All You Need To Know About Insurance Nomination
Updated: May 9, 2022
Want to find out more about insurance nomination but don’t know where to start? Well, you’ve come to the right place - we’ll be sharing key points to note on this topic!
If there’s no will in place, all your assets will be distributed according to Singapore’s inheritance law when you pass away. In some cases, everything may even be given to the government if you have no surviving relatives.
There’s a way to avoid losing control of your assets, of course, and that’s through insurance nomination.
As with writing a will, an insurance nomination allows you to dictate how your policy proceeds are distributed to your loved ones when you die.
But did you know that your will can override your insurance nominations? We’ll explain that and more in the article below.
What is an insurance nomination?
As an insurance policy owner, you have the power to make a nomination on your insurance policies in terms of how your policy proceeds will be distributed.
It’s worth noting that insurance nomination only applies to policies with a death benefit payout, such as life, accident, health, and general policies. You won’t have to stress over nominating someone for your car insurance!
Above all, insurance nomination is free for all policy owners! You just need to ask how the process goes for your insurance company.
Here are the 2 types of insurance nominations:
In this form of insurance nomination, anyone can be your beneficiary, whether it’s your immediate family or close friends. There’s no restriction as to who’s qualified to be a beneficiary.
The best thing about revocable nomination is that there will be no changes to your rights as the policy owner. You can make changes to your policies without informing your beneficiaries and securing their consent.
As long as you’re alive, all the benefits of your policies will be paid directly to you despite having beneficiaries.
If one of your beneficiaries passes on before you, all the proceeds will be distributed equally among the living beneficiaries. It’s worth noting here that if there are no remaining living beneficiaries, then the nominations are as good as cancelled.
To prevent this from happening, we recommend maximising the number of your beneficiaries! If your insurance policy allows 4 nominations, look for 4 people within your immediate family or close circle of friends to be your beneficiaries.
If you’re planning to write a will, that can be used to override your nominations. Just be sure to declare and make it known that you have a valid will at the time you’re making insurance nominations.
Under irrevocable nomination, the beneficiaries you can choose to nominate are limited to your spouse and children. The terms are stricter compared to the revocable nomination because you’re giving up all your rights as the policy owner.
That said, when you have to make changes to your policies, you’ll need to secure written consent from all your beneficiaries. So you need to be completely sure of your nominees as backtracking on your decision will not be easy!
Unlike revocable nomination, whether you’re alive or dead, all your proceeds will go directly to your beneficiaries, ranging from living benefits to death benefits. That’s another reason you need to be sure of your nominees.
In the event that one of your beneficiaries dies before you, their share of the proceeds will not be distributed among the other beneficiaries. Instead, their portion of the proceeds will be considered part of their estate, and thereafter distributed according to their wishes.
A key thing we have to point out is that with irrevocable nominations, it will not be as easy for your will to override your insurance nominations. Since you have to obtain written consent, your beneficiaries need to agree to revoke their nomination first before your will is recognised.
Why should I make a nomination?
Now you may think that insurance nominations aren't too important since personal wills can easily be prioritised.
With both insurance nominations and personal wills, all your assets will be distributed according to your wishes, but it’s worth remembering that policy proceeds may not form part of your estate.
This means that the death benefits from your insurance policies will not have to be processed in the same manner as the rest of your estate, which can sometimes take months. Instead, these benefits can be given to your beneficiaries much more quickly, usually in the span of 2 weeks.
Choose your nominees wisely
If you’re an insurance policy owner, one way to protect your monies is by nominating beneficiaries. Selecting insurance nominees gives you as a policy owner the peace of mind that your assets will be distributed according to your wishes after you pass away.
If you need help in legacy or estate planning, or simply want some advice on nominating your beneficiaries, don’t hesitate to reach out to us. We can connect you with experienced experts in the financial planning sector who can guide you through these areas!