Appointing a nominee in life insurance is a step that holds significant weight in ensuring your family’s financial security. The nominee (or nominees) is the person who will receive the claim amount upon your passing. By appointing a nominee, you help ensure your loved ones can access the claim amount without any legal roadblocks or disputes. 

So, in this article, let’s take a look at nomination in life insurance: what it means, who can be a nominee, the legal aspects involved, and common mistakes to avoid.

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What is a Nominee in Life Insurance?

A nominee in life insurance is the person you name in your life insurance policy to receive the cover amount in the event of your death. Their primary role is to collect the claim amount from the insurance company. Under the Insurance Act of 1938, the nominee is recognised as the rightful recipient of the claim amount. 

However, that does not always hold true. This is because a life insurance policy is an asset. The insured person’s legal heir also has a right to the asset. If the legal heir is not a nominee, they may claim rights over the payout if there’s a dispute.

Now that you know the basics, let’s take an in-depth look at the legal rights of a nominee under the Insurance Act, 1938:

1. Right to Nominate a Person (Including for Minors)

    • Section 39 (1) of the Insurance Act, 1938:
      • "The holder of a policy of life insurance on his own life may, when effecting the policy or at any time before the policy matures for payment, nominate the person or persons to whom the money secured by the policy shall be paid in the event of his death.Provided that, where any nominee is a minor, it shall be lawful for the policy-holder to appoint in the prescribed manner any person to receive the money secured by the policy in the event of his death during the minority of the nominee."
    • Explanation: You can name anyone to receive the policy money if you pass away. If your nominee is a minor, you can appoint an adult custodian (usually called an "appointee") to collect the money on their behalf until the nominee turns 18.

2. How to Make or Change a Nomination

    • Section 39 (2) of the Insurance Act, 1938:
      • "Any such nomination in order to be effectual shall, unless it is incorporated in the text of the policy itself, be made by an endorsement on the policy communicated to the insurer and registered by him in the records relating to the policy and any such nomination may at any time before the policy matures for payment be cancelled or changed by an endorsement or a further endorsement or a will, as the case may be, but unless notice in writing of any such cancellation or change has been delivered to the insurer, the insurer shall not be liable for any payment under the policy made bona fide by him to a nominee mentioned in the text of the policy or registered in records of the insurer."
    • Explanation: To make your nomination valid, it must either be included in the policy document or registered with the insurer through a written note. You can also change or cancel the nomination any time before the policy pays out, but you must inform the insurer in writing, or they will legally pay whoever was last on record.

3. Insurer Must Acknowledge Nomination

    • Section 39 (3) of the Insurance Act, 1938:
      • "The insurer shall furnish to the policy-holder a written acknowledgement of having registered a nomination or a cancellation or change thereof, and may charge a fee not exceeding one rupee for registering such cancellation or change."
    • Explanation: Once you submit or update a nomination, the insurance company must give you a written confirmation/endorsement.

4. Nomination Is Cancelled Upon Assignment (With Exception)

    • Section 39 (4) of the Insurance Act, 1938:
      • "A transfer or assignment of a policy made in accordance with section 38 shall automatically cancel a nomination:

        Provided that the assignment, of a policy to the insurer who bears the risk on the policy at the time of the assignment, in consideration of a loan granted by that insurer on the security of the policy within its surrender value, or its reassignment on repayment of the loan shall not cancel a nomination, but shall affect the rights of the nominee only to the extent of the insurer's interest in the policy."
    • Explanation: If you assign (transfer) your policy to someone else — like a bank or another person — your existing nomination becomes invalid. But if the policy is assigned to the insurer for a loan, the nomination remains valid. However, the nominee will get the money after the insurer recovers its loan.

5. Payment if Nominee Dies or Policy Matures During Lifetime

    • Section 39 (5) of the Insurance Act, 1938:
      • "Where the policy matures for payment during the lifetime of the person whose life is insured or where the nominee or, if there are more nominees than one, all the nominees die before the policy matures for payment, the amount secured by the policy shall be payable to the policy-holder or his heirs or legal representatives or the holder of a succession certificate, as the case may be."
    • Explanation: If you – the policyholder – are alive when the policy matures, you get the money. But if all your nominees die before the policy pays out, then the money will go to your legal heirs, representatives, or someone with a succession certificate.

