After you have signed the proposal form for assurance, please make sure you also name the nominees. A good insurance agent always has his client fill up the nomination form before he leaves. When I do policy revision with my clients, I usually find some policies without nomination which are bought years ago. Let’s look at what will happen to the sum assured payout if someone passed away without leaving a name in the nomination column. Here are the options for the life insurance companies in Malaysia:
1. Pay to the applicant who produces GP, LA, or DO
Where no nomination has been made, the insurance company shall pay the policy moneys to the applicant who produces the Grant of Probate (GP) or Letters of Administration (LA) or Distribution Order (DO).
Normally those who can produce these documents is the estate Executor or Administrator.
2. Pay at its discretion
However, the insurance company may, at its discretion, make payment to a claimant without requiring the Grant of Probate or Letters of Administration or Distribution Order, under the following circumstances:
- if the claimants are the policy owner’s spouse, child or parent, the insurance company can pay to the policy owner’s spouse, child or parent in that order of priority. If there is more than one person in any of the above-mentioned categories, then all individuals in that category will be paid in equal shares.
Image: Insurance Company will pay according to this order of priority
- if there is no spouse, child or parent and the policy moneys payable do not exceed RM 100,000: the insurance company, may pay the policy moneys to whom it is satisfied, is entitled and likely to be given the Grant of Probate or Letters of Administration or Distribution Order, or to a person who the insurance company is satisfied is beneficially entitled to the estate of the deceased policy owner.
- if there is no spouse, child or parent and the policy moneys payable exceed RM100,000: the insurance company may pay the first RM100,000 to a person as specified above. The balance of the policy moneys shall be paid to the same person upon production of the Grant of Probate or Letters of Administration or Distribution Order. However, upon 12 months after the first payment of RM100,000 and no claim has been made on the balance of the policy moneys by any person who holds a Grant of Probate or Letters of Administration or Distribution Order, the insurance company shall pay the balance to the person who has received the first payment.
When no nomination has been made, the person who received the policy moneys is only receiving it as an executor and must distribute it in accordance to the will of the deceased, or if there is no will, the applicable laws of distribution. This means the person who receive the money other than the nominee, is treated as a person who temporarily manages the money which is to be paid to the legal beneficiaries according to WILL or Distribution Act when GP or LA is available.
Here is a tricky question: What if both husband and wife passed away in a double tragedy accident and left behind two minor children? Who will receive the insurance claim? What will the person do with the money that belong to the children?
Source: Insurance Info
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Managing Risk of Double Tragedy
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