The term “insurance nominee” refers to a person, or a company, in whose name the shares are held, but he is not the actual owner of the policy. Insurance nominees are supposed to hold the shares on behalf of the actual shareholder. Holding an insurance nominee is a convenient means of preserving anonymity of the actual shareholder and for institutional investors in order to consolidate the administration or individual holdings or their private clients.
While buying the insurance policy, most of the people give names of their beneficiaries and then never give the subject another thought. It is highly recommend by the insurance experts that you should ponder and review your policies’ beneficiary designations periodically (annually or whenever there is a birth, death, graduation, divorce, etc) in order to verify if your current needs, goals and circumstances are properly covered by the policy terms and conditions.
In India, the insurance providers always expect you to name the nominee and name their designation. For example, "Padmini, my wife, whose date of birth is 12 July 1977 and address is Plot 12, street 14, Guntur, and my children Ram, and Suresh". Such phrases are easy to comprehend that who you wish to nominate and give the money.
However, the process of nominee has some serious considerations. First of all, the process is a rigid one. If your current children are identified as nominee by name, and then you get a third child later, he will not have any share in the policy. In that case, you have to update the policy completely to revise your beneficiary designations, so that the youngest child will get the share.
In addition to that, if a named beneficiary dies before you, the beneficiary’s heirs may be excluded from receiving proceeds. Suppose, all your three children are married, and have children. In case one of your children passed away before you, the spouse and kids of that child of yours will be excluded from receiving proceeds.
If you have a married child, and you have planned to include his family in the nomination, you have to mention it. Like, "Mr Suresh, my son, his spouse Mrs Lalitha Suresh and their daughter Ms Anuradha." This has more clarity than saying only "Mr Suresh".
Focus on using better language in a will that ensure omitting unintended beneficiaries by name. If beneficiaries are designated to be "all children of the insured," future children will automatically be included.
However, the process of revising the insurance nominee can bring several disadvantages.
· You can face complication if you have a complicated marriage. If you and your spouse have more than one marriage and children from both sides, you should be careful while putting the names of your insurance nominee.
A small mistake can end up with the surviving spouse of your first wife getting all the money intended for the children from your first marriage. So be careful and talk to the insurance provider before putting the insurance nominee’s name