Insurance nomination? What’s that?
Excuse me, it’s not to nominate them for the ‘Best Insurance Award’, ya?
Well, the morbid topic is back. Sorreh, not sorreh.
Remember how your money will be distributed by law and may go to the government when you pass on and have no valid will and no surviving relatives?
Well, that doesn’t have to be the case if you’re well prepared for the day that will eventually come.
Making an insurance nomination allows you to distribute your policy proceeds to your loved ones according to your wishes.
I wish it was that simple though, for there are several things that you should know before rushing into making a nomination.
TL;DR – What Do I Need To Know About Insurance Nomination?
As a policy owner, you can make nominations on your own insurance policies to distribute your policy proceeds according to your wishes.
Not all policies though, relevant policies are your life, accident and health policies recognised by Singapore law, are not funded by any CPF savings and pays out death benefits.
There are two types of nominations, with different conditions tagged to each of them.
| Trust (Irrevocable) Nomination | Revocable Nomination | |||
|---|---|---|---|---|
| Who can be nominated as beneficiaries? | Spouse & children only | Anyone | ||
| What happens to my rights as policy owner | You lose all rights to your policy | You retain all rights as policy owner | ||
| Written consent from beneficiaries required to make any changes to policy | No consent required to make changes to policy | |||
| Who gets the policy proceeds? | Living benefits | Paid to beneficiaries | Living benefits | Paid to you |
| Death benefits | Death benefits | Paid to beneficiaries | ||
| What happens if my beneficiaries pass on before me? | Proceeds allocated to beneficiary will form part of their estate | With remaining beneficiaries | Distributed equally to other beneficiaries | |
| No other surviving beneficiaries | Nomination considered cancelled | |||
| Can my will take priority over my nomination? | No, written consent is first required to revoke nomination | Yes, but you'll need to declare that you have a valid will | ||
However, it is not compulsory for policy owners to make their nominations, especially if they have already made a will to distribute their estate.
Is Nomination Applicable To All Insurance Policies?
Don’t roll your eyes at me, but I’d agree that this part is rather straightforward.
Yea, I know, there’s no point in nominating beneficiaries for your car insurance and whatnot.
So, what can be nominated?
Broadly speaking, as the policy owner, you can nominate your own life, accident and health policy that:
- provides death benefits
- insures yourself
Of course, these policies have to meet certain criteria to be eligible for nomination.
Again, pretty straightforward so far, the policies should be:
- governed by Singapore law
- issued by licensed insurance companies registered in Singapore
- not subject to any trust created under section 73 of Conveyancing and Law of Property Act
- not annuities funded by Minimum Sum Scheme, CPF Investment Scheme or Supplementary Retirement Scheme
Types Of Nomination
Now, there are only two types of nomination, but it can get a little tricky.
Trust Nomination, a.k.a. Irrevocable Nomination
As the name suggests, a trust nomination or an irrevocable nomination is rather permanent, and you should only do so when you are very certain about giving away the proceeds entirely.
A trust nomination allows you to create a trust for your beneficiaries, so a trustee has to be named to ensure that the policy monies are properly administered and distributed to them.
One major benefit of a trust nomination is the protection of the policy proceeds against claims from your creditors in the event of bankruptcy.
Who Can Be My Beneficiaries?
For trust nomination, only your spouse and children can be nominated as beneficiaries.
What Happens To My Rights As Policy Owner?
There’s a reason why we said that you’ll have to be very certain before you make a trust nomination, and that’s because you’ll lose all of your rights as the policy owner.
Once the trust nomination is made, you’ll need to obtain written consent from your trustee or beneficiaries to make any changes to the policy.
What are some changes you might make to a policy? You might ask.
Depending on the policy-in-question, you may want to make withdrawals, take policy loans, request for a fund switch or premium redirection, alter the sum assured, or lastly surrender the policy.
All of these actions will require written consent from your trustee or beneficiaries should you have made a trust nomination.
If you want to revoke your trust nomination, whether it’s because you changed your mind, or your family situation changed, consent is also required before you can revoke it.
Who Gets The Policy Proceeds?
Again, this is another reason why you have to be 100% certain before making a trust nomination.
Once you’ve made one successfully, all proceeds will go to your beneficiaries.
That’s right!
Even living benefits paid while you’re still around, such as medical reimbursement, will go to your beneficiaries, along with the death benefits.
What Happens If My Beneficiaries Pass On Before Me?
Well, things happen and we can’t control the world around us.
If you have nominated more than one beneficiary and one of them were to pass on before you, their portion of the proceeds will not be distributed to the other beneficiaries.
Instead, the proceeds will be allocated to their estate and distributed, either according to the Intestate Succession Act or according to their will.
Can My Will Take Priority Over My Trust Nomination?
Nah, since revoking of your trust nomination requires the consent of your trustee or beneficiaries, you need to revoke the nomination first, otherwise, your will won’t be recognised.
Revocable Nomination
A revocable nomination simply allows you to allocate the death benefits of your policy to your loved ones and people of your choice.
Who Can Be My Beneficiaries?
Anyone!
That’s right, you are not restricted to just nominating your family members as your beneficiaries.
You can nominate any person, or even organisation to be your beneficiary.
In a revocable nomination, you don’t have to name a trustee as well.
What Happens To My Rights As Policy Owner?
Thankfully, for this type of nomination, you will still retain your rights as a policy owner and can make changes to your policy without obtaining consent from your beneficiaries.
Same goes for revoking your nomination, you don’t have to consult and get their consent in order to do so.
Who Gets The Policy Proceeds?
Since you still have your rights to your policy, your living benefits will still be paid to you. Phew!
Under the revocable nomination, only the death benefits will be paid out to your beneficiaries.
What Happens If My Beneficiaries Pass On Before Me?
Similarly, the unfortunate happens.
However, under a revocable nomination, the proceeds will be distributed equally to the other surviving beneficiaries, if one of them were to pass on before you.
In certain cases, if there are no other beneficiaries, then the nomination will be considered cancelled.
Can My Will Take Priority Over My Nomination?
Yes, it can!
But of course, you can’t just expect the insurance companies to look for any valid will when you pass on, so you’ll need to fill up a form to revoke your nomination while declaring that you have made a valid will.
Just take note here that there are separate forms for just revoking the nomination, and revoking the nomination with a valid will.
I Can Simply Make A Will, Why Do I Need A Nomination?
Some of you may choose not to make any nomination if you’ve already made a valid will since both will ensure that your monies are paid out according to your wishes.
However, some individuals may still wish to make a trust nomination as policy proceeds will not form part of your estate.
In this case, your policy proceeds will not have to go through the same process as the rest of your estate, which can take some time, and will be paid out faster to your beneficiaries.
Furthermore, insurance nomination is free, and you can do it yourself through the designated forms with your insurance companies.
Oh hi, did you read all the way here, but haven’t gotten yourself any insurance coverage?
You’re kinda one step ahead, my friend, but it’s fine, we’re here if you need some information about the important policies you may need!
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