Successive / Alternative Nomination – Why it is so important?
Successive / Alternative Nomination – All details you need to know and download forms to be used. The nomination is a right conferred by Section 39 of the Insurance Act 1938, on the “holder of a policy of life assurance on his own life” to appoint a person or persons to receive the policy money in the event of the policy becoming a claim by the assured’s death. A nomination is necessary to make the claim settlement procedure fast and hassle-free.
Nomination – Important points to remember
- Nomination can be done by the life assured only.
- The nominee is statutorily recognized as a payee to whom the claim amount can be transferred on the unfortunate event of the death of Life Assured, without further delay on establishing legal heirs.
- Nomination can be effected at the proposal stage or after the issue of policy.
- At present, there are three ways to effect nomination namely single nomination, joint/ multiple nomination and successive or alternative
- If a ‘beneficial nominee’ (A close relative like parents spouse or children nominated) is available in the policy, other legal heirs will not have any claim in the amount paid.
- If the nominee is not a ‘beneficial nominee’ he is supposed to act as a trustee of the claim amount and should transfer the title to the legal heirs at the earliest.
- As per the latest amendment, the nominee can receive the maturity amount of the policy also in the event policyholder’s death.
Nominations – Various types available
As of now, three different types of nominations are available for life insurance policies.
- Single nomination
- Joint/ multiple nominations
- Successive or Alternative nomination.
Single Vs Joint /Multiple nominations
In case of the single nomination, 100% of the death claim amount is transferred to a single nominee. This is the type of nomination done in a major chunk of life insurance policies. If the designated nominee is a minor, a major appointee who can act as trustee till the nominee becomes a major also has to be appointed.
In case of joint or multiple nominations, more than one person is entitled to receive the death claim proceedings at prefixed percentages. If any of the nominees is a minor a major appointee all has to be appointed. In case of joint or multiple nominations, all the nominees shall have a right to claim the amount. But, the amount thus paid shall be based on the percentages fixed at the time of nomination.
Both single, as well as joint/multiple nominations have its own limitations on specific occasions.
Successive / Alternative nominations
In specific cases, the nominee may die even before the death of the policyholder. People generally overlook the fact that here the title of the policy will remain open on the death of the life assured. In such cases to settle the claim, proper legal evidence of title will be required.
It has been observed that claimants have to face a lot of hardships for either obtaining proper evidence of title or for submitting requirements to waive the evidence of title.
Successive / Alternative nomination is a solution to avoid such a difficult situation and settle the claim at the earliest. With the successive nomination, it is possible to have up to three nominees registered under the policy who shall give a valid discharge to policy amount on death of the life assured.
The nominees registered under Successive / Alternative nomination shall become effective based on following conditions.
- After expiry of life assured, the first nomination will become operative.
- At that time, if the first nominee is not alive, then only the second nomination will become operative.
- If 1st and 2nd nominees are not alive, then only third nomination will become operative.
Successive / Alternative nominations – How to nominate?
This type of nomination can be effected at the proposal stage or any time after that.
Successive nomination effected at proposal stage
Successive or alternative nomination can be effected at the proposal stage for policies of LIC of India by filling and submitting form number 5194(Rev) along with the proposal at the time of taking the policy. One copy of the nomination form will be pasted on policy document at the time of issue of the policy document.
Successive nomination effected after completion of the policy.
Fill the form for the successive/alternative nomination – 5194 (Rev) – and submit it at the nearest LIC branch office. The procedure will be the same as that of a nomination change.
Successive / Alternative nominations – Important guide lines
If the death of any of the nominees happens during the term of the policy, it has to be informed to your nearest branch office. If the life assured informs about the death of the first nominee along with valid proof of death, the office would take RFM (Requested File Maintenance) operation for registering the date of death of nominee. Name of next successive nominee will appear in policy master thereafter.
If life assured informs about the death of 2nd or 3rd successive nominee before the death of 1st nominee, the office would take note of this in the record by way of incremental scanning and update it to EDMS (Enterprise Document Management System). The nomination in favor of the first nominee will hold good and shall remain valid.
In order to effect a change of nomination, there is no need to submit any reason or any proof like death certificate of nominee or divorce decree form need to be submitted by the policyholder. No consent of the existing nominee is also required.
Read more: Nomination on Insurance policies – Facts and new changes.
Download Successive / Alternative nomination form 5194 (Rev)
Anish L J is a ‘Financial Planner’ and member of Chartered Insurance Institute(CII), London and Insurance Institute of India. He is also a finance, insurance and software consultant. He thoroughly follows the developments in finance, insurance, and other related sectors.