LLQP StudyGuide PlannerPrep Sample

LLQP$Study$Guide$2021$
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Table!of!Contents !
LLQP$Competency$Profile$.............................................................................................$4!
Ethics'and'Professional'Practice!.............................................................................................................................!4!
Rules'and'Principles'Governing'the'Activities'of'Life'Insurance'Agents'and!Accident'&'Sickness'
Insurance'Agents!.........................................................................................................................................................!4!
Life'Insurance!................................................................................................................................................................!4!
Accident'and'Sickness'Insurance!............................................................................................................................!6!
Segregated'Funds'and'Annuities!............................................................................................................................!7!
Ethics$and$Professional$Practice$.................................................................................$10!
Legal'Framework'Governing'Life'Insurance!....................................................................................................!10!
General'legal'principles'applicable'to'an'agent!.............................................................................................!11!
Public'insurance'and'retirement'regimes!........................................................................................................!14!
Other'relevant'legislation!......................................................................................................................................!15!
Insurance'Policy'Provisions!...................................................................................................................................!17!
Formation'of'policy!..................................................................................................................................................!18!
Term'and'termination'of'policy!...........................................................................................................................!19!
Termination'by'the'insurer!....................................................................................................................................!20!
Assignment'of'a'policy!............................................................................................................................................!21!
Product'specific'policy'provisions!.......................................................................................................................!21!
Life'Insurance,'Accident'&'Sickness'Insurance'and'Annuity'ClaimsFPayment'of'Proceeds!............!26!
Rules'and'Principles'Governing'the'Activities'of'Life'Insurance'and'Accident'and'Sickness'
Insurance'Agents!......................................................................................................................................................!30!
Agent!principles!and!rules:!.................................................................................................................................!34!
Licensing!process!and!regulations!..................................................................................................................!39!
Life$Insurance$............................................................................................................$42!
Introduction'to'Life'Insurance!..............................................................................................................................!42!
Financial'Impact'of'Death!......................................................................................................................................!42!
Risk'Management'Strategies!................................................................................................................................!43!
Term'Life'Insurance!..................................................................................................................................................!45!
Whole'Life'and'TermF100'Insurance!..................................................................................................................!49!
NonFparticipating'vs.'Participating'Whole'Life'Policies!...............................................................................!50!
Non?forfeiture!Benefits!........................................................................................................................................!50!
Advantages'of'Whole'Life'Insurance!..................................................................................................................!51!
Disadvantages'of'Whole'Life'Insurance!............................................................................................................!52!
TermF100'(TF100)'Life'Insurance!.........................................................................................................................!52!
Universal'Life'Insurance'(UL)!................................................................................................................................!54!
Riders'and'Supplementary'Benefits!...................................................................................................................!58!
Advantages!of!Riders!and!Supplementary!Benefits!.................................................................................!60!
Disadvantages!of!Riders!and!Supplementary!Benefits!...........................................................................!60!
Group'Life'Insurance!...............................................................................................................................................!62!
Replacement!Contracts!........................................................................................................................................!64!
Taxation'of'Life'Insurance'and'Tax'Strategies!................................................................................................!67!
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Business'Life'Insurance!...........................................................................................................................................!75!
Application'and'Underwriting!..............................................................................................................................!79!
Assessing'the'Client’s'Situation!...........................................................................................................................!84!
Recommending'an'Insurance'Policy!..................................................................................................................!89!
Ongoing'Service!.........................................................................................................................................................!94!
Accident$and$Incident$Insurance$..............................................................................$100!
Financial'Protection'Provided'by'Accident'and'Sickness'Insurance!......................................................!100!
Insurance'to'Protect'Income!..............................................................................................................................!104!
Individual'Disability'Insurance!............................................................................................................................!105!
Group'Disability'Insurance!..................................................................................................................................!111!
Creditor'Disability'Insurance!...............................................................................................................................!113!
Insurance'to'Protect'Assets!.................................................................................................................................!115!
Insurance'to'Protect'Businesses!........................................................................................................................!126!
Client'Profile!.............................................................................................................................................................!131!
Insurance'Recommendation,'Contract'and'Service'Needs!......................................................................!141!
Group'Plan'Specifics!..............................................................................................................................................!149!
Co?ordination!of!benefits!...................................................................................................................................!154!
Agent’s!service!role!..............................................................................................................................................!154!
Annuities$and$Segregated$Funds$..............................................................................$157!
Investment'and'Savings!........................................................................................................................................!157!
Segregated'Funds!...................................................................................................................................................!164!
Annuities!....................................................................................................................................................................!171!
Investor'Profile!........................................................................................................................................................!179!
Segregated'Fund'and'Annuity'Recommendation!........................................................................................!211!
Segregated'Fund'Contract!...................................................................................................................................!217!
Annuity'Contracts!...................................................................................................................................................!223!
Group'Retirement'and'Investment'Plans!.......................................................................................................!226!
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LLQP$Competency$Profile$
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Ethics$and$Professional$Practice$
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Legal$Framework$Governing$Life$Insurance$
• Integrate!into!practice!the!legal!aspects!of!insurance!and!annuity!contracts!
o Delimit!the!legal!framework!governing!life!insurance!
Insurance$Policy$Provisions$
o Characterize!the!parties!involves!in!the!contract!
o Contextualize!the!rules!relating!to!the!contract’s!formation,!taking!effect,!reinstatement!and!
termination!
o Explain!the!main!provisions!and!clauses!of!an!insurance!or!annuity!contract!
Life$Insurance,$Accident$&$Sickness$Insurance$and$Annuity$ClaimsJPayment$of$
Proceeds$
o Integrate!into!practice!the!rules!relating!to!beneficiary!designation!and!exemption!from!
seizure!of!benefits!
o Contextualize!the!rules!relating!to!claims!and!the!payment!of!benefits!
Rules$and$Principles$Governing$the$Activities$of$Life$Insurance$Agents$and!Accident$&$
Sickness$Insurance$Agents$
o Explain!the!role!of!the!organizations!that!protect!clients!
o Integrate!into!practice!the!obligations!and!responsibilities!of!life!insurance!agents!
Life$Insurance$
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Introduction$to$Life$Insurance$
• Assess!the!client’s!needs!and!situation!
o Articulate!the!client’s!needs!based!on!the!risks!that!could!affect!their!financial!situation!
Term,$Whole$and$Universal$Life$Insurance$
• Assess!the!available!products!that!meet!the!client’s!needs!
o Analyze!the!types!of!contracts!that!meet!the!client’s!needs!
Term$Life$Insurance$
Whole$Life$Insurance$
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Universal$Life$Insurance$
Riders$and$Supplementary$Benefits$
• Analyze!the!available!products!that!meet!the!client’s!needs!
o Analyze!the!riders!that!meet!client’s!needs!
Group$Life$Insurance$
o Analyze!the!riders!that!meet!client’s!needs!
Taxation$of$Life$Insurance$and$Tax$Strategies$
o Assess!the!appropriateness!of!the!client’s!existing!coverage!in!regard!to!their!situation!
• Implement!a!recommendation!adapted!to!the!client’s!needs!and!situation!
o Propose!a!recommendation!adapted!to!the!client’s!needs!and!situation!
Business$Life$Insurance$
o Articulate!the!client’s!needs!based!on!the!risks!that!could!affect!their!financial!situation!!
Application$and$Underwriting$
• Consider!the!impact!of!underwriting!criteria!as!they!apply!to!the!client’s!situation!
• Consider!the!requirements!that!must!be!met!to!implement!the!recommendation!
$Assessing$the$Client’s$Situation$
• Asses!the!client’s!needs!and!situation!
o Determine!the!client’s!situation!
Recommending$an$Insurance$Policy$
• Asses!the!client’s!needs!and!situation!
o Articulate!the!client’s!needs!based!on!the!risks!that!could!affect!their!financial!situation!!
• Implement!a!recommendation!adapted!to!the!client’s!situation!
Ongoing$Service$
• Provide!customer!service!during!the!validity!period!of!coverage!
o Validate!the!appropriateness!of!contract!amendment,!renewal!and!termination!application!in!
regard!to!the!client’s!situation!
o Inform!the!claimant!of!the!claims!process!
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Accident$and$Sickness$Insurance$
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Financial$Protection$Provided$by$Accident$and$Sickness$Insurance$
Insurance$to$Protect$Income$
o Analyze!the!riders!that!meet!the!client’s!needs!
Insurance$to$Protect$Assets$
o Analyze!the!riders!that!meet!the!client’s!needs!
Insurance$to$Protect$Business$
Client$Profile$
o Assess!the!appropriateness!of!the!client’s!existing!coverage!in!regard!to!his!or!her!situation!
Insurance$Recommendation,$Contract$and$Service$Needs$
• Analyze!the!available!products!that!meet!the!client’s!needs;!!
o Analyze!the!types!of!contracts!that!meet!the!client’s!needs;!!
o Analyze!the!riders!that!meet!the!client’s!needs;!!
o Consider!the!impact!of!underwriting!criteria!as!they!apply!to!the!client’s!situation;!!
• Implement!a!recommendation!adapted!to!the!client’s!needs!and!situation;!!
o Propose!a!recommendation!adapted!to!the!client’s!needs!and!situation;!!
o Confirm!the!requirements!that!must!be!met!to!implement!the!recommendation;!!
• Provide!customer!service!during!the!validity!period!of!the!coverage.!!
o Validate!the!appropriateness!of!contract!amendment,!renewal!and!termination!applications!
in!regard!to!the!client’s!situation;!!
o Inform!the!claimant!of!the!claims!process.!!
Group$Plan$Specifics$
• Assess!the!client’s!needs!and!situation;!
• Analyze!the!available!products!that!meet!the!client’s!needs;!
o Consider!the!impact!of!underwriting!criteria!as!they!apply!to!the!client’s!situation!
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• Implement!a!recommendation!adapted!to!the!client’s!needs!and!situation;!
o Validate!the!appropriateness!of!contract!amendment,!renewal!and!termination!applications!
in!regard!to!the!client’s!situation;!!
• Provide!client!service!during!the!validity!period!of!the!coverage!
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Segregated$Funds$and$Annuities$
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Investment$and$Savings$
o Determine!the!client’s!situation,!investment!objectives!and!investor!profile!
o Analyze!the!advantages!of!segregated!funds!in!comparison!to!other!types!of!investments!in!
regard!to!the!client’s!needs!
Segregated$Funds$
o Analyze!the!types!of!investments!that!can!constitute!a!segregated!fund!and!that!meet!the!
client’s!needs;!
o Analyze!the!advantages!and!limitations!of!segregated!funds!in!comparison!to!other!types!of!
investments!in!regard!to!the!client’s!needs;!
Annuities$
o Analyze!the!types!of!annuities!that!meet!the!client’s!needs!
Investor$Profile$
• Analyze!the!client’s!needs!and!situation!
o Determine!investment!objectives!and!investor!profile!
o Assess!the!appropriateness!of!the!client’s!existing!coverage!in!regard!to!their!current!situation!
Segregated$Funds$and$Annuity$Recommendation$
o Analyze!the!types!of!investments!that!can!constitute!a!segregated!fund!and!that!meet!the!
client’s!needs!
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Segregated$Funds$Contract$
o Analyze!the!advantages!of!segregated!funds!in!comparison!to!other!types!of!investment!in!
regard!to!the!client’s!needs!
o Confirm!the!requirements!that!must!be!met!to!implement!the!recommendation!
• Provide!customer!service!during!the!validity!period!of!the!coverage!
Annuity$Contracts$
o Confirm!the!requirements!that!must!be!met!to!implement!the!recommendation!
Group$Retirement$and$Investment$Plans$
o Determine!the!client’s!situation,!investment!objectives,!and!investor!profile!
o Analyze!the!advantages!of!segregated!funds!and!annuities!in!comparison!to!other!types!of!
investments!
o Confirm!the!requirements!that!must!be!me!to!implement!the!recommendation!
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ETHICS$AND$PROFESSIONAL$PRACTICE!
