I would like to believe that by now, everyone in Malaysia own at least an insurance policy each. If you are reading this and you don’t have one, I’m sure someone in the family has some policies. You could help them check this out :-
For those of you who have not nominated anyone for your policies, please do so now! Or, put this task in your iPhone or BB or whatever – To Do List. It is as easy as ABC. Get your insurance advisor or financial planner to help you out, or call your insurer’s customer service representative and he/she would be most glad to assist you.
Why do you need to nominate? Simply because, in the event of death, the Insurer needs to know who to write the cheque to without unnecessary delay. If you leave it blank, this insurance policy would be part of your estate (at death, a person’s assets would be referred to as “estate”). Before I proceed further, I must emphasise that there are two parts to this nomination issue. For Muslims and non-Muslims, the treatment is entirely different.
Now I shall start with the Non-Muslims : for those of you who are interested to make your policy a Trust Policy, here’s how. Huh….Trust Policy??? Sorry, I’m so eager to share this info with you that I forgot to explain myself first. Trust Policy in simple term means that it is Creditor Proof – creditors would not be able to claim a piece of that money, if the person has outstanding debts. Creditors could claim from the estate, but not from the insurance proceeds in this case. That is why an Insurance Policy is a Huge Umbrella to hold your loved ones together when you are not around for them. You should thank your insurance advisor or financial planner for taking time to plan for your financial security. However, if your policy is a Non-Trust Policy, then, it falls under your estate, so not creditor proof at all then.
Now, how do we do that? It all depends on who you nominated for your policy proceeds. Go get your policy(ies) and check it out. If you are not sure, call the customer service and ask them for your latest nomination.
For a single person, with living parent(s), nominate your parent(s). This way your policy will automatically become a Trust Policy. Nominate any other persons, it would become a Non-Trust Policy.
For married person, nominate your spouse and/or children. If children is of minority age, nominate a trustee at the same time. By nominating your spouse and/or children, your policy will be a Trust Policy.
Once your policy is a Trust Policy, you don’t have include it in your Will (if you have a will) – just like you do not include your EPF in your Will, after nomination. If you wish to change your nomination in your insurance policy, do it with the insurer, D-I-Y or with the help from your insurance advisor or financial planner.
If for some reasons, you decided to nominate differently and the policy is then a non-trust policy, (e.g. married person nominating sibling; single with living parents, nominating sibling or friend), the named person would just be an Administrator (without the presence of a Will) or Executor (with a Will) and he/she is supposed to distribute the proceeds accordingly to the Distribution Act (without a Will) or as specified in the Will.
My dear Muslim friends, here’s what your nomination means when you nominated someone in your policy(ies). The person will undertake the duty as an Administrator only, to distribute the proceeds according to Faraid (Islamic estate distribution ratio). The proceeds would form part of your estate.
I hope you are clearer now about Insurance Nomination. This is very important. I shall now leave you to your thoughts.
Signing off with warm wishes to you and your family 🙂