What's inside? 🧐
- Introduction
- Who gets the Death Benefit Amount, from Term Insurance?
- Who gets the Term Insurance Claim, if the nominee is no more?
- Who’ll get the Term Insurance Claim, if there’s no Will?
- Another Important Question - What if you have loans to be paid off?
- How Can You Add The MWP Act To Your Term Insurance?
- How to Claim Term Insurance after death?
- In A Nutshell,
Introduction
The last few years have changed us in ways we couldn't have imagined. COVID-19 wasn’t just a health crisis—it was a wake-up call, a reminder that life doesn’t always follow the script. In what felt like a flash, our routines were upended, and we found ourselves staring at life’s fragile edges. Suddenly, tomorrow wasn’t something to take for granted; it was something to cherish. Now, in 2024, as we move forward, there’s a new wisdom guiding us: to protect what we hold dear and live each day a bit more intentionally.
If you are the main earning member of the family, you’ve definitely had thoughts of worry about how your family will cope without you - emotionally as well as financially - if you’re suddenly not there anymore. And a quick Google search can tell you that buying a term insurance plan is the best strategy to protect their well-being (at least financially) should your death happen!
Term Insurance is an affordable and simple type of life insurance that provides your family with a sum of money if you pass away during the term of the policy. As long as you pay your premiums on time and keep the policy active, your family will receive a death benefit - which they can use to fulfil their monetary needs - be it regular monthly expenses or long-term dreams and goals - without compromising their current lifestyle.
In this article, we’ll learn about who this death benefit will be paid to and what you can do to ensure it reaches the people that you intend it for. Let’s dive right in!
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Who gets the Death Benefit Amount, from Term Insurance?
The Nominee does. When you buy a term insurance policy, you are required to identify a nominee (or multiple nominees) who will receive the claim amount when you pass away. You can choose any family member to be your nominee - your wife, children, or even your parents.
- When choosing a nominee, consider if they’ll be able to handle the claims process on their own. If you feel they might need support, be sure to select a reliable financial advisor who can guide them and provide assistance when you’re not there.
- Further, think about whether or not they’ll be able to manage a large sum of money by themselves. If you think they might lose money in poor investments, ensure you choose a monthly income component in the claim payout so their needs are secured in the long term.
Note - You can add or change nominees any number of times during the course of your policy term. So, ensure you are updating your nominee according to your life changes - as the policy can last many years - and decades even!
But what will happen if the nominee dies before the insured in the term insurance policy? Who will get the claim amount then? Let's find out.
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Who gets the Term Insurance Claim, if the nominee is no more?
We have heard of extremely tragic incidents where many members of a family pass away due to one unfortunate incident. In such situations, it could happen that the person you’ve chosen as the nominee is dead by the time of the term insurance claim. So, what happens if the nominee dies in term insurance? What can you do about such a situation?
Well, in case the death of the nominee happens before yours, you must ensure you change/ update the nominee's details.
This can get trickier in case both deaths happen at the same time (or you do not have enough time to update the nominee details).
One good way to work around this is to create a Will.
In the Will, you can include detailed instructions on who should receive the amount and on what conditions. The Will is a strong instrument that can help you protect the interests of your family should something happen to the person you selected as a nominee.
An interesting point. You can also use the Will to give an amount from the claim to a person you’re not related to. It could be a cousin, even a friend. And similar to a Nominee, the Will can also be changed any number of times.
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Who’ll get the Term Insurance Claim, if there’s no Will?
In the unfortunate circumstance that you did not create a will and your nominee is dead too, the claim amount will be distributed amongst your legal heirs.
This, however, could be a tedious process - and your family might need to wait for many days before getting the Legal Heir document to prove their right to the claim amount. And meanwhile, they could be hounded by bills, creditors, and other payments that need to be done.
So, to avoid this, ensure you are updating your nominee details, as well as your will regularly.
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Another Important Question - What if you have loans to be paid off?
Let’s say you took out a large loan to buy your own house and have arranged for the instalments to be paid over the next 20 years. Unfortunately, if your death happens before you can fulfil this repayment, your family will need to pay it off.
In fact, your creditors and the bank may have the first right to your term insurance amount - and will receive their payout even before the money reaches your family.
There’s a way around this - that works in the case that you’re male and want your wife to be the receiver of the claim money. Through a legal provision called the Married Women’s Property Act (or MWP Act), you can ensure that your wife will be the first recipient of your term insurance claim amount - before your creditors.
