Policy Delivery: Getting Your Health & Life Insurance Policy Contract

You get your insurance policy for one final review before asking for the coverage to start

After you apply for life or health insurance, the underwriting process starts. Once your application is approved, we will give you details about the offer from the insurer. You then decide whether you accept the terms. If yes, the next step is the delivery of your policy.

Tip: Since your insurance policy is personalized for you, be sure to refer to your actual contract for specific details.

The offer from the insurer

After reviewing your insurance application, the underwriter informs us of their decision. The offer for coverage is conditional upon factors such as:

• No changes in your health since the time you applied for coverage
• No medical visits since you applied
• No medical visits pending
• No travel outside of Canada that wasn’t disclosed before

Once we have the specifics, we will inform you of the offer. Here are the possible outcomes:

The actual policy delivery “meeting”

Before COVID-19, policy deliveries used to take place in person. You received a paper insurance policy contract (after we received it by courier and reviewed it).

Now, the delivery process has been modernized and done primarily by email. You generally receive an electronic contract. This lets you review your policy at any time. You don’t need to worry about misplacing or losing the original. 

You sign via e-signatures from your smartphone, tablet or computer. 

Tip: If you like, we can have a video meeting to simulate the old experience. 

Do not delay the policy delivery

Take delivery as soon as you can. If your health changes before the policy delivery, the insurer could change their decision. Also, your premiums are due as of the policy date in the contract, not the date you take delivery. Waiting means you’re ultimately paying for time you weren’t covered.

Example: Suppose your policy date is April 2, and you don’t take delivery until May 30. You pay your premiums from April 2, even though that was about two months ago.

Review key portions of your insurance policy

Your insurance policy is a contract. Some portions warrant special attention to ensure that you understand them. If you spot any mistakes, notify us, and we will inform the insurer. 

Reminder: the information here is general. Rely on the wording in your insurance policy.

Your “free look” period

You now have your actual insurance policy contract for the first time. This is when you can read all the terms and conditions. You generally have 10 days for your review. This is called a “free look” period. If you do not want the coverage for any reason, you can cancel the coverage during this period and get a full refund. 

Note: You can cancel your coverage anytime after the free look period, but you will not receive a full refund and may face surrender penalties. 

The initial policy pages

The initial policy pages show details like the:

• Policy number
• Policy date
• Policyowner
• Coverage amount
• Life or lives insured
• Premium schedule
• Coverage expiry date

Suicide provision

If the life insured dies by suicide in the first two years of the policy, usually all premiums are refunded, but the death benefit is not paid. It is as if the insurance never existed.

After two years, death by suicide is usually covered and treated like other causes of death. 

Under the Medical Assistance in Dying (MAID) rules, the death would not be considered suicide, but the other contract provisions would apply. This is the position of the Canadian Life & Health Insurance Association (CLHIA).

Contestability provision

If the life insured dies within the first two policy years, there is additional scrutiny from insurers since this rarely happens. There may be an investigation to see if:

• Information was knowingly omitted (example: health issues were not disclosed)
• Misstatements were made (example: a smoker claiming to be a nonsmoker)

If evidence of fraud is found, the death benefit may not be paid because the insurance policy would not have been approved.

After two years, the insurer can usually only challenge (“contest”) the death benefit payment where fraud is suspected.

Fraud exclusion

If evidence of fraud is found at any time, whether the life insured is alive or dead, the death benefit and policy can be voided. The focus is on conscious actions, like:

• Misremembering details (example: a smoker claiming to be a nonsmoker)
• Omitting details (example: a cancer diagnosis five years ago) 

“Cotinine testing analysis shows that 42.5% of applicants tested positive for tobacco but said they did not smoke on the application.” 

ExamOne 2021 continine testing

Your application form

Your insurance application is part of your insurance contract. That’s because the offer from the insurer is based on the accuracy and completeness of the information you provided when applying for coverage. While you saw the details on your screen during the e-application process, this is the ideal time for a thorough review.

Beneficiary information

Beneficiaries receive the death benefit when you pass away. A beneficiary could be a person, corporation, trust, charity, or other entity. If the beneficiary is a minor, a trustee must be designated to manage the proceeds of your life insurance until the beneficiary reaches the age of majority. 

