Insurance and financial planning

This section applies only to insurance representatives.

Individual personal insurance products

When a personal insurance representative helps a client purchase an individual insurance product or an individual annuity, he must give his client an easy-to-read document answering the following questions. He must do so by the time the policy is delivered, at the latest.

  • Are insurance costs under the contract guaranteed? If so, for how long? Can they change?
  • Are returns on amounts invested for a personal insurance product guaranteed?
  • Is the capital of the insurance purchased guaranteed, or can it change?
  • Are there specific guarantee exclusions or limitations that impact the personal insurance contract purchased?
  • Do redemption fees or penalties apply in the event of a withdrawal? If so, what are they?

A personal insurance representative must ensure that the answers to these questions are specifically included in the insurance proposal and ensure his client’s understanding of these concepts


Often, in practice with personal insurance, the outline (quotation) of the individual insurance product includes all the information that must be provided to the client as well as the special conditions. Providing the outline to the client will give him all the information about the product in question. However, this information is generally too technical for clients who are less familiar with insurance. This is why providing the outline to the client is not enough. As a professional, the representative must explain the information included in the outline to his client and ensure that the client understands it.

When insurance is purchased to cancel or replace a current individual life insurance product, a replacement notice must be included with the proposal before it is provided to the insurer. A copy of this notice must be provided to and signed by the client by the time the insurance contract is delivered, at the latest.

Segregated funds


Segregated funds are a type of investment fund containing assets that belong to an insurer, but are maintained and recorded separately from his other assets, hence the name “segregated.”

When a client purchases segregated funds, he becomes the holder of an annuity contract called an “individual variable insurance contract” (IVIC), which offers him certain rights and coverage, including investment of premiums (payments) into segregated funds of his choosing.

IVICs are defined as an individual life insurance contract, including an annuity or the commitment to pay an annuity, for which provisions vary based on the market value of the components of assets in the segregated fund. This also includes provisions of an individual life insurance contract that states that members are invested in a segregated fund.

Withdrawals permitted

The ability to withdraw all or part of the accumulated capital for the annuity payout may be stipulated, but its application reduces the insurance company’s obligations accordingly.

Investment option

Segregated funds are offered as investment options both for registered accounts (RRSPs, RRIFs, RDSPs, etc.) as well as for non-registered accounts. They are reserved exclusively for IVIC holders who choose to “invest” part of the premium paid to the insurer in the IVIC. More specifically, non-guaranteed benefits under an IVIC come from segregated funds; the other part of the premium is used to purchase coverage that protects all or part of the contract value in the event of a market decline.

Pension value

During the capital accumulation phase, fund units are attributed to the client. The value of units acquired over time will determine the amount of the periodic pension that will be paid to the annuitant on the maturity date (or before, if the contract permits; for example, through IVICs with minimum withdrawal guarantees). On this date, if the holder has not requested complete repurchase of his annuity contract, the insurer will start paying him an annuity, until the end of his life. In Quebec, the annuity amount that will be distributed periodically must, at the time of the contract finalization, be determined or at least determinable based on variables and according to a calculation method indicated in the contract.



Fees associated with products

The representative must thoroughly explain the pricing of proposed segregated funds to his client, in particular the cost of insurance coverage, and explain to him how these segregated funds may correspond to his needs, as defined in the FNA.

When evaluating different segregated funds, the personal insurance representative must take each fund’s fee structure into account.

  • Sales charges: fees payable by the client upon purchase or redemption of invested funds, before maturity, based on a fee schedule. They are calculated based on a percentage of the value of the shares at the time of their purchase or sale. Some funds do not have sales charges.
  • Management and operating expenses: fees associated with the funds’ administration and daily management, deducted directly from the shares. All segregated funds have management and operating fees. Management fees vary based on the fund type, the management style and market offering. In particular, they include payment for the manager and the representative’s trailer fee. Operating expenses are the cost of functioning, which includes auditors’ and legal experts’ commissions, printing fees, bank fees, marketing, and taxes.

    These fees are shown as a management expense ratio (MER), which corresponds to a percentage of the fund’s average net asset. It does not appear on the client’s account, but it must still be considered because it decreases the returns. It should be noted that the MER was deducted from past returns released by the fund.

    The MER includes trailer fees, which depend on the applicable sales charge structure. The MER varies from one segregated fund to another, based on the protection offered. In general, an IVIC with…


  • a 100% guarantee at expiration and at death has a higher MER than an IVIC with a minimum coverage of 75%.
  • segregated funds of actively managed shares have a higher MER than a segregated fund requiring little management.
  • postponed sales charges has a higher MER than a contract with no sales charges.
  • a guarantee reset option has a higher MER.
  • a minimum withdrawal rider has a higher MER.