The Married Women’s Property Act (MWP) provides the married woman and her children the right to receive a smooth and hassle-free claim settlement.
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How Can You Add The MWP Act To Your Term Insurance?
You can do this by adding a simple addendum to your term insurance application.
But remember -
- You can only add the MWP Addendum at the time of buying the term insurance policy and never later.
- You cannot remove the MWP Addendum later - even in case of a divorce.
If you’re male and married and want to ensure the claim amount reaches your wife and children- we recommend that you buy the term insurance policy with the MWP Act.
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How to Claim Term Insurance after death?
Losing a loved one is, without a doubt, one of the most painful experiences. Amid the stormy waves of distress and the mental strain, there is also the added pain of managing the complexities of life insurance claims. But knowing how to handle term insurance claims can take a bit of weight off your shoulders.
To make things a little smoother for your loved ones, here’s a breakdown of the key steps involved in the term insurance claim process -
Step 1: Notify The Insurance Company
The first step is for your nominee to inform the insurance company about the claim. This can be performed in different ways. Let’s look at them below -
- Visiting the Nearest Branch: Your nominee can walk into the insurer's office to notify them directly.
- Online: The insurance company's website usually has an easy-to-find claims section.
- Phone or E-mail: Many companies allow claims to be notified via a call or email.
- Toll-Free Number: For instant support, insurers offer toll-free numbers to get the ball rolling quickly.
Once the insurance company is notified, the claim settlement process officially begins.
Step 2: Submitting All The Documents
Next, your nominee will need to complete a claim form and send it to the insurer. They can easily grab this form online from the insurance company's website or pick one up in person at their nearest branch.
Along with the duly filled-out claim form, your nominee will need to gather a few key documents to back up the claim and send them over. Think about it like assembling the last bits of a riddle!
☑️Documents Required For Term Insurance Claim
Here’s a quick rundown of the insurance documents your nominee will need to submit when making a claim -
👉Documents Required For Natural Death Claims-
- Original policy certificate
- Copy of death certificate as provided by the local authority
- Photo identity proof
- Nominee's address proof
- Cancelled cheque
- Copy of medico-legal cause of death
- Bank passbook copy
- Medical records (Admission notes, Discharge / Death summary, Test reports, etc.)
👉Documents Required For Unnatural Death Claims-
- Original policy certificate
- Copy of death certificate provided by the local authority
- Photo identity proof
- Medical records (Admission notes, Discharge /Death summary, Test reports, etc.)
- Bank passbook copy
- Nominee's address proof
- Cancelled cheque
- Copy of medico-legal cause of death
- Inquest report
- Copy of FIR
- Panchanama
- Postmortem report
- Driving license
Once all the documents are in, the insurance company will move forward with processing the claim request.
Step 3: Additional Document Requests
At times, the insurance company might request your nominee to provide some additional documents to support the claim. It’s important for your nominee to act swiftly and gather these extra documents to ensure the claim settlement sails through without a hitch! Think of it as ensuring every ingredient is in place for a perfect recipe—timing is everything!
Step 4: Claim Approval And Payout Options
After your nominee submits all the documents to the insurance company, the team will carefully review everything to determine whether to approve or reject the claim. If the claim gets the green light, the payout will be processed based on the claim payout option you selected when you purchased the term insurance policy.
MyInsureBuddy Tip:
- Know the Process in Advance: Since each insurance company has a slightly different procedure for claims and documentation requirements, inquire about these aspects when buying the policy.
- Be Prepared: It’s a good idea to keep all necessary documents ready, preferably in a digital format like an e-insurance account or the Digilocker app. This lessens the hassle on your nominee, making it one less thing to fret over in hard times.
- Stay Updated: Be certain that the nominee is fully aware of all the necessary information and the steps they need to follow.
By staying informed and remaining up to date, your nominee can avoid potential interruptions in term insurance death claims and navigate the claim process more smoothly. In this way, you can ensure they are financially protected when life throws a curveball.
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In A Nutshell,
Choosing term insurance is more than a policy; it’s a promise. By making thoughtful decisions today—like naming the right nominee, keeping your documents in order, and understanding the claim process—you’re weaving a safety net for your family that’s ready when life throws the unexpected. In times of loss, this protection becomes more than just financial support; it’s a lasting reassurance, allowing your loved ones to find comfort and stability. It’s your legacy, securing not just today but also a brighter, steadier tomorrow.
If you have any further questions related to term insurance, adding a nominee, or the MWP Act, you can post them on the MyInsureBuddy Insurance Forum, and get responses from experts in 6-8 hours!