How will your life insurance nomination fail in a time of Covid-19 crisis?

I read with horror such news report headline, “Coronavirus: Five children orphaned as both parents die of Covid-19”.

According to NZ Herald in its 12 June 2020 edition, five underage children this week became orphans, after both their mum and dad died of coronavirus in Los Angeles, USA. The parents died one day apart, leaving behind their five children, who will now be cared for by their stepsister. Karina Bonilla, 38, died on Monday. Her husband, Humberto Ruelas-Rivas, 60, had died on Sunday.

Five children aged between 2 and 17 years have been left orphaned. In another news report by The National, UAE dated 21st May 2020, six young children were orphaned last week after their father died of Covid-19, less than a month after their mother succumbed to the same disease.

“It was very difficult for the children to lose both parents within few days.”

Life is uncertain, more so during times of disasters and pandemic like what everyone is facing right now. The only thing one can do is to prepare for the worst and hope for the best.

Double Tragedies

That leads to my article title captioned above. What will happen to your life insurance monies if there is an unfortunate incident when both parents die while young children are left at home? And while the estate of both parents are frozen.

Over the many years of estate planning and research I had done, I find that most parents are not aware of such risk, when both parents were to perish together or in short space of time. I term this as double tragedies. I have researched in depth how my integrated approach of estate planning can take care for such risk for you.

Most people I have talked to assume that such scenario are remote and thus ignore the planning for such tragic event. Whatever piecemeal estate plan they have, they just put their spouse’s name as the nominee in their EPF.

The same with the nomination of their life insurance policies. Their life insurance sales agents would just happily submit the insurance proposal form without thinking too much about how double disasters will fail the insurance nomination of their clients. They have done well only for the first part of the job, which is convincing their clients to buy the life insurance coverage.

The insurance agents’ job on the second part is just inadequate, which is to ensure that the life insurance monies, when claimed, can be used for the benefits of the young and under aged children.

In actual fact, I have written an estate planning article published on 18th January 2014 in The Borneo Post, with the title: “Implications of Financial Services Act 2013 on your life insurance nomination and estate planning”.

This article is still available online. I mentioned that things will get very complicated if both parents were to die together in an unexpected accident. Previously I had a couple who came to complete their will and estate-planning saying that they were really worried about double tragedies event because they often travel together on their business trips.

Financial Services Act 2013

The nomination of life insurance policies, including personal accident policies is now governed by Financial Services Act 2013, replacing the earlier Insurance Act 1996.

Financial Services Act 2013 (FSA 2013) Schedule 10, Paragraph 5(1), states that: A nomination by a policy owner, other than a Muslim policy owner, shall create a trust in favour of the nominee of the policy moneys payable upon the death of the policy owner, if-a) The nominee is his spouse or child; or b) Where is no spouse or child living at the time of nomination, the nominee is his parent. In Paragraph 5(3), it states that the policy owner may, appoint any person other then himself to the trustee of the policy moneys and where is no trustee appointed: (a) The nominee who is competent to contract; or (b) Where the nominee is incompetent to contract, the parents of the incompetent nominee other than the policy owner and where is no surviving parent, the Public Trustee or a trust company nominated by the policy owner, shall be the trustee of the policy moneys and the receipt of a trustee shall be a discharge to the insurer for all liability in respect of the policy moneys paid to the trustee.

The complications come when the other parent, named as the nominee for the life insurance death benefit, also die at the same time as the insured, or in a short time from each other. When there is no surviving nominee, the nomination fails and the death benefit belongs to the estate, which will be frozen together with all other assets, including the bank accounts, properties, etc.

The horrendous result is the undue delay and suffering brought about by cumbersome probate process to administer and distribute the estate.

If a minor child (below age 18) is named among the nominees, the complication is that an under aged child cannot inherit the life insurance proceed until the child attains the age of 18. In the meantime, the insurer may pay to the Public Trustee, based on the provision in FSA2013, Schedule 10, Paragraph 5(1)(c).


I can’t stress enough on the urgency of planning your estate comprehensively now, including covering the tragic event of both you and your spouse may perish together. My proven integrated approach to will and estate planning covers all the eventualities as well as your whole estate, including all personal assets under your name, life insurance death benefits in multiple life policies, as well as your business interest and shareholdings.

For your will and estate planning appointment, please contact Lee Khee Chuan, a chartered financial consultant and chartered life underwriter at 016-888 0138 (Whatsapp). Lee is also a licensed financial adviser representative with Areca Capital, a senior franchisee of Rockwills Trustee Bhd and Islamic estate planner with As-Salihin Trustee Bhd.

The post How will your life insurance nomination fail in a time of Covid-19 crisis? appeared first on Borneo Post Online.

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Lim Li Yin

Lim Li Yin

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