Life insurance is there to pay your family when you die. A mistake on your application, a missed payment or an old nomination can mean they get less, get nothing or see the money go to someone else. Your family finds out when they make a claim, and by then it's too late to fix.
You might sign an application without checking the answers your agent entered, miss a payment after your bank card is replaced, or forget to update your nomination after getting married. Switching to a new policy also restarts waiting periods that had already ended on your old one.
| Mistake | What Can Happen | How To Avoid It |
| Giving wrong or incomplete answers on your application | The insurer may reduce or reject your claim, or cancel your policy. | Answer every question fully and accurately. Check the completed form before signing. |
| Not paying before the grace period ends | Your policy can lapse, and any attached benefits end with it. | Set up automatic payments and act promptly on payment or lapse warnings. |
| Keeping an outdated nomination | The payout goes to someone you no longer want to receive it, or becomes part of your estate. | Review your nomination after marriage, divorce or the birth of a child. |
| Switching policies without checking the new terms | Waiting periods and exclusions restart, and you must answer health questions again. | Check the new terms and keep your existing policy until the new one is approved and issued. |
How To Answer The Questions On Your Application
For life insurance bought for personal or family use, the Financial Services Act 2013 sets out your responsibilities when applying for cover. The Islamic Financial Services Act 2013 has similar rules for family takaful.
Answer every question on the insurance application form, also called a proposal form, fully and accurately. Your legal duty is to take reasonable care not to give wrong or misleading information. You must also tell the insurer about anything else you know is relevant to its decision, even if the form doesn’t ask about it directly.
Health questions ask about things like conditions diagnosed by a doctor, hospital stays, surgery, medication and test results over a set period. Include a condition if the question covers it, even if you think it was minor or has been resolved.
That includes a childhood operation or a high blood pressure reading that your doctor asked you to monitor. If a question asks about symptoms, include them even if you haven’t received a diagnosis.
Whether you smoke, the work you do and hobbies such as diving or motorsport can affect your premium. Answer these questions honestly too.
If a question asks about the last five years, answer for that period. You must still tell the insurer about older information that you know is relevant to its decision. If you’re unsure whether to include something, ask the insurer in writing and keep its reply.
Before signing the application form or submitting an online application:
- Read every answer, even if your agent completed the form or an app filled in some details automatically.
- Check dates, diagnoses and medication names against your medical records.
- Keep a copy of the completed form with your policy documents.
- If you find a mistake, tell the insurer in writing immediately and ask it to confirm the correction.
If a wrong answer comes to light when your family makes a claim, what the insurer can do depends partly on how long your policy has been active.
During the first two years, the insurer has more options, depending on whether the mistake was deliberate, careless or honest. After more than two years, it can cancel the policy over a wrong answer only if it proves both that the information would have affected its decision and that the answer was given fraudulently.
Our guide to why life insurance claims get rejected explains the possible outcomes, including an example of how an insurer may reduce a payout.
How To Keep Your Policy From Lapsing
A grace period gives you extra time to pay after your premium is due. Your cover remains active during this period. Check your policy and Product Disclosure Sheet (PDS) for the exact length. Many life plans allow 30 or 31 days, but some allow only 15 days for monthly payments.
What happens after the grace period depends on your policy type. Our guide to term life, whole life and investment-linked insurance explains your options if you can’t keep paying your premiums.
An investment-linked plan (ILP) can lapse even if you’ve paid every premium. Our guide to ILPs explains why this can happen and how to use your insurer’s yearly sustainability statement to check how long your cover is expected to last.
If your policy lapses, any attached benefits, called riders, also end. This includes a medical card attached to the policy.
To restore the policy, a process called reinstatement, you’ll need to pay the overdue premiums. The insurer may also ask you to answer health questions again. Waiting periods can start again from the reinstatement date, so an illness diagnosed during that time may not be covered.
Set up automatic payments from an account with enough money to cover your premium. Update your payment details promptly if you change banks or replace your card. Check that each payment goes through, because a failed automatic payment counts as a missed payment.
How Your Nomination Decides Who Gets The Payout
A nominee is someone you name to receive your insurance payout when you die. Making a nomination allows the insurer to pay without your family first obtaining a grant of probate or letters of administration. These are court documents needed to manage your estate.
Without a nominee, the insurer pays the executor or administrator responsible for managing your estate. If neither has been appointed, the insurer may choose to pay your spouse, children or parents without these court documents. It doesn’t have to, so your family may still need to obtain the documents first.
