MOST insurance policyholders need not do anything in the light of the new Insurance Nomination Act if they already have a will, say financial advisers.

But if they have no will and have not nominated a beneficiary - especially for policies bought after 2002 - they may be well advised to make a nomination now.

The new regime, which took effect on Sept 1, gives policyholders greater flexibility to change nominated beneficiaries - for example, after a divorce.

First Principal Financial's chief executive Mohamed Salim is encouraging life policy clients to consider nominating beneficiaries under the new regime.

'The new framework is a very simple, useful and convenient way for policyholders to specify who they wish to distribute their policy benefits to. And unlike a will, which costs money, it is free,' he said.

It is suitable for those dealing with a single asset like an insurance policy and who want to avoid the hassle of making a will, or are not ready do so, he said.

Prior to the new regime, most policyholders who wanted to name beneficiaries were encouraged to draw up a will.

Those who may want to make nominations under the latest framework include new and existing policyholders who have previously not made nominations or have nominated someone other than a spouse and/or children, said Ms Ang Kim Lan, director of Goodwins Law Corporation.

The plans affected by the new regime are: life policies, accident and health plans with benefits.

One exception is policyholders of insurance cooperative NTUC Income.

This is because its policy proceeds are paid to nominees under a different law - the Cooperative Societies Act - allowing a cooperative member to make a nomination, which can include spouse, children, relatives and friends.

For Income policyholders, fresh nominations or changes to current nominations will come under the new framework, she added.

Before 2002, nominations were allowed by insurers but the legality of these nominations was unclear back then, which led to confusion and, in some cases, lawsuits.

The lack of clarity prompted most insurers to do away with nominating beneficiaries in life policies in 2002.

Given this complex backdrop, the Life Insurance Association encourages policyholders to check first with their insurers as to whom - if anyone - they had nominated before making fresh nominations.

The new law does not apply retrospectively to existing policies with previous nominations of spouse and/or children, even if the spouse was later divorced. This is because a statutory trust was created in such cases so the policyholder relinquishes all rights to the policy.

Under the new nomination regime, customers have two choices - make a trust nomination, which can be changed later with the consent of all nominees, or a revocable nomination. Each comes with a prescribed nomination form obtainable from the insurer.

When completing the forms, the policyholder must specify the percentage share of the policy proceeds that each nominee is to receive. Two witnesses of at least 21 years of age must also be present. When completed, notify the insurer and send the completed form to the firm.

It may seem logical to make nominations a standard compulsory feature for life policies, but it never was because some consumers preferred to have a will or they had not made up their minds on who they wished to nominate.

Also the legalities surrounding nominations were not very clear in the past.

lorna@sph.com.sg