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PLEASE NOTE: The following information is taken from Assuris membership information booklet:
CANADIAN LIFE AND HEALTH INSURANCE COMPENSATION CORPORATION operating as AssurisThe Canadian Life and Health Insurance Compensation Corporation (Assuris) is a federally incorporated, private company established in 1988 to administer the Consumer Protection Plan. Assuris'
objective is to protect, within limits, Canadian policyholders against
loss of benefits should a member of Assuris become insolvent and wound
up. You may read the following information in the order presented, or use the following questions to jump directly to the information you seek:
THE PROTECTION Assuris PROVIDES:1. Can all financial institutions that sell life and/or health insurance be members of Assuris?No. Membership is open to all insurance companies that are licensed to sell life and/or health insurance. However, fraternal or mutual benefit organizations would not normally be members, nor would prepaid hospital, medical and dental service organizations. 2. What will Assuris do?If a member becomes insolvent, Assuris will arrange for payment under the member's covered policies, up to certain specified limits. (See questions 4, 21 and 22.) This means annuity income payments will continue, claims will be paid, and requests for cash surrender will be honored. If policyholders wish to continue their life, disability or health insurance protection, replacement policies will be available, within specified limits. Arrangements will be made with another insurer that is a member of Assuris to look after these matters. 3. What is protected by Assuris?Protected is any promise a member insurer makes in a life insurance, health insurance, money-accumulation or annuity policy to pay either a fixed or at least a minimum amount of money to a person, or on a person's death. However, if the insurer has not guaranteed the amount to be paid, there is no protection. Employer, union or association-owned group pension policies are not protected unless the member insurer has direct obligation to the pension plan members. (See question 21.) 4. What are the limits of protection?There are three separate classes of policies, each with its own limits: Class A: In this class are policies providing life insurance protection, and policies providing for the accumulation of money. These include accumulation annuities, registered retirement savings plans (RRSPs) and registered retirement income funds (RRIFs). The limits for this class are:
For example, a person holding a life insurance policy, a non-registered accumulation annuity, an RRSP and a RRIF will be protected for up to $200,000 of life insurance and for up to the following withdrawable amounts:
Class B: In this class are health benefits, other than disability income annuities. The limit for this class is:
RRIFs and Commutable Annuities:Owners of RRIFs and commutable annuities (annuities where the owner may take a lump sum cash payment instead of a monthly income) may believe that it is more advantageous to come under the Class B limit than the Class A limits. Therefore, after a member insurer becomes insolvent and Assuris enters the picture, owners would be given a one-time-only opportunity to give up the right to make cash withdrawals and to exchange their policies for annuities that provide a lifetime income instead. They would have to make the choice for all their RRIFs and commutable annuities with the insolvent member. 5. Do the limits apply to each policy separately?For the purpose of applying the limits, the person is: 6. How are the limits applied?Example A: A person with both a life insurance policy and a money-accumulation policy could receive up to Assuris's amount limits on each policy. For example, a person with a $200,000 term insurance policy which has no cash value and a $60,000 non-registered accumulation annuity could choose to continue both. If the person died before the term policy expired,payment would be made under both policies. Example B: Usually, the policyholders will have the option to continue life insurance coverage or to take the cash value of a whole life policy, but not both. However, the owner of a very large life insurance policy, which has cash values, could continue the maximum amounts of insurance under Assuris's limits and receive part of the cash value as well. For example, a person with a $400,000 life insurance policy which has a $60,000 cash value could choose to continue $200,000 of life insurance protection. The cash value of the continued insurance would be $30,000. The remaining $30,000 would be available in cash, or it would be paid with interest in addition to the $200,000 if the person died. 7. Can the limits ever be exceeded?Yes. For example, the $60,000 cash withdrawal limits in Class A are the limits at the date an order is issued to wind up a member. A higher amount could be paid after the date if premiums continue to be paid, or as interest is credited. To illustrate, a person with a $200,000 life insurance policy which has a $60,000 cash value could choose to continue the life insurance protection or to withdraw the cash. If the life insurance protection is continued, it could be terminated at a later date and a cash withdrawal of more than $60,000 may be available. 8. Are policies protected if issued before Assuris was established?Yes. 9. Are only Canadian policies protected?Yes. To be protected by Assuris...
