Legal Tips

Third Party Policies

Document Date: 10-Mar-2011

1. What is a third party policy?
2. What happens upon the death of the life assured?
3. What happens upon the death of the policyholder?
4. When are the insurance proceeds payable?
5. What if both the life assured and the policyholder die at the same time?

1. What is a third party policy?

   A third party policy is one where the policyholder buys protection for himself against the death of a person other than the payer or the owner (himself) of the policy.  Often, the cover is on the life of another person on whom he may be financially dependant. The policy is bought for the benefit of the policyholder and not the life assured. eg. in a creditor - debtor relationship, or an aging parent who is financially dependent on the life of a child who is supporting him/her. Insurable interest must be present in taking up such policies.

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2. What happens upon the death of the life assured?

   The insurance proceeds are payable to the policyholder.

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3. What happens upon the death of the policyholder?

   Upon the death of the policyholder, the policy continues as long as Income continues to receive premium, or unless the legal representative of the policyholder’s estate steps forward to request for the policy to be surrendered upon which any cash value accruing under the policy will be paid to the policyholder's estate.
   
   If the policy is not surrendered, and life assured subsequently dies, NTUC Income will pay the insurance proceeds to the policyholder’s estate.

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4. When are the insurance proceeds payable?

   The proceeds are payable only upon the death of the life assured.

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5. What if both the life assured and the policyholder die at the same time?

   A third party policy continues as long as NTUC Income continues to receive premium, or unless the legal representative of the policyholder’s estate steps forward to request for the policy to be surrendered.
   
   If the policy is not surrendered, and life assured subsequently dies, NTUC Income will pay the insurance proceeds to the policyholder’s estate.
   
   Hence, if the life assured and policyholder die at the same time, the insurance proceeds will still be paid to the policyholder’s estate upon death of the life assured.

[Ref: LG/VY/Mar 2011]