Ordinary (non-superannuation) life insurance policies

For an ordinary (non-superannuation) life insurance policy, including death, TPD and trauma policies, the policy proceeds are typically payable to:

• the nominated beneficiary, or beneficiaries; otherwise
• where no nomination of beneficiary is made, the policy owner or in the event of death and the policy owner is the life insured, the policy owner’s estate.

Life insurance policy ownership
Policy ownership gives the policy owner the right to the policy proceeds where no nomination of beneficiary is made.Policy ownership is, therefore, a particularly useful device. If, for example, a client wants their spouse to receive life insurance proceeds following their death, having the spouse own the life insurance policy (with no nominated beneficiaries) will guarantee that the spouse receives the policy proceeds.However, policy ownership also gives the right to deal with the policy and this may prove problematic if the relationship between the policy owner and the life insured ceases. If, as in the above case, a life insurance policy was owned by one spouse over the life of the other, following the separation of the couple the policy would be owned by an ex-spouse. While this issue would typically be addressed in any property settlement, it can leave some clients feeling uncomfortable with this possibility.

Nomination of a beneficiary in a life insurance policyMany, but not all, life insurance contracts allow a policy owner to nominate a beneficiary, or beneficiaries, to receive any life insurance policy proceeds payable instead of the proceeds being payable to the policy owner. Such a nomination cannot be ignored or overturned by a life insurance company and, as such, binds the life company to pay the nominated beneficiary, or beneficiaries.Unlike the requirements for a superannuation nomination of beneficiary, a nominated beneficiary on an ordinary life insurance policy can, subject to any restrictions of the particular contract concerned, be any person or entity, i.e. the nominated beneficiary does not have to be a dependant. Unlike most binding superannuation death benefit nominations, an ordinary nomination does not have a maximum term of three years.

Superannuation owned life insurance policies
Where a life insurance policy (death, TPD and trauma policies) is owned by a superannuation fund, any proceeds payable under the policy are paid to the superannuation fund (as the policy owner). In the event of the death of the member, the superannuation benefits (including the insurance proceeds) will be paid to the member’s estate or dependant beneficiaries. In the event of TPD or trauma, the member has to satisfy a condition of release to access their superannuation benefits (which include the insurance proceeds).

For more information on Who Will Get Your Life Insurance Proceeds please refer to www.xLife.com.au. 

Filed under:
Insurance by egoli

Ordinary (non-superannuation) life insurance policies

For an ordinary (non-superannuation) life insurance policy, including death, TPD and trauma policies, the policy proceeds are typically payable to:

• the nominated beneficiary, or beneficiaries; otherwise
• where no nomination of beneficiary is made, the policy owner or in the event of death and the policy owner is the life insured, the policy owner’s estate.

Life insurance policy ownership
Policy ownership gives the policy owner the right to the policy proceeds where no nomination of beneficiary is made.Policy ownership is, therefore, a particularly useful device. If, for example, a client wants their spouse to receive life insurance proceeds following their death, having the spouse own the life insurance policy (with no nominated beneficiaries) will guarantee that the spouse receives the policy proceeds.However, policy ownership also gives the right to deal with the policy and this may prove problematic if the relationship between the policy owner and the life insured ceases. If, as in the above case, a life insurance policy was owned by one spouse over the life of the other, following the separation of the couple the policy would be owned by an ex-spouse. While this issue would typically be addressed in any property settlement, it can leave some clients feeling uncomfortable with this possibility.

Nomination of a beneficiary in a life insurance policyMany, but not all, life insurance contracts allow a policy owner to nominate a beneficiary, or beneficiaries, to receive any life insurance policy proceeds payable instead of the proceeds being payable to the policy owner. Such a nomination cannot be ignored or overturned by a life insurance company and, as such, binds the life company to pay the nominated beneficiary, or beneficiaries.Unlike the requirements for a superannuation nomination of beneficiary, a nominated beneficiary on an ordinary life insurance policy can, subject to any restrictions of the particular contract concerned, be any person or entity, i.e. the nominated beneficiary does not have to be a dependant. Unlike most binding superannuation death benefit nominations, an ordinary nomination does not have a maximum term of three years.

Superannuation owned life insurance policies
Where a life insurance policy (death, TPD and trauma policies) is owned by a superannuation fund, any proceeds payable under the policy are paid to the superannuation fund (as the policy owner). In the event of the death of the member, the superannuation benefits (including the insurance proceeds) will be paid to the member’s estate or dependant beneficiaries. In the event of TPD or trauma, the member has to satisfy a condition of release to access their superannuation benefits (which include the insurance proceeds).

For more information on Who Will Get Your Life Insurance Proceeds please refer to www.xLife.com.au. 

Filed under:
Insurance by egoli