Life Insurance Guide | Insurance Help Product Information

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There are a number of ways in which payment can be made under a life policy and different procedures apply to each.

Death claims

A death claim is normally initiated by the claimant or solicitors to the estate informing the office of the death of the life assured and asking for confirmation of the amount payable. The office will first check its index of lives assured to discover all the policies on that life. Then the amount payable will be calculated. This may depend on the exact date of death – for example, the profits on a with-profits policy or the sum assured under a decreasing term policy will vary with the precise date of death. The office will then reply quoting the amounts payable and stating its requirements for payment.

The main requirements will be:
Proof of death – death certificate
Proof of age – birth certificate
Proof of title – grant of representation if it is an own life policy
Completion of a claim form

The proceeds of an own life policy are payable to the deceased’s executors (if there is a will) or the administrators (if there is no will). The executors will have to produce the grant of probate and the administrators must produce the grant of letters of administration. Executors will distribute the proceeds as set out in the will and administrators will distribute the proceeds according to the laws of intestacy.

The proceeds of a trust policy are payable to the trustees who must use them for the benefit of the beneficiaries. If a policy is assigned, the proceeds are payable to the assignee and if it is life of another, they are payable to the grantee.

Maturity claims

All offices have procedures for paying claims on maturity of their endowment policies. Most offices have programmed their computers to list out every week the policies maturing in say eight weeks’ time. These lists are then used as a basis for the maturity procedure. For each maturing policy the office will write to the policyholder, say a month or six weeks before the maturity date, reminding him of the maturity, quoting the amount payable, listing the requirements for payment and enclosing the claim form. The aim is to receive all requirements before the maturity date to enable the office to be able to release its cheque in settlement to reach the policyholder by the maturity date.

Surrender

A surrender is when a policy is cashed in before it becomes a claim. When a policyholder asks to surrender his policy the office will calculate the surrender value and send out its surrender form for signature and return with whatever documents of title are needed.

Paid up policies

If a policyholder can no longer afford to pay premiums he may request that the policy be made ‘paid up’. This means that no further premiums are payable and cover continues at an appropriately reduced level. Only substantive policies (endowments and whole life assurances) can be made paid-up - a term assurance will just lapse if premiums cease. The reduced paid-up sum assured will normally bear some relation to the number of premiums actually paid as opposed to the total originally payable. Thus if a 20-year endowment was made paid-up after premiums had been paid for 10 years, the reduced paid-up sum assured would probably be half the original sum assured. Any future bonus would be based on the reduced sum assured.

Loans

It is possible for life offices to give loans on the security of their policies. This does not apply to all policies. Loans will not generally be offered on term assurances or unit-linked policies. Offices will often only lend on non-linked policies up to say, 905 of the surrender value, because it is the surrender value that is the security. Rates of interest charged will vary according to market conditions.

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