What happens if no heir is nominated?

November 17, 2017

When it comes to funeral cover, it’s important to name an heir. But what happens with no heir named?

With no heir, the executor or your estate gets paid. This can lead to family squabbles and lengthen the payment time. In this post, we look at what might happen in such a case should the executor not be paid.

No heir Named and the Outcome

Mr X applied for funeral cover for himself, his wife and their kids. At that stage, he chose not to name an heir. He and his wife soon divorced but did not inform the insurer.

He died three years later. His ex-wife lodged a claim without disclosing the fact that they were divorced, and was paid out.

Later the company received another claim which came from the deceased’s current partner and common-law wife. She was acting as the executrix of the estate. The insurer refused to pay the claim on the grounds that it had paid it out already.

Their argument was that they had acted in good faith based on the information they had. They suggested that the estate claim the funds back from the ex-wife as they believed they had paid out correctly.

No heir Named and What the Ombudsman said –

No heir NamedThe policy had no provisions that would entitle the insurer to pay the money to the ex-wife. What should have happened in this case, was that the insurer should only have paid out to the person listed on the Letters of Executorship.

The insurer had a duty to pay the amount to the deceased’s estate. However, the insurer said that it was common practice to pay the benefit in such cases to the undertaker or the legal partner.

The Ombudsman was not satisfied that the company had ruled fairly in terms of the rightful beneficiary. They acted in good faith but not in terms of the contract.

While no one denied that the company had been misled by the ex-wife, the fact that they were misled is not a defence. They had a duty to ensure that the money was paid to the correct person and failed in that duty.

The Ombudsman agreed that someone should try to recover the funds from the ex-wife and it was the insurer’s duty to do so. The insurer’s claim that the complainant should try and recover the money themselves was held to be incorrect.

What it Finally came Down to –

The Ombudsman issued a ruling that the insurer was to pay out the full amount of the claim to the rightful beneficiary. They were to pay interest on the funds and compensation as well.

This was due to the inconvenience and upset that the insurer had caused by arguing a defence that was not legally correct. The company made an error and so should have admitted it. They did pay in terms of the ruling handed down.

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All info was correct at time of publishing