones are financially secure in your absence and can lead a seamless life.


*Tax benefits are as per the Income Tax Act, 1961, and are subject to any amendments made thereto from time to time
The article is meant to be general and informative in nature and should not be construed as solicitation material. Please read the related product brochures for exclusions, terms and conditions, warranties, etc. carefully before concluding a sale.
Make responsible financial decisions. Consult with your financial advisor before making any decisions on insurance purchase.

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