6. Payment to Surviving Nominees

    • Section 39 (6) of the Insurance Act, 1938:
      • "Where the nominee or, if there are more nominees than one, a nominee or nominees survive the person whose life is insured, the amount secured by the policy shall be payable to such survivor or survivors."
    • Explanation: If at least one nominee is still alive when you pass away, the insurance money will go to the surviving nominee(s).

7. Exception for Policies under the Married Women's Property Act

    • Section 39 (7) of the Insurance Act, 1938:
      • "The provisions of this section shall not apply to any policy of life insurance to which section 6 of the Married Women's Property Act, 1874 (3 of 1874) applies or has at any time applied:

        Provided that where a nomination made whether before or after the commencement of the Insurance (Amendment) Act, 1946, in favour of the wife of the person who has insured his life or of his wife and children or any of them is expressed, whether or not on the face of the policy, as being made under this section, the said section 6 shall be deemed not to apply or not to have applied to the policy."
    • Explanation: If your life insurance policy is taken under Section 6 of the Married Women’s Property Act, your wife and/or children become automatic beneficiaries, and Section 39 rules don’t apply. But if you clearly state that the nomination is under Section 39, then this rule overrides MWPA, and the nomination will be valid under this section.

Nomination in Insurance – Meaning & Process

Nomination refers to the process of selecting a person who will receive the death benefit under a life insurance policy. This can be done when purchasing the policy or later during the policy tenure by filling out a change of nomination form. This is particularly important in term insurance because it does not have any maturity or survival benefits 

In order to nominate someone, you’ll need to provide the nominee’s full name, age, relationship to you, and address. Identity and relationship proof may also be required. The Insurance Regulatory and Development Authority of India (IRDAI) mandates that insurers record and acknowledge all nominations accurately. You can revise or update your nominee details as many times as needed during the policy term.

Documents required for nomination
To ensure that your nomination is recorded correctly and there are no hassles at the time of claim, here are some documents that you need to keep in mind:

    • Nomination form or endorsement letter: This must be filled out and signed by the policyholder, ideally at the time of purchase.
    • Proof of identity of the nominee: Documents like Aadhaar cards, PAN cards, voter IDs, or passports help confirm the nominee’s identity.
    • Proof of relationship: For close relatives like spouse, children, or parents, insurers may ask for supporting documents to confirm the relationship — such as a birth certificate, marriage certificate, or family ID.
    • Address proof of the nominee: Any valid address proof, such as your gas or telephone bills, Aadhaar card, or bank passbook, is accepted.
    • Policy document (if making changes): If the nomination is being updated or changed, the original policy document may be needed for endorsement.

Note: You can’t change nominees if you have purchased a life insurance policy under the MWP Act. I have explained this in detail here.

Who Can Be a Nominee for your Life Insurance Policy?

Now that you know the laws regarding nominee registration and how to update a nominee, let’s take a look at who is allowed to be a nominee.

Now that you're familiar with the nomination rules and how to update a nominee, let’s talk about who can actually be your nominee. The most common and preferred nominees in a life insurance policy are your legal heirs — i.e., your spouse, children, or parents. These are considered first-degree relatives, and insurers generally recommend naming someone from this group. Not only is it straightforward, but these individuals also fall under the category of beneficial nominees, meaning they are entitled to receive the money without interference from a third party.

That said, you can sometimes nominate extended family members — like siblings, uncles, and aunts — but this depends on the insurer’s internal policies and may involve additional scrutiny or documentation. Insurers are usually more comfortable if your nominee is an immediate ascendant or descendant, as it reduces the chances of disputes or legal complications during claim settlement. So, while the system offers flexibility, going with a close family member is often the easiest and safest route.

    • Minor nominee – What happens if a minor is nominated?

      Yes, you can nominate a minor as the beneficiary of your life insurance policy. But here’s the catch – minors can’t legally receive the claim amount. So, while the nomination is valid, the insurer won’t hand over the money to a 12-year-old, no matter how mature they seem.