  • Trading fees: fund trading fees – in particular, this includes fees for fund switching and short-term trading.

The client may incur other fees.


Representative compensation

The representative’s compensation (lien 2) includes various elements that may impact the client’s investment:

  • The sales commission, based on the selected sales charges option
  • Bonuses, normally based on the maintenance and growth of business
  • The trailer (service) fee, based on the selected sales charges option – when there is no sales charge (zero sales charge), trailer fees are generally higher, which may result in a higher MER and therefore a larger impact on the segregated fund’s return for the client.

Communication at the point of sale

Individual variable insurance contracts (IVICs) are purchased through an insurance proposal. Normally, using this document, the client selects the segregated funds where his premiums (contributions) will be invested, and he designates his beneficiary or beneficiaries. The contract (policy), included with the proposal, is useful for the representative to explain all the contract features to the client. The client normally receives his copy of the contract once the insurer has the proposal in hand and the first premium has been paid.

IVICs must be provided to consumers with an information booklet that includes the following information about IVICs:

  • the policy “highlights,” where the main features of the IVIC are explained
  • the fund overview, which describes each fund offered through the IVIC

The representative must provide the information booklet to the client as either a paper or electronic copy, as the client prefers, before the client signs the proposal. The representative must then explain the main features of the IVIC and its associated segregated funds so the client has a thorough understanding of it.

A confirmation of receipt for the information booklet must be signed by the client.

Former purchases

When there are former purchases of segregated fund units, the representative is not required to provide a new information booklet. However, by the finalization of the IVIC at the latest, the representative must inform the client of:

  • the possibility of obtaining the most recent version of the information booklet or fund overviews, as applicable, from the insurer, for all available funds, at any time
  • how to access to these documents with the insurer

The insurer must allow the client to view the Fund overview online at any time. At the client’s request, the insurer must also provide a paper copy at no cost.

Annual statement

The insurer provides an annual statement to IVIC holders no later than during the four months following the closure of each fund’s year end.



One point to remember is the tax impact of certain transactions or options involving segregated funds.
Insurers provide personal insurance representatives a document describing the tax consequences based on the options, the drafting of their contracts, the holder type, the annuitant, etc. Representatives must of course learn this information, but occasionally it’s necessary to consult a tax specialist to properly check the specific tax implications at the time of a client or potential client’s death.


The voluntary retirement savings plan (VRSP), which entered into effect on July 1, 2014, is the equivalent as the pooled registered pension plan (PRPP) offered by the federal government and other provinces and territories. Quebec, with its VRSP, is still the only Canadian province to require membership from certain employers meeting criteria outlined in the Voluntary retirement savings plan act and its associated regulation.

The purpose of the VRSP is to facilitate Quebec citizens’ access to a retirement plan. It is a special group product, because it can be offered not only to individuals but also to employers for their employees, to encourage saving for retirement. A VRSP can only be established and administered by a life insurer, a trust company, or an investment fund manager.


An insurance and group annuity adviser, a group annuity plan adviser, or an actuary may offer a VRSP administered by a life insurer to an employer (for their employees). If the client is an individual, the VRSP must be distributed by a financial security adviser. In addition, a life insurer administering a VRSP may offer this plan to an employer or individual directly, with no representative, if no counsel is requested or provided.

However, to meet high demand, the law allowed for such a VRSP to be offered to an employer by a financial security adviser or a group insurance plan adviser during a limited period, until December 31, 2017.

The following is a list of what different representatives authorized to distribute a VRSP administered by a life insurer can and cannot do.

A financial security adviser or a group insurance plan adviser can:

  • Until December 31, 2017, offer a VRSP to an employer, without an adviser for group annuity products
  • For financial security advisers only, offer a VRSP to an individual, inform him of the applicability of the proposed VRSP and, of course, advise the individual of other individual annuity products administered by a life insurer
  • For financial security advisers only, offer individual advice on selecting an investment option within the scope of the VRSP if…
  • He accepts an individual mandate from an employee
  • He obtains a mandate from the employer outlining the provision of individual advice to employees
  • The offer is made to an individual

He cannot:

  • Offer advice or information to the employer or individual about other group annuity products
  • Compare the VRSP to other group annuity products
  • Make recommendations on the type of group annuity plans to choose
  • Replace a VRSP that the employer already purchased or replace an annuity plan already established with the employer through a VRSP

A group insurance and annuity adviser or group annuity adviser can:

  • Offer a VRSP to an employer
  • Advise the employer and give him information about the VRSP offered and about different group annuity products
  • Compare the VRSP to other group annuity products
  • Give the employer recommendations on the type of plan to choose
  • Replace a VRSP that the employer already purchased or replace an annuity plan already established with the employer through a VRSP

He cannot:

  • Offer a VRSP to an individual
  • Offer personalized advice to individuals about choosing an investment option within the scope of the proposed VRSP

Personal insurance representatives and group personal insurance representatives must first and foremost ensure that they fully understand their client to determine if this product aligns with their situation, except in the event where his mandate only includes employees purchasing the VRSP offered to the employer.


