Speaking at the ABI savings, assets and protection in the UK conference in London, director general Stephen Haddrill discussed the value of ensuring that some money can be paid out straight away for family members.
At present, when someone with a life insurance policy dies it can take months for any payment to be made to their family due to a lengthy legal process. But by changing the revenue and customers rules life offices could issue part-payments to family members who are waiting for their claim to be paid.
Progress IFA marketing manager Aidan Dewhurst says the principle of partial payments is a good one because there can often be immediate financial difficulties for dependents.
He says: “Removing the financial worries when individuals already have plenty to deal with is precisely the point of life cover. If the HMRC can revisit the rules and make partial payments easier for insurers then I can’t see there being many objections. It’s good for policyholders and might help put the industry in a better light.”
Dewhurst says an easy way to avoid the legal process family members endure is writing polices in trust.
He says: “Aside from the potential tax benefits, they can help to remove any probate delay and ensure a prompt and efficient payment to the people who need it at the time they need it most.”
Similarly, Legal & General PR manager for housing and protection Joe Wiggins says: “I think that putting a policy in trust would be a better solution. It is one way of helping make sure that the value of a life assurance policy is given to the person that the life assured wants it to go to, without unnecessary delays. A trust avoids the need to obtain probate before making a claim, thereby speeding up the process.”
Lifesearch senior policy adviser Matt Morris says just about every life insurance policy should be written in trust. Morris adds: “Policies written in trust are technically no longer your assets and belong to the beneficiary from the moment the trust form is completed. The monies are paid quickly and avoid any probate delays with the HMRC, which average six months. The money is paid to the right person – the person you nominate as your beneficiary – rather than openly to your estate.”
Aviva already offers partial payments for low sums insured. Protection director Richard Verdin says: “We already offer part payments on claims being delayed for legal reasons, to allow for funeral costs, hardship etc. It is natural therefore that we support industry initiatives designed to alleviate financial pressures at what is always a difficult time.”
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