      To resolve this, when you nominate a minor, you’ll also need to have an appointee — an adult you trust — who will receive the money on the minor’s behalf. This appointee acts like a temporary caretaker of the funds, holding them until the minor can legally claim it themselves.

      If you forget to appoint an appointee and your nominee is still a minor at the time of claim, the insurer won’t be able to release the funds until a legal guardian steps in or a court order is obtained. So, it’s best to plan ahead and make the nomination complete by adding an appointee right away.

      Now, the next question you may have is, if my child (who is under 18) cannot receive the funds, can I appoint a close friend who will take care of my child?
    • Non-family members as nominees – Are they allowed?

      Yes, you can nominate someone outside your family — like a trusted friend, a colleague, or a distant relative — but it’s not as straightforward as nominating a close family member. While the law doesn’t stop you from choosing a non-family nominee, insurers may raise an eyebrow and ask for additional documentation to justify the relationship and the reason behind this nomination. This is because insurers like things to be crystal clear when money's involved.

      However, there is a catch when you appoint a non-family member as a nominee. They can only be a custodian of the funds until your legal heir is able to access them. Therefore, even if you nominate a non-family member, they can’t actually benefit from it.

      That’s why most insurers prefer nominees to be your spouse, children, or parents since they’re your natural legal heirs and are automatically considered beneficial nominees. When you step outside that circle, the nomination may still be valid. Still, the claim process could involve more paperwork and, in some cases, even legal intervention if your legal heirs decide to contest it. So, while it’s allowed, it’s something to be thoughtful about.

      Note: In case you want a non-family member or distant relative to be the beneficiary of the policy, you must ‘assign’ the policy to them. Then, create a will stating that you want this person to be the complete beneficiary of your life insurance policy. That said, we recommend you consult an Estate Planning & Succession Lawyer to understand the nuances better.
    • What happens if there is no nominee?

      Life insurers will not let you purchase a policy without a nominee. However, in case your nominee passes away before you do, be sure to update your nomination as soon as possible.

      If you and your nominee pass away together or you have not changed the nomination, the insurance policy becomes part of your estate and is distributed according to inheritance laws. That means your legal heirs must go through the courts and get a succession certificate to prove their right to the money. This takes time, involves legal fees, and can delay the payout for months, sometimes even years (provided they know the policy and make a claim).
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Difference Between Nominee and Beneficiary

Since we touched upon nominees, custodians, and beneficiaries, I felt it was important to mention the differences. Here’s a table to highlight the differences.

Particulars Nominee Beneficiary
Definition A person appointed by the policyholder to receive the policy proceeds after death A person who is legally entitled to receive the policy proceeds
Legal Status Acts as a trustee or custodian (holds money on behalf of legal heirs) unless a beneficial nominee Has full ownership rights to the policy proceeds
Rights Over Proceeds May or may not have absolute right—depends on relationship and/or court decisions Has the legal right to receive and use the insurance amount freely
Role in Claim Settlement The insurer pays the nominee as per policy records Beneficiaries are the ultimate recipients of the benefit
Can Be Changed? Yes, the policyholder can change the nominee anytime before policy maturity. Yes, beneficiaries can also be changed before the policy matures. This can be done through a will.
Applicability If the nominee is a spouse, child, or parent, they are treated as a beneficial nominees. Beneficiaries are assumed to have a complete claim—unless disputed legally.

Note: Role of a Will in determining the final beneficiary – A will can override the nominee in certain situations. While a nominee is the person designated to receive the insurance proceeds, they act as a custodian of the money only if they’re not classified as a beneficial nominee (like a spouse, child, or parent). 

Suppose the policyholder is not a beneficial nominee. However, if he/she has a valid will that specifies them as the beneficiary of the policy amount, the insurer may still pay them. However, the final distribution can be contested in court by the beneficial nominee. 

In such cases, the will takes precedence, and the nominee may be legally required to transfer the money to the person named in the will (if it’s not them). That’s why it’s important to align your nomination with your estate planning documents to avoid disputes later.

