It does not mean that the nominated person has full legal rights to consume the money ahead of other successors of the deceased person. The nominee just receives the claim on behalf of successors.
The claim amount should be shared among all successors. If the nominee does not has legal right of the successor, he cannot claim the settled amount from the successors even though he is nominated to receive the claim.
While signing the contract, the insurance company will ask for a person to be nominated. He can be spouse or blood relatives or any other person whose details should be given during proposal. But if the nominee is from out of close relation, it may increase risk to the life insured. So insurance companies only prefer very close relatives and avoid friends and others.
If the nominated person is a minor, then the proposer cum life assured has to appoint an “appointee” to receive the proceedings on behalf of the nominated minor.
If proposer and Life to be assured are different persons, then there is no point of appointing a nominee. Proposer himself act as a nominee.