This beneficiary details are generally within the insurance application. If the beneficiaries are revocable, as the policyowner, you can change them later.

If the beneficiaries are irrevocable, they must sign off on any policy changes, including changes to beneficiary designations. The main action you can take without their consent is halting the payment of premiums. 

Product-specific portions of your insurance policy

Some portions of your insurance policy only appear for specific products.

Term life: conversion option

You can convert some or all of your face amount to permanent life insurance regardless of your health. Your premium for the portion converted is based on your age at the time of conversion.

Your policy generally shows:

• The maximum age by which you must decide
• The products to which you can convert

Tip: Insurance companies differ in the quality of the products to which you can convert. That’s why we consider conversion options when showing you proposals for temporary (“term”) life insurance. Because of competition, having a better conversion option has a marginal effect on your premiums.

Disability insurance: definition of disability

Getting strong definitions protects you better. 

Universal life insurance: investment options

You have many investment choices with universal life. Some investments guarantee your principal at the cost of lower returns. There are many considerations, such as your age, goals, deposit amount, and risk tolerance.

Tip: Since the worlds of investing and insurance are so different, we recommend you consult your independent investment advisor for guidance on what investments are right for you.

Whole life insurance: reduced paidup option

If you decide to stop paying future premiums, you can cancel your coverage, but you will likely face penalties:

• Penalties from the insurers: there are usually cancellation charges 
• Tax penalties: a portion of your cash value may be taxed

With whole life insurance, you can use up the cash value in your policy to buy life insurance coverage that lasts for life without any more premiums. The death benefit on this “reduced paidup” insurance will likely be significantly lower than on your original policy. 

Tip: We can help you understand your choices before you decide to stop your premiums. 

Changes in health

You are usually asked to confirm your health hasn’t changed since you applied for insurance. If there have been changes, give us details. We will inform the insurer and then inform you of their decision.

Payment and signatures

If you did not provide your payment information earlier, this is the time:

• Insurance for needs: clients tend to select monthly premiums through Pre-Authorized Debit (PAD) for the convenience of budgeting, though this may cost 8% more than paying annually
• Insurance for wants: clients tend to select annual premiums (which may save 8%) since the funds usually come from other assets. In future years, the insurance company will send you a premium notice before your policy anniversary. You can send the money through online banking or by mailing a cheque.
• Insurance for gifts: the choice varies

Note: you may not pay your premiums with cash. Also, all premiums are payable to the insurer (never to the insurance advisor).

Tip: Universal life insurance does not have an 8% surcharge for paying monthly instead of annually. The cost is the same with either option. 

Acceptance by the insurer

We send your completed delivery documents to the insurance company for their final review. 

If the insurer has any concerns, we will contact you once we are informed. 

If the insurer is satisfied, your first premium gets charged, and your coverage goes into effect. Congratulations!

Note: with some term policies, especially those on younger clients and smaller death benefits, a premium may be withdrawn before you sign the delivery forms. These policies tend to be simpler to underwrite, and the insurer may not anticipate a reason for the settlement to be postponed. In these situations, you can still cancel your coverage during the free look period, and have the premium returned to you.

Reminder: Premiums are due from the policy’s effective date, not from when you take delivery. For instance, if you take delivery two weeks after the effective date and you’re paying monthly, you’ll be paying for the full month, including the two weeks you before you took delivery. Your next premium would be due one month from the effective date or two weeks from the delivery date. After that, you would pay on the same day of every subsequent month.

The “reason why” letter

Once your insurance is settled (“inforce”), we email you a letter summarizing why you got your coverage. This is s handy reminder for the future.

The “end”

We remain available to provide ongoing service. Please feel free to ask us questions. We’re here to help. 

To get clarity from your family team at Taxevity, schedule a chat.

Promod Sharma (FSA, FCIA, FEA) and Jeevan Sharma (CFP) YOUR FAMILY TEAM

At Taxevity Insurance, we’re passionate about bringing clarity to complex financial decisions. Let us empower you with personalized strategies to achieve your goals. We focus on life and health insurance solutions to protect your business, your family, and your legacy.