|
The
Insurance (Amendment) Act 2009, which
incorporates a framework for nomination
of beneficiaries in respect of insurance
policy proceeds, was passed by Parliament
on 19 January 2009 and came into effect
on 1 September 2009. The framework aims
to give policy owners a clear, simple
and economical means to decide how the
proceeds from their insurance policies
should be distributed.
Under the nomination framework, policy
owners have a choice of whether or not
to make nominations. If they choose to
nominate, they then have the option of
making either a revocable or an irrevocable
(trust) nomination.
With a revocable nomination, the policy
owner will be able to unilaterally change
his nomination at any time. Any legal
entity may be nominated as the beneficiary.
The policy proceeds under such a nomination
will be paid to the policy owner while
he is still alive and to his beneficiaries
thereafter.
An irrevocable (trust) nomination will
create a statutory trust in favour of
the beneficiaries. This means the policy
owner will lose all rights and control
over the policy concerned. In exchange,
the policy proceeds will be protected
from his creditors. Only the policy owner’s
spouse and/or children can be nominated
as the beneficiaries of a trust nomination.
All policy proceeds under such a nomination
will be paid to the beneficiaries.
The nomination framework applies to all
life, as well as accident and health insurance
policies with death benefits. However,
it does not apply retrospectively, meaning
that policies with existing nominations
will continue to be subjected to the legislation
in-force at the time the nomination was
made. |
