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11 June 2020
By Dave Dineen
A beneficiary in your life insurance policy/takaful plan means choosing someone to receive or manage the money disbursed by the insurance company/takaful operator when you are no longer around.
Naming a beneficiary takes just a few minutes to do, costs nothing and doesn’t require help from a lawyer or accountant. It should be a no-brainer, right?
In most cases, that would be straightforward but there are also instances where people with larger families have more consideration to make. However, the fact of the matter is every individual must ensure that beneficiaries are named so that it’s distributed according to their wishes. If they do not do so, the administration of their wishes could be cumbersome and result in difficult situations.
How do you name a beneficiary, you may ask? You can do it by making a nomination for your policy/contract via a nomination form from your provider. If you do not make a nomination for your insurance policy / takaful contract, the company is not obligated to release the policy moneys / Takaful benefits until your loved ones obtain a Grant of Probate or Letter of Administration or Distribution Order, which may take several years. If that occurs, your loved ones will not be financially protected during that period should anything happen to you.
However, if a nomination is made, the policy moneys / Takaful benefits can be disbursed much faster. Having said that, from Takaful perspective, the Takaful benefits are subject to any applicable distribution law (other debtors can claim the Takaful benefit first before your family members), if no nomination is made.
To know more on importance of making a nomination, please refer here.
Benefits of naming a beneficiary
Here are two good reasons why you should name a beneficiary:
If you’re ready to rush off right now and name your own beneficiaries, you may want to slow it down and consider some professional advice as it can provide you with clarity.
Things to consider before naming your beneficiary
Do you want to leave money to someone who is currently a minor? In that case, rather than naming the minor as your plan’s beneficiary, you might want to create a “trust,” which is a legal document that defines when and how the minor can receive the money and how the money must be managed until then. You’ll need professional advice to sort out what will work best for you. Start by talking with your financial advisor, who may also suggest bringing in your lawyer to help put the right solution in place.
Suppose you want your life insurance or Takaful plan benefits to go to your son by naming him as your beneficiary for that plan but you want to use your will to name your daughter as the inheritor of your other investments? It can be done, but it’s a good idea to get a lawyer’s advice so you don’t create confusion, bad feelings or even legal costs for your beneficiaries.
Remember that it’s easy to name beneficiaries for your plans but you should get advice if your needs are a bit tricky. Though you still won’t get to take your money with you, naming beneficiaries helps ensure your money will go straight where you want it to go.
You can now easily nominate a beneficiary to ensure your loved ones will get your plan benefits via our SunAccess web portal or mobile app. You may also talk to our advisor for more info and let them help you plan for brighter future.