Early Distribution Insurance

Early distribution insurance protects executors, personal representatives and beneficiaries from claims by unknown dependants under the Inheritance Act 1975.

The Act allows people to claim against an estate if they feel that the estate has unfairly excluded them or not adequately provided for them.

The cover has two elements: 

1. It provides insurance protection to allow the early distribution of the estate;
2. Protection from Inheritance Act claims if the statutory 6-month waiting period is complied with. 

Distributing the Estate Early:

Normally, executors have to wait 6 months after the Grant of Probate is issued before they can distribute the estate, in case any claims are made. This is a requirement under the Act also.

But there are times when it makes sense to consider distributing the estate before the 6-month period ends, such as:

• If the deceased had beneficiaries or dependents who need the funds.

• When the estate is small and simple. Where there are no taxes or debts to pay then it could be possible to distribute the estate quickly.

• When the executors and personal representatives have a good understanding of the estate’s assets and liabilities. If there are no known issues, then it may make sense to distribute the estate earlier.

• When there are no known potential claimants. If there are no people who could claim against the estate, then there is less risk in distributing it early.

• The deceased may have expressed a desire to distribute the estate quickly. Perhaps they wanted to ensure their dependents didn’t struggle financially by waiting an unnecessary period for their inheritance.

If the estate needs to be distributed early, it is sensible to consider insuring against the risk of potential claims from unknown dependents.

A claim can come from a person who believes they fall under the definition of a “dependant” under the provisions of the Inheritance (Provisions for Family and Dependants) Act 1975, and:

1. Where you did not wait until the end of the 6-month expiry period (a claim could be made before the estate was distributed); or

2. Where the statutory period was met before distribution of the estate but where a dependant has a successful claim outside of the statutory limitation.

The people who fall under the definition of the Act are:

• The spouse or civil partner of the deceased

• A former spouse or civil partner of the deceased, if they were married or in a civil partnership for at least two years immediately before the death

• A child of the deceased

• A child of the family of the deceased (this includes stepchildren, adopted children, and children who were treated as children of the family by the deceased)

• A dependant of the deceased (this includes people who were financially dependent on the deceased, such as a parent or sibling).

The court can make several orders under the Act, including:

• An order for a lump sum payment

• An order for periodical payments

• An order for the transfer of property

• An order for the variation of the deceased's Will

So as you can imagine, Early Distribution Insurance claims can be sizeable.

The cost of early distribution insurance will vary depending on a number of factors, including:

• The size of the estate;

• The complexity of the estate; and

• The likelihood of a claim being made.

Our insurance cover, provided by CLS Property Insight has a minimum premium of £112 (including Insurance Premium Tax). So not a huge cost for the peace of mind the insurance provides.

If a claim occurs on an early distribution insurance policy you must adhere to all the claims conditions listed in the policy.

Failure to do this could mean the insurer rejects your claim, or they could reduce the value the policy pays out if the breach of conditions increases the value of the loss.

You should ensure you read and understand all of the policy conditions listed in the policy.

Here are some pointers on what you should do in the event of a claim:

1. You should never tell a third party about the existence of this policy.

2. If there are circumstances that might cause a claim, you must tell the insurer in writing as soon as possible. You should also provide the insurer with as much information and documentation as you can.

3. Don't incur any costs relating to a claim without first consulting your insurer

4. Never admit liability or offer to pay or settle with someone else. You should refer the matter to your insurers claims team.

5. Pass all correspondence and requests for meetings to your insurer's claims team.

For full details of your claims conditions, you must read your policy wording or speak to the insurer's claims team for guidance.

If there aren’t funds in the estate to pay for the insurance protection upfront, you and the beneficiaries don’t need to worry.

Insuristic customers can fund the cost of any of our Probate Insurance Policies with our partner, FSL Finance.

The loan is simple to arrange, with 90% of applications being accepted immediately.

There are no arrangement fees or early repayment charges. 

Once a loan is approved, the money is paid to Insuristic to finance your insurance policies.  You will then need to pay FSL Finance a monthly amount until the loan is repaid.

If you need cover before the loan is repaid, we can help you.  Instructions on what to do in this scenario will be provided in your quotation.

You can find out more or start an application on our Probate Loans page.