No one really wants to imagine life without their partner. But unfortunately, the inevitable will happen to all of us. So, what to do when you find yourself having to file a claim against your partner’s life insurance? It’s a difficult time in your life but the process can be a smooth one.
Claiming the death benefit
The nominated beneficiary, which, in most cases, will be the spouse, will usually become the fund trustee and receive the death benefit. To get to that far, however, there are a couple of steps along the way. Here are the basic steps along the way to file a life insurance claim.
- You will need to find the life insurance policy. (If you can’t find it you can simply call the insurer and they will try to trace it. The process is quicker if you can find the policy though).
- Contact the insurer as soon as you can. They will send you some forms and will want to see a copy of the Death Certificate.
- Complete the claim forms and submit them with the other requested information, such as the Death Certificate. Some insurers may require additional information, such as pay slips, but the claims kit they send you will provide you all the detail you need about their specific requirements.
- It should take between a few days to a couple of weeks to process the claim and your insurer will advise you on the progress of your claim prior to payment.
The cost of making a claim
Pay-outs from life insurance held outside of super have always been tax-free. Major reforms by the Federal Government to superannuation have also meant that life insurance cover within super to a dependent – previously, an unattractive proposition – are now also tax-free, with Reasonable Benefit Limits having been abolished.
A lump sum payment to a non-dependant, however, (such as, for a parent of a lost offspring), will be taxed at 15 percent – the exception being recipients who are aged 60 plus.
Andrew Hamilton, managing director of Cavendish Superannuation, says: “The inclusion of life, total and permanent disability (TPD) and income protection insurance in a self-managed super fund will provide various tax concessions as premiums paid for these types of policies are fully tax-deductible for the fund.”
Life insurance traps that can prevent you from getting your payment – or can reduce it – include if the insurer finds the policy-holder has had pre-existing conditions or health issues, following a medical examination. Most policies will also not provide a pay-out if the policy holder committed suicide. Some cheaper life cover policies will only cover for accidents, so it is important to always read the fine print of your insurance.
In addition, if you want to leave death benefits bought through superannuation to someone other than a spouse or a financial dependent, you need to put in place a binding beneficiary nomination – otherwise, it can be left to the trustee’s discretion where it’s allocated.