Can I Use My Will to Distribute Insurance Proceeds?

What is an Insurance Policy?

An insurance policy is a contract between an individual (who purchases the insurance policy) and an insurance company.

The contract involves the individual paying a monthly premium in exchange for financial protection or reimbursements to himself, against certain losses (e.g. an accident). In this case, the insurer will be the insurance company and the purchaser of the insurance policy will be the insured party.

If you have any insurance policies, you may have also made nominations.

Nominations are arrangements regarding who are the nominees that will receive the insurance proceeds in the event of death or permanent disability. These nominees may be your family members, loved ones or any other persons. You may make nominations with your insurance company, or in your will, to distribute any policy benefits to your desired nominees.

This article will help in explaining how to distribute the proceeds from your insurance policies via a will, in the event of your death.

What are the Types of Insurance Policies?

There are many types of insurance policies that protect you from different types of risks, but generally there are 3 broad types of policies.

1. Life insurance policies

A life insurance policy is one that pays out a fixed sum of money to your dependants upon your total and permanent disability or death, to ensure that their long-term financial needs are met.

Your dependants may be your loved ones such as your spouse, children, parents and grandparents.

2. Health insurance policies

There are various types of health insurance policies that pay out money in the event of accidents, illnesses or disabilities to ease the financial burden of high medical costs.

3. General insurance policies

There are also different kinds of general insurance policies that cover a range of situations like damage to your house, car or other belongings, and will pay out money to cover these losses.

Can I Distribute My Insurance Proceeds by Way of a Will?

Typically, when a person passes away with a will, the person’s estate will be distributed to the beneficiaries according to the will, by the named executor(s) of the will.

However, when you have a named nominee under your life insurance policy, depending on whether the nomination is a trust nomination or a revocable nomination (see below), the insurance proceeds may or may not distributed according to your will, since there is a named nominee who is entitled to receive the proceeds.

Should you wish to distribute your insurance proceeds via a will, you may have to override your insurance nomination (see below), and the possibility of it again depends on whether you have made a trust nomination or a revocable nomination.

On the other hand, if you have not nominated a nominee or have not provided for the distribution of the insurance proceeds in your will, the insurance company may pay the insurance proceeds to any proper claimant without the production of any Grant of Probate or Grant of Letters of Administration.

The proper claimant may be the executor of your will, or your immediate family member such as your spouse, parent, child, sibling, nephew or niece.

If the proper claimant cannot be determined, the insurance company may then request for a certified true copy of the Grant of Probate or the Grant of Letters of Administration before the insurance proceeds will be released to your estate.

In this case, the insurance proceeds will undergo probate proceedings and form part of your assets, where the court will decide the rightful recipient. If you have a will, the insurance proceeds will be distributed according to the will. If you do not have a will, the insurance proceeds will be distributed according to intestate law.

To find out what other assets you can distribute under your will, download our free guide to will-making:

Can I Use My Will to Override My Insurance Nomination?

There are 2 types of nominations that you may make with respect to your insurance policies, namely:

1. A trust nomination (also known as an irrevocable nomination); or
2. A revocable nomination.

Depending on which type of nomination you made in your insurance policy, you may or may not use your will to override that nomination to change your initial beneficiary.

1. Trust nomination

Under section 132 of the Insurance Act, you may make a trust nomination in your insurance policy in favour of your spouse and/or children.

In both cases, a trust is created over the insurance proceeds. This means that upon your death, the proceeds from the insurance policy will be received by a trustee, who will then pay the nominees or beneficiaries.

This also means that you have “given” away the benefits of your policy to your beneficiaries, and thus you cannot override the trust nomination using a will.

Further, the insurance proceeds do not form part of your estate upon your death. Hence, upon your death, the insurance proceeds will not be distributed by your executor(s) according to your will (as mentioned above).

A trust nomination may however be revoked with the trustee or nominee’s prior written consent.

2. Revocable nomination

Under section 133 of the Insurance Act, you may make a revocable nomination in your insurance policy in favour of any person such that upon your death, the insurance proceeds will go to this nominee.

A revocable nomination is a nomination that may be revoked, meaning you may change the nominee that will receive your insurance proceeds if you wish to.

How do I revoke a nomination?

The nomination may be revoked either by another nomination under the same insurance policy or if you execute a will indicating how the insurance proceeds are to be distributed.

Thus, if you have a valid will, you can revoke the initial nomination in the insurance policy, if the following requirements are met:

• The insurance company has received written notice signed by the policy owner of the will, enclosing a certified copy of the will
• The will must be made in accordance (i.e comply) with the Wills Act and indicate how the insurance proceeds are to be distributed
• The will must specify the following particulars of the policy as referred to in regulation 5(3) of the Insurance (Nomination of Beneficiaries) Regulations 2009:
  • The name of the registered insurer that issued the relevant policy;
  • The policy number;
  • The name of each beneficiary to whom any portion (including the whole) of the death benefits under the relevant policy is bequeathed;
  • Where a beneficiary is an individual, the following particulars of the beneficiary: NRIC/birth certificate/foreign passport number, address and date of birth.
  • Where a beneficiary is an entity, the following particulars of the beneficiary:
    • The Singapore Unique Entity Number (UEN) of the beneficiary or, or any other official registration number which identifies and is unique to the entity (whichever is applicable);
    • The address of the beneficiary; and
    • The portion of the death benefits under the relevant policy which is bequeathed to each beneficiary.

NTUC Income policy nominations

Generally, NTUC Income policy holders will not be able to override nominations under their policies using a will. NTUC Income will pay the nominee stated in the insurance policy upon the death of the policy holder, regardless of any will.

This is unless a revocable nomination has been made and the will has been validly executed (i.e requirements of the Wills Act, as discussed above, have been met) and made to known to the insurer. In this case, you can use your will to override the insurance nominations under the NTUC Income policy.

Alternative to Revoking a Nomination via a Will

Revoke a nomination through your insurance company

To revoke a nomination through your will, you have to fulfil the requirements discussed above, which may be complex and lengthy.

Furthermore, confidentiality and privacy may be points of concern given that one of the requirements involve lodging a certified copy of your will with the insurance company.

Therefore, an alternative to revoking a nomination via a will may be to revoke the nomination through your insurance company.

If you go through your insurance company, you will only need to fill in and submit the appropriate forms. This may however, vary from company to company.

Should I Include My Insurance Policies in My Will?

You can choose to deal with the proceeds of your insurance policy by doing a nomination, rather than giving away the proceeds through your will.

However, you may wish to include your insurance policies in your Schedule of Assets. This is normally a document that is kept with the will and is updated periodically to reflect your personal assets. The Schedule of Assets is beneficial for the executor(s) (person(s) carrying out the instructions of your will) and any named beneficiaries (persons receiving your inheritance via a will) in identifying your assets.

If there is no nomination made, and no specific reference to the insurance policies in your will, the insurance proceeds will usually be distributed as part of your general residuary estate under the will (as most wills have a clause dealing with residuary estate).

What Happens to the Insurance Proceeds If the Beneficiary Dies?

If there is a trust nomination, the insurance proceeds are passed on to the estate of the deceased beneficiary.

If there is a revocable nomination and there is only one beneficiary, the nomination is revoked. If there are other surviving beneficiaries, the insurance proceeds will then be distributed equally among them.

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If you have taken up insurance policies and wish to make or revoke any nominations in those policies via a will, it is advisable to inform your insurance company. This will avoid any confusion as to who is the correct nominee to receive the insurance proceeds upon your death.

If you wish to distribute your insurance proceeds through your will, you may want to seek advice from a lawyer to ensure the proper and accurate drafting of the will.