Can I Change the Nominee in Term Insurance?

Yes, you can change your nominee anytime during the policy tenure. This is because your life changes every few years — marriages, children being born, divorces (hopefully not), etc. — and your nomination should reflect those changes. 

To update your nominee, you must submit a nomination change form and supporting documents like proof of identity and relationship. There generally is no charge for this update. However, some insurers may charge a nominal amount.

Updating the details becomes even more important if your nominee passes away before you. And here’s a step-by-step guide to update your nominee.

Step-by-step guide to change your life insurance nominee:

    1. Check the Updated Policy Document: In some cases, the insurer may issue a fresh endorsement or update to your policy document reflecting the new nominee details. It's important to review this document carefully and keep a copy for your records to avoid any confusion during the claim settlement.
    2. Get Confirmation from the Insurer: After submission, the insurer will process your request and send you a confirmation once the new nominee has been successfully registered. This acknowledgment is proof that your nominee details have been officially updated in their system.
    3. Submit the Documents to the Insurer: Once everything is ready, submit the form and documents to the insurer. This can usually be done in person at the nearest branch, through registered email, or by uploading them via the insurer’s online portal or app, depending on what your insurer supports.
    4. Collect and Attach the Required Documents: You must submit relevant supporting documents along with the filled form. These generally include identity proof, address proof, and sometimes relationship proof for the new nominee. If the nominee is a minor, you must appoint an appointee and provide their details and documents.
    5. Fill in the Updated Nominee Details: Once you have the form, fill it out carefully with the updated nominee’s full name, date of birth, relationship to you, current address, and any other details they ask. If you are adding more than one nominee, you’ll also need to clearly state what percentage of the claim amount each nominee should receive.
    6. Obtain the Nomination Change Form: To start the process, you’ll need to get your insurer's official nomination change form. This form is usually available at the insurer’s branch office, customer service portal, or official website. Some insurers also offer this option via their mobile app for added convenience.

What to do if the nominee in life insurance refuses to claim the insurance?


Has anyone actually said no to free money? Apparently, yes. And in such cases, the insurer is probably having a great day—because they don’t have to pay a dime until someone steps up.

However, in all seriousness, if the nominee doesn’t want the money and just vanishes or decides not to claim it, the insurer or anyone else cannot force someone to claim insurance. It’s like leaving a cake on the table—if no one eats it, it just sits there — quiet, untouched, and convenient for the insurer.

But there is a workaround if the nominee and the legal heir are two different people — and the nominee’s doing their best to ignore the pile of money. The legal heir can approach the insurer and request the claim, but they’ll need to produce a succession certificate to prove their right to the funds. Only then will the insurer consider releasing the amount.

So yes, while the process is simple for nominees, it gets more paperwork-heavy if they ghost the claim and the legal heir wants to step in. This is why I’m going to reiterate: Choosing the right nominee is as important as choosing the right policy itself.

Things to Consider When Choosing a Nominee for a Life Insurance Plan

Here are some rules of thumb you need to consider when appointing a nominee for your term or life insurance policy:

    • The nominee should be a natural successor:
       
      When choosing a nominee for your life or term insurance policy, the first rule is to stick to natural successors — your spouse, children, or parents. These are first-degree relatives and considered beneficial nominees per the Insurance Laws (Amendment) Act, 2015. Insurers also prefer them because it reduce the risk of claim disputes. If you nominate someone outside this circle, especially second-degree relatives like siblings, there’s a chance your legal heirs could contest the payout later, and insurers try to avoid being caught in the middle of such disputes. In fact, many insurers may not even allow nominations outside of first-degree relations for this very reason.
    • The nominee’s age:

      The nominee’s age also plays a critical role. If you nominate a minor, they cannot legally receive the claim amount on their own. In such cases, you are required to appoint a custodian who will manage the money until the nominee becomes an adult. Failing to do this can lead to unnecessary legal delays, as the court may have to step in to appoint a guardian. To avoid this, make sure your nomination includes a responsible adult who can handle the money in the minor nominee’s best interest.
    • Relationship with the nominee:

