Nominee in health insurance

Whenever a person takes an insurance policy, they have to choose a nominee at the time of taking the policy. This is a very important and thoughtful step on the part of the policyholder. In life insurance, term insurance or personal accident insurance, it simply means that if the insured dies unexpectedly, the nominee chosen by them will receive the benefit of the insurance. Whereas in health insurance, the nominee can get the benefit of insurance only when the death occurs during medical treatment.

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You can choose any trusted person as your nominee. Usually, people choose their spouse (spouse), children, parents or any member of the family. In some cases, one can also choose to have distant relatives such as an aunt, uncle, nephew or niece to be their nominee but it may require the policyholder to submit some additional documents. Apart from this, you can also choose your best friend as a nominee.

Although it is not always necessary to pick a nominee, it is still suggested to nominate someone so that your family does not have to grapple with any court cases in the future. For example, suppose an insured person dies during treatment and they had not entered the nominee column, then the family members may need to go through legal channels to try and get the benefit of the sum assured. But if they had declared the nominee in writing, the sum assured will go directly to the nominee.

(Read more: What happens to health insurance after death of insured)

The nominee can be linked to the policy when you are filling the health insurance plan offline or online. Your agent can help you through this process and you can ask them to clear any doubts you may have. Apart from this, if you have not made a nominee or want to change the name later, you can do so anytime through both online and offline means.

While there have been many cases where people have made friends, cousins ​​etc. as their nominees, if a court case ever comes up, then nothing is left in the hands of the legal heirs.

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While adding a nominee to a health insurance policy, you will have to provide their full name, age, date of birth, address and relationship to you. Any wrong information can lead to problems at the time of claim. If you wish to remove the nominee after some time, you can do so and add another name by informing your insurer. If the nominee dies before the policyholder, the sum assured will be passed on to their legal heir(s).

The Insurance Regulatory and Development Authority of India (Irdai) has amended the Insurance Act, 2015 to create a category called "Beneficial Nominee", under which your relatives like spouse, children and parents automatically become beneficial nominees. This way the insurer can pay the sum insured at the earliest.

(Read more: Coverage in myUpchar Bima Plus)

Following are some of the advantages of the nomination facility in insurance policies:

• Serves the purpose of insurance: The nominee naming facility serves the main purpose of the insurance. In case of the unfortunate death of the policyholder, the nominee gets the financial benefit, after which the contract of the policy terminates. This protects not only the interest of the insured but also the nominee.
• Can nominate any person: The policyholder can choose any person as a nominee. Ideally, one should choose a responsible person who can take care of the needs of the family in their absence.
• Option to create more than one nominee: The policyholder can choose multiple persons as nominees. If Nominee A does not survive the term of the policy, then Nominee B gets the death benefit.
• Death benefit sharing: The death benefit can be shared among the nominees, when more than one nominee is mentioned in the policy.
• Cancellation of nominee: Suppose you change your mind after some time has passed. You can easily remove the previously selected nominee and choose a new nominee in their place.
• Details of the nominee on the insurance cover: The information related to the nominee should be written on the insurance policy document as it helps the insurance company pass on the benefits to the person.

(Read more: What does health insurance cover)

First of all, know that the nominee is not only necessary in the insurance world, but also in many other sectors like EPF, banks or many investment channels like the stock market and mutual funds. Whether you are a policyholder or an account holder in a bank, in both cases, some of your money will be deposited either with the bank or with the insurance company. The name of the nominee is required so that after the death of the insured, the bank or insurance company does not confiscate the money and gives it to the intended recipient. 

On the other hand, all insurance policies are designed in such a way that they can help you in times of crisis. These include maternity health insurance plan to cover pregnancy, pre-existing illness plan for pre-existing diseases, family floater plan to cover the entire family, senior citizen health insurance for older people, etc. All these policies ensure that you or a family member can get health benefits and if the insured person dies during the treatment then their nominee can get the benefit of the policy. Hence, it is necessary to have a nominee.

Due to changing lifestyles and poor diets, the risk of diseases has increased more than ever before. On top of this, the COVID-19 pandemic has opened our eyes to other unexpected health risks. In such times, people often wonder if they should opt for a health insurance policy. If they decide they do want to buy health insurance, then begins the journey of finding the best health insurance and making sure it includes all the facilities that you and your family may need. 

The nominee can be beneficial in the health insurance sector in the following ways:

• Support the dependents: If you nominate a member of your family and if you die during treatment, the insurance company provides financial assistance to the family. The insurance company transfers the pre-determined sum assured to the nominee. This helps the family members during their time of grief by ensuring that they do not have to worry about money.
• Eliminate complications: Designating a nominee eliminates complications for insurance companies. If no one is named in the insurance policy, the insurer faces a lot of difficulties in selecting the right person for compensation. Therefore, being the policyholder, you must inform the insurance company about the correct beneficiary on your own.
• Death-benefit sharing: If the policyholder wishes, more than one person can be nominated as a nominee. If the policyholder does so, the death benefit will be shared equally among all the nominees. If you want, you can also fix a certain percentage of the sum assured for each nominee. In case one of the nominees dies, the sum assured will be given to the other nominee.

(Read more: Corporate medical insurance)

Following are some key differences between choosing a single nominee and multiple nominees: 

• Single Nominee: A policyholder has the option to pay the sum assured to one of their nominees in case they die during medical treatment.
• Multiple Nominees: In this, the policyholder can nominate multiple family members or friends so the sum assured will be shared among all the nominees.
• Single Nominee: The nominee can claim through cashless or reimbursement mode, wherein the sum assured is directly transferred to the nominee's account.
• Multiple Nominees: After getting the sum assured, multiple nominees can share the financial benefits among themselves.
• Single Nominee: A single nominee can legally be an heir, spouse or one of the parents.
• Multiple Nominees: Multiple nominees can be your family members, close friends or children.

(Read more: Dependant in health insurance)

If the nominee is below 18 years of age, they will be treated as a minor. While a policyholder can nominate a minor, they will not be eligible to receive the sum assured till they reach the age of 18 years. In case, the nominee is below 18 years of age when the life assured dies during medical treatment, the amount declared by the insured will be paid to the legal guardian of the minor. You can instruct the guardian of what should be done with the money in your will.

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In the case of health insurance, if the insured dies during hospitalization, the nominee has to claim reimbursement by submitting medical bills, death certificate, identity card and relationship proof. Reimbursement is a method of claiming, in which the bill is paid first and then the necessary documents are shown to the insurance company. When the company verifies the documents and everything is found according to the terms and conditions, it transfers the money directly to the account of the nominee.

(Read more: Sum insured in health insurance)

In group policies, the nominee can be announced at the time of issuance of the policy. If the nominee is not declared in a group policy, the sum assured is paid to the legal heir.

Some important things related to the nominee:

• Complete information related to the nominee should be given.
• The nominee can be changed at any time.
• A minor can also be nominated if needed. If the insured person dies during this period, then the sum assured may be given only after the minor turns 18 or be given to the legal guardian.
• In the case of life insurance, if the insured dies suddenly, then the nominee should inform the insurance company at the earliest. In case of natural death, death certificate, age proof, original copy of the insurance policy and nominee identity proof will have to be submitted. If the death is due to an accident, then a copy of the FIR and the post-mortem report will also have to be given.

(Read more: Policyholder's responsibilities during claim settlement)