Life insurance is protection for a person’s dependants from financial harm due to that person’s death.
These dependants are described as ‘beneficiaries’ who, in the event of the policy holder’s death, will receive a lump sum payment.
The Trustee of the fund will usually have the discretion to pay any benefits to the following (depending on whether or not a binding death nomination is in place):
- The deceased’s Estate (in which case the superannuation death benefits will be distributed in accordance with the Will of the Deceased. If there is no Will, then the monies will be distributed in accordance with the rules of intestacy)
- The person claiming the superannuation death benefit; or
- Any other people who were financially dependent upon the deceased
Upon the policy holder’s death, the beneficiaries will be required to notify the insurer and provide them with the relevant claim forms and documentation. This information will then be assessed by the insurer who will decide upon the claim’s validity. In the event of the claim being approved, the policy will be paid out to the beneficiaries and it will cease to exist, thus preventing any further claims.
Most people will have life insurance, as it is usually included by default in a superannuation policy, however, you should investigate whether your policy includes life insurance.
In some cases there may be strict time limits. Any person who may have a claim on a death benefit should seek advice as soon as possible to ensure a claim is lodged within time.