Nomination of beneficiary: employees, it's important!
We have a lot of questions from advisers and employers regarding the payment process from making a group life claim to receiving payment using a Master Trust. We've teamed up with our Master Trust provider, PTL , to provide answers and information to the most commonly asked questions. The information below will help you to understand more about the process and what you can expect to happen, when.
We take a look at why employees need to wake up to the importance of completing their nomination of beneficiary.
When you join a business, you are often passed a bunch of paperwork to read over and more often than not, the odd form to fill out. This can be tedious. However, there’s one form in particular that you shouldn’t skim over, and that’s your nomination of beneficiary.
If your employer provides group life insurance as an employee benefit, they will usually ask you to nominate who you would like to receive that benefit in the event you die while employed by the company. Whether there’s the option to complete this nomination online, or you’re required to do so on paper, you should complete it as soon as possible.
Why nominate a beneficiary?
“Why should I bother? I’m not going to die anytime soon!”
We wouldn’t be surprised if these thoughts cross your mind when you’re asked to nominate your beneficiary, but unfortunately you can never be too prepared.
If you were to die unexpectedly, and filled out that form when you were asked to, the speed at which your life insurance benefit reaches your family could be twice as fast than if you hadn’t bothered.
Figures from the trustees who look after our Master Trust show that where a nomination of beneficiary form has been filled out, families receive the money within 28 days on average, compared with 46 days where the form hasn’t been completed. This is due to the trustees being able to access a completed nomination of beneficiary form which speeds up the time it takes for them to establish the most appropriate beneficiary.
Taking five minutes to nominate your beneficiary, whether that’s your spouse, close family member, your children, a family trust or a charity, can ensure that the ones you leave behind are financially secure as soon as possible. Therefore minimising money worries during an already difficult time.
However, it’s not a one off. You need to keep it up to date. It’s very possible that you’ll experience a life change that results in your nomination of beneficiary having to be changed. Again, in order to ensure the correct beneficiary is paid as quickly as possible, it is vital that you keep this up to date.
At AIG Life, our online nomination of beneficiary service sends annual reminders to the employees registered with us. However, if your business asks you to complete paper forms, it’s highly unlikely that you’ll receive a reminder. In which case, it’s important you remember yourself to keep this important paperwork up-to-date should you experience a significant life event.
The small print
You should bear in mind that filling out a nomination of beneficiary form doesn’t guarantee your benefit will be paid to the person(s), trust or charity you nominate.
As your group life insurance benefit is held in a trust, the trustees will have absolute discretion over who the payment is made to, although they will take your wishes into account during their investigation.
This does however provide you with a safety net. Although you should remember to change your nomination form yourself, if a situation arises where it’s no longer appropriate for your benefit to be paid to the person(s), trust or charity you suggested, the trustee’s investigation will pick this up and they will then determine the most appropriate beneficiary.
In a nutshell
Where employees have access to group life insurance, it is extremely important that they ensure their nomination of beneficiary form is filled out. On average, completing this form cuts the time it takes for beneficiaries to be paid in half, therefore minimising the stress and risk to those left behind.
Once completed, employees should endeavour to keep their nomination of beneficiary up-to-date. It is possible a life event will occur that requires the nominated party on the form to be changed.
It’s important to remember that group life benefits are paid into a trust and the trustees therefore have absolute discretion over where the benefit is paid. That being said, they will always take your nomination into account.