What Happens to Your Life Insurance Benefits After You’re Gone?

Term Insurance

2026-09-29 5 Min read

You bought life insurance, named a nominee, and took an important step towards protecting your loved ones. But nomination is only one part of the process. Understanding how it works can help ensure that your policy benefits are handled as you intended.

Is the nominee always the owner?

A nominee is the person recorded with the insurer to receive the policy proceeds following the death of the life assured. However, whether the nominee is also beneficially entitled to retain those proceeds may depend on the applicable law and the facts of the case.

Section 39 of the Insurance Act, 1938, provides the legal framework for nomination under a life insurance policy. The nomination should be recorded with the insurer, and the policyholder may change or cancel it during the policy term in the prescribed manner. An assignment or transfer of the policy may also affect the nomination and the nominee’s rights.

Entitlement to policy proceeds may be affected by factors such as:

i. The nomination registered with the insurer

ii. The relationship between the nominee and policyholder

iii. Applicable succession and personal laws

iv. A valid assignment or transfer of the policy

v. The terms and structure of the policy

vi. A policy effected under the Married Women’s Property Act, 1874

vii. A valid will or other testamentary arrangement

viii. Applicable court orders or judicial interpretation

Accordingly, the outcome may vary depending on the circumstances of each case.

Beneficial nomination under Section 39

i. Section 39 of the Insurance Act contains provisions relating to beneficial nomination. Subject to the conditions provided under the law, where the nominee is the policyholder’s parent, spouse or child—or any combination of them—the nominee may be beneficially entitled to the policy proceeds.

ii. However, this should not be presented as an unconditional rule applicable to every policy. Rights may depend on the nomination, assignment, policy ownership and structure, succession arrangements, testamentary documents and other legally relevant circumstances.

iii. Where the nominee is someone outside the specified category, the nominee’s role and entitlement may be determined in accordance with applicable laws and the individual facts. Policyholders with specific distribution intentions may consider obtaining independent professional advice.

What happens to the claim?

Following the death of the life assured, the nominee or claimant should notify the insurer and submit the required documents. The insurer will assess the claim in accordance with the policy terms, applicable law and its claims process.

The insurer may request documents such as:

i. The completed claim form

ii. The death certificate

iii. Policy details

iv. Identity and address proof of the claimant

v. Bank account details

vi. Medical, hospital or other supporting records, where applicable

vii. Additional documents depending on the nature and circumstances of the claim

viii. Submission of documents does not by itself guarantee payment. Every claim is evaluated in accordance with the applicable policy terms and prevailing laws.

As stated on SUD Life’s website, its Individual Claims Settlement Ratio is 99.01% as on 31 March 2026. The source and reporting period should remain displayed wherever this figure is used. A claims settlement ratio represents claims settled during the relevant reporting period and does not guarantee the outcome or settlement timeline of an individual claim.

The unclaimed amount problem:

Life insurance amounts may remain unclaimed for several reasons. The insurer may not have the policyholder’s current contact information, the nominee may not know that the policy exists, or the claimant may not have initiated the required process.

Policyholders should therefore:

i. Keep their contact information updated with the insurer

ii. Review nominee details following significant life events

iii. Ensure that the nominee knows the policy exists

iv. Store policy information securely and make it accessible to the appropriate person

IRDAI’s Bima Bharosa portal provides access to insurers’ unclaimed-amount portals and also permits users to submit an unclaimed-amount query, subject to the information and conditions specified on the portal.
SUD Life customers may also use the facilities available in the customer-service section of the company’s website.

What about taxes?

The tax treatment of life insurance proceeds depends on the prevailing tax law, the type and terms of the policy, the nature of the payment and the recipient’s individual circumstances.

Death benefits under a life insurance policy are generally eligible for tax exemption subject to applicable provisions and conditions. However, any interest or additional income earned on amounts retained or paid over time may be treated differently for tax purposes.

Tax laws are subject to change. Policyholders, nominees and beneficiaries should consult a qualified tax professional for advice based on their circumstances.

Your actionable?

Three practical steps to adopt

1. Review your nomination periodically

Check that the nominee recorded with the insurer reflects your current intentions. Rights to policy proceeds may depend on applicable laws, policy structure, assignments and individual circumstances.

2. Update your details after important life events

Review your nomination and contact information following events such as marriage, the birth or adoption of a child, a change of address or the death of an existing nominee.

3. Inform your nominee

Ensure that your nominee knows the policy exists and has access to the insurer’s name, policy number and claim-contact details. Avoid sharing passwords, OTPs or other sensitive account credentials.

Frequently Asked Questions

1. Can I have more than one nominee under my policy?

2. Does a will override a life insurance nomination?

3. How can I check for an unclaimed amount from an old policy?

4. Is a life insurance death benefit tax-exempt?

A policyholder may generally appoint more than one nominee, subject to the insurer’s procedures and the terms of the policy. Where multiple nominees are appointed, the policyholder should specify the respective shares where required.

The interaction between a nomination and a will is fact-specific. It may depend on the category of nominee, wording and validity of the will, assignment of the policy, applicable succession law, policy structure, arrangements under the Married Women’s Property Act and relevant judicial interpretation.

Customers should not assume that either document automatically overrides the other in every situation. Independent legal advice may be appropriate where the policyholder has specific estate-distribution intentions.

Most insurers provide an unclaimed-amount search facility on their websites. IRDAI’s Bima Bharosa portal also provides links to insurers’ unclaimed-amount portals and an online query facility. Users may need to provide information such as the policyholder’s name, date of birth, mobile number, PAN or policy number.

A life insurance death benefit is generally eligible for tax exemption subject to prevailing tax laws and applicable conditions. Interest or other income associated with deferred or instalment payments may be treated differently. Customers should obtain professional tax advice for their individual circumstances.