Enhanced Safeguards: Canadian Insurers Bolster Assuris Protection

What happens if the insurance company providing your life insurance or annuity goes bankrupt? Will you lose your benefits or monthly annuity payments?

This isn't something you have to worry about because you're protected by Assuris, a non-profit organization that safeguards Canadian policyholders if your life and health insurance company goes bankrupt. You won't lose your full benefits or annuity payments if your insurer goes under.

In fact, in May of this year, Assuris announced that it increased protection levels, in some cases significantly. This is welcome news for more than 29 million Canadians who own a life insurance policy, health insurance, annuities, and segregated funds. Here's what the recently enhanced protection means for you and your policy benefits and payments.

New Life Insurance Protection Amounts From Assuris

Provided that your policy is with an Assuris-affiliated insurance company (more on that in a moment), protection levels have increased by five per cent. What that means is that you now have a minimum of 90% of your benefits protected, whereas it used to be limited to 85% of their value.

Where amounts really jumped up, however, was in the full amounts that will now be covered, particularly in death benefits and monthly income in the form of annuity payments.

Death Benefits

The biggest jump in policy protection is under the category of life insurance death benefits. Assuris will now cover $1,000,000 or 90% of the death benefit, whichever is higher.

Prior to May 29, 2023, the amount was $200,000 or 85%, whichever was higher.

Let's look at a simple example of how this would work. Prior to this increase in protection, if you owned a life insurance policy that paid a $500,000 death benefit to your spouse and your insurer went bankrupt, Assuris would have covered $200,000 or 85%, whichever is larger. In this example, Assuris would have ensured your spouse got $425,000 (which is 85% of $500,000) of the death benefit payment. In this example, under the new protection, the full death benefit amount of $500,000 is covered. Effectively, that's $75,000 of extra protection.

Annuities

In the case of annuities, monthly annuity payments are now covered at $5,000 per month or 90%, whichever is higher. Previously, this was $2,000 per month or 85%, whichever was higher. Annuities have been really popular lately with the increase in interest rates, and this heightened protection makes them an even more attractive set-it-and-forget-it retirement income solution.

Let's say you had an annuity that paid out $3,000 per month. Previously, you would have been covered for $2,550 per month under Assuris' protection levels if the company that paid your annuity went bankrupt (85% of $3,000). Now, you will be getting the full $3,000 monthly payment. That extra $450 a month could go a long way if you're a retiree on a fixed income, so this is excellent news for existing and prospective annuity owners.

Health Expense

For the category of health expenses, which includes supplementary medical insurance and travel insurance, the coverage has seen a big bump up, to the tune of $250,000 of coverage or 90%, whichever is higher. You can visit Assuris for more details: assuris.ca/how-am-i-protected/assuris-protection/

Investments And Savings

Segregated funds and cash values are now protected to $100,000 or 90%, where they were previously $60,000 or 85%.

Life Insurance Protection Prior to May 29, 2023

New Life Insurance Protection Effective Immediately

More About Assuris

Assuris is the name of the organization in Canada that protects the benefits of life and health insurance policyholders in case of bankruptcy. It's a not-for-profit compensation organization that was founded in 1990 and is designated under the Insurance Companies Act of Canada. Assuris is funded by its member life insurance companies.

Is My Life Insurance Company Covered Under Assuris?

Yes, if your insurer is authorized to sell insurance in Canada. According to federal law, every life and health insurance company authorized to sell insurance in Canada is required to become a member of Assuris, so you're covered. If you want to look up your specific insurer, go to the Assuris.ca website: assuris.ca/how-am-i-protected/list-of-assuris-members/. Once a company joins Assuris, it can't opt out if it has active business in Canada.

What Do I Have To Do To Qualify For The Enhanced Protection?

You don't have to do anything, as the increased protection levels automatically went into effect on May 29, 2023, and include existing policies and investments, not just new ones purchased after that date.

Why Did Assuris Raise The Protection Levels For Benefits And Investments?

Assuris, together with its member life and health insurance companies, raised the benefit protection levels to strengthen public confidence in the industry, it said in a May statement announcing the news. "With higher levels of protection, Canadian policyholders can feel secure and confident that their life and health insurance products will always protect them and their loved ones," said Paul Petrelli, President and CEO of Assuris.

What Happens To My Policies If A Company Goes Bankrupt?

Your policies are transferred to a stable insurance company if your insurance company fails. Let's say you have both life insurance and annuities with a life insurance company that goes bankrupt. First off, this is an unlikely event because the life and health insurance industry is very highly regulated in Canada. Of course, "unlikely" is not the same as "impossible."

The insurance industry and regulators have planned for this scenario. Here's what happens: If a company fails, a court-appointed liquidator will transfer your policies to a stable insurance company. There is also the Assuris guarantee of your benefits, so there's nothing to worry about regarding your insurer potentially going under and taking all of your annuity payments or death benefits with it.

Greater Peace Of Mind

Canadian policyholders can rest assured knowing that their life insurance policies, health insurance, annuities, and segregated funds are safeguarded by Assuris, a reliable non-profit organization. You don't have to worry about losing benefits or monthly annuity payments in the event of an insurer's bankruptcy because of these robust protection measures. As of this year, the organization has taken a positive step forward by announcing an increase in protection levels, providing even greater peace of mind to millions of Canadians with insurance policies. With this enhanced protection, you can be confident your insurance benefits and payments are secure.

Rino Racanelli, Independent insurance advisor

racanelli@sympatico.ca, www.CorporateLifeInsurance.ca