Would I be correct to say that when someone places commitment to a life insurance policy, the very main concern of that person would be to ensure that his loved ones are always well provided for because his loved ones will need funds as soon as possible to cover for legal, medical and other expenses, not to mention utilities bills and loan repayments.
This is where an insurance policy will be most useful to the. With a policy, you can ensure that they receive the monies due quickly. Only if the life assured have named their loved one as nominee.
Failure to make a nomination simply means that the insurer would not be able to make payment until a court has issued Grant of Probate (if the deceased has left behind a will), or Letters of Administration (where there is no will). This, could mean a waiting period of many years.
On the other hand, if the deceased is a non-Muslim and have nominated spouse, children, or parents (if there is no surviving spouse or children), they are entitled to the policy monies without having to wait for the Grant of Probate. Moreover, a trust policy would be created for them under which these monies do not form part of the deceased’s estate. As such, debtors do not have the rights to claim the monies from the beneficiary. This means that the deceased’s spouse, children, or parents will receive the sum paid out by the policy in 100%.
What happened if the nominee is not spouse, children, or parents? But someone else, like uncles, nieces, siblings, or even a friend?
Under a non-Muslim’s policy, the nominee in such a case is not entitled to the policy monies as a beneficiary. He or she only entitled to receive the money as an executor, and must pass it on to the deceased’s estate, thus become part of the deceased’s estate, and be distributed according to the will(If there is no will, estate will be distributed according to the laws of distribution, after debtors have claimed their entitlements).
The lesson here is that if the life assured’s intended beneficiary is not a spouse, child or parent, then he must write a will naming that person as beneficiary. Once he does this, the nominee will receive the policy monies subject to the laws of distribution- once all estate’s debts have been settled, otherwise, they would not even entitled to receive a single sen!
However, a trust policy does not apply if the life assured is a Muslim, in which case the nominee acts as an executor and must distribute the policy monies according to Islamic law.
* the above information is obtained from by Life Insurance Association Malaysia (LIAM)