Whether your nominee can keep the payout depends on your religion, who you nominate and whether you have conventional life insurance or family takaful. A beneficiary receives the money for their own benefit. A nominee acting as an executor must pass it on to the people entitled to it.
Nominations By Non-Muslim Policyholders On Conventional Policies
For a non-Muslim policyholder, nominating a spouse or child creates a trust under Schedule 10 of the Financial Services Act 2013. The same applies if you nominate a parent and have no living spouse or child. Under this arrangement, the payout belongs to the nominee.
You need the trustee’s written consent to change the nomination, end the policy early or use it as security for a loan. You can’t appoint yourself as trustee.
If you nominate someone else, such as a sibling or friend, no trust is created. The same applies if you nominate a parent while you have a living spouse or child.
In these cases, the nominee receives the payout as an executor. They must distribute it according to your will or, if you have no will, the Distribution Act 1958.
You can appoint a trustee on the nomination form. If you don’t appoint one, an adult nominee acts as their own trustee.
For a nominee under 18, the trustee is the child’s other parent. If there’s no surviving parent, it’s Amanah Raya Berhad or a trust company you’ve chosen.
Nominations By Muslim Policyholders On Conventional Policies
For a Muslim policyholder with conventional life insurance, the nominee receives the payout as an executor, regardless of their relationship to the policyholder. They must distribute the money according to Islamic law.
If you want a particular person to keep the payout, ask your insurer about assigning the policy to them.
Nominations On Family Takaful Plans
Family takaful has its own nomination rules, and they apply to every participant, whatever their religion. Your nomination form lets you choose whether someone receives the payout as:
- An executor, who must distribute it as part of your estate.
- A beneficiary under a conditional hibah, who receives it as a gift when you die.
Under Schedule 10 of the Islamic Financial Services Act 2013, a conditional hibah beneficiary owns the takaful benefits when you die. The benefits don't become part of your estate and can't be used to pay your debts. If you took out the plan to cheat your creditors, they can claim back the contributions you paid.
When To Review Your Nomination
Marriage, divorce or the birth of a child does not automatically update your nomination. For example, a nomination naming your parents remains in place after you marry until you cancel or replace it.
If the nomination created a trust, you need the trustees’ written consent to change it. In this example, your parents are the trustees unless you appointed someone else.
If your only nominee dies before you or at the same time as you, the nomination no longer applies. You can name more than one nominee and specify the share each should receive, but the outcome differs if one dies before you.
For conventional life insurance, that nominee’s share goes to the remaining nominees. For family takaful, a conditional hibah beneficiary’s share becomes part of your estate unless you name a replacement.
What To Check Before You Switch To A New Policy
A new insurer assesses your application based on your current age and health. A condition you developed after buying your existing policy may be excluded from the new cover or result in a higher premium. You must also answer the new application questions fully and accurately.
Waiting periods and exclusions that apply for a set period start again from the new policy’s issue date. This includes the suicide exclusion, which usually applies during the first 12 months.
Read any section in the PDS explaining the disadvantages of switching. If your existing policy is an ILP, you may also face charges for ending it early. Our guide to ILPs explains these surrender charges.
RinggitPlus compares term life plans from 11 insurers and takaful operators. You can check the eligible ages and minimum amount of cover, called the sum assured, to shortlist plans before applying.
Keep your existing policy until the new one has been approved and issued.
The new policy’s 15-day free-look period gives you time to review its terms and cancel it if they aren’t what you expected.
Frequently Asked Questions
Does my policy still pay out if I die during the grace period?
Yes. Your cover remains active during the grace period, so the insurer will still pay a valid claim. It may deduct the unpaid premium from the payout.
Do I have to tell my insurer if my health changes after the policy starts?
No, not for your existing cover, unless your policy says you must. Some contracts ask you to report certain changes, so check yours.
You must provide relevant information again if you apply to add a rider or increase your sum assured. The insurer may also ask you to answer health questions when you apply to restore a lapsed policy.
Can my family still claim if I never named a nominee?
Yes. Without a nominee, the insurer pays the executor or administrator responsible for managing your estate. If neither has been appointed, it may choose to pay your spouse, children or parents without court documents.
Otherwise, your family will need the relevant documents, such as a grant of probate, letters of administration or a distribution order, before the insurer releases the money.