      Your relationship with the nominee matters, too. Under the Insurance Laws (Amendment) Act, 2015, close blood relatives and legally recognized dependents are the preferred choices. These include your spouse, children, and parents. Extended family or friends may also be nominated, but the process is more complicated, and insurers may request additional proof or justification.
    • Financial dependency:

      Financial dependency is another important factor. The purpose of life insurance is to support those who would face financial hardship in your absence. Ideally, your nominee should be someone who genuinely depends on your income—like your spouse, children, or elderly parents.
    • Health condition of the nominee:

      The health condition of the nominee is often overlooked, but it's worth considering. You want the insurance payout to be handled by someone who is mentally and physically capable of managing a large sum of money responsibly. If the nominee has a cognitive impairment, it may be better to either assign the policy to a trust or to someone you trust who can oversee the funds for them.
    • Nominee’s credibility:

      A nominee’s personal and professional background also deserves some thought. Someone with a stable career, clean financial record, and good decision-making skills is far more likely to manage the payout wisely. This is especially important if the money is meant for a child’s education or a spouse’s retirement.
    • Can an NRI or foreign citizen be a nominee for life insurance?

      Yes, an NRI can be nominated in a life insurance policy. However, the insurer may ask for additional KYC documents, overseas address proof, and sometimes even a declaration of relationship. The claim process might also take a bit longer due to the involvement of cross-border documentation, but the nomination itself is legally valid.

      However, do note that they should have an Indian bank account (or an account that accepts INR). This is because the insurer will not pay the amount in any foreign currency.

      Note: NRIs can also purchase life insurance plans in India. I’ve explained about it in this article. 
    • Estate Planning – Role of Wills and legal documentation:

      Estate planning is the final, but often ignored, aspect of choosing a nominee. It’s important to remember that life insurance is part of your estate, and therefore, it falls under succession laws. While naming a nominee in life insurance ensures a smoother payout, it doesn't necessarily prevent legal heirs from contesting the claim — especially if they are excluded. This is why creating a valid will is just as important. If there's a mismatch between your nominee and the person named in your will, the courts may intervene, and legal heirs can still stake a claim. So, always ensure that your nomination and will are updated.
    • Changing a nominee in life insurance:

      As long as your life insurance policy is not covered under the Married Women’s Property (MWP) Act, you can change your nominee at any time during the policy tenure. Life circumstances change—people get married, have children, or go through separation — and updating your nominee ensures your insurance money reaches the right person at the right time.

      However, your nomination rights are restricted if your policy is assigned under the MWP Act. In such cases, only your wife and/or children can be beneficiaries, and you cannot change this later (even after a divorce). The policy becomes legally locked to protect your family from creditors and external claims.
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Types of Nominees in Life Insurance

There are three primary types of nominees in life insurance. Individual nominee, multiple nominees, and contingent nominee. Let’s take a look at them now:

    • Individual Nominee – A particular nominee is a single person who receives the complete payout of the cover amount.
    • Multiple Nominees – Unline an individual nominee; two or more people are entitled to the payout of the cover amount. It is distributed in a pre-determined percentage set by the policyholder.
    • Contingent Nominee – A contingent nominee is essentially your backup plan. This is the person who receives the policy payout if your primary nominee is unable or unwilling to accept the money — whether due to death, legal incapacity, or simply refusal. It’s a smart move, especially for people who want to ensure there’s no delay or confusion in claim settlement if something happens to the first nominee. 

      For example, if your policy names your spouse as the primary nominee, but both of you meet with an untimely accident, the insurer will pay the death benefit to the contingent nominee you’ve listed.

      Some people also assign the policy to a trust or another person, especially in high-value policies or when the financial dependents are minors or incapacitated. However, in this case, the assignee becomes the legal owner of the policy. If you assign it to someone, they take full control over the policy, including the right to receive the maturity or death benefit. In such cases, the nominee is completely overridden. The assignee’s rights take precedence over any nominee you might have listed, which means the nominee becomes irrelevant once a valid assignment is in place.

      Assignment completely transfers the ownership of the policy. That’s a big step and should only be done when you fully understand the legal and financial implications. Let me clearly explain the differences between the two.

