How Life Insurance Works in Ontario

How Life Insurance Works in Ontario
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There was an ad about life insurance in an old magazine: no words, just two pictures. On the first picture there was a family sitting at the dinner table: a father at the head, a mother beside him and a couple of well-dressed kids. The table was full of food, the furniture was expensive and a beautiful crystal chandelier giving bright light to the entire room. On the second picture there were the same kids, the same mother, the same room, the same table full of food, the same crystal chandelier…but the father’s chair was empty … only his portrait on the wall. The message was obvious: the father had a life insurance.

The main advantage for the policy owner is “peace of mind”, knowing should you pass away, life insurance can provide sufficient fund for your loved ones that can:

  • Replace lost income
  • Pay off your mortgage or loans
  • Help with home-related expenses, utilities and taxes
  • Provide money for college or university fees for your children
  • Cover funeral costs, final income taxes and other expenses

Life insurance policies can pay to the beneficiary either a tax-free lump sum cash payment or an annuity.

An annuity is any continuing payment with a fixed total annual amount.Annuities and pensions that pay a benefit for life are sometimes regarded as insurance against the possibility that a retiree will outlive his or her financial resources. In that sense, they are the complement of life insurance and, from an underwriting perspective, are the mirror image of life insurance.

Nobody can guarantee you immortality

Understanding Life Insurance

Life insurance is a legal contract between an insured (insurance policy holder) and an insurer (an insurance company), which describes the limitations of the insured events. Usually, the policy holder pays a premium on monthly basis. Some other expenses, such as funeral expenses, may be also included in the benefits. Common exclusions are claims relating to suicide, fraud, war, riot and civil commotion.

Some life insurance plans accumulate cash values that may be taken by the insured if the policy is surrendered or which may be borrowed against. If worse comes to worst, you may use this funds for a down payment for your property, for example.

The cost of insurance is determined using mortality tables (statistically based tables showing expected annual mortality rates) calculated by actuaries. Actuaries are professionals who employ actuarial science, which is based on mathematics (primarily probability and statistics). The three main variables in a mortality table are commonly age, gender, and use of tobacco.

Whether a man buys life insurance or not, someone always has to pay for it; the question is who … the man or his loved ones?

Upon the insured’s death, the insurer requires acceptable proof of death (normally, a death certificate) before it pays the claim and the insurer’s claim form completed, signed (and typically notarized).

If the insured’s death is suspicious and the policy amount is too large, the insurance company may investigate the circumstances surrounding the death before deciding whether it has an obligation to pay the claim.

Although the owner and the insured are often the same person, there is a difference between the insured and the policy owner. For example, if Joe buys a policy on his own life, he is both the owner and the insured. But if Jane, his wife, buys a policy on Joe’s life, she is the owner and he is the insured. The owner designates the beneficiary, but the beneficiary is not a party to the policy. The owner can change the beneficiary unless the policy has an irrevocable beneficiary designation.

If you have any questions about life insurance please contact Toronto Life Insurance Broker Olga Ryjkova


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