10. Are all individual policies protected by Assuris?Individual policies cover only one person, or sometimes several persons having a family or business relationship. Policies are protected by Assuris, with one exception. If they promise to pay only whatever amount of money is available based on the current market value of investments, with no minimum, that promise is not protected. 11. Are group life and health insurance policies protected by Assuris?Group life and health insurance policies cover employees of one or more employers, or members of unions or associations. Claims under most of these group policies are protected by Assuris, up to the stated limits, for up to six months after the date of the order to wind up the member insurer. It is expected that the employer, union or association would move the insurance to another insurer before the end of the six month period, and so, no replacement policies would be made. There are some group insurance policies under which the insurer's obligation relates only to the aggregate claims of the group, not to the claims of individual lives. These policies are not protected by Assuris. There are also arrangements under which member insurers provide "administration services only" to employers, union and associations for group life and health insurance. Assuris provides no protection in such situations. 12. Are group pension policies protected by Assuris?Group pension policies may provide pensions for employees of one or more employers, or members of unions or associations; or they may provide only for the investment of the pension plan funds. Under some of these policies, the insurer has a direct obligation to specific plan members. These policies are protected by Assuris. Under many pension policies, the insurer's only obligation is to the employer, union or association for administration of the plan or investment of the funds. These policies are not protected by Assuris. 13. Do the limits apply separately to individual and group policies?No. The limits apply to the total amounts payable under all policies with the same insurer, whether they are individual or group policies. 14. What if several policies on the same life insured have different owners, or different beneficiaries?It makes no difference to the way Assuris's limits work. If policy amounts must be reduced to meet the limits, normally the amounts payable for each policy will be reduced in the same proportion. 15. How do Assuris's limits work for policies covering more than one person?The limits apply to each person separately. As an example, if Robert and Marie Martin are receiving an annuity of $5,000 a month while both are alive, reducing to $3,000 a month after one dies, the Assuris limit would be $2,000 for each. The protection would be for $4,000 a month while both are alive, and $2,000 thereafter. 16. What is the limit for registered policies?If a policy providing life insurance protection is registered, it is combined with non-registered policies for the purpose of the $200,000 life insurance limit. RRSP's, RRIF's, pension policies and any other policies registered under the Income Tax Act for the purpose of obtaining tax deferral or relief on contributions are combined for the purpose of the $60,000 limit that applies to registered policies. Since the spouse is the owner of a spousal RRSP, spousal RRSP's would come under the limit that applies to the spouse, not the limit that applies to the contributor. Registered and non-registered annuity income payments are combined for the purpose of the $2,000 per month income limit. 17. What are the limits if a person has policies with related insurers?Assuris protection applies separately to each member insurer, regardless of its relationship with any other member. Assuris provides no protection for affiliates of member insurers, unless the affiliates are themselves members. 18. What happens if a member insurer ceases to be a member of Assuris?Under their contracts with Assuris, member insurers may not cease to be members. Once a policy is protected, it continues to be protected unless it changed so that it no longer qualifies as a Canadian policy. (See question 9.) 19. How does a person obtain Assuris protection?Assuris protection applies automatically to covered policies issued by a member. It is not necessary for a policyholder to apply for protection. 20. What will happen if a member insurer goes out of business?Assuris will arrange for policyholders to be contacted as soon as possible. Policyholders and persons entitled to payment will be offered the opportunity to assign to Assuris their rights under the member's policies in return for a payment or a replacement policy arranged by Assuris. Payment or a replacement policy will be provided promptly on receipt of the completed assignment. The assignment is like collateral for a loan. When the member insurer's assets are eventually liquidated, a payment on a policy will be made to Assuris. Assuris will keep what has already been paid out to those entitled to payment, or what is needed to provide continuing insurance, and will pass on any excess payment. If the payment from the liquidator is not enough, Assuris will make up the difference. Any person not wishing to make an assignment would receive whatever amount is eventually paid on the policy directly from the liquidator. Assuris would not be involved. However, a person cannot lose by making an assignment. 21. Will the terms of a member insurer's policy be honored, within limits, if the member goes out of business?Generally, yes. Payments will usually be made according to the terms of the member insurer's policy, and replacement policies will have the same terms. However, there will be a test of reasonableness. If the terms of a member's policies are clearly out of line with normal business practice, Assuris protection will be modified somewhat. For example, if a policy promises an interest rate that is out of line with what other financial institutions were offering at the time the policy was purchased, Assuris will ensure payment of the principal and a lower, more reasonable rate of interest. 22. Is there a chance that Assuris would not be able to meet its obligations?Assuris is a private corporation, not a government agency. Also, there is a limit on the amount that Assuris can assess its members in any one year. Therefore, there is a possibility that it could be financially unable to meet its obligations. However, it should be considered that (1) member insurers are contractually bound to continue their membership and pay assessments levied by Assuris; and (2) Assuris will have the power to levy assessments for as many years as it takes to meet Assuris's obligations. Note: The information contained in this booklet is presented in a non-technical way. It is not intended to be a legal explanation of Assuris's By-Laws and Rules. Policyholders may obtain more information on the Canadian life and health insurance industry's Consumer Protection Plan by calling The Information Centre. The English language toll-free number is 1-800-268-8099. The French language toll-free number is 1-800-361-8070. Alternatively, write to Assuris, 20 Queen Street West, Suite 2500, Toronto, Ontario M5H 3R3. Fax:(416) 977-1895 Tel:(416) 359-2001 For
a current list of Member Companies please contact Assuris
at the numbers above.
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