The option will come in handy in times of COVID-19
The COVID-19 pandemic poses a high life risk. In such a situation, it is possible to enrol three nominees in life insurance policies under the concept called successive or alternative nomination.
Normally, the insured person gives the name of the nominee while enrolling for life insurance. When the insured person dies, his/her nominee receives the claim amount. However, they cannot use the claim amount unless they are a legal heir of the policyholder.
In life insurance policies, the two common types of nomination are single nomination or joint/multiple nomination (in which the policyholder mentions how much of the claim money should go to each nominee). However, there is the third type of nomination called successive nomination or alternative nomination, which many are not aware of.
There might be instances in which husband and wife would have put up each other as nominees. If both lose their lives to COVID-19, immediate claim settlement becomes difficult. In such a situation, proper evidence of title is required, and it is a cumbersome process. That is when the successive nomination can come in handy, said Mohan Prasad, an insurance adviser.
“The successive nomination makes it possible to have three nominees registered. Under it, after the expiry of the policyholder, the first nomination will become operative. If the first nominee is not alive, the second nomination will become operative. If the first and second nominees are not alive, the third nomination will become operative,” he explained.
Mr. Prasad pointed out that existing policyholders can switch their nominees to successive nomination.
“It is the best solution to have a successive or alternative nominee to ensure an easy claim process for the rest of the family,” said Naval Goel, founder & CEO, PolicyX.Com, an online insurance marketplace. He argued that it is important to inform the insurance company of the expiry of the first nominee if it happens before the demise of the policyholder to avoid any hassle.
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