Insurance Act

The Insurance Act governs the formation of insurance contract, regulation of insurance business in Singapore, and for other purposes relating to insurance. There are few sections of the Act that are important to estate planning.

Section 61: Payment of living benefits or death benefits under life policy or accident and health policy, etc.

Section 61 governs the pay-out of life policy when the life assured dies. The insurer can make payment to the nominated beneficiary or trustee on life policy which contains nomination according to the nomination of beneficiary framework. The insurer shall be discharged from all liability in respect of the amount paid.

The other important point is that it allows insurer to pay, on life policy without nomination, up to $150,000 to a proper claimant without the production of probate or letter of administration. The balanced of the sum assured will be paid out pending the production of letter of administration or grant of probate by the legal personal representative.

Proper claimant refers to executor, widow, widower, parent, child, brother, sister, nephew or niece of the deceased. Under this law, an illegitimate child* shall be treated as a legitimate child of the actual parents. (*It is important to note this distinction, as not all the estate planning laws give legal standing to an illegitimate child.)

Why is this law important to estate planning?

• This law gives the estate the needed liquidity, as all other assets of the deceased will be frozen pending estate settlement clearance.

Section 49L: Trust Nomination

Section 49L allows the policy owner (who is also the life assured) of a relevant policy who has attained the age of 18 years to nominate his spouse and/or children as nominee(s) in his policy. Nomination under S49L shall create a trust in favour of the nominee or nominees.

The policy owner can name an appropriate trustee to hold the policy pay-out for the benefit of the nominee who could be a minor.

If the nominee dies before the policy owner or while the claim is in process, the nominee’s interest shall form part of the nominee’s estate [Section 49L (6)].

Why is this law important to estate planning?

1. This law protects the insurance pay-out from the creditors of the deceased’s estate.
2. This law gives the estate the needed liquidity as the pay-out can be done without the grant of probate or letter of administration.
3. Unlike Section 61 (which is described above) which allows the insurer to pay up to $150K to the proper claimant, S49L allows the insurer to pay the full amount of the sum assured to the rightful trustee or nominee. The cheque will be made payable to the name of the trustee or nominee.
4. It is prudent to note that a marriage or divorce does not automatically revoke such a nomination.
5. A will cannot supercede such a nomination.
6. A Muslim can make such a nomination.

Section 49M: Revocable Nomination

Section 49M allows the policy owner (who is also the life assured) of a relevant policy who has attained the age of 18 years to nominate any person or organisation as revocable nominee(s) in his policy.

If the nominee dies before the policy owner, the nominee’s interest does not form part of the nominee’s estate; instead the nominee’s interest will be extinguished, and his share will be distributed to other surviving nominees [Section 49M (5)].

Why is this law important to estate planning?

1. This law allows the policy owner to direct his estate to specific beneficiary who could be inconvenient to be listed in the will (e.g. illegitimate child)
2. This law allows the policy owner to direct his estate to specific beneficiary who could be disadvantaged under the Intestate Succession Act (e.g. elderly parents, de facto partner).
3. This law gives the estate the needed liquidity as the pay-out can be done without the grant of probate or letter of administration.
4. Unlike Section 61 (which is described above) which allows the insurer to pay up to $150K to the proper claimant, S49M (similar to S49L) allows the insurer to pay the full amount of the sum assured to the rightful nominee. The cheque will be made payable to the name of the nominee.
5. It is prudent to note that a marriage or divorce does not automatically revoke such a nomination.
6. A will can supercede such a nomination. However, the will has to spell out the policy details for it to supercede such a nomination.
7. A Muslim can make such a nomination
8. Insurance pay-out under such revocable nomination does not protect (unlike S49L) against estate creditors.