We buy insurance for the peace of mind that our lives will not be financially upended by any unforeseeable event. Insurance further assures us that our dependants are well looked after, should anything disrupt our ability to continue providing for them financially. A part of everybody’s financial planning journey is to correctly set up the insurance nomination so proceeds will be distributed to the intended beneficiaries. Jonathan Chua of Ignite Wealth Group explains why you need to do up your insurance nomination and shares tips to get it right.
Insurance nomination applies to life, accident and health policies with death benefits which are governed by Singapore law and issued by licensed insurance companies registered in Singapore . The policyholder appoints a person or persons i.e. the nominee(s) to receive policy benefits in case of a death claim. This is called insurance nomination, and in case of an eventuality, the insurance company will know exactly who to pay the policy proceeds to.
Making a nomination is not compulsory, but it makes the insurance payout quicker and fuss-free. On top of that, your loved ones are well-assured when you let them know you have them properly covered in your insurance nomination?
The important question is: what happens if there is no insurance nomination? A death claim will be paid to the “Proper Claimant” as defined by the Insurance Act, where the insurance company may pay up to SGD150,000 to the “proper claimant” according to the law but this may not be the intended beneficiary.
The remaining balance above SGD150,000 will be paid to the administrator(s) under Grant of Letters of Administration (if no will has been made) or executor(s) under Grant of Probate (will has been made). This means the proceeds will be distributed according to your will, provided you have one. If not, the proceeds will follow the rules under the Intestate Succession Act. It may take some time for these legalities to be sorted out depending on the individual circumstances, delaying the payout.
Therefore, I strongly recommend you to make your nomination with urgency. Some people prefer to make a nomination upon application while others do it after the policy is incepted. The choice is yours – just remember to get it done properly to avoid potential unpleasantness down the road.
Some worst-case scenarios have happened when no proper nomination was made. For instance, the payout ended up in the wrong hands (e.g. ex-spouse); or family disputes have erupted over who should be the rightful claimant. Try to make the nomination wisely to avoid problems in future.
• Give policyholder absolute control over how insurance proceeds are distributed
• Avoid potential conflicts between loved ones that may arise over the distribution
• Nominees get to receive payout promptly, when they need it most
There are two types of insurance nomination: trust nomination and revocable nomination. The table below published by MoneySense summarises wonderfully how each of them works. Any time you are keen, I am happy to go through them to help you understand the pros and cons of each option so you can make an informed decision on which way to go.
| Considerations of the Policyowner | Trust Nomination | Revocable Nomination |
| Can I retain control over the policy for as long as I am alive? | No | Yes |
Who gets the policy proceeds?
|
Nominees get both types of benefits | Living benefits are paid to me. Nominees only get the death benefits |
| Can I change my nomination by myself at any time? |
No Nomination can be revoked only if any trustee who is not myself gives consent; or if the nominees all give consent. |
Yes |
| Can I name one or more nominees who are not my spouse or children? |
No Only spouse and/ or children can be nominated |
Yes Any legal entity (i.e. individual, association or corporation), including spouse and / or children, can be nominated. Nomination of an animal is an invalid nomination. |
| Can I make a will after having made an earlier nomination? |
The Will has no impact on the earlier trust nomination.
Once a trust nomination is made, the policy no longer belongs to the policyowner. As such, he cannot give it away under his Will as he can only give away property under the Will which still belongs to him. |
The earlier revocable nomination is revoked by the Will.
Note: The insurance company will pay according to the latest properly executed instrument (be it a revocable nomination or a Will) That is known to the insurance company at the time of the policyowner’death |
| What happens if my nominee dies before me? | Policy proceeds passes to the estate of the deceased Nominees | If only one nominee is named, the nomination is revoked; in all other cases, the surviving nominees share in the deceased’s portion |
| Are the policy proceeds protected against claims from creditors in the event of bankruptcy? | Yes | No2 |
As a financial consultant, I am relieved you have the right insurance protection. What I care about is making the whole financial planning journey with you to make sure the insurance policies serve their intended purpose. Like you, I have a family I care for deeply so we share the same concerns. Some of my clients also asked what if the beneficiary is a minor or there are multiple beneficiaries? These are all valid and important questions I can answer to help you complete your insurance nomination confidently. If you have any more questions, need a sounding board for your insurance policies or wish to discuss any aspect of your financial planning journey, please feel free to give me a call at SG Alliance. Trust me, making an insurance nomination (whichever insurer you are covered with) is easier than you think and we can help you with it.
1Source: Moneysense, https://www.moneysense.gov.sg/-/media/moneysense/guides-publication/nomination-of-insurance-nominees_english.pdf
2However, for CPFIS policies which have not been withdrawn under Section 15 of the CPF Act, the living proceeds of such policies are protected against claims from creditors.
