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Insurance Have Your Say!

Insurance  Have Your Say!


Life Insurance in Superannuation

Well if your life insurance is held within your superannuation fund and you have not completed a binding beneficiary nomination, then this could include you.

Because your life circumstances change, the Trustee will use your instructions as a guide, but will always consider your current situation in determining which beneficiaries to make a payment to.

Think about your own situation, when you started working you might have filled out an insurance form and jotted on it your beneficiaries at the time. Since then, if you have taken advantage of choice of fund (meaning you can select your own superannuation fund, even if you change employers), then it is likely that you havent ever changed or thought about updating them.

Think now about how quickly life changes, have you got married, divorced or had children since then?

So while the Trustee will be guided by your beneficiary nomination, they are not bound by it, which means that on your death, they will have the ultimate discretion on who is paid and who is not. To do this, the Trustee will use your Will, your nomination form, but will also listen to any other claims that arise during the benefit payment period.

What Can You Do?

Most superannuation funds now offer you the opportunity to make your beneficiary nomination Binding. This means that the Trustee must act in accordance with your instruction. So what is the difference?

If you choose to make your beneficiary nomination binding you will need to update it more frequently. Every three years your form will need to be recompleted, witnessed again and then returned to your superannuation fund.

So if you are willing to fill out a form, once every three years you can have a lot more control over your life insurance benefits. In addition you can specifically state how much each of your beneficiaries should receive, which you state in percentage form on the application.

Complicated Lives Lead to Messy Benefit Payments

If you had to think about your death, who would you want to receive your combined superannuation and life insurance benefit? If you feel strongly about your answers, then it is definitely worth making your nomination binding.

For example, if you have grown up children, a mistress, a child from another marriage, a disabled parent or some other person you wish to support after your death then binding nominations will allow you to be sure that they will continue to be provided for.

You can request a binding beneficiary nomination form from your superannuation provider and can complete it privately. Forms are then held in confidence by your superannuation fund.

The only time a Trustee will not pay as per your binding nomination, is if they:

are restricted by a Court order which prevents the payment (eg a Family Court ruling),

know that you are restricted by a Court order from making a binding nomination, or

your form is declared invalid.

Avoiding Issues when Completing Your Binding Beneficiary Nomination

When filling out your binding beneficiary form, avoid common mistakes such as:

Not checking the percentages add up to 100 percent. Most funds require that you use full numbers, so if you have three children your nomination must state 34 percent to one child and 33 percent to the other two, not 33.3 to each.

Ensure that you sign and date the form and that you have two witnesses sign and date the form as well. Your witnesses must be over 18 years of age, otherwise your nomination may be declared invalid.

Are Binding Nominations Required Outside of Superannuation

If you decide to purchase your life insurance outside of your superannuation your life insurance will become part of your Estate and will be distributed in accordance with the instructions in your Will. In this case, ensure that you keep your Will up to date with your current life circumstances.

by: Adam King
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Insurance Have Your Say!