In Malaysia, assets held within insurance policies are expressly exempted from the estate of the deceased individual. This provision is designed to protect the entitlements of the insured’s spouse and children with respect to the insurance proceeds, thereby mitigating any prospective claims from the creditors of the deceased. The legal foundation for this exclusion is articulated in Section 23(1) of the Civil Law Act 1956, which unequivocally stipulates that “Moneys payable under a policy of assurance are not to be deemed as part of the estate of the insured.”
Consequently, upon the demise of the insured individual, the stipulations delineated in the insurance contract will come into effect. Subsequently, all funds earmarked for disbursement under the insurance policy will be allocated to the specified nominee, as per the provisions outlined in Schedule 10 Section 130 Paragraph 4 of the Financial Services Act 2013.
Claim Initiation Process
The disbursement of policy funds is not an automatic process in Malaysia. As per Schedule 10 Section 130 Paragraph 4(1) of the Financial Services Act 2013, upon the demise of the insured individual, the designated nominee plays a pivotal role in initiating the claim process. This necessitates the submission of a formal application to the insurer, notifying them of the insured’s death and providing substantiating evidence. It is imperative for nominees be proactive in this step, as the claim process does not commence automatically. According to Schedule 10 Section 130 Paragraph 4(2) of the Financial Services Act 2013, a failure to make a claim within 60 days from the insurer’s acknowledgment of the insured’s death triggers an obligation on the part of the insurer to promptly notify the nominee in writing about their entitlement to claim the policy funds.
If, subsequent to the insurer’s notification, the nominee neglects to claim the policy funds within 12 months of the policy owner’s demise, the insurer will proceed as if no nomination had been made in accordance with Schedule 10 Section 130 Paragraph 4(3) of the Financial Services Act 2013.
Distribution of Insurance Policy Funds in the Absence of Designated Beneficiary
In instances where the insured has not designated a beneficiary in the insurance policy, the insurer is obliged to disburse the policy funds to the lawful executor or administrator of the estate in accordance with Schedule 10 Section 130 Paragraph 8(1) of the Financial Services Act 2013.
Schedule 10 Section 130 Paragraph 8(2) of the Financial Services Act 2013 reiterates that if the insurer ascertains the absence of a lawful executor or administrator at the time of disbursement, they may allocate the policy funds to the deceased individual’s spouse, child, or parent in accordance with the Section 6 of the Distribution Act 1958.
Proactive Measures for Policyholders
To ensure a seamless transition of policy funds to the intended recipient, it is strongly recommended that insurance policyholders proactively nominate beneficiaries. This strategic measure guarantees that, upon the insured’s demise, the policy funds will be directed to the specified recipient without delays or uncertainties.
Moreover, nominees are advised to promptly initiate the insurance claim following the insured’s death. Timely action not only expedites the disbursement process but also contributes to the efficient resolution of any potential complications.
In conclusion, navigating the allocation and disbursement of insurance policy funds in Malaysia demands a clear understanding of the procedures involved. Proactive measures, such as nominating beneficiaries and initiating timely claims, not only streamline the process but also honour the wishes of the deceased in safeguarding the financial well-being of their loved ones. It is recommended that individuals stay informed about these processes, and if needed, seek professional guidance to ensure a smooth transition during a challenging time.
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