Helpful insurance reminders 

The insurance contract is created once the insurer accepts the purchaser’s proposal. The creation of the contract therefore signifies that there is a voluntary agreement between the purchaser and the insurer, when the insurer agrees to insure the risk as defined in the insurance proposal.

It is important to remember the distinction between the contract creation and its entry into effect, because certain conditions outlined by law or in the contract can vary based on the insurance type. Conditions for the life insurance contract’s entry into effect are not the same as those for accident and sickness insurance.

However, if the accident and sickness insurance coverage is an addition to the life insurance contract, the conditions for the life insurance’s entry into effect apply. On the other hand, if the life insurance coverage is an addition to the accident and sickness insurance contract, the conditions for the accident and sickness insurance’s entry into effect apply.


Life insurance
The life insurance contract enters into effect when the following three conditions are met:

  1. the proposal is accepted with no modifications by the insurer
  2. the first premium is paid
  3. the risk insurability has not changed between the proposal signature and its acceptance by the insurer

However, the law allows the insurer to give the purchaser more beneficial conditions. For example, the insurer may offer insurance coverage starting from the signature of the proposal, even if the first premium will be paid later, or require that the first premium be paid and apply an effective date that is before the proposal acceptance. The insurer may offer multiple premium payment methods (monthly, quarterly, biannual or annual payment).

Example – Life insurance and first premium paid

On November 21, 2016, Raymond purchases life insurance of $125,000, which he chooses to pay monthly. The premium is $105 per month. The first payment is made when the proposal is signed.

On December 5, the insurer accepts the proposal with no modifications, and no change occurs in Raymond’s insurability between the signature of the proposal and its acceptance. Raymond dies of a heart attack the day after New Year’s Day. As the first premium was fully paid by Raymond, the insurer will pay the insured capital, because the insurance entered into effect on December 5, 2016.

Example – Life insurance and first premium not paid

Juliette purchases life insurance of $90,000 on November 4, 2016 and chooses to pay the $800 premium annually. The proposal does not mention conditions for the contract’s entry into effect. Juliette does not have the required cash and tells Patrick, her personal insurance representative, that she will not be able to pay the full premium until December 8. On December 6, the insurer accepts the proposal with no modifications, and no change occurs in Juliette’s insurability between the signature of the proposal and its acceptance. On December 7, Juliette dies from a skiing accident. In this case, unfortunately, the insurance is not in effect because the first premium was not paid. Patrick should have reminded his client of the importance of paying the first premium when signing the proposal, or he could have checked with the insurer if they could agree to defer the premium payment to December 8. It is also important to note that life insurance may be offered with no medical questionnaire and no requirement for the insured person to undergo a medical exam. In this case, the insurer accepts or rejects the proposal more quickly. When the insurer requires a medical exam of the insured person, the insurer’s acceptance, modification, or rejection of the proposal is delayed until they receive the results of this medical exam.

Example – Change in risk insurability

On January 2, 2017, Jacques purchases insurance and pays the first premium. On February 3, the insurer accepts the risk without knowing that Jacques had a stroke two days earlier. On February 6, the insurer sends the policy to Isabelle, the personal insurance representative, so she can provide it to Jacques, the purchaser. Given that a change occurred in Jacques’ health since the signature of the proposal, Isabelle cannot provide the contract and must contact the insurer to inform them of this change. Therefore, the insurance never enters into effect. Isabelle must review the insurance proposal based on this new information.



Accident and sickness insurance

An accident and sickness insurance contract enters into effect when the policy is provided to the purchaser or when the policy is provided to a representative of the insurer to be delivered to the purchaser, if this has been stipulated in the proposal.
As with life insurance, the insurer may grant the purchaser more advantageous conditions and agree that the contract will enter into effect on the date of the proposal’s acceptance.
The personal insurance representative must understand the conditions of the contract’s entry into effect. He must also be able to explain to the client, for example, the different premium payment methods.