Difference Between Nomination and Assignment

    • What is nomination in life insurance?

      Nomination is the process by which a policyholder names someone to receive the death benefit from the insurance policy in case of their demise. This is done to ensure the claim amount reaches the intended person without delays or legal hurdles. The nominee in life insurance can be a spouse, child, parent, or even a trusted friend, depending on the insurer’s rules. Nomination does not transfer ownership of the policy. It only designates who should get the death benefit.
    • What is an assignment in life insurance?

      Assignment is the act of transferring the ownership of a life insurance policy to another person or entity. This transfer is done under Section 38 of the Insurance Act, which governs the legal procedure for assigning policies. Once a policy is assigned, the assignee becomes the legal owner and gains full control over the policy, including rights to the maturity value, surrender benefits, and death claim. There are two types of assignments:
      • Partial Assignment: Let’s say you have a loan from a bank of ₹50 lakhs, and you have a ₹2 crore policy. You can assign the bank ₹50 lakhs and the remaining to your nominee. In the unfortunate event of your death, the bank can claim the assigned amount – i.e., ₹50 lakhs – and the remaining amount will go to your nominees.
      • Complete Assignment: In this case, you transfer the entire policy to another person or a trust. Once this is done, the assignee becomes the sole owner of the policy and is entitled to the full payout in case of a claim. The nominee loses all rights to the claim amount.
    • Who gets the payout in case of an assigned policy?

      One crucial point to understand is that assignment takes precedence over nomination. Once a policy is assigned, the nominee loses the first right to claim the amount. The insurer is legally bound to settle the claim with the assignee first, regardless of who the nominee is. So, if you’ve named your spouse as the nominee but assigned the policy to a bank, the bank will receive the claim amount up to its interest, and the nominee will get the remainder if there’s any balance.

      Note: In case your policy is registered under the MWP Act, you cannot assign the policy to any person or institution.
    • Can a nominee also be an assignee?

      Yes, a nominee in life insurance can also be made the assignee, but only if a formal assignment is executed. In such cases, the nominee doesn’t just receive the policy money as a beneficiary—they legally own the policy. This might be suitable when the policyholder wants to give full control and ownership to a trusted family member or caregiver. However, this must be adequately documented, and the insurer must be informed.

Here is a table explaining it in a concise format:

Aspect Nomination Assignment
Definition Naming a person to receive the policy proceeds after the policyholder’s death Transferring ownership rights of the policy to another person or entity
Who Can Be Chosen Individual (e.g., spouse, child) or even a trust Individual, trust, or institution (e.g., bank loan)
Purpose To ensure smooth payout to intended recipient after death To transfer control and rights of the policy
Legal Ownership Policyholder retains full ownership until death Assignee becomes the legal owner once assignment is done
Can Be Changed? Yes, it can be changed anytime during the policy term Yes, but requires a reassignment process
Effect on the Nominee in life insurance The nominee is entitled to claim the proceeds unless overridden by the assignee. Assignee overrides nominee—the nominee becomes irrelevant after assignment
Revocability Revocable by the policyholder Revocable only if assignee agrees or policy is reassigned
Under the MWP Act The nominee must be your spouse and/or children; it cannot be changed once assigned under MWP. Policies under MWP cannot be assigned.

Common Mistakes to Avoid While Appointing a Nominee

    1. Appointing Non-First-Degree Relatives as Nominees

      While the law allows you to nominate anyone, including extended family members or friends, doing so can complicate the claim process. Insurers generally prefer nominees to be your spouse, children, or parents. That is, your first-degree relatives. This is because they are presumed to have a natural financial interest in your life. 

      When a distant relative or a non-family member is nominated, the insurer may require additional documentation to justify the relationship, and legal heirs could also contest the claim. This could delay the payout and lead to legal disputes, defeating the purpose of having a nominee in life insurance.

      Read: ‘Assignment’ in the above sections.
    2. Not Updating Nominee Details

      Life keeps changing — marriages happen, children are born, and sadly, people pass away. But if you don’t update your nominee details to reflect these changes, your insurance claim could land in the wrong hands or get stuck in a legal quagmire. A common mistake is leaving an ex-spouse or deceased parent as the nominee. 

