There have been changes to Schedule 2 of the Insurance Act 18 of 2017, where the definition of the term “beneficiary” has been redefined. These changes imply that the benefits of the unapproved group life and funeral policy will only be paid to a beneficiary/ies that have been nominated on a valid beneficiary nomination form.
 

" If there is no valid beneficiary nomination form, the unapproved group life and funeral policy will be paid into the deceased’s estate." 

 
Prior to these changes, the funeral policy proceeds were paid at the discretion of the employer, following an interaction with the deceased employee’s family to cover the funeral costs. The funeral policy is usually payable within 48 hours.

What is an unapproved group life policy?

An unapproved group life policy is a policy, underwritten by a Life Company, that is offered by an employer to their employees. It is provided outside of the retirement fund benefit and is not subject to the Pension Fund Act regulations. This means that in the event of death, the proceeds from the unapproved policy will not be paid with the pension fund proceeds, where the trustees use their discretion to determine beneficiaries as well as the percentage allocation to the identified beneficiary. Instead, the proceeds will be paid out to the nominated beneficiary/ies as per the valid beneficiary nomination form. This form must have been completed, signed and submitted to the human resource department of your company.

A valid Last Will and Testament is as important as a valid beneficiary form for the unapproved group life and funeral policy. The beneficiary forms can be obtained from the human resources department who will keep the forms for all employees and will submit the forms to the insurer in the event of death.

There are several consequences that are linked to the payment of the proceeds into the deceased’s estate. If the proceeds of the group life policy are paid to the deceased’s estate, the proceeds might not be distributed according to the deceased’s wishes and may add unnecessary avoidable costs to their estate. The funeral policy might not be available for its required purpose, which is to finance the funeral costs. This could result in lengthy delays and might leave the dependents in financial distress while they await the availability of funds from the deceased’s estate.

As part of good financial planning, it is important that you discuss your group risk benefits with your financial advisor and see how these changes will affect you. The beneficiary nomination form should be updated regularly. Factors such as marriage, having children or getting divorced should prompt an update to the beneficiary nomination form. If this is not already done, it would be in your best interest to reach out to your human resources department to confirm that you have an updated and valid beneficiary form in place. Failure to do this may lead to a delay in distribution of benefits and payments may not be made in accordance with your final wishes.