Why you should be the nominee in your husband's life insurance policy

When Suman Chopra's husband died of a heart attack in 2013, the world turned upside down for this Delhi-based school teacher. Even as she was trying to cope with the emotional trauma, she was hit with another shock. Her mother-in-law staked claim on a Rs 32-lakh life insurance policy taken by her husband in which she was a joint nominee with Suman. In another Rs 5-lakh insurance policy, which was taken before marriage, the mother was the sole nominee. "My husband had not bothered to get the nomination changed after marriage," she says regretfully.

Suman got half the sum assured (Rs 16 lakh) from the second policy and nothing from the first one. She is paying a home loan EMI of Rs 32,000 and bringing up her five-year old child. "I find it very difficult to manage on a single income. The insurance money would have helped me a lot," she says.

A mother is a class 1 heir so Suman may not get any relief from a court in this matter. However, if some other relative (like a brother or father) was the nominee in the policy, she could have staked a claim. Till recently, a life insurance policy could be contested because the nominees were not beneficiaries. They merely acted as receivers of the insurance proceeds on behalf of the legal heirs of the policyholder.

However, the revised Insurance (Amendment) Act 2015 has removed the ambiguity. Under the new rules, if the policyholder nominates his spouse, mother or children in an insurance policy, they become beneficial owners of the claim proceeds, thus eliminating the chance of disputes among family members over death benefits. Even if other legal heirs claim the amount, insurers need only pay the beneficial nominees.

The new rules also say that if the policyholder had outstanding loans, the creditors can recover their dues after his death by attaching the life insurance policy. However, if the policy is bought under the Married Women's Property (MWP) Act, it insulates and protects the woman's assets from court attachments. This can be done by simply filling in a MWP addendum while applying for insurance.