Policy Assignments – It Pays To Be Prepared
When couples separate, an insurance policy can often take a back seat.
Many couples take out joint insurance policies, particularly to cover the mortgage on the matrimonial home, if one of them was to die. In any subsequent divorce, parties often want to limit their outgoings and often cancel the insurance policy premium, surrender the policy and divide the proceeds.
Sometimes, one party wishes to take over the premiums on the basis they would receive any subsequent benefit from that policy if it paid out. This agreement was often recorded in a Court Order.
However, clients have recently contacted us where many years after a divorce, policies have matured and despite there being a Court Order in place reflecting that one party will receive the benefits, the insurance companies who have stringent requirements for paying out on the policy are refusing to follow the terms of the Court Order.
To compliment a Court Order directing payment of benefits under a policy, a formal assignment should also be prepared and approved by the insurance company, stating that one party has transferred their interest in the policy.
Even where this has been done, we are finding, when the policy matures, insurance companies are hesitant to pay proceeds to only one party. They offer to pay the proceeds into a joint bank account. As parties have been separated for many years there is inevitably no joint account. The company then require a letter of authority supported by documentary evidence confirming the identity and parties’ addresses. Where parties have been separated for years, they may not know the other’s whereabouts and obtaining that information can be difficult. Recently we instructed an Enquiry Agent to discover the whereabouts of the other party, who had moved abroad. They then had to comply with strict requirements from the insurance company. The process took twelve months to resolve, whilst the insurance company sat on thousands of pounds of policy proceeds.
A simple checklist can stop this happening:
- Ensure the Court Order reflects what is to happen to any proceeds of the jointly owned policy.
- Prepare and execute an assignment of the benefits of any policy which is approved and acknowledged by the insurance company.
- Prepare a letter from both parties authorising the payment out of any proceeds to the recipient party, supported by evidence of the parties’ current identity and address.
This should avoid future problems.
If you would like advice or assistance with an insurance policy following a separation you can call us on 01752 663295 or email Lisa Stanzl at email@example.com