Missing Beneficiary Indemnity Insurance – Protection for Personal Representatives
What is MBI?
Missing Beneficiary Indemnity Insurance (MBI) offers Personal Representatives (PR’s) protection from unexpected claims against them for a share of an estate following distribution. Claims could be made by untraced known beneficiaries, or unexpected beneficiaries who were previously not known to the family; therefore, an MBI policy is the only true way of obtaining total peace of mind for PR’s.
People insure their house, their car, even their pets, yet do not seem to consider MBI as equally important, which is maybe due to a lack of understanding around the product itself. In fact, the reality is the cover provided by an MBI policy could well turn out to be just as important and valuable as any of the more mainstream, well-known insurance products; in some cases, even more so.
MBI should be considered as particularly relevant in intestacy cases(when someone passes away without leaving a valid will). It is strongly recommended that a policy is taken out given the lack of certainty and mystery around these cases, which are historically more susceptible to claims.
Insurance is often described as a safety blanket, and this definitely applies to MBI policies. It is also worth pointing out that the duration of cover is in perpetuity – this isn’t just an annual policy, this offers cover for life. To use terminology from the pet insurance world, this is a lifetime policy, and therefore should give absolute peace of mind for Personal Representatives.
So, how do claims arise? There are two scenarios where a claim can arise:
- A known beneficiary that couldn’t be found appears
- An unknown beneficiary surfaces
These are two very real risks that can crop up on any case, even those that appeared straightforward, or where research has been undertaken diligently and in good faith. As in life though, sometimes things don’t always go to plan, and the appearance of a beneficiary – known or unknown – after distribution really can put the PR in a very difficult position financially.
The assumptions that the insurance policy won’t offer cover when needed, or that the estate value is too low to justify the cost are not reasons enough to ignore taking out the cover. Often PR’s decide to risk it by not having cover in place, and for many this will not develop into an issue. After all, insurance as a concept is the combined premiums of the many to pay for the claims of the few.
However, for the unfortunate few, a claim against them can be a massive inconvenience and a most unwanted potential financial burden. Nobody can categorically guarantee that every entitled relative has been found on any case, and these situations do arise.
Even where it appears that every relative has been identified, there is always the possibility of there being more to the story, such as an illegitimate birth. As Donald Rumsfeld once infamously said, there are “known unknowns” and there are also “unknown unknowns”, with the latter being the greater risk in most cases.
Regrettably, stories of rightful relatives making claims some years after distribution are not reserved solely for the press and movie makers; it happens in real life too.
Policy Buying Process
Insurance has always been about offering peace of mind, and an MBI policy is no different. The PR is essentially outsourcing the chances of a claim arising to the insurer in exchange for a fee (the premium). The insurer is then effectively taking on the PR’s claim risk.
MBI is a niche part of the insurance world and there aren’t that many providers out there in the market. The few that there are employ specialist class underwriters who understand the fundamentals of the market and are experienced at assessing the niche risks presented. The policies will most likely be underwritten by specialist insurers; this tends not to be a market for household names; there are no meerkats or skateboarding dogs to be seen or heard here.
Unlike other areas of the insurance industry, there isn’t a long list of questions before a quote can be obtained. By marrying the experience of the specialist underwriter with the expertise provided within the original report of the probate genealogist (a copy of which is always required by the insurance provider before quoting), the majority of the required information will already be known. Therefore, in most cases, quotes can be produced on demand.
In fact, some insurance providers will only offer quotes via their strategic probate genealogy partner, such is the level of understanding and trust between them. Anglia Research, authorised and regulated by the Financial Conduct Authority for indemnity insurance business, has just such an arrangement with its long-standing insurance partner, Isis Conveyancing Insurance Specialists.
Despite its slightly misleading name, Isis has the expertise to handle all MBI insurance requirements, with capacity provided by Liberty Legal Indemnities, part of Liberty Mutual Insurance Europe Ltd, an A-rated insurer.
One last point here – if the PR is using a legal professional to administer the estate, it will actually be the legal professional’s responsibility to arrange the policy on the PR’s behalf. But neither they nor the PR should be put off by any pre-conceptions on whether obtaining MBI is difficult or stressful – it very often isn’t – and it is a very sensible and practical way to mitigate risk.
Expense and Type
Cost is of course a consideration. Premiums typically are in the region of 0.5% to 1% of the net total estate value for distribution which, by and large, should be considered as competitive, though there are a few other rating factors. Quotes given are individually tailored as every case is looked at on its own merits – there are no fixed or set premiums.
As with all non-compulsory insurance products, the choice is entirely up to the individual. The decision shouldn’t come down solely to cost if all at possible though. Getting a quote will at least establish likely expense, helping the PR with their budgeting and decision-making.
Premiums will be reflective of the level of cover sought and will broadly be offered on the following options:
- Known missing beneficiaries
- No known missing beneficiaries
- A combination of known missing beneficiaries and potential unknown beneficiaries
- A combination of the above option plus missing will protection
There is no getting away from the fact that MBI cover is another estate expense, further reducing the overall estate value. However, it could turn out to be invaluable for the PR should things not go to plan, and should be considered as a reasonable estate expense.
Ultimately it is the PR who will be left with the responsibility of rectifying an issue after an estate has been distributed, so it is very much the PR’s decision on whether to proceed with purchasing insurance cover to give them personal protection.
It’s hard not to come to the conclusion that MBI should be considered by all Personal Representatives. However, each case is of course unique, so a decision on whether to purchase a policy should be carefully weighed up.
The size of estate shouldn’t be a consideration in most cases – just because an estate is of a lower value doesn’t make the insurance any less important. After all, a missing beneficiary can appear any time, any place, on any case, regardless of estate value.
The key take away is: If in any doubt, get a quote.
Ultimately it is the PR who will be left with the responsibility of rectifying an issue after an estate has been distributed incorrectly, so it is very much the PR’s decision on whether to proceed with insurance cover. Realistically though, and for the sake of a one-off cost of likely a few hundred pounds, it is the only way to genuinely mitigate the PR’s risk.
If you’d like further information on MBI then please do get in contact with Anglia Research on [email protected]
This article was submitted to be published by Anglia Research as part of their advertising agreement with Today’s Wills and Probate. The views expressed in this article are those of the submitter and not those of Today’s Wills and Probate.