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Ethics$and$Professional$Practice$
Legal$Framework$Governing$Life$Insurance$
In!Canada,!insurance!law!is!taken!from!several!sources:!the!Canadian!Constitution,!Common!Law!
and!legislation/regulation.!Insurance!law!has!been!mostly!enacted!through!legislation!passed!by!
provincial!and!territorial!legislatures.!This!section!provides!an!overview!of!the!legal!framework!
applicable!to!insurance!and!serves!as!a!guide!for!insurance!agents!as!it!relates!to!the!conduct!of!
their!professional!practice.!This!section!will!also!present!the!most!important!Common!Law!rules,!
statutes!and!regulations!applicable!to!a!life!and!health!insurance!agent’s!business.!!
Life$and$accident$and$sickness$insurance$in$its$legal$context$
An!insurance!contract!is!an!“undertaking!by!one!person!to!indemnify!another!person!against!loss!
or!liability!for!loss!in!respect!of!a!certain!risk!or!peril!to!which!the!object!of!the!insurance!may!be!
exposed,!or!to!pay!a!sum!of!money!or!other!thing!of!value!upon!the!happening!of!a!certain!event!
and!includes!life!insurance.!
• Life!Insurance!
o Covers!the!risk!of!one!or!more!persons!dying!
• Accident!and!Sickness!
o Loss,!due!to!accident!or!sickness,!of!the!ability!to!work!in!gainful!employment!
(disability!insurance)!
o Onset!of!diagnosed!illness!(critical!illness)!
o Accidental!death!or!dismemberment!
o Reimbursement!of!medical!fees!and!drugs!
o Long!term!care!
• Insurers!
o Insurance!contracts!are!created!and!underwritten!by!business!corporations!or!
mutual!insurance!corporations!which!are!licensed!by!the!government!to!act!as!
insurers!
• Agency!relationships!
o In!law,!‘agency’!is!referred!to!as!a!relationship!of!delegated!authority.!Individuals!who!
play!this!role!are!considered!‘agents,!and!the!other!party!(corporation,!person,!etc.)!
are!called!the!‘principal’.!
• Agents!
o The!relationship!between!the!insurance!company!and!a!life!insurance!agent!is!
considered!to!be!that!of!a!principal!and!agent!
o Act!on!behalf!of!the!insurance!company!in!selling!insurance!to!clients!
o Can!be!employed!by!individual!insurers!(captive!agents)!or!as!independent!reps!
• M anaging!general!agent!(M GA)!
o Facilitates!business!between!agents,!their!clients,!and!insurers!by!providing!some!or!
all!of!the!following!services!
! Supports!the!agent!is!obtaining!contracts!with!insurers,!including!providing!
authority!to!the!agent!
! Processing!and!tracking!agents’!business!submitted!by!an!agent!
! Providing!sales!and!training!support!
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! Pooling!of!commission!payments!for!the!agents!from!multiple!insurers!
• Agency!
o An!insurance!agency!is!either!a!corporation!or!a!partnership!that!holds!a!license!from!
a!regulator!or!several!regulators.!!
o An!insurance!agency!must!have!at!least!one!licensed!insurance!agent!for!
the!same!category!of!insurance!for!which!the!insurance!agency!holds!a!
license!
o An!agent!who!wants!to!expand!his!business!by!hiring,!training!and!supervising!other!
agents!must!apply!for!a!license!as!a!corporate!agency!life!license!meeting!the!
requirements!of!the!specific!province!(or!territory)!where!they!intend!to!operate!
o An!employee!of!an!agency!will!need!to!be!licensed!to!conduct!most!activities!(e.g.!
solicit!insurance,!negotiate!or!procure!insurance,!etc.)!
• Regulation!of!insurance!and!licensing!
o All!insurance!companies!are!heavily!regulated!and!supervised!
o Provincial!legislation!gives!designated!actuaries!extensive!powers!and!responsibilities!
including!reporting!on!the!financial!soundness!of!a!life!insurer’s!business!operations!
o Under!the!provisions!of!provincial!and!territorial!law,!insurance!agents!must!be!
licensed.!The!name!of!the!applicable!regulatory!and!statutory!framework!varies!from!
province!to!province!
General$legal$principles$applicable$to$an$agent$
The!law!that!applies!to!the!interpretation!of!an!insurance!contract!will!be!the!law!of!the!province!
or!territory!where!the!policy!was!contracted.!The!statutory!basis!for!the!creation!and!treatment!
of!insurance!contracts!in!the!various!provinces!and!territories!is!very!similar!resulting!in!
consistent!treatment!of!legal!principles!and!their!application!to!the!life!insurance!agent’s!
business.!The!relevant!legal!principles!that!arise!from!common!law!are!outlined!below.!
• Capacity!and!status!of!persons!
o From!a!legal!standpoint,!the!concept!of!capacity!relates!to!a!person’s!ability!to!
provide!valid!consent!–!are!they!capable!of!understanding!the!terms!of!the!
contract!even!if!they!do!no!know!all!the!details!
• Natural!persons,!partnership!and!legal!persons!(corporations) !
o Natural!persons!
! Defined!as!a!hum an!being!that!has!the!ability!to!make!decisions!about!
their!person!and!property!and!to!bear!the!risks!and!rewards!of!those!
decisions!
o Partnerships!
! A!partnership!is!an!arrangement!between!two!or!more!parties!carrying!on!
business!together!with!a!view!to!making!a!profit!
o Legal!person!(corporation)!
! A!corporation!is!a!“legal!person.”!In!other!words,!it!can!be!described!as!a!
separate!entity!from!those!that!manage!or!own!it!
• M inors!and!guardians!
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o Provincial!insurance!legislation!says!that,!for!contracting!a!policy!(but!not!as!a!
beneficiary!receiving!death!benefits),!a!person!16!years!of!age!or!older!has!
the!capacity!to!contract!for!insurance!on!its!own!behalf!
o Parents!of!minors!aged!15!and!under!(without!the!capacity!to!contract!a!life!or!
accident!and!sickness!insurance!policy)!have!an!insurable!interest!in!their!children!
and!may!apply!for!a!life!insurance!policy!in!their!name!
• Power!of!Attorney!(POA)!
o To!address!the!risks!of!becoming!unable!to!look!after!themselves!(personal!care)!or!
manage!their!property,!adult!individuals!may!voluntarily!appoint!a!legal!
representative!while!they!are!still!capable,!to!represent!them!and!make!decisions!on!
their!behalf!when!they!are!coming!to!the!end!of!their!life!
o POA!
! A!power!of!attorney!is!a!legal!document!made!by!one!person!who!appoints!
another!person,!called!an!“attorney,”!to!deal!with!the!business!and!property!
of!another!person!and!to!make!financial!and!legal!decisions!on!their!behalf!
! It!can!be!very!broad!or!specific,!but!ends!upon!death!or!if!the!individual!
becomes!mentally!incapable!
o Enduring!POA!
! Same!as!a!regular!POA,!only!that!it!continues!even!if!the!principal!becomes!
mentally!incapable!
! A!property!power!of!attorney!document,!depending!on!its!terms,!may!come!
into!effect!immediately;!or!it!may!require!someone,!such!as!a!doctor!or!
capacity!assessor,!to!“trigger”!its!effect!
! Agents!dealing!with!POA’s!should!obtain!a!certified!copy!of!the!POA!from!a!
notary!public!and!have!it!reviewed!by!the!insurance!company!
! A!POA!is!not!the!same!thing!as!a!“living!will”,!which!simply!addresses!your!
treatment!and!personal!care!wishes!and!does!not!name!anyone.!
• M arriage!and!common!law!spouse!
o The!agent!must!understand!the!legal!relationships!clients!may!enter!into!with!third!
parties,!e.g.!marriage!or!common!law!relationships!
o Property!rights!are!treated!different!when!a!client!is!married!vs.!when!they!are!in!a!
common!law!relationship!
o Couples!may!adjust!their!legal!rights!before!or!during!a!relationship!through!pre\
nuptials!or!cohabitation!agreem ent!
• Divorce!and!separation!
o In!the!event!of!divorce!or!separation,!the!value!of!the!policy!may!become!subject!to!
the!valuation!and!division!of!property.!!
o Insurance!proceeds!received!from!a!third!party!may!receive!preferential!treatment!
similar!to!inheritances!and!gifts,!and!be!excluded!from!the!rebalancing!of!financial!
assets!
o Family!property!
! Implies!property!that!was!acquired!during!the!marriage!or!used!by!the!family!
of!married!spouses!or!generates!income!that!supports!the!family!
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! Family!property!is!presumed!subject!to!equal!division!when!the!married!
spousal!relationship!breakdown!
! In!contrast,!property!that!was!acquired!prior!to!the!marriage!(or!
relationship),!or!that!came!from!an!inheritance!during!the!marriage,!usually!
gets!protection!from!division!
! Rights!for!spousal!support!are!separate!and!additional!to!the!right!of!
property!division!
• W ills,!estates!and!successions!
o The!collection!of!property!and!property!rights!that!the!deceased!owned!is!referred!to!
as!their!“estate!
o Not!all!property!owned!by!an!individual!is!controlled!by!their!will.!!
! Ownership!of!property!held!in!“joint!tenancy”!with!one!or!more!persons!
usually!passes!outside!the!will.!!
! Registered!plans!with!a!named!beneficiary,!including!RRSP,!RRIF,!and!TFSA!
pass!directly!to!the!named!beneficiary.!Life!insurance!payable!to!a!named!
beneficiary!also!passes!outside!the!will!to!the!named!beneficiary!
! Financially!dependent!persons,!such!as!a!surviving!spouse!or!children,!can!
sue!the!estate!for!support!if!the!deceased!person!owed!them!a!duty!of!
support!and!failed!to!make!“adequate”!provision.!The!laws!governing!this,!
generically!called!“dependent’s!relief!legislation”46,!give!dependents!priority!
before!any!disposition!or!distribution!under!the!deceased’s!will!is!made!
o Intestate!
! If!the!client!has!no!will!or!an!incomplete!one!(e.g.!no!named!executor)!they!
are!said!to!have!died!‘intestate’!
! When!there!is!no!will,!the!estate!trustee!will!distribute!the!estate!in!
accordance!with!the!applicable!provincial!rules!on!intestacy!
! If!there!is!a!will,!the!executor!will!distribute!the!estate,!after!the!payment!of!
the!debts,!according!to!the!will!
! Divorce!does!not!revoke!a!will!either;!the!will!is!interpreted!as!if!the!former!
spouse!had!predeceased!the!testator!
! If!a!policyholder’s!beneficiary!designations!contained!in!a!will!are!revoked,!
and!there!is!no!valid!beneficiary!designation,!the!insurance!or!registered!plan!
proceeds!will!become!payable!to!the!policyholder’s!estate!
! Agents!must!direct!clients!to!receive!their!own!legal!advice!a nd!
estate!planning!services!related!to!specific!life!events,!such!as!
marriage!or!death!
• Trusts!and!trustees!
o Trusts!established!during!life!of!the!settlor54!are!called!“inter\vivos”!trusts!
(between!living!people).!!
o Trusts!established!upon,!and!as!a!consequence!of,!someone’s!death!are!called!
“testamentary”!trusts!
o While!guardians!and!POA’s!have!certain!powers!over!a!person’s!property,!they!do!
not!take!title.!In!contrast,!trustees!of!a!trust!have!legal!title!
!
! 13!
!
!! ! !!!!!!!!!!!!!!!!!!!!!!!!!!
o once!a!trust!has!been!created,!a!trustee!is!already!under!a!positive!legal!obligation!to!
act!as!and!when!the!need!arises.!A!trust!is!therefore!arguably!a!form!of!property!
management!for!the!benefit!of!the!beneficiaries!of!the!trust!
!
• Bankruptcy!
o If!someone!cannot!meet!their!financial!obligations!as!they!fall!due,!they!are!
insolvent.!If!some!creditor!pushes!them!to!pay!a!debt,!they!may!decide!to!make!a!
formal!declaration!of!bankruptcy!
o Life!insurance,!or!financial!products!that!qualify!as!life!insurance,!including!life!
annuities!and!segregated!funds,!may!qualify!for!special!protection!against!
creditors!in!the!event!of!an!insolvency!or!bankruptcy!of!the!policyholder!
o Provincial!insurance!legislation!states!that!insurance!proceeds!payable!to!
beneficiaries!do!not!form!part!of!the!insured’s!estate!and!thus!are!not!subject!to!
control!by!the!estate’s!creditors.!
o Asset!protection!is!one!reason!that!agents!usually!advise!clients!to!name!direct!
beneficiaries,!rather!than!their!estate!
