If you have an insurance policy

Civil Law implication:  
  • Under the new Insurance Nomination Law, the assured has two choices to make a revocable or an irrevocable nomination.
  • With an irrevocable nomination, the policyholder relinquishes all rights to the policy. This means that while he is still obliged to pay premiums, all policy benefits – living and death – belong to the nominees. An advantage is that policy proceeds are protected from creditors in the event of bankruptcy.
  • The policyholder can regain his rights to own the policy benefits only with the consent of all nominees. And only the spouse or a child of the policyholder is eligible to become a nominee.
  • With a revocable nomination, the policyholder continues to retain full ownership over the policy. He retains the right to change, add or remove nominees at anytime without the consent of nominees.
  • The policyholder will receive living benefits and only death benefits will be paid to the nominees.
  • Unfortunately, the new law does not apply retrospectively to existing policies with previous nominations, but existing policies with no previous nominations are eligible.
  • Previous policyholder who has purchased their insurance policies under Section 73 of the Conveyancing and Law of Property Act (CLPA), the proceeds from the insurance will be given to the spouse and/or children if the insurance is bought for their benefits.
  Syariah implication:  
  • Under the new law, where revocable nominations were made, the insurance proceeds from such policies are considered as part of Hibah, a form of life-time gift (inter-vivos).
  • If there is no nomination, the insurance proceeds form part of the deceased’s estate and will be distributed according to faraidh.
  • Insurance policies under Section 73 of the CLPA Act are treated as trust policies at the onset of the policies. Hence the insurance proceeds are not deemed as part of the deceased’s estate and will therefore be distributed to the deceased’s spouse and/or children as per the nomination form. Please click here for the full fatwa.
To help you plan your estate, please call us at 6842 2282 or SMS 9185 2559 or email us at enquiry@barakahcapital.com.sg

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