New Insurance Domination Framework

With effect from 1 Septem­ber 2009, all insur­ance com­pan­ies will fol­low the new insur­ance nom­in­a­tion frame­work, includ­ing insur­ance cooper­at­ive giant, NTUC Income.

NTUC Income, being a cooper­at­ive, had its own Sec­tion 45 of the Co-operative Soci­et­ies Act (CSA) to gov­ern the revoc­able nom­in­a­tion of bene­fi­ciar­ies before 1 Septem­ber 2009. In the past, the com­mer­cial insur­ance industry has two prob­lems for nom­in­at­ing bene­fi­ciar­ies for their insur­ance policies bought.

Firstly, when the poli­cy­holder has nom­in­ated the spouse and/or chil­dren as the bene­fi­ciar­ies, Sec­tion 73 of the Con­vey­an­cing and Law of Prop­erty Act (“CLPA”) and Law of Prop­erty Act (“CLPA”) will auto­mat­ic­ally cre­ate a stat­utory trust in favour of the beneficiaries.

The implic­a­tion is that he will not be able to change nom­in­a­tion sub­sequently except with the approval of all the exist­ing bene­fi­ciar­ies. Hence, a divor­cee can­not change the bene­fi­ciar­ies to his new wife and chil­dren without the con­sent of his ex-wife and/or chil­dren from the pre­vi­ous mar­riage. The cre­ation of such a trust also implies that the policy owner will irre­voc­ably lose all rights and con­trol over the insur­ance policy con­cerned, includ­ing pay­outs made when he claims on crit­ical ill­ness or total per­man­ent disability.

Secondly, if the policy owner nom­in­ates someone other than his spouse and/or chil­dren, no nom­in­a­tion will be recog­nised under sec­tion 73 of the CLPA.  Since there is presently no pro­vi­sion for nom­in­a­tion of other types of bene­fi­ciar­ies in the Insur­ance Act, the status of such nom­in­a­tions is uncertain.

So in order to over­come the above 2 situ­ations, the new Insur­ance (Amend­ment) Act & Insur­ance (Nom­in­a­tion of Bene­fi­ciar­ies) Reg­u­la­tions now allow the policy owner to make two kinds of nomination:

  • Revoc­able Nom­in­a­tion (sim­ilar to NTUC Income CSA)
  • Trust Nom­in­a­tion (sim­ilar to Sec­tion 73 of CLPA)

Revoc­able Nomination

To make a revoc­able nom­in­a­tion, obtain the offi­cial pre­scribed form from the insur­ance com­pany. Com­plete the form in the pres­ence of two adult wit­nesses who must be at least 21 years old and who are not your nominee(s) or your nom­in­ees’ spouses. The nom­inee can be any indi­vidual or any legal entity such as an asso­ci­ation or cor­por­a­tion. You must send your ori­ginal com­pleted Revoc­able Nom­in­a­tion Form to the insur­ance com­pany for it to take effect.

You are allowed to make numer­ous Revoc­able Nom­in­a­tions for the same policy, with the latest nom­in­a­tion revok­ing and repla­cing the pre­vi­ous nomination.

For nom­in­ees below 18 years, the death pro­ceeds will be paid to the par­ent or legal guard­ian. And the pro­ceeds of the policy are not pro­tec­ted from your creditors.

Trust Nom­in­a­tion

If you make Trust Nom­in­a­tion, you will be facing the prob­lems as described above. How­ever, the insur­ance policy under trust nom­in­a­tion will be pro­tec­ted from your debt­ors upon bank­ruptcy as you have given up all rights under the Trust Nom­in­a­tion.
Like the Revoc­able Nom­in­a­tion, obtain the offi­cial pre­scribed form from the insur­ance com­pany. Com­plete the form in the pres­ence of two adult wit­nesses who must be at least 21 years old and who are not your nominee(s) or your nom­in­ees’ spouses. The nom­inee can be only your spouse and/or chil­dren. You will need to name a trustee who is at least 18 years old. A nom­inee can also be a trustee. The trustee can be changed at any time, sub­ject to pre­vail­ing law. You can name your­self as the trustee but if you do so you will not be able to

  • Receive the policy pro­ceeds or
  • Give con­sent for revoc­a­tion of the nom­in­a­tion on behalf of the nominees.

You must send your ori­ginal com­pleted Trust Nom­in­a­tion Form to the insur­ance com­pany for it to take effect.

Take note that you need to get the writ­ten con­sent of all nom­in­ees or of a trustee other than you before you can:

  • Revoke the trust nomination
  • Make any changes to the policy
  • Take a loan under the policy
  • Sur­render the policy

When a nom­inee dies before you, the deceased nominee’s share of the policy pro­ceeds will go to his estate, unless you revoke the nomination.

So hurry, approach your insur­ance com­pany and start mak­ing your nom­in­a­tion now. Your fam­ily will be able to receive the pay­out from the insur­ance faster should the unfor­tu­nate event were to occur. Moreover, the nom­in­a­tion is free, unlike applic­a­tion for Let­ter of Probate/Administration.

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