Public$insurance$and$retirement$regimes$
The!government!has!set!up!programs!that!contribute!to!a!‘social!safety!net’!for!society.!!It!is!
important!that!agents!monitor!changes!to!these!programs!to!guide!their!decisions!with!clients!
and!consider!relevant!information!and!coordination!of!benefits.!When!spouses!are!both!entitled!
to!benefits!for!themselves!and!their!family!members!under!a!privately!sponsored!health,!drug,!or!
group!dental!plan,!care!must!be!taken!to!avoid!double!payment!for!the!same!expense.!!
• Federally!sponsored!or!facilitated!programs!
o CPP,!OAS!and!GIS!help!to!provide!Canadians!with!a!secure,!modest!base!upon!which!
to!build!additional!retirement!income,!but!are!not!intended!to!meet!all!retirement!
income!needs!
o The!purpose!of!EI!is!to!provide!temporary!income!support!to!those!who!are!
unemployed,!cannot!work!for!reasons!of!sickness,!childbirth!or!parenting!or!who!are!
providing!care!or!support!to!a!family!member!
o CPP!and!disability!
! CPP!contributors!may!draw!a!disability!benefit!if!they!become!
permanently!and!totally!disabled.!!
! There!are!also!provisions!for!a!modest!death!benefit!to!assist!with!
funeral!expenses,!and!survivor!benefits!for!spouses!and!children.!!
! Spouses!may!split!CPP!benefits!to!enable!income!splitting!in!retirement.!!
! Benefits!m ay!also!be!assigned!as!part!of!the!property!
settlement!should!the!marriage!break!down.!
o OAS!and!Guaranteed!Income!Supplement!(GIS)!
! Old!Age!Security!(OAS)!is!non\contributory!and!is!government!funded!
through!duties!and!taxes!
! The!Guaranteed!Income!Supplement!(GIS)!is!a!non\taxable!supplement!for!
those!already!getting!the!OAS!pension!
o Employment!Insurance!(EI)!
!
! 14!
!
!! ! !!!!!!!!!!!!!!!!!!!!!!!!!!
! Employees!must!contribute!through!payroll!earnings!to!EI!
! The!individual!must!have!a!minimum!number!of!insurable!hours!of!
employment!before!becoming!eligible!for!benefits,!and!the!benefit!payable!
will!depend!on!the!number!of!hours!worked!
! The!self\employed!are!not!eligible!
• Provincially!sponsored/facilitated!programs!
o The!purpose!of!the!plans!described!next!all!vary,!but!all!provide!public!coverage!to!
individuals!in!certain!circumstances!and!avoid!lawsuits!
o No\fault!automobile!insurance!
! Individuals!are!only!reimbursed!through!their!own!insurance!without!proof!
of!fault,!but!are!also!restricted!from!the!legal!system!for!losses!caused!by!
other!parties!
o W orkers’!compensation!
! Compensation!and!rehabilitation!benefits!are!available!to!the!workers!on!a!
no\fault!basis,!i.e.!without!any!finding!of!fault!with!them!or!the!employer.!!
! Benefits!payments!are!secure!because!they!are!funded!by!mandatory!
employer!contributions!through!a!payroll!tax.!In!exchange!to!being!entitled!
to!these!benefits,!workers!give!up!the!right!to!sue!their!employers!
o Universal!health!care!and!drug!plan!
! Canadians!with!valid!provincial!health!care!enrolment!enjoy!a!form!of!
universal!health!care!anywhere!in!Canada!
! The!provinces!and!territories!remain!responsible!for!the!management,!
organization!and!delivery!of!health!care!services!
Other$relevant$legislation$
• Privacy!Act!
o How!agents!handle!the!large!amounts!of!personal!client!data!is!regulated!by!privacy!
legislation!
o Personal!Information!Protection!and!Electronic!Documents!Act!(PIPEDA)!
! Sets!out!ground!rules!for!how!businesses!and!other!organizations!may!
collect,!use!or!disclose!personal!information!in!the!course!of!commercial!
activities!
! Controls!how!federally!regulated!businesses!must!act!in!handling!employee!
personal!information!
! Ensures!that!only!information!that!is!needed!and!relevant!to!conduct!a!
business!transaction!should!be!collected.!!
! Once!the!need!for!the!information!is!over,!the!information!should!be!
disposed!of!in!a!careful!fashion!
• Human!rights!legislation!
o Discrimination!on!the!basis!of!a!number!of!personal!and/or!group!attributes!and!
characteristics!is!prohibited!
• Crim inal!code!
!
! 15!
!
!! ! !!!!!!!!!!!!!!!!!!!!!!!!!!
o Canadian!federal!law!defining!behaviour!and!actions!that!constitute!a!“crime”!and!
are!generally!more!serious!offences,!including!those!that!may!result!in!jail!time!as!
well!as!fines!
• M oney!Laundering!and!Terrorist!Financing!Act!
o Aims!at!detecting!individuals!and!corporations!involved!in!criminal!activity!and!
preventing!them !from !getting!their!illegally!obtained!money!into!the!
banking!system!
o Insurance!protects!can!be!used!for!storage!and!transfer!of!illegal!funds!or!activities.!
Reporting!suspicious!transactions!and!suspected!possession!of!terrorist!property!
remains!a!responsibility!of!every!insurance!agent!
o Suspected!money!laundering!or!terrorist!financing!must!be!reported!to!an!
agency!called!the!Financial!Transactions!and!Reports!Analysis!Centre!of!Canada!
(FINTRAC)!who!will!monitor!and!investigate!
• National!Do!Not!Call!List!(DNCL)!
o Clients!may!register!their!phone!numbers!and!request!that!telemarketers!do!not!call!
them.!Calls!to!businesses!are!not!prohibited.!!
o These!rules!apply!to!life!insurance!agents!who!call!clients!and!prospective!
clients!
• Anti\spam!legislation!(CASL)!
o CASL!prohibits!the!sending!of!commercial!electronic!message!(CEM)!if!the!sender!
does!not!first!have!the!recipient’s!consent.!!
o The!CEM!must!have!prescribed!consent!and!a!mechanism!to!unsubscribe.!!
o Agents!should!establish!and!document,!from!their!very!first!dealings!with!clients,!the!
practices!to!be!followed!when!dealing!with!their!clients’!personal!information!
! !
!
! 16!
!
!! ! !!!!!!!!!!!!!!!!!!!!!!!!!!
Insurance$Policy$Provisions$
This!section!outlines!the!various!components!of!the!policy/insurance!contract,!followed!by!the!
specific!provisions!of!insurance.!Other!kinds!of!policies!or!products!marketed!by!life!insurance!
companies!qualify!as!‘life!insurance’!but!do!not!resemble!life!insurance!policies!(e.g.!annuities,!
segregated!funds).!
Parties$to$an$individual$policy$
Contracts!for!life!insurance!is!entered!into!between!an!insurer!and!a!policyholder!(i.e.!insured).!
Depending!on!the!type!of!insurance,!there!may!be!other!persons!referenced!or!involved!in!
and/or!deriving!rights,!such!as!the!life!insured,!beneficiary,!contingent!beneficiary,!or!a!successor!
owners!or!an!assignee!
• Insurer!
o The!insurer!is!the!life!insurance!company!that!takes!on!the!risk!and!issues!the!policy.!
• Policyholder!
o The!policyholder!is!the!individual!or!legal!person!(e.g.,!corporation)!who!has!legal!
ownership!of!the!policy!and!exercises!the!contractual!and!statutory!rights!that!go!
with!being!the!owner.!
o The!policyholder!can!also!be!the!life!insured,!owning!insurance!on!their!own!life,!but!
it!is!common!for!the!policyholder!to!own!insurance!on!the!life!of!someone!else,!such!
as!a!spouse,!child,!or!parent!
o There!can!be!co\owners!of!policies!as!well!
o Successor!policyholder!
! If!the!policyholder!is!not!also!the!life!insured,!the!policyholder!could!die!
before!the!insured!person!(i.e.,!while!the!insurance!is!still!in!effect).!!
! Ownership!of!the!policy!will!then!be!transferred!to!a!new!owner.!The!identity!
of!the!new!owner!can!be!determined!in!advance!by!the!policyholder!
• Life!insured!
o The!“life!insured”!means!the!person!whose!life!is!insured!and!on!whose!death!the!
benefit!is!paid,!also!called!the!person!insured!or!insured!person!
o It!is!common!to!have!several!individuals!insured!under!one!policy!
• Beneficiary!
o A!beneficiary!is!a!person!to!whom!or!for!whose!benefit!insurance!money!is!payable!
o Beneficiaries!have!rights!under!the!insurance!policy,!but!are!not!a!party!to!it!
o Designating!certain!individuals!as!beneficiaries!of!a!policy!cannot!only!protect!death!
benefits,!it!can!protect!the!policy!itself!from!execution!and!seizure.!These!individuals!
include!spouses,!children,!grandchildren!and!parents!of!the!life!insured!(also!known!
as!protected!class!beneficiaries)!
o The!policyholder!may!also!later!name!or!change!a!beneficiary!using!a!beneficiary!
designation!or!change!form!issued!by!the!insurer!
o Irrevocable!beneficiary!
! A!policyholder!may!agree!to!make!a!designation!irrevocable.!Such!a!
declaration!must!be!filed!with!the!head!office!of!the!insurer!in!order!to!
become!irrevocable.!If!not!filed,!it!remains!a!revocable!designation.!
!
! 17!
!
!! ! !!!!!!!!!!!!!!!!!!!!!!!!!!
! If!the!policyholder!names!a!beneficiary!as!an!irrevocable!beneficiary,!then!
they!can!only!change!(revoke)!that!designation!if!the!irrevocable!beneficiary!
consents!to!the!change!
o Policyholders!may!also!choose!to!designate!their!estate!as!the!recipient!of!the!
insurance!benefits!
o For!creditor!protection,!it!is!always!best!to!name!an!individual!as!a!beneficiary!vs.!the!
estate!
o Loss!of!protection!
! The!designation!of!a!beneficiary,!including!a!protected!class!beneficiary,!is!
subject!to!being!set!aside!and!ignored!if!it!is!made!in!an!attempt!to!defeat,!
delay,!or!hinder!creditors!
o Contingent!beneficiary!
! It!is!also!possible!to!name!a!“contingent,”!also!called!secondary!beneficiary,!
to!address!the!possibility!that!the!primary!beneficiary!might!die!before!the!
life!insured!
• Group!insurance!policies!
o Insurance!companies!also!offer!group!insurance!policies,!insuring!the!lives!or!health!
of!a!defined!pool!of!individuals!(and!often!their!spouses!and!dependents)!under!one!
policy!
o The!pool!usually!consists!of!employees!or!members!of!a!group!such!as!a!union!or!
association!with!a!clearly!definable!and!controlled!membership.!
Formation$of$policy$
• Rules!about!form ing!an!individual!insurance!contract!
o The!process!of!forming!any!contract!is!often!described!as!having!two!steps,!called!
“offer”!and!“acceptance.”!
o In!practice,!the!completion!of!an!insurance!application!by!an!individual!is!generally!
considered!an!offer!where!the!individual!becomes!the!offeror.!Then,!the!offer!is!
generally!accepted!when!the!insurance!carrier!issues!the!contract,!and!the!contract!is!
delivered!to!the!applicant.!But!under!common!law!(i.e.!legally),!the!offer!and!
acceptance!is!reversed!
o Application!for!insurance!
! It!is!the!agent’s!role!to!help!the!applicant!understand!and!correctly!answer!
the!questions!
! It!is!crucial!that!the!agent!not!paraphrase!or!change!the!wording!of!the!
questions!created!by!the!insurer!(which!can!be!lengthy),!so!that!the!response!
given!is!as!complete!and!accurate!as!possible!
