Frequent Questions
Product Information
Helpful Articles
ABI announces new proposals to speed up life insurance payouts
The Association for British Insurers (ABI) has just revealed a proposal aimed at speeding up life insurance payouts to families following a claim.
They have raised the possibility of allowing immediate tax-free payments of a portion of the sum assured in all life insurance policies. Such changes to life insurance regulations could potentially provide much needed financial support to families at a time of great difficulty.
Under current regulations, when someone with a life insurance policy dies, families can end up waiting months for any payment. This is because unless it has been placed in trust, the sum assured will automatically become part of the deceased individual’s estate and therefore is subject to a lengthy legal process as the courts decide how it should be distributed.
This can cause a great deal of financial hardship during a time of distress when they should be benefiting from the financial security a life insurance policy is intended to provide. It is particularly important in lower income families following the death of a breadwinner, especially since they are least likely to have placed the life policy in trust.
In order to develop this proposal, the AIB will be consulting with consumer groups, member companies and other relevant bodies before disclosing any further details. Crucially, HM Revenue & Customs (HMRC) will be required to revisit its rules and provide clarification that any partial payment can indeed be tax-free.
Should this clarification be made by HMRC, insurance companies would then be able to allow life insurance customers to nominate one or more beneficiaries in the policy. This could work in a similar way to the current rules for group life assurance offered by many companies to their employees where beneficiaries are nominated to receive a ‘death in service’ payment.
Best on Price
Best Service provider in the COVER Excellence Awards 2009!