What is the MBI?
Missing Beneficiary Indemnity Insurance (MBI) offers personal representatives (PR) protection against unexpected claims against them for a share of an estate after distribution. Claims could be made by unidentified known beneficiaries or unexpected beneficiaries not previously known to the family; therefore, an MBI policy is the only real way to get complete peace of mind for public relations.
People insure their homes, cars, even pets, but don’t seem to consider MBI to be as important, which may be due to a lack of understanding of the product itself. In fact, the reality is that the coverage provided by an MBI policy could turn out to be just as important and valuable as any of the more common and well-known insurance products; in some cases even more.
The MBI should be considered particularly relevant in cases of intestate succession (when a person dies without leaving a valid will). It is strongly recommended to purchase a policy given the lack of certainty and mystery surrounding these cases, which are historically more sensitive to claims.
Insurance is often described as security coverage, and this certainly applies to MBI policies. It’s also worth pointing out that the term of coverage is in perpetuity – it’s not just an annual policy, it provides coverage for life. To use the terminology of the pet insurance world, this is a lifetime policy and therefore should offer absolute peace of mind to personal representatives.
So how do complaints arise? There are two scenarios where a complaint can arise:
- A known and untraceable beneficiary appears
- Unknown beneficiary surfaces
These are two very real risks that can arise in any case, even those that seem simple, or when the research has been undertaken diligently and in good faith. As in life however, sometimes things don’t always go as planned, and the appearance of a beneficiary – known or unknown – after the distribution can really put the PR in a very difficult financial position.
Assumptions that the insurance policy will not provide coverage when needed or that the value of the estate is too low to justify the cost are not sufficient reasons to ignore purchasing coverage. Often times, PR decides to take the risk by not having cover in place, and for many, that won’t become a problem. After all, insurance as a concept is the combined premiums of several to pay the claims of a few.
However, for the unfortunate few, a claim against them can be a major inconvenience and most unwanted potential financial burden. No one can categorically guarantee that every eligible parent has been found in every case, and these situations do occur.
Even when it seems like each parent has been identified, there is always the possibility that there is more to the story, such as an illegitimate birth. As Donald Rumsfeld has sadly said, there are “known unknowns” and there are also “unknown unknowns”, the latter being the greatest risk in most cases.
Unfortunately, stories of legitimate parents making claims years after distribution aren’t just for the press and filmmakers; it also happens in real life.
Policy purchase process
Insurance has always been about providing peace of mind, and an MBI policy is no different. PR essentially externalizes the chances of a claim occurring to the insurer in exchange for a fee (the premium). The insurer then effectively takes charge of the risk of loss of the PR.
MBI is a niche part of the insurance world and there aren’t many providers in the market. The few that do exist employ specialized underwriters who understand the fundamentals of the market and are experienced in assessing the niche risks presented. The policies will probably be taken out by specialized insurers; it tends not to be a market for familiar names; there are no meerkats or skateboard dogs to see or hear here.
Unlike other areas of the insurance industry, there is not a long list of questions before a quote can be obtained. By marrying the experience of the specialized underwriter with the expertise provided in the original report of the estate genealogist (a copy of which is always required by the insurer before quoting), most of the information required will already be known. Therefore, in most cases, quotes can be produced on demand.
In fact, some insurers will only offer quotes through their probate genealogy strategic partner, such is the level of understanding and trust between them. Anglia Research, authorized and regulated by the Financial Conduct Authority for the property and casualty insurance business, has just such an agreement 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 the capacity provided by Liberty Legal Indemnities, which is part of Liberty Mutual Insurance Europe Ltd, an A rated insurer.
One final point here – if the PR employs a legal professional to administer the estate, it will actually be the responsibility of the legal practitioner to establish the policy on behalf of the PR. But neither they nor the PR should be put off by preconceptions about whether obtaining an MBI is difficult or stressful – it very often is not – and it is a very smart way. and practice to mitigate risk.
Expense and type
Cost is of course a consideration. Bonuses are generally in the range of 0.5% to 1% of the total net worth of the wealth to be distributed, which, overall, should be considered competitive, although there are a few other scoring factors. . The quotes given are individually tailored as each case is considered on its own merits – there are no fixed or fixed premiums.
As with all non-compulsory insurance products, the choice is entirely up to the individual. The decision shouldn’t just come down to cost, if possible. Getting a quote will at least establish the likely expenses, helping the PR in their budgeting and decision making.
Premiums will reflect the level of coverage sought and will be widely offered on the following options:
- Known missing beneficiaries
- No known missing beneficiary
- A combination of known missing beneficiaries and unknown potential beneficiaries
- A combination of the above option and the missing protection
There’s no denying that MBI coverage is another real estate expense, further reducing the overall value of the estate. However, it could prove invaluable to the PR if things don’t go as planned, and should be considered a reasonable estate expense.
Ultimately, it is the PR who will be responsible for rectifying a problem after an estate is distributed, so it is largely the PR’s decision to proceed with the purchase of insurance coverage. to give them personal protection.
It is hard not to conclude that MBI should be considered by all personal representatives. However, each case is of course unique, so the decision whether or not to buy a policy should be carefully weighed.
The size of the estate shouldn’t be considered in most cases – just because an estate is of less value doesn’t mean less insurance. After all, a missing beneficiary can appear anytime, anywhere, in any case, regardless of the value of the estate.
The key to remember is this: if in doubt, get a quote.
Ultimately, it is the PR who will be responsible for rectifying a problem after an estate has been misallocated, so it is largely the PR’s decision to proceed with the insurance coverage. Realistically though, and at a one-time cost of probably a few hundred pounds, this is the only way to truly mitigate the risk of RA.
If you would like more information about MBI, please contact Anglia Research at [emailÂ protected]
This article has been submitted for publication by Anglia Research as part of their advertising agreement with Today’s Wills and Probate. The opinions expressed in this article are those of the author and not those of Today’s Wills and Probate.