EFFECT OF NOMINATION UNDER LIFE INSURANCE AND FAMILY TAKĀFUL

It is a requirement that a policyholder or participant who wants to join a life policy or family tākaful certificate must nominate someone to receive the benefits after his/her demise. The issue to be decided here is: in what capacity is the nominee receiving the benefits? This study seeks to examine the status of the nominee of a Muslim policyholder or participant under the Malaysian Insurance and Takaful Laws and Muslim jurists’ views on this issue.

The findings of this research show that there is two juristic views on this issue; one view says that a nominee can only be a trustee and this means the benefits shall be distributed based on al-mīrāth (Islamic law of inheritance) and al-waṣiyyah (bequests), whereas the other view states that a nominee may also be a beneficiary based on al-hibah. Moreover, under the Malaysian Insurance Law as provided by Insurance Act 1996 and current Financial Services Act 2013, the nominee of a Muslim policyholder can only receive the policy benefits as a trustee. On the other hand, the Islamic Financial Services Act 2013 provides that the nominee under a family takāful certificate may be an executor and may also be a beneficiary based on a conditional hibah. This study recommends that the status of the nominee under the family takāful certificate provided by the Islamic Financial Services Act 2013 be the same as that under a trust nomination under the Insurance Act 1996 and the current Financial Services Act 2013, which provides that the nominee is only a trustee. This is in order to achieve maqāṣid al-Sharīʿah.