! The!answers!recorded!in!the!application!act!as!the!benchm ark!against!
which!“changes!in!insurability”!are!later!m easured!when!the!
policy!is!issued!
o Temporary!Insurance!
! An!applicant!may!be!able!to!obtain!temporary!coverage!during!the!
underwriting!process.!If!they!can!answer!“no”!to!three!or!four!temporary!
insurance!questions!confirming!their!good!health!and!that!they!have!not!
!
! 18!
!
!! ! !!!!!!!!!!!!!!!!!!!!!!!!!!
been!in!hospital!or!ill,!this!separate!insurance!agreement!can!provide!limited!
insurance!coverage,!typically!for!90!days.!It!will!expire!once!the!policy!applied!
for!is!approved,!or!declined,!and!is!subject!to!terms!and!conditions!outlined!
in!a!separate!temporary!coverage!agreement!
o Change!in!insurability!
! If!there!has!been!a!change!in!insurability!between!application!and!policy!
delivery,!the!policy!does!not!take!effect,!even!if!it!was!delivered!and!the!first!
premium!taken!
! This!is!because!a!change!in!insurability!means!the!risk!disclosed!in!the!
application!and!underwritten!by!the!insurance!company!is!different!than!the!
actual!risk!present!at!the!time!the!policy!is!delivered!to!the!policyholder!
o Approval!and!application!by!insurer!
! Once!the!insurer!decides!to!make!the!offer!of!insurance,!they!will!notify!the!
applicant!and!prepare!a!policy!to!be!delivered!
! The!policy!tendered!may!include!changes!from!the!presumed!terms!and!
conditions!the!applicant!contemplated!when!they!applied!\!this!may!include!
a!different!underwriting!classification,!it!could!contain!exclusions!to!the!
proposed!coverage!and!changes!to!the!premium!to!be!paid!by!the!applicant!
o Delivery!of!policy!
! If!the!applicant!indicates!that!they!will!accept!the!insurance!policy!offered,!
the!policy!will!be!printed!out!and!sent!to!the!agent!for!“delivery”!to!the!
applicant,!together!with!any!instructions!relating!to!delivery!requirements!
! The!policy!is!not!in!force!until!all!delivery!requirements!have!
been!obtained!and!the!first!prem ium !paid!
Term$and$termination$of$policy$
A!policy!may!be!annulled!or!cancelled!either!voluntarily!by!the!owner!or!for!limited!reasons!by!
the!insurer!
• 10\day!Rescission!
o Allows!the!applicant!to!review!the!policy!to!confirm!it!is!consistent!with!what!was!
expected!and!if!requested!to!change!their!mind!a!return!the!policy!for!a!full!refund!–!
the!policy!is!annulled!
o This!guideline!is!from!the!Canadian!Life!and!Health!Insurance!Association!(CLHIA)!
which!allows!the!policyholder!holder!to!rescind!the!policy!within!10!days,!without!
penalty!and!with!a!reimbursements!of!premiums!paid!
• Surrender!
o Individual!life!policies!are!referred!to!as!“unilateral”!contracts,!in!that!the!individual!
policyholder!can!always!cancel!the!policy!at!any!time.!A!policyholder!can!“surrender”!
a!policy!at!any!time,!resulting!in!a!complete!termination!of!rights!under!the!policy!for!
both!the!policyholder!and!any!beneficiary.!
• Expiry!or!termination!
o Some!policies!simply!terminate!in!accordance!with!its!terms!–!for!example!a!term!life!
insurance!policy!will!have!a!finite!duration!of!coverage!
!
! 19!
!
!! ! !!!!!!!!!!!!!!!!!!!!!!!!!!
o Guaranteed!renewable!and!convertible!term!policies!have!age!limits.!They!cannot!be!
renewed!after!a!specified!age,!and!they!also!cannot!be!converted!to!permanent!
insurance!after!a!specified!age!
Termination$by$the$insurer$
Life!insurance!policies!can!also!be!cancelled!by!the!insurer!before!their!coverage!expires.!
Outlined!below!are!some!possible!reasons.!
• Termination!in!the!event!of!fraud,!misrepresentation!or!intentional!
concealm ent!
o Fraud!occurs!when!the!applicant!or!insured!person!
! Makes!a!deliberate!misstatement!(e.g.!claiming!to!be!a!non\smoker,!but!in!
fact!smokes)!
! Deliberately!omits!to!inform!the!insurer!of!a!material!fact!(e.g.!failing!to!
disclose!that!they!were!recently!treated!for!cancer)!
! Obtain!insurance!for!which!the!policyholder!or!insured!person!does!not!
qualify!
o Fraud!occurs!when!there!is!intent!to!mislead!the!insurer!and!get!insurance!that!
would!otherwise!not!be!offered!
o Depending!on!when!misrepresentation!or!concealment,!different!outcomes!would!
occur:!
! During!the!application!process:!insurer!would!be!entitled!to!adjust!the!
proposed!coverage!or!premium!or!they!could!choose!not!to!insure!the!
individual!if!insurer!feels!that!they!have!lost!the!confidence!in!the!
truthfulness!or!motivation!of!the!applicant!
! W ithin!the!first!two!years:!If!a!misrepresentation!or!concealment!other!
than!age!that!is!in!good!faith!is!discovered!during!the!first!two!years!of!the!
policy,!the!insurer!would!have!the!option!of!cancelling!the!policy!
! After!two!years:!the!insurer!can!only!cancel!it!based!on!a!fraudulent!
misrepresentation!or!concealment!
• Termination!for!non\paym ent!of!sickness!or!accident!insurance!prem ium s!
o The!insurer!may!terminate!the!policy!for!non\payment!by!mailing!a!postage!pre\paid,!
registered,!written!notice!of!termination!to!the!last!known!address!of!the!
policyholder!
• Termination!for!non\paym ent!of!life!insurance!prem ium s!
o If!life!insurance!policy!premiums!are!not!paid!in!a!timely!fashion,!any!term!life!policy!
or!permanent!life!policy!with!no!cash!values!will!also!terminate,!subject!to!a!30!day!
grace!period!
o Agents!should!be!aware!of!the!specific!termination!features!of!a!policy!and!be!able!to!
guide!clients!properly!as!required!
o Cancellation!is!never!final,!since!the!insurer!is!obligated!to!reinstate!the!
individual!life!insurance!under!the!following!conditions!
! Client!applies!for!reinstatement!within!2!years!of!cancellation!
! Client!still!meets!the!insurability!conditions!of!the!cancelled!policy!
!
! 20!
!
!! ! !!!!!!!!!!!!!!!!!!!!!!!!!!
Assignment$of$a$policy$
• Absolute!assignm ent!
o Transfer!of!ownership!of!the!policy!
o Agents!should!understand!the!consequences!of!assignment!before!advising!clients!–!
change!in!ownership!could!trigger!tax!issues!and!may!result!in!large!taxable!gains!for!
the!assigner!
o Assignee,!has!all!the!rights!of!the!original!policyholder!(the!assignee),!including!the!
right!to!designate!a!new!beneficiary!or!to!withdraw!money!from!the!policy!
• Collateral!assignm ent!
o Policies!with!large!cash!values!may!be!acceptable!to!third!party!lenders!as!additional!
collateral!for!a!loan!
o This!means!the!policyholder!assigns!ownership!of!the!policy!to!the!lender,!but!only!as!
collateral.!This!restricts!the!policyholder!from!doing!anything!with!their!policy!that!
could!affect!the!value!of!the!security!
o When!the!loan!is!paid,!the!collateral!assignee!releases!their!right!to!the!policy!and!full!
ownership!reverts!to!the!original!policyholder!
o If!the!life!insured!dies,!the!lender/collateral!assignee!is!only!entitled!to!
enough!of!the!policy!death!benefit!to!retire!the!loan!balance!
Product$specific$policy$provisions$
This!section!will!review!the!specific!policy!provisions!of!the!most!important!products!that!will!be!
further!outlined!in!the!rest!of!this!study!guide.!
• Individual!life!insurance!
o The!nam e!or!a!sufficient!description!of!the!insured!and!of!the!person!
whose!life!is!insured;!!
o The!amount,!or!the!method!of!determining!the!amount,!of!the!
insurance!proceeds!payable!by!the!insurer,!and!the!conditions!under!which!the!
amount!becomes!payable;!!
o The!amount,!or!the!method!of!determining!the!amount,!of!the!premium!and!the!
period!of!grace,!if!any,!within!which!it!may!be!paid;!!
o Whether!the!contract!provides!for!participation!in!a!distribution!of!
surplus!or!profits!that!may!be!declared!by!the!insurer;!!
o The!conditions!upon!which!the!contract!may!be!reinstated!if!it!lapses;!!
o The!options,!if!any:!!
! of!surrendering!the!contract!for!cash;!!
! of!obtaining!a!loan!or!an!advance!payment!of!the!insurance!money;!and!!
! of!obtaining!paid\up!or!extended!insurance.!!
o Statutory!conditions!
! Insurance!Acts!include!requirements!that!all!policy!terms!and!conditions!
must!be!set!out!in!full!when!the!policy!is!issued!
! As!well,!the!following!documents!must!constitute!the!entire!agreement!
between!the!policyholder!and!the!insurance!company:!application,!policy,!
!
! 21!
!
!! ! !!!!!!!!!!!!!!!!!!!!!!!!!!
any!attachment!tied!to!the!policy!and!any!amendment!to!the!policy!
agreed!to!in!writing!
o Reduction!
! Some!policies!contain!customized!provisions!that!affect!the!coverage!
offered,!or!the!amounts!payable!under!a!particular!coverage!
o Exclusions!
! Change!in!coverage!provided!
! Exclusions!can!also!be!imposed!by!law!and!established!by!the!courts.!They!
may!relate!to!actions!that!are!deemed!a!violation!of!public!order,!or!because!
the!beneficiary!or!insured!caused!or!ran!the!very!risk!insured!against,!which!
constitutes!grounds!for!denying!entitlement!to!insurance!proceeds!
! Pre\existing!conditions:!more!common!under!disability!insurance!
! Suicide!clause:!Most!individual!policies!will!pay,!but!restrict!paying!the!death!
benefit,!if!death!is!caused!by!suicide!or!attempting!suicide!within!the!first!
two!years.!After!two!years,!the!exclusion!provision!ends,!and!the!death!
benefit!is!payable!
o Living!benefits!
! Some!insurance!policies!entitle!the!policyholder!to!receive!an!advance!
payment!of!a!portion!of!the!death!benefit!if!the!person!whose!life!is!insured!
is!diagnosed!with!a!terminal!illness!and!has!only!a!short!time!to!live!
o Cash!surrender!value!(CSV)!
! Permanent!insurance!provide!for!the!buildup!of!cash!values!on!either!a!
contractually!guaranteed!basis!or!a!non\guaranteed!basis!
! If!the!policy!is!cancelled,!the!amount!that!the!policyholder!will!receive!in!cash!
is!called!the!CSV!
o Riders!
! Policy!may!have!additional!coverages!added!to!it!through!documents!
sometimes!called!“riders,”!more!commonly!now!referred!to!as!“additional”!
or!“attached”!benefits.!These!amendments!may!change!existing!benefits,!or!
provide!additional!coverages!(e.g.,!term!life!insurance!coverages!on!the!life!
insured!or!a!new!life!insured!such!as!their!children).!
• Group!life!and!health!insurance!
o Group!insurance!means!a!type!of!insurance!in!which!a!single!insurance!policy,!
sometimes!called!a!“master!policy,”!covers!specified!people!who!can!be!called!plan!
members!(or!participants),!and!their!eligible!dependents,!against!a!specific!risk!or!
risks!
o The!group!must!be!clearly!defined!so!that!entitlement!to!coverage!can!be!readily!
determined!
o When!the!group!policyholder!is!an!employer,!the!employer!is!responsible!for!paying!
the!premiums!owed!to!the!insurer!(even!though!the!cost!sharing!might!be!50%!by!
the!employer!and!50%!by!the!employee).!
o Group!insurance!can!cover!a!wide!array!of!benefits,!including:!
! Life!insurance!
