Exceptions: group life policies: conditions about nature of persons intended to benefit
In order to qualify to be an excepted group life policy, there are also rulesrestricting who may receive the death benefits payable under the policy. In general, theexception from the chargeable event rules only applies to policies where the beneficiarieson death are the families, dependants or nominated charities of the deceased. This can bedirectly, or indirectly by way of a trust, as is common with group policies set up toprovide death benefits to the dependants of the deceased.
Beneficiaries of the death benefits are restricted to individuals and charities
The beneficial recipients of any death benefits paid under the policy must beindividuals or charities. Charities are included to allow for the case where an individualmight nominate all or part of the death benefit to be paid to a charity in the event ofthat individuals death. This is subject to the group membership rightcondition described in the next section.
Thus, for instance, a policy held by a company on the lives of its employees where thecompany is the beneficiary of the death benefits (sometimes referred to in the industry asdead peasant policies) would not meet this condition. Similarly, a loanprotection collective life policy where the lending company has first call on the deathbenefit to pay off an outstanding loan also would not qualify.
Death benefits may be paid to the personal representatives of the estate of the deceasedwithout causing this condition to be failed.
Group membership right condition
No individual whose life is insured under the policy, or any individual connected withsuch an individual, may directly or indirectly receive death benefits on the death ofanother insured person merely because he or she is also one of the persons insured underthe policy, that is, is a member of the insured group.
So, for instance, business-cover type policies which pay benefits to other partners of apartnership or shareholders of a company to enable them to buy out the share of thebusiness owned by the deceased partner or shareholder are not excepted group lifepolicies.
If the insured person receives a death benefit other than by virtue of being a member ofthe group, for instance because they are the spouse of an insured person who has died,this would not in itself cause the policy to fail this condition.
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