You must name a beneficiary when purchasing life insurance in India so that the money assured can be legally claimed in your absence. You might believe that naming a beneficiary is a simple task.
Though choosing a life insurance beneficiary is straightforward, you must consider a number of financial, legal, and tax considerations in order for it to work for you. It might cost you and your family a lot of money if you don't properly appoint a beneficiary to your life insurance policy.
You Have A Variety Of Beneficiaries To Choose From
There are two sorts of life insurance beneficiaries you can add:
Primary Life Insurance Beneficiary: This is the person you can name as a beneficiary on your policy, and who will be eligible to receive the sum assured proceeds in the event of the insured person's death. However, if the principal beneficiary passes away before the insured person, there will be no money left to claim in his name.
Secondary or Contingent Life Insurance Beneficiary: This is the person you can name as a secondary beneficiary on your life insurance policy, and who will be entitled to the sum assured if the primary beneficiary dies. The caveat is that a contingent beneficiary is only entitled to the money if the primary beneficiary passes away before the insured individual. After the insured person's death, the money can be claimed by the secondary beneficiary.
It's usually a good idea to name both of these accounts as beneficiaries on your term life insurance policy so that your money doesn't go to waste.
Who Should Be the Beneficiaries?
It is entirely up to you who you choose as your beneficiary when purchasing a term plan in India. Among the options are:
Members of Your Family: As both primary and secondary beneficiaries, you can choose your loved ones who are currently financially reliant on you. He or she could be your spouse, children, siblings, or anyone else in your family who is linked to you.
If you're thinking about adding an estate to your beneficiary list, you'll need to include the administrator or executor of the estate as well. You should consult with your chartered accountant about the tax implications of adding beneficiaries to the estate's name.
Legal Parent: If you name a minor as the beneficiary of your life insurance policy, you must also name a legal guardian. When the minor reaches the age of 18, he or she will be eligible to receive the sum assured. In any instance, if there is no lawfully appointed guardian by court order, the sum pledged will not be given to the minor.
Trusts: If you have your own trust or another trust to whom you want to donate the benefit of your life insurance, the trustee should be chosen as the beneficiary who will be able to claim the sum assured.
Charitable Trusts: You can name charities as beneficiaries who will get the money assured after you die.
Comments