! Accidental!death!and!dismemberment!
!
! 22!
!
!! ! !!!!!!!!!!!!!!!!!!!!!!!!!!
! Short!term!and!long\term!disability!plans!
! Critical!illness!coverage!
! Health!care!and!dental!coverage!
o Certificates!
! When!members!join!an!insured!group!plan,!they!do!not!have!any!contractual!
connection!with!the!insurer!
! The!insurer!gives!the!employer!(sponsor)!certificates,!in!paper!or!electronic!
form,!to!deliver!to!the!group!members.!Certificates!contain!individualized!
information!for!the!group,!based!on!information!relayed!to!the!insurer!by!
the!group!policyholder!
o Booklets!
! Plan!sponsors!may!also!use!booklets!to!explain!the!different!group!benefit!
coverages.!These!booklets!are!only!summaries,!not!insurance!policies;!the!
provisions!of!the!group!policy!with!the!plan!sponsor!govern!in!the!case!of!any!
dispute!
• Individual!and!group!accident!and!sickness!insurance!
o Accident!and!sickness!insurance!may!be!available!in!an!individual!personal!contract,!
or!as!part!of!a!group!benefit!plan!
o Accidental!death!and!dismemberment!(AD&D)!
! This!insurance!covers!the!risk!of!the!insured!person!suffering!a!defined!
physical!loss!or!death!due!to!an!accident.!The!physical!losses!can!include!loss!
of!limbs,!or!hearing!or!eyesight!
! The!definition!of!what!constitutes!an!“accident”!in!the!insurance!policy!can!
be!very!complex.!There!may!be!many!restrictions!and!exclusions!to!coverage,!
situations!in!which!an!insurer!will!not!pay!a!benefit!(e.g.!death!from!sickness,!
suicide,!war,!etc.)!
! Processing!a!death!claim!may!take!some!time,!since!determining!that!death!
was!“accidental”!and!not!affected!by!some!exclusion!may!not!be!a!simple!
process!
o Disability!specifics!
! Coverage!can!be!very!complex,!as!it!can!cover!both!full!and!partial!disability,!
as!well!as!temporary!or!permanent!reductions!in!the!ability!to!earn!income!
o Drug!insurance!
! Clients!may!choose!to!purchase!their!own!health!insurance!covering!the!cost!
of!expensive!medication.!!
! They!would!be!both!the!policyholder!and!the!life!insured.!
! This!type!of!personal!coverage!is!similar!to!group!benefits!coverage,!and!is!
usually!part!of!a!personal!health!insurance!plan!that!covers!drugs,!dental!and!
out!of!country!or!extended!expenses!
o Critical!illness!(CI)!
! It!insures!against!the!risk!of!a!person!suffering!a!life\threatening!illness.!
! If!the!person!is!diagnosed!with!a!covered!critical!illness!and!survives!for!a!
period!of!usually!30!days,!the!insurer!pays!a!lump!sum!amount.!
o Long\term!care!
!
! 23!
!
!! ! !!!!!!!!!!!!!!!!!!!!!!!!!!
! Provides!a!benefit!when!the!insured!person!cannot!safely!and!independently!
perform!a!number!of!daily!living!activities,!or!must!be!constantly!supervised!
due!to!deterioration!of!mental!functions!
o Effective!date!
! Because!no!medical!underwriting!is!necessary!for!personal!accident,!or!
accidental!death!or!dismemberment!insurance,!the!policy!can!take!effect!
quite!quickly,!sometimes!immediately!on!the!insurer’s!acceptance!of!the!
application!
! For!sickness!insurance,!the!process!and!timelines!are!similar!to!life!insurance!
o Termination!
! A&S!policies!can!be!terminated!by!the!policyholder!at!any!time!giving!written!
notice!and!surrendering!the!policy!
! Insurer!may!cancel!only!after!the!insurer!sends!written!notice!and!once!the!
period!indicated!in!the!insurance!policy!expires!
! Non\payment!of!the!premiums!in!and!of!itself!therefore!does!not!allow!the!
insurer!to!terminate!an!insurance!policy;!a!grace!period!defined!in!the!policy!
will!have!to!be!followed!
o Statutory!conditions!
! There!are!statutory!terms!and!conditions!that!must!be!included!in!
every!individual!accident!and!sickness!policy!for!the!policy!to!be!
valid!
• Annuities!
o Annuities!are!policies!issued!by!insurers!or!other!financial!institutions!where!they!
agree!to!pay!a!fixed!amount!to!a!payee!over!a!specified!period!of!time.!
o If!the!duration!of!the!payments!is!determined!by!a!person’s!life,!it!is!called!a!“life!
annuity.”!If!the!payments!are!for!a!defined!period!of!time,!it!is!called!a!“term!certain”!
or!“fixed\term!annuity.”!
o Annuities!can!be!deferred!or!immediate!
o Annuities!can!be!purchased!as!registered!contracts!(e.g.!RRSP,!RRIF,!etc.)!
o Parties!
! The!insurer!or!annuity!provider!
! Policyholder!or!annuity!holder!
! Annuitant!or!life!insured!is!the!measuring!life!on!which!the!duration!of!a!life!
annuity!is!based!
! Policyholder!may!designate!a!named!recipient!called!the!annuitant!
grantee!who!will!receive!the!actual!annuity!payments!
! Designated!beneficiary!
o Policyholder!
! It!is!the!policyholder!who!has!the!right!to!determine!to!whom!the!payments!
will!be!paid!
! Often!referred!to!as!the!“annuitant”!in!annuity!contracts,!or!as!the!
“investor.”!
o Annuitant!(life!insured)!
!
! 24!
!
!! ! !!!!!!!!!!!!!!!!!!!!!!!!!!
! The!person!who’s!life!is!being!measured!by!the!annuity!to!calculate!the!
payments.!It!is!not!necessarily!the!same!person!who!is!receiving!the!
payments!
! Some!policies!have!a!second!or!successor!annuitant,!most!often!a!spouse!
o Payee!
! Person!to!whom!the!annuity!payments!will!be!directed!by!the!policy!holder.!
It!could!be!the!policyholder!himself!or!some!other!payee,!including!a!
corporation!or!trustee!
! For!all!registered!contracts!(RRSP,!RRIF,!LIF,!LIRA,!DPDP,!TFSA,!etc.),!the!
policyholder,!the!annuitant!(life!insured)!and!the!payee!are!always!the!same!
person!
o Immediate!annuities!
! Annuities!called!immediate!or!payout!annuities!provide!that!the!first!
payment!will!begin!on!the!next!defined!periodic!annuity!frequency!period!
! Deferred!annuities!permit!the!investment!and!accumulation!of!income!
over!time!with!payments!starting!later!
o Group!annuities!
! Group!annuity!contracts!may!be!entered!into!by!a!group,!such!as!an!
employer,!a!union,!a!professional!corporation!or!association,!for!the!benefit!
of!their!employees!or!members!
! An!employer!may!use!a!group!annuity!contract!with!a!life!insurance!company!
to!capitalize!a!pension!fund,!a!PRPP!(Pooled!Registered!Pension!Plan),!a!
group!RRSPs,!a!DPSPs,!as!well!as!other!registered!or!unregistered!contracts.!
o Structured!settlem ents!
! Structured!settlements153!are!a!special!kind!of!single\premium!annuity,!non\
assignable,!non\commutable!and!non\transferrable!that!is!accorded!special!
tax!treatment.!Instead!of!a!court!awarding!(or!the!parties!to!litigation!
agreeing!on)!a!lump!sum!in!damages,!a!structured!settlement!means!that!the!
court!awards!or!the!litigants!agree!to!a!customized!stream!of!damage!
payments!to!be!funded!through!the!purchase!usually!by!the!defendant!or!
the!defendants’!insurer!of!a!structured!settlement!annuity.!
! Generally!no!tax!is!payable!for!damages!paid!for!personal!injury!as!it!is!
compensation!for!loss!of!the!ability!to!earn!an!income.!This!is!the!case!
whether!it!is!a!lump!sum!payment!or!through!annuity!payments!
• Segregated!funds!
o An!individual!variable!insurance!contract!(IVIC)!is!in!fact!an!individual!annuity!
contract!related!to!segregated!funds.!It!means!that!premiums!paid!are!invested!in!
segregated!funds!managed!by!the!life!insurance!company!
o The!details!of!an!IVIC!can!be!complex.!They!are!governed!by!insurance!legislation,!not!
securities!law.!
! !
!
! 25!
!
!! ! !!!!!!!!!!!!!!!!!!!!!!!!!!
Life$Insurance,$Accident$&$Sickness$Insurance$and$
Annuity$ClaimsJPayment$of$Proceeds$
!
Rules$pertaining$to$claims$and$payment$of$benefits$
Once!a!life!insurance!policy!matures!or!the!life!insured!dies,!a!claimant!must!satisfy!the!insurer!
requirements!to!have!the!benefit!paid,!which!includes!providing!evidence!that!the!life!insured!has!
died,!and!that!the!claimant!is!entitled!to!the!benefit.!No!claims!process!is!identical,!and!the!
agent’s!role!may!vary!depending!on!the!insurer.!
• Claim ant!
o The!claimant!may!be!the!insured,!the!insured’s!estate,!or!one!or!more!designated!
beneficiaries!(either!a!primary!or!contingent!beneficiary)!
o It!is!possible!for!a!creditor!to!make!a!claim!under!certain!situations!and!a!court!order!
may!allow!for!a!claim!where!money!is!owed!for!spousal!or!child!support!
• Insurer’s!records!
o Insurers!will!pay!benefits!based!on!the!most!recent!beneficiary!designation!they!have!
on!file,!or!to!the!estate!if!there!is!no!beneficiary!designation!
• Notice!of!claim !
o When!the!insured!person!dies,!the!insurer!usually!receives!notice!of!death!from!the!
agent,!the!estate!executor!or!trustee,!a!beneficiary!or!the!employer!
o The!insurer!often!relies!on!the!agent!to!locate!the!named!beneficiary!and!help!them!
complete!the!claim!form!
o Most!of!the!times!the!agents!know!who!the!beneficiary!is!because!it!is!usually!a!
family!member.!!
o Upon!receiving!a!reliable!notice!of!death,!the!insurer!will!record!it,!so!no!more!
premiums!are!charged,!and!will!wait!to!receive!a!claim!
o A!life!insurance!policy!may!set!out!a!time!limit!in!which!a!claim!must!be!made.!But!
provincial!and!territorial!insurance!and!limitation!period!legislation!govern!when!a!
person!makes!a!claim!after!the!deadline!indicated!in!the!insurance!policy!
• Proof!of!claim !
o Docum ents!required!
! The!first!step!is!for!the!beneficiary!to!complete!a!claim!form!
! Once!the!insurer!receives!the!completed!form!with!the!information!it!
requires,!it!will!assess!whether!a!claim!is!payable!and,!if!payable,!pay!the!
person!making!the!claim!if!that!person!is!entitled!to!it.!
! The!claimant!will!need!to!establish!the!identify!of!the!person!who!died!is!the!
same!as!the!life!insured!under!the!policy!and!provide!proof!that!the!insured!
person!has!died,!their!age,!that!the!claimant!has!the!right!to!receive!the!
benefit!and!the!claimant’s!name,!age!and!identity!
o Proof!of!age!
! If!the!age!was!satisfactorily!established!by!the!agent!when!the!policy!was!
issued!or!while!the!life!insured!was!still!alive,!the!insurer!will!use!age!
indicated!in!the!file!when!a!claim!is!made,!without!requiring!proof!
!
! 26!
!
!! ! !!!!!!!!!!!!!!!!!!!!!!!!!!
o Proof!of!identity!
! Where!there!is!a!named!beneficiary,!the!insurer!will!seek!satisfactory!proof!
of!identity!
o Accidental!vs.!natural!causes!
! Most!policies!have!few!restrictions,!but!where!they!do,!then!the!insurer!or!
the!agent!may!investigate!to!determine!if!they!apply!or!not!
