What if I never thought of naming beneficiaries/nominees in my insurance policies?
If you have an insurance policy, you’ll know that there’s a section where you’d be asked to name beneficiaries/nominees. Beneficiaries in insurance policies mean the same thing as beneficiaries in your wills.
Basically, when you have passed away, all the money in your will gets transferred to your named beneficiaries. It’s the same thing here in insurance policies. If you’ve passed away, the insurance payouts will go to your named beneficiaries in your insurance policy.
Purpose of having beneficiaries in your insurance policies
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The main purpose of having beneficiaries in your insurance policies is to make sure the insurance policy’s money will go to the right people after you’ve passed away. It’s legitimately that simple and that straightforward to understand.
You can name up to a certain number of beneficiaries and have as little as just 1 beneficiary. How you divide the money in your insurance policy is pretty much up to you and your decision.
For example, you can name just 1 beneficiary in your insurance policy and s/he will get 100% of the payout. Or you can name 2 beneficiaries and split the payout money 50/50. Some people do it 60/40 as long as all parties agree and sign on to it.
People usually name their family members or relatives as beneficiaries. Some people like to change things up for a bit and name a close friend, a mistress, or anyone who has no blood relations to them. It can be messy but such cases exist.
Some people don’t name people as beneficiaries. Sometimes, some people name organizations and charities as their beneficiaries. However, in such cases, it can be contested as sometimes family members may not agree with such a move.
If you don’t name a beneficiary, what’s going to happen to the insurance payout?
If you don’t name anyone or any organization as your beneficiary in your insurance policy, then the money will go to Bank Negara Malaysia (BNM) first. It will remain there as unclaimed money until someone comes forward to claim the money.
If you have an estate, then it’s a different story. If you have an estate then the insurance payout money will go to your estate.
If your family decides to come forward to claim your insurance money, then they will need to produce documents as proof. Usually, they will be asked to produce:
- Proofs of identities
- Proof of relationship
- Death certificate
- Letter or memo saying you’re here to claim the insurance payout
- Other proof of documents where needed
If you don’t have any named beneficiaries in your insurance policy, then the payout will go to your next-of-kin. The money will be divided between your spouse and your kids – if you are married and have kids.
The money will be paid out according to Malaysia’s Distribution Act (1953). The insurance payout money is not taxed, by the way. Below is a table detailing how much your next-of-kin will receive. Although the money is for the total monies you’ve left behind, it is also applicable for insurance payout monies.
Do take note that the above table includes distribution details for West Malaysia and Sarawak. If you are from Sabah, you will be subjected to a different set of rules – Intestate Succession Ordinance 1968.
Have a Will ready and in place
Here’s the issue with having beneficiaries (or not) in your insurance policies. Although you may have named beneficiaries in your insurance policy, there may be circumstances where the payout will not go to them.
For example, sometimes there may not be ways to contact the named beneficiaries from the insurance company’s end. So the money is left with the insurance company. If not, it will be handed over to Bank Negara Malaysia until someone comes forward to claim it.
If that’s the case, then it’s good to have a will and have your insurance policies listed in it. Work out the specifics and steps with a lawyer to move forward with it. With the help of a lawyer and having a will, list your insurance policies in it.
If anything happens after you have passed away and your insurance payout isn’t really going smoothly, at least your trustees have your wills to refer to. It’s ok if you’ve named someone already in your policies. However, it’s always great to be extra careful and list your insurance policies in your wills for the extra fortifications.
Key Takeaway
If you forgot to name beneficiaries in your insurance policies before you passed away, it’s all right. It just mean that the money from your insurance policy will go to BNM first before someone comes along to claim it. To be safe, it’s always good to list your policies in your wills just in case anything happens.
