Who can be a nominee in term insurance?

When you purchase a term insurance policy, one key decision is choosing a nominee, the person who will receive the death benefit if something happens to you. 

Under Section 39 of the Insurance Act, 1938, you can nominate your spouse, children, parents, or any trusted individual. Picking the right nominee ensures your loved ones are financially protected quickly and without complications.

Choosing the right nominee is a key step when buying a term insurance plan. Your nominee is the person who receives the policy payout in case of your untimely demise, ensuring your loved ones are financially secure.

At Ditto, we help thousands of customers choose the right nominee. This avoids legal disputes or delays while keeping the family’s future protected.

This guide will help you understand:

1. What a nominee is and who can be chosen.
2. The different types of nominees and their roles.
3. Essential considerations for appointing and updating nominees effectively.

Still unsure how to go about purchasing a life policy and choosing the right nominee? Book a call with us, and let our experts guide you through the process.

Let's take a quick look at key case laws on term insurance nominations:

Understanding how courts view nominees helps clarify why selecting the right person is crucial:

• Before 2015 (Sarbati Devi v. Usha Devi, SC 1983): Nominees acted only as trustees or collectors of the insurance payout; they didn’t legally own the money.
• After the 2015 Amendment (Section 39(7) of the Insurance Act): Recent High Court rulings (Madras HC 2025; Bombay HC 2025) confirm that beneficial nominees (your spouse, children, or parents) now have full ownership rights.

This means that if you name a beneficial nominee in your term plan, they will receive the payout directly. Such procedures reduce delays and disputes in the settlement process.

Who is a Nominee?

A nominee is the person you choose to receive the sum assured of your term insurance if you pass away during the policy term. 

Here’s a snippet from Axis Max Smart Term Plan plus regarding nomination:

For example, Rahul buys a ₹1 crore term insurance plan and names his wife, Ananya, as the nominee. If Rahul dies while the policy is active, Ananya will receive the death benefit, provided all policy conditions are fulfilled.

Take Note:

For your nomination to be valid, it must be recorded in the policy document or submitted in writing to the insurer. You can update or cancel it at any time before a payout, but the insurer will legally honor the last recorded nomination.

What are the types of nominees in Term Insurance?

When selecting a nominee for your term insurance, it’s essential to understand the various types available. Here are the three main types of nominees:

1. Beneficial Nominee: Immediate family members like your spouse, children, or parents who have full rights to the insurance payout. Legal heirs cannot override their claim.
2. Minor Nominee : If the nominee is under 18, an adult guardian should be appointed to manage the payout until the minor reaches the age of majority.
3. Multiple Nominees: You can name more than one nominee and specify how the payout is shared. For example, 50% to your spouse and 25% each to two children.

Point to be noted:

You can nominate your spouse, children, parents, or minors (with a guardian). Most people choose their immediate family, but you can update your nominee at any time as your life circumstances change.

Insurers usually don’t allow nominating friends or distant relatives, as it may create risks or motives to harm the policyholder.

Who can be a Nominee in Term Insurance? Ditto's Take

01

Pick a natural successor

It’s best to choose your spouse, children, or parents. They are considered beneficial nominees under the Insurance Laws (Amendment) Act, 2015.

02

Check the nominee’s age

If your nominee is a minor, appoint a trusted adult as a guardian to manage the money until they turn 18.

03

Consider financial dependency

Choose someone who truly depends on your income, like your spouse, kids, or elderly parents.

04

Ensure capability and trust

Pick someone responsible, financially stable, and capable of handling the payout wisely.

At Ditto, the right nominee choice ensures your family receives the benefit smoothly, just as you intended.

Did You Know?

You can sometimes nominate extended family members, such as siblings, uncles, or aunts, but insurers usually prefer immediate family members to minimize disputes and legal complications. Additional reasoning or scrutiny may be required for non-immediate nominees.

For example, insurers often require you to fill a moral hazard questionnaire when you add these types of nominees. Click here to check out HDFC Life’s moral hazard questionnaire.

What is the Difference Between a Nominee and a Beneficiary?

People often get confused between a nominee and a beneficiary. Let’s take a look at how the two differ:

Take Note:

When you buy a term insurance policy under the Married Women’s Property Act (MWP), it works like a trust. Your wife and children are the only beneficiaries of the payout. Unlike a regular term plan, you cannot change the nominees, ensuring your family’s financial security is protected.

Why Talk to Ditto for Your Life Coverage?

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Final Thoughts:

Before you wrap up, here’s a quick summary of what to remember about nominees in term insurance:

1. Adding a nominee ensures quick and hassle-free claim settlement for your loved ones.
2. You can nominate multiple people and decide how much payout percentage each will receive.
3. While nominees don’t have to be family, it’s best to choose someone you can trust.
4. If your nominee is a minor, you must appoint an adult to handle the funds until the child turns 18.
5. Review and update your nominee details whenever there’s a significant life change, like marriage or childbirth.

Still unsure how to go about purchasing a life policy and choosing the right nominee? Book a call with us, and let our experts guide you through the process.

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