Disappearance$and$presumption$of$death$
Although!it!does!not!happen!often,!insured!persons!sometimes!go!missing.!If!they!have!
disappeared!and!remain!missing!for!seven!years!or!more,!interested!parties,!most!often!the!
family,!can!ask!a!Court!to!declare!them!dead.!They!will!do!this!to!obtain!life!insurance!proceeds.!
• Death!of!two!or!m ore!people!
o Sequence!of!deaths!may!also!be!important!in!order!to!establish!who!is!entitled!to!
insurance!proceeds!
Payment$into$Court$
When!insurer’s!have!difficulty!determining!who!the!beneficiaries!are,!provincial!legislation!allows!
them!to!pay!the!benefit!into!Court,!which!releases!them!of!liability.!Resolution!can!then!be!dealt!
with!via!a!system!that!is!designed!to!deal!with!reviewing!evidence!and!claims!adjudication!
Proceeds$on$deposit$and$payout$options$
• There!are!several!options!for!the!payment!of!the!death!benefit!–!known!as!policy!
settlement!options!
• The!same!form!that!is!used!for!beneficiary!claimant!information!will!also!ask!the!client!which!
payment!option!they!prefer!for!the!death!benefit!
• Lump\sum!cheque!is!the!most!common,!with!the!insurer!making!the!deposit!to!their!
financial!institution!of!choice!
Time$to$pay$the$claim$
• Insurer!is!required!by!law!to!pay!the!claim !within!30!days!of!receiving!evidence!that!
satisfies!the!claim!is!payable!
• Most!insurers!will!pay!interest!for!at!least!some!of!the!time!between!death!and!the!payment!
of!the!death!benefit!
Denial$of$claim$
• As!described!previously!there!are!several!scenarios!where!the!insurer!will!deny!a!claim.!
During!the!application!process!it!important!for!the!agent!to!check!for!possible!
fraudulent!information!
• Payment!contrary!to!public!order!
o When!a!beneficiary!causes!the!death!of!the!life!insured,!it!is!considered!a!violation!of!
community!standards!or!“public!order,”!enabling!the!insurer!to!refuse!payment,!
regardless!of!their!intention!was!to!enrich!themselves!by!committing!the!act!
!
! 27!
!
!! ! !!!!!!!!!!!!!!!!!!!!!!!!!!
Accident$and$sickness$claims$
For!certain!accidental!injuries!it!might!be!difficult!for!the!life!insured!to!follow!the!claims!process!
and!legislation!allows!relief!to!them!in!these!situations.!
• Accidental!death!and!dismemberment!claims!
o For!loss!of!life,!benefit!is!paid!to!the!beneficiary,!for!injury!that!causes!loss,!payment!
is!to!the!life!insured!
o Documents!required!are!similar!to!life!insurance!and!detailed!medical!evidence!from!
a!physician!may!be!necessary!to!substantiate!a!claim!
• Disability!claim s!
o The!claimant!must!satisfy!the!insurer!that!they!meet!the!definition!of!disability!set!
out!in!the!policy!
o Being!unable!to!find!a!job!is!not!a!relevant!factor!under!a!disability!insurance!policy!
o Docum ents!required!
! The!definitions!of!“disabled”!vary!considerably!among!different!policies.!
Therefore,!the!documentation!required!to!support!a!claim!will!need!to!match!
the!benefit!requirements!stated!in!the!insurance!policy!
! The!insurer!will!tell!the!claimant!what!it!needs!to!assess!a!claim.!Usually,!the!
claimant!must!complete!a!statement!and!have!their!doctor!provide!an!
attending!physician’s!statement!(APS).!The!doctor!will!be!asked!to!state!
when!the!person’s!condition!started.!This!is!important!because!this!
insurance!has!a!waiting!(or!elimination)!period.!The!insurer!may!use!the!date!
given!by!the!doctor!to!determine!when!the!waiting!period!began.!
! Sequence!of!events!must!be!followed!to!prove!the!existence!of!a!
disability:!(1)!period!of!total!disability!may!be!required!before!partial!
disability!benefits!are!available,!(2)!waiting!period!must!therefore!lapse,!(3)!
proof!that!they!can!no!longer!perform!their!duties!of!their!occupation,!(4)!
periodic!assessment!of!whether!claimant!is!still!disabled!and!(5)!assessment!
as!to!whether!the!claimant!is!still!disabled!
o M edical!and!other!examinations!
! Claims!are!based!on!medical!evidence,!from!a!family!doctor!or!a!specialist!if!
required.!!
! There!may!also!be!additional!medical!evidence!requested!by!the!insurer,!as!
they!seek!to!better!understand!and!verify!the!nature!and!extent!of!an!
individual’s!disability!
! For!critical!illness,!a!licensed!physician!specializing!in!the!determined!illness!
diagnosis!will!be!required!for!confirmation!
Segregated$funds$and$annuities$
• For!immediate!or!payout!annuities!that!are!within!their!guarantee!period,!the!insurer!is!
obligated!to!make!a!lump!sum!payment!for!the!remaining!annuity!guarantee!or!continue!
making!the!annuity!payments!to!the!annuity!grantee!
• For!amounts!that!are!held!within!‘locked\in’!accounts!(e.g.!LIRA,!LIF,!etc.)!they!can!only!be!
paid!out!or!transferred!as!per!applicable!legislation!requirements,!which!require!that!locked!
in!funds!remain!in!or!transferred!to!another!locked!in!account!
!
! 28!
!
!! ! !!!!!!!!!!!!!!!!!!!!!!!!!!
• Death!before!retirem ent!
o When!a!person!receives!a!pension!under!a!pension!plan!and!his!or!her!spouse!is!also!
eligible!under!the!same!plan,!if!the!person!dies,!the!benefits!will!become!payable!to!
the!spouse,!even!if!the!spouse!was!not!the!designated!beneficiary.!!The!spouse!may!
be!able!to!roll!it!into!his!own!locked\in!plan.!If!there!were!no!eligible!spouse,!the!
pension!benefit!will!become!payable!to!the!named!beneficiary.!If!there!is!no!named!
beneficiary,!the!pension!amount!will!be!payable!to!the!estate!of!the!pensioner!
• Death!after!retirement!
o If!the!pensioner!had!an!eligible!spouse,!the!spouse!may!be!entitled!to!a!survivor’s!
death!benefit,!usually!a!reduced!amount!of!the!pension!that!was!paid!to!the!
pensioner.!!If!there!is!no!eligible!spouse,!a!commuted!lump\sum!representing!the!
remaining!payments!in!any!applicable!guarantee!(if!any)!period!will!be!payable!to!the!
named!beneficiary.!If!there!is!no!named!beneficiary,!it!would!be!paid!to!the!estate!of!
the!pensioner!
! !
!
! 29!
!
!! ! !!!!!!!!!!!!!!!!!!!!!!!!!!
Rules$and$Principles$Governing$the$Activities$of$Life$
Insurance$and$Accident$and$Sickness$Insurance$Agents$
!
Strong!Ethics!and!following!the!rules!of!the!professional!practice!are!fundamental!to!licensed!
insurance!agents.!High!standards!are!critical!to!maintaining!the!public’s!trust!in!the!insurance!
industry!and!in!the!profession!of!the!insurance!agent.!
Ethical!conduct!includes!(1)!dealing!with!conflicts!of!interest,!(2)!client!needs!analysis,!(3)!selling!
ethically,!(4)!meeting!fiduciary!obligations!and!(5)!complying!with!statutes,!regulations!and!codes!
of!conduct!
This!section!defines!important!concepts!that!must!be!understood!and!applied!by!all!insurance!
agents!
Role$of$the$organization$that$protect$clients$
!
• Provincial!and!territorial!regulatory!authorities!
o The!federal,!provincial!and!territorial!governments!legislate!and!enact!regulations!for!
insurance!companies.!However,!the!focus!of!federal!supervision!under!the!
Insurance!Companies!Act!is!the!financial!soundness!of!the!federally!incorporated!
life!insurance!companies!
o Provincial!authorities!also!supervise!provincially!regulated!firms,!but!they!are!
maintaining!sole!responsibility!for!licensing!insurance!agents,!the!licensing!of!
insurers!operating!within!their!jurisdiction!and!the!marketing!of!insurance!
products!
o The!regulators!take!a!risk\based!approach!focusing!on!issues!that!could!
negatively!impact!clients!
o They!set!expectations!and!requirements!that!include!
! Promoting!transparency!to!clients!
! Taking!enforcement!actions!against!breaches!of!conduct!
! Equipping!clients!with!financial!knowledge!
! Allowing!clients!to!access!independent!compliant!resolution!such!as!
OmbudService!for!Life!and!Health!Insurance!
• Canadian!Insurance!Services!Regulatory!Organizations!(CISRO)!
o The!principal!responsibility!of!the!members!of!CISRO!is!to!administer!the!regulatory!
system,!applicable!to!insurance!intermediaries,!under!their!authority.!Although!CISRO!
members!cannot!enact!legislation,!they!are!key!advisors!to!their!governments!on!
regulatory!issues!related!to!insurance!intermediaries!
o The!CISRO!website!includes!a!link!to!disciplinary!actions!taken!by!insurance!
regulators.!This!provides!transparency!to!both!the!industry!and!clients!
o In!2018,!CISRO!published!guidance!on!the!fair!treatment!of!customers,!which!applies!
to!both!insurers!and!insurance!intermediaries.!It!encompasses!concepts!such!as!
ethical!behavior,!acting!in!good!faith!and!prohibition!of!abusive!practices!to!produce!
positive!outcomes!for!customers!
!
! 30!
!
!! ! !!!!!!!!!!!!!!!!!!!!!!!!!!
• Other!authorities!
o Office!of!the!Privacy!Commissioner!of!Canada!
! The!mandate!and!mission!of!the!Office!of!the!Privacy!Commissioner!of!
Canada!is!to!administer!enforcement!of!the!federal!Personal!Information!
Protection!and!Electronic!Documents!Act!(PIPEDA),!Canada’s!
private!sector!privacy!legislation,!and!to!“protect!and!promote!the!privacy!
rights!of!individuals!
o Financial!Transactions!and!Reports!Analysis!Centre!of!Canada!
(FINTRAC)!
! Mandate!of!FINTRAC!is!to!help!protect!the!integrity!of!the!Canadian!financial!
system!by!ensuring!life!insurance!agents!and!other!entities!comply!with!
Canada’s!Proceeds(of(Crime((Money(Laundering)(and(Terrorist(Financing(Act(
and!related!regulations.!Life!insurance!agents!have!a!responsibility!for!
reporting!suspicious!transactions!and!terrorist!property!
! Agents’!role!under!the!‘Act’!is!to!(1)!ascertain!each!client’s!identity!and!
confirming!the!existence!of!entities!(2)!third\party!determination,!(3)!
determination!of!purpose,!(4)!determination!of!politically!exposed!persons!
and!heads!of!international!organizations!and!(5)!obligations!to!report!
suspicious!transactions,!terrorist!property!and!large!cash!transactions!
• Agent’s!Role!under!Proceeds!of!Crime!(Money!Laundering)!and!Terrorist!
Financing!Act!
o Ascertaining!the!client’s!identity!
! The!life!insurance!agent!is!required!to!ascertain!the!identity!of!a!client!
purchasing!an!immediate!or!deferred!annuity,!or!a!life!insurance!policy!that!
is!not!an!exempt!policy!
! Exempted!products!include!registered!accounts!and!exempt!life!insurance!
! The!agent!must!keep!a!record!of!the!information!collected!under!these!laws!
in!the!client!information!record!
! There!are!three!ways!to!identify!the!individual!(1)!government\issued!
photo!ID!where!the!document!must!be!authentic,!valid!and!current,!(2)!
credit!file!m ethod!from!a!Canadian!credit!bureau!and!has!been!in!
existence!for!3!years!and!(3)!dual!process!m ethod!where!information!is!
matched!between!2!sources!
o Confirm ing!the!existence!of!the!entity!and!identifying!the!beneficial!
owners!
! Agent!must!identify!the!client!if!they!are!a!corporation!or!another!type!
of!entity!
! This!type!of!client!must!provide!acceptable!proof!of!identity,!such!as!a!
certificate!of!corporate!status!and!the!names!of!the!directors.!The!client!
must!provide!the!name,!date!of!birth!and!information!on!the!authorized!
signatories!of!the!entity!
