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Importance of Mutual Fund, Insurance and investment nominations

It is imperative for every responsible person to have a nomination in place

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An investor spends an incredible amount of time deciding on his investments, the tenure and the returns that will be fetched but on a realistic note, the repercussions of  an unforeseen event and the  actual recipient of the investment amount has not been given its due attention.  

While filling any financial application form, be it a bank account or or a Mutual Fund application form, a person may come across the column ‘nominations’, which more often than not is left out blank or is filled vaguely with little understanding of the importance it holds. In this piece, an effort has been put forth to highlight the importance of  in our financial lives.

More about nominations

In a nutshell, a ‘Nominee’ is a person to whom the the custodianship of the assets is transferred, in the event of death of the holder(s). This does not necessarily mean that the ownership of the assets is also transferred as the final settlement and distribution of the assets will happen in accordance with theWILL. Therefore, a nominee could either be a legal heir himself or any other person who merely takes the custody of assets or money in the event of the death of the primary investor.

Why nominations are important

It is imperative for every responsible person to have a nomination in place, be it a bank A/c or any other financial investment. Nowadays, as per the revised regulations, ‘Nominations’ have been made mandatory before commencing any investment, however utmost care should be taken that the desired person is nominated.
Below is the process and some facts highlighted for registering nominations in some of the financial assets.

Life Insurance Nominations-

In Life Insurance, the final proceeds of the claim will be settled in favor of the nominee. However, the nominee will be liable to distribute the funds in accordance of the ‘Will’, if any. In case a ‘Will’ is not prepared, then the amount will be distributed among the legal heirs equally.

The name of the nominee can be changed any time during the operation of the term of the insurance. In case of a minor nominee, a proper appointee should also be named, who will look after the asset till the time minor turns into a major. Insurance also provides an option of having multiple nominations, which means that the sum assured will be divided among several other nominees.

Mutual Fund Nominations-

Registering a nominee in a mutual fund is as simple as filling out the details in the form while making application for the investment. A nomination could also be changed by filling the specific form available across all mutual fund offices. Minor can also be named along with a guardian in the form. A nomination in a mutual fund applies to the folio and therefore all units in the folio will be transferred to the nominee(s). The same nomination will apply to all the future units under the same folio.

Demat Account Nominations-

Unlike, Life Insurance and mutual funds, the nominee in a Demat Account will be the legal beneficiary of the shares and therefore care should be taken before nominating any individual under this account. As stated in the Companies Act, the nominee in the Demat account will supersede the Will, therefore, the holdings of the shares will be transferred to the nominee’s Demat.

Claim Process

The assets of the deceased do not get directly transferred to the Nominee until and unless a stipulated claim process has been fulfilled. Primarily, the nominee has to inform the respective financial institutions about the death of the investor and should seek information on the process of claiming of the assets. This means that the nominee is required to submit requisite documents as stated under the law to validate the transfer of assets.

Though the process of transmission of the financial institutions differs due to operation of law imposed by different regulatory bodies, but in this piece we would focus on the primary documents which will be required in common by all.

(1)    Identity Proof- Identity Proof of the nominee is the prerequisite of claiming the asset. An identity proof establishes the validity of the nominee in reference to the nomination made.

(2)    KYC and other Documents – In case of and Demat Account, a nominee will have to get the KYC compliance done for himself as a part of the claim process.

(3)    Death Certificate – Death Certificate certifying the death of the unit holder is mandatory in any claim process. This certificate can be obtained from the municipal corporation or Gram Panchayat.

(4)    Probate of WILL – In the event a WILL exists, then the Probate of WILL will be required. Probate authenticates the existence of the WILL. Many a times a WILL is present but is not registered, which calls for the requirement of having a Probate from court to validate legally the existence of the WILL and that it can be trusted for the transfer of the assets.

(5)    Succession Certificate – In absence of a WILL or a nomination, succession certificate is demanded to ensure the transfer of assets to the legal heirs of the deceased. A single certificate is issued per asset and the assets are transferred as per the order mentioned in the succession certificate.

(6)    Claim Form – A nominee has to apply for his claim as per the prescribed claim application form. At some places, a mere submission of letter asking for the claim of the asset is sufficient while at other places a proper form has to be filled.


A small step of ensuring ‘Nominations’ in the financial assets can save the loved ones in a big way, which otherwise could become a challenging task  for them. In your absence, the time and money spent meticulously to benefit your family should not lose its meaning amid the legal procedures involved in the transmission process. Therefore, along with the nomination, a registered WILL should also become part of the succession planning to further lessen the pressure of transfer of assets.

Source: InvestmentYogi is one of the leading websites in India

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