16 February 2011

Insurance: Importance of Nomination (Part 2)

In Part 1, we have discussed the importance of nomination in insurance. But, what happens if it is someone else, like an uncle, niece or even a friend was named as nominee(s)?

When a nominee is not automatically a beneficiary

Under a non-Muslim's policy, the nominee in such a case is not entitled to the policy monies as a beneficiary. He or she only receives them as an executor, and must pass it on to the deceased's estate to be distributed according to the will.
  1. If there is a will, but the nominee in this case is not named as a beneficiary under the will, he or she will not get a single sen.
  2. If there is no will, then the property will be distributed according to the existing laws of distribution.
What if I named my siblings (brother or sister) as a nominee?
Well, it will form as a trust policy, and your siblings will act as an executor instead. So, please take note. Anyway, you can change your nomination, but must sought the consent from your said siblings who is a trustee in this case.

The lesson here is that if your intended beneficiary is not a spouse, child or parent, then you must write a will naming that person as a beneficiary. Once you do, your nominee will receive the policy monies subject to the laws of distribution -- once all your estate's debts have been settled.

When to nominate?
Of course, the sooner the better. I would suggest you did it when you fill-in the proposal forms. Or else, you may nominate after the application or after you get the policy.

Can I name more than one nominee?
Yes, you can. Normally, you can name up to 4 nominees in a policy. But, you should state the proportion to which each person is entitled. Otherwise, each will receives an equal share.

Can I change my nominee(s)?
You can make any changes on your nomination anytime as you like. There is no restriction on the number of changes. The latest nomination will supersede all previous nomination. A nomination will also be considered revoked upon the demise of nominee, or all of the nominees (if more than one nominee), during the lifetime of policy owner. However, in the case of a trust policy, a nomination cannot be revoked without the written consent of the trustee.

What is the nomination procedures?
  1. Fill in nomination form:
    •  It usually requires details of your nominee's name, date of birth, NRIC, and address
  2. Witness
    • It must be signed by a witness who is above 18 years old, of sound mind, and who is not named as one of your nominee
    • Alternatively, your insurance agent can be the witness
  3. Endorsement
    • Ensure that your insurance company endorses the nomination
    • For new policy, it is written in you policy document
    • For existing policy, make sure you receives a letter highlighting any changes to your nomination
Source: Life Insurance Association of Malaysia (LIAM)

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  1. Life insurance is not limited to provision of funds at the death of a policy holder, but can be used to plan for retirement, fund children education, plan for a comfortable future life, access bank loan, or any other acceptable purposes.

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