! Client!must!provide!names!of!those!who!control!more!than!25%!of!the!entity!
! Agent!must!retain!information!on!the!ultimate!beneficiaries!of!the!entity!
o Third\party!determ ination!
!
! 31!
!
!! ! !!!!!!!!!!!!!!!!!!!!!!!!!!
! Required!for!applicants!that!are!acting!on!behalf!of!a!third!party!
! A!third!party!is!an!individual!or!entity!who!gives!instructions!regarding!the!
policy!
! Agent!must!keep!a!record!of!the!third\party!information!including!individual!
or!corporate/entity!name,!address,!date!of!birth,!nature!of!their!business!and!
for!entities,!incorporation!number!and!place!of!incorporation.!Finally!the!
nature!of!the!relationship!between!the!third!party!and!the!client!
o Determ ination!of!politically!exposed!persons!(PEP)!and!heads!of!
international!organization!(HIO)!
! A!life!insurance!agent!must!take!reasonable!measures!to!determine!if!a!
person!is!a!foreign!PEP,!a!domestic!PEP,!a!HIO,!or!the!family!member!or!close!
associate!of!one!of!these!
! Reasonable!measures!include!(1)!asking!the!client,!(2)!conducting!an!open\
source!search!or!(3)!consulting!a!source!of!commercially!available!
information!
o Determ ination!of!purpose!
! As!of!2014,!the!client!must!indicate!the!purpose!of!the!product!they!are!
purchasing!and!to!what!end!it!will!be!used!
o Obligation!to!report!suspicious!transactions!
! All!conducted!or!attempted!suspicious!transactions!must!be!reported!to!
FINTRAC!as!soon!as!practicable!after!the!agent!has!taken!measures!that!
enable!him!to!establish!that!there!are!reasonable!grounds!to!suspect!that!
the!transaction!or!attempted!transaction!is!related!to!the!commission!of!a!
money!laundering!offence!or!a!terrorist!activity!financing!offence!
! Examples!include!(1)!client!refuses!to!provide!required!identification!
documents,!(2)!client!is!accompanied!or!monitored,!is!withdrawn!or!nervous,!
(3)!client!is!curious!about!internal!controls!or!has!unusual!knowledge!of!
legislation!on!suspicious!transaction!reporting,!(4)!client!deposits!third\party!
cheques!for!large!amounts,!(5)!client!is!more!interested!in!a!product’s!
termination!than!its!long\term!advantages!or!(6)!transaction!is!very!complex!!
o Obligation!to!report!large!cash!transactions!
! Requirements!also!apply!to!large!cash!transactions,!such!as!a!single!deposit!
of!$10,000!or!more,!or!two!or!more!$10,000!deposits!within!a!24\hour!
period.!Insurers,!however,!rarely!accept!cash!payments!
! When!a!client!purchasing!a!policy!makes!a!deposit!of!$100,000!or!more,!
in!any!payment!form,!the!agent!must!check!whether!the!client!is!a!
politically!exposed!foreign!person.!The!agent!has!15!calendar!days!
after!the!transaction!to!report!this!type!of!client!
• Assuris!
o Assuris!is!a!“not\for\profit!organization!that!protects!Canadian!policyholders!if!their!
life!insurance!company!should!fail!
o Life!insurance!agents!must!understand!what!would!happen!if!an!
insurance!company!became!insolvent!
o Level!of!protection!is!as!follows:!
!
! 32!
!
!! ! !!!!!!!!!!!!!!!!!!!!!!!!!!
! Death!benefit!$200,000!
! Health!expense!$60,000!
! Monthly!income!$2,000/month!
! Cash!value!$60,000!
! Accumulated!value!100%!up!to!$100,000!(no!additional!coverage)!
! Beyond!the!limits!described!above,!Assuris!provides!85%!of!promised!
benefits!
• OmbudService!for!Life!and!Health!Insurance!(OLHI)!
o A!national!independent!complaint!resolution!organization!providing!clients!with!
assistance!to!their!enquiries!and!complaints!pertaining!to!Canadian!life!and!health!
insurance!products!and!services!
• Canadian!Council!of!Insurance!Regulators!(CCIR)!
o Similarly!to!CISRO,!the!Canadian!Council!of!Insurance!Regulators!(CCIR)!is!an!inter!
jurisdictional!association!of!insurance!regulators.!Their!mandate!is!to!facilitate!and!
promote!an!efficient!and!effective!insurance!regulatory!system!in!Canada!to!serve!
the!public!interest!
o The!regulators!priority!is!to!(1)!strengthen!the!foundation!of!market!conduct,!(2)!
implementing!enhanced!market!conduct!supervisory!framework,!(3)!making!the!
supervision!of!insurance!intermediaries!more!effective!and!(4)!Assisting!clients!
through!targeted!financial!education!programs,!such!as!fraud!alerts!and!client!
information!portals!
• International!Association!of!Insurance!Supervisors!(IAIS)!
o Mandate!is!promoting!effective!and!providing!globally!consistent!supervision!of!the!
insurance!industry!and!contributing!to!global!financial!stability!
Main$responsibilities$of$life$insurance$agents$
This!section!outlines!the!responsibilities!of!life!insurance!agents!within!the!business!conduct!
framework!that!follows!provincial!insurance!acts!and!codes!of!conducts!mandated!by!regulators,!
insurers!and!industry!associations.!Ethics!and!professional!practices!should!always!be!at!the!
core!of!the!activities!of!the!insurance!agent.!Non\compliance!with!sound!professional!
practices!can!lead!to!harsh!penalties,!which!could!be!monetary!or!licensing.!!
• Principles!required!of!an!agent!
o An!applicant!will!be!granted!a!license!if!the!regulator!is!satisfied!that!the!applicant:!
! Is!of!good!character!and!reputation.!
! is!not!engaged!in!any!business!or!occupation!that!would!
jeopardize!the!applicant’s!integrity,!independence!or!
com petence!as!an!agent.!
! intends!to!hold!himself,!herself!or!itself!out!publicly!and!carry\on!business!in!
good!faith!as!an!agent.!
• Rules!im posed!upon!an!agent!
o An!agent!who!has!a!license!shall!not!
! Offer!inducements!or!use!coercion!in!order!to!control,!direct!or!secure!
insurance!
!
! 33!
!
!! ! !!!!!!!!!!!!!!!!!!!!!!!!!!
! Make!false!or!misleading!statements!or!representation!in!the!solicitation!or!
registration!of!insurance!
! Coerce!or!propose,!directly!or!indirectly,!to!coerce!a!prospective!buyer!of!life!
insurance!through!the!influence!of!a!professional!or!a!business!relationship!
or!otherwise!to!give!a!preference!with!respect!to!the!policy!of!life!insurance!
that!would!not!otherwise!be!given!on!the!effecting!of!a!life!insurance!
contract!
Agent!principles!and!rules:!
• Acting!in!good!faith!
o Acting!in!good!faith!or!in!a!manner!that!is!consistent!with!the!client’s!best!interests!is!
a!fundamental!aspect!of!an!agent’s!business!conduct!
o Duty!of!care!
! The!client’s!interests!take!priority!over!the!interests!of!the!agent!
o Integrity!
! Agent!must!be!honest,!trustworthy,!fair,!reliable,!dependable!and!respectful!
! If!personal!integrity!is!missing,!there!is!little!an!agent!can!do!to!compensate!
for!its!absence!or!to!repair!the!damage!to!their!reputation!
o Com petence!
! Agents!should!only!carry!out!business!in!respect!to!the!products!and!services!
for!which!they!have!the!required!competence!
! Where!the!agent!does!not!have!the!knowledge!and!skills,!they!have!an!
ethical!duty!to!either!ask!for!technical!assistance!from!a!colleague!or!refer!
the!client!to!someone!that!can!assist!
• M anaging!conflicts!of!interest!
o Situation!in!which!a!life!insurance!agent!is!motivated!to!act!by!an!interest!
other!than!that!of!the!client.!
o Conflicts!of!interests!must!be!disclosed!and!managed!appropriately!
o Priority!of!the!client’s!interest!
! Agent!must!not!knowingly!prejudice!the!interests!of!a!client!for!personal!gain!
or!take!advantage!of!a!client’s!or!an!insured’s!inexperience!or!ill!health!
o Disclosure!of!conflicts!or!potential!conflicts!of!interest!
! Agents!must!openly!disclose!any!conflict!of!interest!and!they!must!not!place!
themselves!in!one!either!
o Product!suitability!
! Agents!are!expected!to!follow!appropriate!client!needs\based!sales!practices!
to!make!the!most!suitable!recommendations!for!prospective!client!
! The!recommended!product!must!be!suitable!to!the!needs!of!the!client.!The!
client’s!insurance!needs!analysis!must!also!show!that!the!agent!has!
understood!the!client’s!needs!and!that!he!puts!the!client’s!interests!first!
! Agents!must!(1)!perform!a!client!needs!analysis,!(2)!recommend!the!products!
that!meet!the!client’s!needs,!(3)!explain!and!document!the!product!
recommendation!
!
! 34!
!
!! ! !!!!!!!!!!!!!!!!!!!!!!!!!!
! Best!practices!around!product!suitability!include!disclosure!to!the!client,!
client!expectations,!fact!finding,!needs!assessment,!recommendation!and!
advice!and!product!information!
o Avoiding!conflict\of\interest!occupations!
! Agent!must!not!be!engaged!in!any!business!or!occupation!that!would!
jeopardize!the!applicant’s!integrity,!independence!or!competence!
! Regulatory!authorities!can!restrict!certain!types!of!additional!employment!
for!life!insurance!agents.!For!example,!restrictions!exist!on!the!licensing!of!
clergymen,!liquor!store!employees!or!police!officers.!However,!regulators!
have!moved!away!from!these!specific!restrictions!for!a!broader!approach!
• Refraining!from !unfair!or!deceptive!practices!
o Tied!selling!
! Involves!making!a!purchase!of!one!product!conditional!on!the!purchase!of!
another!
! Example:!if!an!agent!advises!a!client!that!they!are!eligible!for!an!RRSP!loan!
but!must!first!transfer!their!RRSP!funds!to!the!life!insurance!company!that!
the!agent!represents.!This!is!not!true!and!thus!deceptive!
o Churning!
! Agent!encourages!a!client!to!give!up!one!product!for!another!(usually!from!
the!same!insurer)!in!order!for!the!agent!to!benefit!from!the!commission!
o Twisting!
! Agent!persuades!a!client!to!terminate!a!policy!in!view!of!replacing!it!with!
another!one!(generally!from!a!different!insurer)!
! The!sale!is!considered!not!to!be!in!the!best!interest!of!the!client!and!the!full!
consequences!of!termination!(i.e.!financial!loss)!is!withheld!by!the!agent!
! The!agent!profits!from!the!sale!through!increased!commissions!
! Agents!must!not!recommend!the!replacement!of!any!insurance!policy!unless!
they!believe!that!such!a!replacement!is!in!the!best!interests!of!the!client!
o Premium!rebating!
! Involves!an!agent!giving!back!or!rebating!a!portion!of!the!premiums!
! Example:!an!agent!sells!insurance!to!a!client!that!was!reluctant!to!sign,!so!
the!agent!offered!to!covert!the!first!premium!
o Trafficking!in!Insurance!
! Agent!acts!as!an!intermediary!between!a!policyholder!who!wishes!to!sell!a!
policy!(give!up!or!absolute!assignment)!and!a!potential!buyer!
! This!practice!is!prohibited!in!some!provinces!(e.g.!Newfoundland)!and!
discouraged!in!others!by!the!industry!itself.!Several!insurers!have!policies!
that!prohibit!this!practice!as!well!and!could!lead!to!termination!
o Inducing!to!insure!
! An!agent!cannot!use!a!gift!or!offer!of!payment!to!convince!a!client!to!
purchase!insurance!
! Example:!agent!offers!to!give!a!discount!on!a!policy!benefit!such!as!a!rider!
if!they!decide!to!purchase!permanent!insurance!over!term!
o Fronting!
!
! 35!
!
