Many people buy life insurance Policy for Risk cover where the Beneficiary gets the Claim amount on death of the life insured. A life insurance coverage allows the Policyholder to specify a nominee to get the benefit in case the life Insured passes away during the policy term.
Apart from the death benefit, there are other benefits as well, such as Accident and disability rider benefit, Critical Illness rider benefit, survival benefits given in installments, and Maturity Benefit.
When buyers get life insurance, financial security, Risk Cover against unforeseen events, and investment plans are key factors which play an important role in the purchase. Easily said than done, Death Benefit is often not awarded to the right beneficiary or to whom the life insured actually wanted due to some legal issues.
It is essential to know who exactly gets the claim of your life insurance. Here are some detail criteria of the claimants.
Nominee or Legal Heir
When a policyholder gets life insurance plan, the beneficiary is an essential part that is named in the policy. A nominee is awarded the claim money in case the life insured dies within the policy Term period.
In many whole-life plans or plans catering to the aged after their retirement, the claim is provided to the spouse in case the life insured or either of the spouses dies during the term plan.
In some endowment plans, the death benefit is awarded to the nominee in case both the partners die during the term plan.
Nominees are generally legal heirs as well, as most people get life insurance for their family members. In case, the nominee is not available or also dies in the process “say, working couples or aged couples“ the beneficiary becomes the legal heir.
A business, charity, or a group of people can also be legal heirs for a particular life insurance policy. For instance, one-man companies or small business hubs assign their business as the beneficiary so that the business survives even on the death of the owner.
Don’t forget that some ULIP plans may not get tax relief on the maturity benefit or fund value. Some legal issues may crop up as a result. The best way to save money from being taken away due to income tax is to allow a trust to buy the policy and become the beneficiary
Life Insured Parent of a Minor
Often, the nominee for the life insurance policy is awarded to a minor while one of the parents becomes the life insured. The Survival Benefit is given in installments to fund the education of the child while lump-sum maturity benefit is awarded to the life insured to invest for the future of his or her child.
Even though the money is awarded to the life insured “the parent“ the money is used for the child. In case, the life insured dies during the policy term period, the death benefit is awarded to the nominee or the child. The minor, however, does not get the money. It is passed on to the appointee or legal guardian of the child.
Some endowment plans for mentally and physically challenged kids are used to catering to the welfare of the kids. So, benefits are mostly used to buy an Annuity plan that would take care of the kid when it reaches retirement age.
Rider Benefits to the Life Insured
Benefits for critical illness Riders or accident and disability riders go to the life insured primarily if he is still alive. On death, the nominee gets the benefit. Disability rider benefit allows life insured to get the claim in installments each year so as to fund his expenses.
In short, life insurance claimants or beneficiaries can be many depending on the details of the claimant in the life insurance policy