Nomination in health insurance

Buying a health insurance policy is beneficial for you and your family as healthcare expenses have skyrocketed in recent times. An unexpected hospitalisation may drain your lifelong hard-earned savings. Hence, to protect yourself from such circumstances, buying a health insurance policy is a smart and wise choice. An important aspect relating to Health Insurance is nomination, a process by which the person nominated or the Nominee becomes eligible to receive the claim amount in the unfortunate event of the death of the policyholder. Hence, it is vital for the insuring public to understand the nomination procedure.

Who is a Nominee?

A Nominee is an individual, usually a family member or a dependent of the policyholder nominated by the latter during the proposal stage. In the event of the death of the policyholder, the expenses incurred towards the treatment or for the treatment of any other insured person  in an Indemnity-based policy or the assured amount in a Benefit policy are paid to the Nominee.

Even in a situation where the main hospitalisation claim is settled on a cashless basis, i.e., the claim amount is paid to the hospital by the insurer, the related pre- and post-hospitalisation claims are still to be settled with the policyholder on a reimbursement basis. Hence, the nomination is of great help even in cases where the policyholder is no more at the time of settlement.

Nomination is made by the policyholder at the time of proposal or anytime after the purchase of the policy. The policyholder can decide to nominate any person to receive the policy proceeds.  However, it is ideal to nominate an immediate family member as a Nominee, such as  spouse, children or either of the parents. 

If the policyholder fails to nominate, there might be certain complications in identifying the legal heirs to receive the amount payable under the policy. This will lead to a delay in settlement of the claim at a time when the family of the policyholder may be in dire need of the money already spent on the treatment.

The policyholder can decide whether to appoint a Single/Multiple Nominee(s).  In the case of multiple Nominees, the  policy proceeds will be divided among them as per the percentage of the nomination made against each of them by the deceased policyholder.

It may be noted that the Nominee or the Nominees receive the claim amount on behalf of the legal heirs of the policyholder and are not automatically entitled to the amount as beneficiaries. However, a Nominee who is also a legal heir will be entitled to the respective share of the claim as a beneficiary. The insurance company is, however, discharged of its liability by making the payment of the claim to the Nominee/s under the policy.  This is the legal position.

Importance of Nomination in Insurance

The Nominee declaration by the policyholder helps the insurer to settle the claim without delay in the event of the policyholder’s demise.

It is important to choose a Nominee, as it,

• Ensures quick financial relief to the family in the event of the policyholder’s death. In the absence of nomination, the family has to undergo the long-drawn process of obtaining the succession certificate to identify the legal heirs. 
• Saves the insurance company the trouble of identifying the legal heirs of the policyholders for payment of the claim.
• Reduces the scope for disputes and litigation in the claim settlement process.

Option to change the  Nominee

The policyholder has the option of changing the Nominee anytime during the policy period or at renewal. Similarly, if a nomination was not made at the time of the proposal, the policyholder can make amends at any time while the policy is in force.

Information to be declared while making a nomination

• The policyholder must provide details of the relationship to the Nominee in the proposal. Further, declaration of Nominee’s Date of Birth (D.O.B)/Age and the percentage share of nomination where there is more than one Nominee is mandatory.
• In case the Nominee is a minor (less than 18 years of age), the policyholder should also nominate an Appointee to receive the claim proceeds in case the policyholder passes away before the Nominee reaches the age of majority.

Responsibilities of the Nominee 

The role of the Nominee comes into the picture only when the policyholder is deceased. In other words, in the event of the policyholder’s death, the Nominee should, 

• Be aware of the existence of the policy and the benefits thereunder.  
• Intimate the claim to the insurer, if necessary
• Understand the claims procedure and submit the required documents for claim settlement.

Key takeaways

Nomination is an enabling step which ensures the hassle-free receipt of the claim proceeds by the right person declared as a Nominee. Therefore, the policyholder should choose the right Nominee for the health insurance plan to receive the claim proceeds in the unfortunate event of the policyholder’s death.