!! ! !!!!!!!!!!!!!!!!!!!!!!!!!!
! An!agent!holds!a!license!but!chooses!to!have!another!agent!who!did!not!
actually!complete!the!transaction!sign!as!the!agent!of!record,!or!where!an!
unlicensed!person!arranges!the!business!and!has!a!licensed!person!sign!on!
their!behalf!
! Example:!If!an!agent!who!has!not!completed!their!license!convinces!a!
relative!to!purchase!insurance!and!gives!the!business!to!his!manager!and!
they!split!the!commission!
o Unnecessary!delay!in!delivering!policies!
! Agent!must!not!hold!or!retain!documents!intended!for!delivery!to!the!client!
and!must!deliver!insurance!policies!or!evidence!of!insurance!coverage!to!the!
client!within!a!reasonable!time!
o M isrepresentation!
! It!is!a!violation!for!any!life!insurance!agent!to!make,!issue,!or!circulate!any!
illustration!or!sales!material,!or!to!make!any!statement!that!is!false,!
misleading!or!deceptive!
! Example:!An!agent!send!a!newsletter!to!their!client!stating!that!their!life!
insurance!company!has!products!that!guarantee!100%!of!all!life!payments!
“no!questions!asked”!and!the!insurer!was!never!made!aware!of!the!
publication!
o M isappropriating!client!funds!
! Taking!money!or!other!property!received!from!the!client!for!a!specific!
purpose!and!fraudulently!misapplying!it!to!another!purpose!is!considered!a!
deceptive!practice!and!is!illegal!
! Com m ingling!of!funds!is!prohibited!
! Agents!must!(1)!not!encumber!funds!without!prior!consent!of!the!insurer,!(2)!
not!use!or!apply!the!funds!for!purposes!other!than!as!described!in!the!
agreement!with!the!insurer!or!the!client!and!(3)!pay!to!the!insurer!all!funds!
collected!or!received!
! A!number!of!insurance!companies!have!a!no\cash!policy!in!regard!to!
premium!payments!with!an!application.!They!require!a!cheque!drawn!on!the!
client’s!account!
! An!agent!should!never!deposit!money!in!his!own!account,!even!if!the!
intention!is!to!issue!a!cheque!from!that!account!to!an!insurer!
o M aking!a!false!document!
! Forgery!is!a!criminal!offence!and!involves!the!agent!making!a!false!document!
and!knowingly!doing!so!
! An!agent!is!required!to!collect!sufficient!information!to!determine!client!
identity!and!ensure!all!transactions!are!lawful.!Furthermore,!false!witnessing!
of!signatures!and!false!declarations!violate!the!professional!standards!set!out!
in!the!various!codes!of!conducts!
o Holding!out!improperly!
! Agents!who!do!not!comply!with!the!following!requirements!are!considered!
to!be!holding!out:!(1)!ensure!their!license!is!posted!in!a!publicly!visible!place,!
(2)!not!mislead!as!to!qualifications!or!the!nature!of!the!business!being!
!
! 36!
!
!! ! !!!!!!!!!!!!!!!!!!!!!!!!!!
conducted,!(3)!avoid!terms!that!indicate!meaningful!specialized!training!and!
competency!unless!the!agent!has!actually!achieved!the!claimed!level!of!
training/or!competency!(4)!not!claim!to!have!“associates”!unless!there!is!
actually!one!licensed!individual!with!equal!or!better!qualifications!and!(5)!not!
hold!out!as!a!financial!planner!unless!holding!a!planning!designation!
recognized!by!FP!Canada!
o M isusing!company\provided!illustrations!
! Life!agents!should!present!information!about!a!product!accurately,!honestly,!
completely!and!in!clear!language.!Agents!must!not!change!illustrations!
produced!for!a!client!by!the!insurer!
o Defam ation!
! It!is!unethical!for!a!life!insurance!agent!to!be!maliciously!critical!or!
derogatory!about!any!colleague,!agency!or!insurer!
• M aking!proper!disclosures!
o Disclosure!of!information!is!an!expected!regulatory!outcome.!Disclosure!is!
entrenched!in!the!approach!to!risk\based!market!conduct!regulation!and!to!reinforce!
fair!treatment!of!clients!
o Product!disclosure!
! Agents!should!also!provide!complete!information!about!the!product!and!how!
it!meets!the!client’s!needs,!as!well!as!the!life!agent’s!business!relationships!
with!the!insurer!
! Key!items!should!be!disclosed:!(1)!provinces!and!territories!the!agent!is!
licensed!to!sell,!(2)!insurer(s)!the!agent!represents,!(3)!nature!of!the!
relationship!with!the!insurer(s)!represented,!(4)!how!the!agent!is!
compensated,!(5)!whether!the!agent!is!eligible!for!additional!compensation!
based!on!other!factors,!(6)!any!conflicts!of!interest!
o Disclosure!about!replacem ent!
! To!fully!understand!policy!replacement!disclosure,!a!life!insurance!agent!
should!have!a!basic!understanding!of!(1)!how!policies!differ;!(2)!why!it!might!
be!appropriate!to!recommend!replacement,!(3)!the!risks!inherent!in!
replacement!even!where!it!may!be!appropriate,!(4)!existing!insurance!that!
may!have!cash!values!and!(5)!negative!tax!consequences!
! Life!Insurance!Replacement!Declaration!(LIRD):!a!written!
comparative!explanation!of!the!advantages!and!disadvantages!of!replacing!
the!life!insurance!policy!must!be!completed!with!the!LIRD,!and!copies!of!the!
documents!provided!to!the!client!
o Com m ission!sharing!
! Before!splitting!commissions!with!another!life!insurance!agent,!the!agent!
should!ensure!that!the!person!is!appropriately!licenced!where!necessary,!in!
order!to!receive!the!split.!Moreover,!it!is!an!obligation!of!the!agent!to!
disclose!to!his!client!that!there!has!been!or!will!be!a!commission!splitting!and!
provide!all!relevant!details!of!the!commission!splitting!to!his!client!
o Referrals!and!referral!fees!
!
! 37!
!
!! ! !!!!!!!!!!!!!!!!!!!!!!!!!!
! Referral!arrangements!consist!of!a!fee!paid!for!each!lead!or!prospect,!
regardless!of!whether!a!sale!eventually!occurs!
! The!agent!should!disclose!details!of!referral!arrangements!to!clients!
! Most!jurisdictions!prevent!those!receiving!a!referral!from!not!being!licensed!
• Acting!in!compliance!with!regulations!and!codes!of!conducts!
o Maintaining!the!required!liability!insurance,!errors!and!omissions!(E&O)!
coverage!
! This!coverage!provides!indemnity!for!negligence,!error,!or!omission!
(professional!liability!insurance)!and!protects!life!insurance!agents!from!
financial!losses!they!may!suffer!
o Docum enting!the!file!
! Agents!must!keep!detailed!notes!and!correspondence!of!the!original!
transactions,!recommendations!made!and!the!client’s!acceptance/non\
acceptance!of!those!recommendations!
! The!agent!will!have!the!necessary!proof!readily!available!to!prove!he!carried!
out!his!business!correctly!
o Contract!delivery!
! An!agent!should!not!deliver!the!policy!to!the!client!without!verifying!and!
ascertaining!any!potential!change!in!his!health!status!
! An!agent!must!be!certain!that!between!the!time!of!signing!the!contract!and!
delivering!it,!no!change!in!the!health!status!of!the!client!has!occurred.!!
! When!the!insurance!policy!is!delivered!(usually!within!30!days),!the!agent!
must!check!that!the!insured!is!still!in!good!health.!If!the!agent!notices!that!
there!have!been!significant!changes!in!the!client’s!insurability!since!the!
application!was!signed,!he!must!not!give!him!the!policy!and!he!must!have!the!
application!updated!
• Handling!complaints!in!a!timely!and!fair!manner!
o Definition!of!com plaint!
! An!expression!of!dissatisfaction!about!the!service!provided!by!an!agent!that!
could!involve!a!financial!loss!
o Ethical!complaints!
! Complaints!involving!unethical!behaviour!or!alleging!violations!of!codified!
ethical!standards,!such!as!a!code!of!conduct!and!ethics,!should!be!taken!
seriously!
o Procedures!to!abide!by!
! The!life!insurance!agent!should!maintain!a!complaint!log!(register)!to!track!
complaints,!to!provide!any!required!reports!and!to!maintain!a!state!of!
readiness!for!regulatory!and!other!audits!
• Core!ethical!values!
o Acting!in!good!faith!
o Managing!conflicts!of!interest!properly!
o Refraining!from!unfair!or!deceptive!acts!or!practices!
o Making!proper!disclosures!
o Acting!in!compliance!of!regulation!and!codes!of!conduct!
!
! 38!
!
!! ! !!!!!!!!!!!!!!!!!!!!!!!!!!
o Handling!complaints!in!a!timely!and!fair!manner!
Licensing!process!and!regulations!
• Purpose!of!licensing!life!insurance!agents!and!agencies!
o Licensing!aims!to!protect!the!public!against!incompetent!agents,!unfair!or!deceptive!
practices!and!unethical!activities!
o Life!insurance!agents!are!required!by!statutory!law!to!hold!a!life!insurance!license!for!
each!province!or!territory!where!they!carry!out!business!
o It!is!the!life!insurance!agent’s!responsibility!to!limit!his!practice!to!areas!in!which!he!
has!been!trained,!educated!and!above!all!licensed!
o Agents!should!only!sell!what!they!are!authorized!to!sell!
• Licensing!regime!
o Applicants!must!complete!the!Life!License!Qualification!Program!(LLQP).!
There!are!two!types!Full!LLQP!and!LLQP!Accident!&!Sickness!(A&S)!
o The!full!LLQP!combines!life!insurance!and!accident!and!sickness!insurance!training.!
The!LLQP!Accident!&!Sickness!(A&S)!covers!accident!and!sickness!insurance!only.!An!
A&S!agent!would!then!be!prohibited!from!selling!any!other!type!of!insurance,!unless!
they!obtain!the!full!license!to!do!so!
o In!addition!to!passing!the!LLQP,!the!applicant!must!submit!a!fully!completed!
application!to!the!appropriate!licensing!authority!and!the!application!must!be!
approved!before!a!license!is!issued!
o Next,!the!applicant!must!obtain!an!employment!or!an!agency!contract!
o Fully!licensed!agents!are!able!to!sell!the!following!products!
! Individual!and!group!life!insurance!policies!
! Individual!and!group!accident!and!sickness!(including!disability)!insurance!
policies!
! Individual!and!group!annuities!
• Selling!to!and!servicing!out\of\province!clients!
o For!agents!that!want!to!sell!to!clients!located!in!another!province!or!territory,!a!
reliance!model!of!reciprocal!licensing!where!regulators!can!rely!on!the!requirements!
of!an!agent’s!home!province,!with!the!option!to!request!further!requirements!if!they!
feel!it!is!necessary!
• Revoking!a!license!
o Regulatory!authorities!maintain!records!of!agents!who!have!had!substantiated!
complaints,!suspensions!and!revocations!of!licenses.!These!records!are!available!to!
clients.!!
o An!agent!who!has!had!a!license!suspended!may!find!it!extremely!difficult!to!obtain!
the!trust!of!potential!clients.!!
o An!agent!who!has!had!a!license!revoked!will!find!it!extremely!difficult!to!obtain!a!
license!again!
o As!outlined!in!the!Insurance!Act,!regulators!may!suspend!or!revoke!a!license!if:!
! Has!violated!any!provision!of!the!license!in!the!licensee’s!operations!as!an!
agent!
!
! 39!
!
!! ! !!!!!!!!!!!!!!!!!!!!!!!!!!
! Has!made!a!material!misstatement!or!omission!in!the!application!for!the!
license!
! Has!been!guilty!of!a!fraudulent!act!or!practice!
! Has!demonstrated!incompetence!or!untrustworthiness!to!transact!the!
insurance!agency!business!for!which!the!license!has!been!granted!
! !
!
! 40!
!
!! ! !!!!!!!!!!!!!!!!!!!!!!!!!!
LIFE$INSURANCE
!
!
! 41!

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