8 questions and answers to demystify life insurance
Revocable and irrevocable beneficiary; insurability; time of payout; homicide, suicide or disappearance of the insured… Life insurance can be hard to grasp. Here are the answers to some questions you might have.
1. What is insurability?
Before offering you an insurance product, an insurer usually has to assess your “insurability” by checking whether you already have a critical illness.
2. What is the difference between the policyholder (client), the insured and the beneficiary?
| Policyholder | The person who bought the insurance and who pays the premium |
|---|---|
| Insured | The person who must die in order for the benefit to be paid out |
| Beneficiary | The individual designated in the insurance contract to receive the payout |
3. Do you have to notify the insurer if your health changes while the insurance contract is in effect?
For life insurance, the answer is “no.” The insurer assesses your health only at the time the contract is issued.
4. In the event of death, when is the insurance paid out?
The insurer must pay out the insurance within 30 days following receipt of the required supporting documents, which may include:
- Proof of death of the insured
- Proof of the insured’s age
- Proof that the person claiming the insured amount is entitled to it
5. Is the insurance paid out if the insured is the victim of a homicide?
If the person convicted of the homicide is the beneficiary, they will lose the right to the benefit. If there are other beneficiaries, and they had nothing to do with the insured’s death, they will be entitled to the insurance amount.
6. Is the insurance paid out if the insured commits suicide?
| Life insurance purchase | If the insured commits suicide during the first two years of the contract, the insurer MAY refuse to provide compensation if there is a suicide exclusion in the insurance contract. | If the insured commits suicide after the first two years of the contract, the insurer MUST pay out, exclusion or no exclusion. |
| 2 years |
7. If the insured goes missing, is the insurance paid out?
An insured can disappear in a number of circumstances. For example:
- A plane they are on crashes
- A ship they are on capsizes at sea
- Missing person: They disappear for an unknown reason, never to be seen again
If there is proof the insured has died—as in the case of a plane crash, for example—a court may declare the insured officially dead even if the body has not been recovered. The insurer will then pay the death benefit to the beneficiary designated in the contract.
However, if there’s no proof the insured has died, the beneficiary must wait seven years for the insured to be declared officially dead (declaratory judgment of death) and for the insurer to pay out the benefit. Note: The premiums must continue to be paid during that time.
8. What is the difference between a revocable beneficiary and an irrevocable beneficiary?
| Type of beneficiary | Meaning |
|---|---|
| Revocable | A revocable beneficiary can be changed by the policyholder at any time while the contract is in effect. The change can be made without the consent of the beneficiary and without notifying the beneficiary of their removal from the policy. |
| Irrevocable | The irrevocable beneficiary remains the beneficiary unless and until they give their consent to be removed from the policy. If the beneficiary of your insurance policy refuses to give their consent, they could stay on the policy until your death.Exception: In case of divorce, the married or civil union spouse (not to be confused with a common law spouse) named as beneficiary automatically loses that status, even though they are an irrevocable beneficiary.. |
| If it is not specified | Two possibilities:
|
