Starter Guide to Financial Planning
The Importance Of Nominating Your Insurance Policy
At this day and age, if you are a working adult, you should already own an insurance policy. Even if you have not bought it, you may have actually already own it since you start working.
Thus, we all know most insurance policy do have a death benefit. It is indeed for our beneficiaries but how certain they will be the one receiving it?
The worse thing is, you will not be there when that death benefit is paid out.
As a result, this article will be about the utmost importance of nominating your insurance policy.
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Lets start with awareness
First of all, it is very important that your dependants know that you have an insurance policy in the first place.
Why? How can they claim for something that they did not now that existed in the first place?
That is the very first step. Making them aware of the existence of the insurance policy.
Next, a nomination should take place if you only want your spouse or a single person to receive the whole death benefit.
The next part will explain what will happen if you do not make a nomination
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It may be unclaimed forever
When you do not make a nomination, no one might know of the very existence of the policy in the first place.
All this time you have been paying premiums so that you can provide your family when you are no longer around. In the end, it might never be put to use due to the fact that they are not aware of the right of receiving it.
The money at the end of the day is just sitting somewhere, untouched.
The Intestate Succession Act
In Singapore, if someone dies without writing a will, the estate will be distributed via The Intestate Succession Act.
It is an act to make provision for the succession of intestate estate. In short, the estate will not be distributed in your favour and will follow the law.
There are so many permutations of distribution but for sure, the distribution may not be in your favour.
Say for example. You passed away leaving behind a spouse and parents. Your parents will get half of the estate and your spouse will receive the other half.
What if your spouse needs the money more and is not in good talking terms with your parents. There might be a fight around the corner if one party fells unjustified.
If you have not nominated your insurance policy, the death benefit will be classified under the estates that will be distributed via the Intestate Succession Act.
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Faraidh Distribution
If you are a Muslim, the Faraidh Law will be implemented.
Same as the example above, if you do not nominate your insurance policy, the death benefit will be classified under the estates that will be distributed via the Faraidh Law.
Hint: If you do not agree with the Faraidh Law, you can nominate your insurance policy in order to “escape” it.
We do not encourage you to go against the Faraidh Law but by nominating your policy, you can help your spouse take care of themselves and children with more cash on hand.
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The witnesses can help
When you do make a nomination, several people would know that you have indeed made a nomination.
When doing a nomination, you would need two witnesses (who are not the nominees). They are there to witness the act of nomination has indeed take place.
Say for example, you do not tell your family that you bought an insurance policy but had made a nomination. When you passed on, the two witnesses are aware that you do have an insurance policy and have made nomination.
They could inform your family and they are able to make a claim.
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Remember the reason why you bought it
All comes back to square one. Why did you buy an insurance policy?
When you are an adult and have kids, it is all about seeing them grow and have the proper education.
You may even want your aging parents to have a comfortable retirement when you are no longer around.
Whatever the reason, do your due diligence to make sure they will receive it at the end of the day.
Hope that this article was useful. Do share it with your family and friends. Till next time.
Disclaimer:
I am a financial adviser but I am not your financial adviser. Therefore, what is posted on this website, are my opinions and NOT to be taken as financial advice. Information provided might be relevant at this period of time but may be irrelevant due to alterations to rules, regulations or policies. The information provided is true to the best of my knowledge, but there maybe omissions, errors or mistakes.
