To quote Benjamin Franklin, the only two constants in life are death and taxes. The subject of death in our African culture has long been regarded as taboo. While this is the norm, it does not negate the fact that we must put in place measures to safeguard the livelihoods of our loved ones in the unfortunate event of our demise.
One of the measures available to employers in providing this safety net to employees and their families is group life insurance. This cover guarantees a payout of a specified sum to the employee’s dependents in the event of death while on the job. In this case, the employer will manage the distribution and safekeeping of the funds.
The options available to the employer for paying out these death benefits include:
Nomination of beneficiaries
A nominated beneficiary is a person or an entity that the employee has chosen to receive the proceeds or the benefits. This information is typically captured in the nomination of the beneficiary’s form provided at the point of taking up the cover or joining employment.
It is always crucial to keep this information updated to ensure that the intended beneficiary receives the benefits. Where the form is available, the death-in-service benefits will be distributed as per the employee’s wishes.
However, there are instances where the employer or the trustees can overrule the nomination of beneficiary form, these include;
Where one of the nominated beneficiaries has since passed on. The benefits would typically go to the secondary beneficiary if one was named. If none was named the benefits may go to the deceased beneficiary’s estate.
Where there are children not declared and they present themselves as dependents of the employee.
Where a third party not nominated as a beneficiary obtains letters of administration to the estate of the deceased staff.
In the case where school-going children are the beneficiaries and one has completed their studies, the trustees may allocate a higher percentage to the ones still in school to cater for their education expenses.
Should the above scenarios occur, the employer or trustees have a duty of care to exercise due diligence in the allocation of the benefits.
Another option available to employers is to hold the insurance benefits paid in trust, which mainly happens where all the beneficiaries listed are minors. This ensures that the funds are managed and used for the children’s well-being until they attain a certain age or meet specified criteria.
Trust funds offer a professionally managed vehicle that ensures that benefits left after an employee’s demise serve their intended purpose.
The monies are invested suitably, and the beneficiaries can make periodic withdrawal requests for expenses such as school fees, upkeep, and medical expenses. The person or entity responsible for the minor will act as the administrator of the trust fund.
A will and a nomination of beneficiary form will serve different purposes. They each have their own distinct functions when it comes to the distribution of assets upon death. A nomination of beneficiary form as described earlier is typically used for life insurance policies and pension accounts.
On the other hand, a will is a legal document that spells out a person’s wishes for the distribution of their assets such as real estate and personal property.
Lastly, a scenario may arise where the employer may be required to distribute these insurance benefits in the absence of a nomination of beneficiary form or will. The employer through the trustees will decide on the most suitable way to distribute the benefits, based on their knowledge and due diligence.
Should a claimant present themselves, they must provide a request in writing for payment of the amount due. This should be accompanied by a certified copy of the Certificate of Probate or Letters of Administration issued by the Court.
These procedures aim to provide a clear framework for the distribution of insurance benefits in different scenarios, prioritising the employees’ wishes and the well-being of their families.