Saturday, January 31, 2009
ARE INSURANCE PROCEEDS A PART OF AN ESTATE AND WHY ARE NOMINATIONS VERY IMPORTANT?
Insurance proceeds are compensation or money received by his beneficiaries after an insured's death.
The answer for the first question above can be yes or no. It all depends on whether a policyholder makes nominations during the application of life insurance. If he does, the life insurance proceeds will usually be distributed to his beneficiaries in less than one week. If he doesn't, the life insurance proceeds will become a part of his estate and the money will be distributed according to his will or the related law. It usually takes at least six months to get the money. This rule also applies to personal accident insurance proceeds.
So, it is very important to make nominations when we are buying insurance so that our family will get the compensation as quickly as possible in order to prevent them from facing the problem of getting the money in a short time. When we are no longer around, six months will be a very long period for those who depend heavily on us such as our surviving spouse and children. They still need to spend money on food, education and others.
For details about the elements of an estate, please read my post titled WHAT ARE THE ELEMENTS OF AN ESTATE? (January 29, 2009).