Can You Appoint Multiple Nominees? How To Split The Benefits?

Can You Appoint Multiple Nominees? How to Split the Benefits?

Nomination is crucial in life insurance, as the nominee receives the policy benefits upon the policyholder's death. Choosing the right nominee ensures the benefits are passed on to your loved ones...in exactly the way you intended for them to receive it

A common choice could be your spouse, parent, child, or an immediate relative, such as your sibling. But what if you cannot, or don’t want to make a single choice? Do you need to buy a different policy to ensure that the benefits reach all intended beneficiaries? Fortunately, that is not necessary. Instead, you can have multiple nominees for your life insurance plan and divide the benefits among them all.How does it work? Read on to understand.

Appointing Multiple Life Insurance Nominees

If you want to appoint multiple nominees for a single life insurance policy, you can do so. The Insurance Regulatory and Development Authority of India (IRDAI) allows policyholders to nominate more than one person to receive the policy benefits. Ideally, when naming multiple nominees, you can also decide on the percentage of the benefit each of them is meant to receive. 

For instance, if you are naming your spouse and your elderly parent, you can allocate a 50% share each to both nominees. If you are adding another individual, such as both of the parents, you can allocate 30% to your mother, 30% to your father, and 40% to your spouse. The total percentage of all the nominees should be equal to 100% of your sum assured.

Communicating With Nominees

When appointing multiple nominees, it is important that each of them is aware of their nomination status, the presence of other nominees, and the percentage allocated to them. Make sure to explain the reasoning behind your nominations. 

You may like to do so by having a formal conversation with all nominees, together or separately, where you communicate all necessary policy details as well as the claims process. 

In some cases, it may not entirely be a pleasant discussion. However, clearing out any doubts and addressing any emotional grievances can be preferable to a full-fledged legal dispute in your absence. 

If you are adding or removing nominees, ensure to inform the individuals involved, in order to avoid any future complications. 

How to Split Benefits Among Multiple Life Insurance Nominees?

If you have decided to have multiple nominees for your life insurance policy, the next consideration should be about splitting the benefits amongst the nominees.

Ensuring each person gets their rightful share is important. Losing a loved one can led to immense grief. In such a situation, if one were perceived that they may not have received what they consider a fair share, the grief may transform into other negative emotions and even end up in a legal dispute. 

Hence, splitting the benefits amongst the nominees requires a certain level of emotional sensitivity.  

Here’s a list of questions you can consider, to make this process easier.

• Who relies on you financially the most?

  To begin with, you must keep the person who is the most financially reliant on you as the primary choice. In your absence, they are likely to face the most financial worries. By allocating a higher percentage to this person, you will encourage them to take on a new phase of life with confidence.

• Does anyone have medical or other needs that their income won’t fully support?

  If you have anyone in your family who has medical or other needs, consider allocating a considerable portion to them as well. For example, it could be an elderly parent who is struggling with a chronic condition or a sibling who has a physical impairment that stops them from doing a full-time job. If they are reliant on you to an extent, their emotional loss will be tinged with a worry about their finances as well. 

  If they have a small source of income, your support can supplement it and allow them to live their life ahead with dignity.

• Is an equal split the right option for your family?

  When dividing benefits between multiple nominees, an equal split may seem like the most convenient option. But, before you go ahead with it, ask yourself, “Is this the right option, given my family’s dynamics?” 

Consider the following scenarios:

• If you have two children, one of whom is on a high-paying job while the younger one is still in college, will it be “fair” to give both equal shares? 

• If your spouse has left their career to take care of your elderly parents, will it be fair to treat them on par with an elder brother who is financially independent? 

Each family is complex, and it is important to consider everyone’s unique situations and needs, before deciding. 

By considering these questions, you can lead the way to a more compassionate decision.

When Should You Appoint Multiple Life Insurance Nominees?

Appointing multiple nominees may make more emotional and practical sense in certain situations.

• Between Children

  If you have two or more children, a balanced or need-based split can help provide for each child without creating future tensions.

• Between Spouse and Elderly Parents

  Leaving something for both your partner and ageing parents, especially if they are financially dependent on you, can bring both parties emotional closure and financial peace of mind.

• For Siblings or an Extended Family

  If you support a sibling or a distant but close relative with health issues, adding them to the nomination list can show how much you care.

• In Case of Complex Relationships

  Families can be complex. The presence of divorced spouses or stepchildren may require a more nuanced approach to the nomination process.

Legal and Practical Tips to Keep in Mind When Appointing Multiple Nominees

Along with the emotional aspect, it is also important to ensure your nominations are practical and in line with the legal provisions.

1. Keep The Nominations Aligned with Your Will

As much as possible, try to avoid conflict between your life insurance nomination and your legal will. Usually, a nominee receives the policy proceeds. However, in some legal contexts, the will can override the nomination. To avoid confusion or family disputes, keep both your will and nomination consistent in relation to each other. When updating the will, update your nomination and vice versa.

2. Inform Your Insurer in Writing

Nominations (and any changes to the same) are only valid when you have communicated the same to the insurance company in writing. Always fill out the relevant nomination change form properly and ask for acknowledgement when submitting it.

3. Get a Confirmation of Changes from the Insurer

When adding a nominee or making any changes to the nominations, ask for a written confirmation or an updated policy document reflecting the changes. Make sure that the allocation is correct and that all nominee details are accurate.

4. Review Your Nomination Details Regularly

Life events, such as marriage, the passing away of a loved one, the birth of a child, and so on, may lead you to review your life insurance nomination. If a nomination no longer reflects the stage of life, you are at, make sure to review it and change it if needed. 

Appointing multiple life insurance nominees is not only possible but also often the most compassionate choice you can make. No man is an island – indeed, an individual is supported by various people throughout their life, whether it be parents, siblings, a spouse, children, or even friends. By appointing multiple nominees, you can continue to give back to your loved ones. But remember to do so with emotional caution and clear communication. This will not only help your loved ones in the future but also give you peace of mind in the present.