      In such cases, the insurer may ask for legal proof from your heirs. This is why reviewing and updating your nomination periodically is a simple step in ensuring that your intended beneficiary receives the money without complications.
    3. Providing False or Incomplete Information

      Any inaccuracy in the nominee’s details — be it their name, date of birth, relationship, or address—can lead to issues during claim settlement. If the nominee’s identity cannot be verified due to incorrect information, the insurer might delay or reject the claim until the issue is resolved. In extreme cases, it might even require court intervention. This is particularly common when the policyholder fills out the nomination in haste or leaves fields blank. Always provide accurate and complete information to avoid unnecessary issues later.
    4. Not Informing the Nominee

      What good is a nomination if the nominee in life insurance doesn’t even know they’ve been named? A surprising number of people forget to inform their nominees about the policy or even where the documents are kept. However, nowadays, insurers ask for the nominees’ phone numbers, and they authenticate it via an OTP.

      If the nominee is unaware, they may never claim the benefit, leaving the funds unclaimed. Make sure your nominee knows about the policy, the cover amount, and how to initiate a claim if needed. Sharing these details may feel uncomfortable, but it ensures your financial planning doesn't go to waste. You can always share a soft copy with them if you don’t want to give them the original document.
    5. No Custodian or Appointee for Minor Nominees in life insurance

      You can nominate a minor child, but minors can't receive the insurance payout directly. If you don’t appoint an adult custodian to manage the funds on behalf of the minor, the insurer cannot release the money when the claim arises. Instead, the matter may end up in court, where a guardian will be appointed. This delays the payout and may create financial stress for your dependents. Always name a trusted adult as the appointee when nominating a minor to ensure a smooth and timely transfer of benefits.
    6. Choosing a Nominee Who May Be Financially Irresponsible

      While choosing someone you love is natural, it’s equally important to consider whether they can manage a large sum of money responsibly. Appointing someone with poor financial habits or unstable income could result in misusing the funds. Primarily if the money is meant for your child's education or parents’ well-being, if you're unsure about the nominee’s financial capability, consider setting up a trust or assigning a portion of the policy to a responsible guardian. The right nominee in life insurance isn't just someone you trust emotionally but also someone who can handle the responsibility that comes with a large payout.

Best Term Insurance Plans in India 2025

Now that you know all about nomination in term and life insurance, here are some of the best plans in India 2025:

Top Term Insurance Providers in India for 2025 Average Claim Settlement Ratio (FY 21 -24) Average Amount Settlement Ratio (FY 21 -24) Average Complaint Volume per 10k claims (FY 21 -24) Average Annual Business Income (FY 21 -24) Best Term Insurance Plans Offered by the Insurer
Axis Max Life Insurance 99.50% 95.50% 7.3 ₹9,296 Axis Max Life Smart Term Plan Plus
TATA AIA Life Insurance 98.91% 92.70% 3 ₹7,599 Tata AIA Sampoorna Raksha Promise
Bajaj Allianz Life Insurance 99.11% 93.00% 4.4 ₹10,456 Bajaj Allianz E-touch II
ICICI Prudential Life Insurance 97.52% 92.10% 14.3 ₹17,198 ICICI Prudential iProtect Smart
HDFC Life Insurance 99.20% 87.30% 2 ₹27,490 HDFC Life Click2Protect Super

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Conclusion

Nominating the right person in your life insurance policy is as important as choosing the policy itself. It secures your family’s financial future, avoids legal disputes, and ensures timely claim settlement. Always review and update your nominee details as and when required to ensure your intent is honoured. If you haven’t checked your policy nomination yet, now is the perfect time to do so. 

While nomination ensures an easy payout, remember that only beneficial nominees in life insurance have full and final rights to the amount. For others, nomination simply means custodianship unless reinforced by a legal will or policy assignment.

If you have dependents and do not have a life/term insurance policy yet, now is the best time to purchase one. Paraphrasing the old proverb, the best time to buy a term insurance policy was last year, and the second best time is now.

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