A startling data from the Reserve Bank of India (RBI) reveals that unclaimed deposits worth Rs 39,264 crores as of March 2021 are lying in banks across the country. These are deposits held in accounts where the account holder has not claimed the money or is deceased and has not submitted nomination details.
Importance of Nomination
Nominating someone you believe is trustworthy to claim the benefit is critical since it saves them from scurrying around trying to prove their eligibility. All banks and financial institutions have a standard and simpler process for settling death claims, where nomination is clearly mentioned in the account or folio.
Here are a few benefits of appointing a nominee:
If a person passes away, their investments can be transferred to the nominee by submitting a death certificate, a document evidencing the relationship with the deceased, and a form. If there is no nomination, there will be a significant wait and delay in getting the investments transferred. The dependents would be required to present a will, certificate, or other proof of their status with the deceased. This might lead to delays and hardship for the next of kin. Thus, nomination ensures a smoother transition of assets.
If a nominee is designated, all you have to do at the time of claim is give address verification, bank information, and an identification card to have the investments moved to their name, which accomplishes the need of coverage. Investments for which you can assign a nominee include financial products like life insurance policies, bank fixed deposits, mutual fund investments and Public Provident Fund PPF, among others. This ensures that your dependents have adequate funds to fall back on in your absence.
Nominees in life insurance policies:
Legal heirs: Legal heirs such as children and wife can serve as nominees.
Immediate family members: Parents, siblings, and other family members are appropriate nominees. They can receive and disburse your insured sum to the person whose financial future you wish to protect.
Extended family members: To nominate a cousin, relative, or any friend you must first obtain approval from your insurance provider.
Policyholders can appoint multiple nominees and the nominees can be changed during policy term.
Types of Nominees
A Beneficial Nominee is a parent, spouse, child (an immediate relative of the policyholder). The death benefit amount is provided to the beneficial nominee only.
A nominee who is under the legal age (18 years of age) is known as a minor nominee. The life insured/policyholder can choose to nominate a person who is under the age of 18. In this situation, the policyholder is required to declare an appointee who can receive the claim amount on behalf of the minor nominee’s behalf under the term insurance policy.
Can you change your nominee?
A policyholder can change the nominee. For this, the policyholder must change the nominee before the maturity of the term insurance policy.
Nomination is a critical aspect, and you should ensure that you have nominated someone who will be entrusted with your funds in the event of your demise. If you have not made a nomination, it will be a cumbersome process for your legal heirs to take control of your investments.