Example – Accident and sickness insurance and first premium not paid

On September 2, 2016, in the presence of Ginette, his accident and sickness insurance representative, Marc completes and signs a sickness insurance proposal including serious illness insurance coverage. The insurer receives the proposal on the same day and accepts it with no modifications on November 4. The insurer sets the policy’s effective as November 4 and sends it to Ginette, who receives it that same day. On November 10, the insurer sends a notice to Ginette to inform her that they are waiting for the payment of the first premium. On November 17, they send Ginette a second notice regarding this situation and inform her that if they don’t receive the payment, they will close Marc’s file. Not receiving any news from Ginette, the insurer closes Marc’s file on November 30. Ginette meets with Marc on December 1 and provides him with his policy, which lists the date of November 4. Marc then gives her a cheque for payment of the first premium, which she sends to the insurer that same day. The insurer changes the policy date to December 1 and sends Ginette a new policy, which she receives that same day. Ginette meets Marc on December 2 and gives him a second policy with the effective date changed to December 1. On December 7, Marc is diagnosed with prostate cancer. Marc calls Ginette because he wants to know how much the insurer will pay for his serious illness. Ginette explains to him that the exclusion period listed in the contract is 30 days for serious illnesses, and that she doubts he falls under this period because the policy entered into effect on December 1, the date the first premium was paid.

The representative should have known that the insurance contract purchased by her client is not subject to the same conditions for entry into effect as those for life insurance, especially the fact that payment of the first premium is not a condition for entry into effect. Consequently, she should not have agreed to provide the second policy to her client. Ginette should have contacted the insurer to inform them that they can’t make the policy’s entry into effect depend on receipt of payment for the first premium. Additionally, given that the insurer had agreed to more advantageous conditions by setting the effective date to the date of the proposal acceptance, November 4, the explanation from Ginette to Marc regarding the exclusion period in the contract is incorrect, because it had been in effect since November 4. Marc would then be eligible to receive the insurance benefit.



Because an insurance contract is not complete until the insurer accepts the proposal, many insurers offer temporary insurance to their future insured clients to cover the time it takes to process their file. Temporary insurance is different from definitive insurance in several ways, especially regarding the applicable conditions. Different terms are used by insurers. For some this is called temporary insurance, and for others it’s called contingent insurance or gap coverage.
Given the specificities of temporary insurance, it is helpful to remember that the provisions of the Civil Code of Québec regarding insurance do not apply.


Temporary insurance is a contract under which an insurer temporarily takes on a risk, under certain conditions, until they issue a definitive insurance policy. For life insurance and accident and sickness insurance, this temporary insurance gives the purchaser the right to obtain insurance for the covered risk, even if his insurability decreases or ceases to exist between the signature of the proposal and its acceptance by the insurer. For example, if the person to be insured meets the temporary life insurance conditions at the time of the proposal signature, then is diagnosed with cancer and dies before the entry into effect of the definitive policy, the insurer will be responsible for paying the life insurance benefit established in the temporary life insurance contract.
Acceptance conditions, exclusions and restrictions for temporary life insurance vary from one insurer to another, just like clauses included in a definitive insurance policy. It’s important for the personal insurance representative or the accident and sickness insurance representative to fully understand them in order to explain them to a client. It should be noted that temporary insurance may be limited to a certain amount. For example, the client may have purchased life insurance of $1,000,000 while his temporary insurance is limited to $500,000.

Definitive or temporary insurance?

One way to distinguish between temporary insurance and definitive insurance when it comes to life insurance or accident and sickness insurance is to check the conditions generally found in the temporary insurance contract included in the proposal. Here are a few examples:

  • the insured person answered “no” to certain medical questions
  • the insured person is included in the age bracket allowed for insurance coverage
  • the first premium has been paid and has been honoured since its presentation
  • the insured person has not made any false statements that could influence the insurer’s decision to grant insurance

Payment of the first premium required

Keep in mind that until the first premium has been paid, which is generally a requirement for temporary insurance both for life insurance and accident and sickness insurance, the insurer has no obligation to the client, even if the representative has provided him a notice of temporary insurance. Also, the payment provided to the representative for the first premium is considered to be made to the insurer.
The temporary insurance contract thus binds the insurer if the insured person meets the requirements therein. If the risk occurs before the definitive policy comes into effect, the insurer will be responsible for paying the amount indicated in the temporary insurance contract.

Coverage period

Temporary insurance is generally valid for a period that can vary between 30, 60, and 90 days, and sometimes until the proposal is accepted or rejected by the insurer. Therefore, it’s essential to carefully read the contract in order to give accurate and precise information about the coverage period.
The temporary insurance ends when the predetermined period ends, whether or not the client’s proposal is accepted, or at the time the insurer accepts or rejects the proposal, based on what is established in the contract.

Informing the client of the existence of the cover note

Many insurers include temporary insurance in their proposal, but this isn’t true in every case.
When an insurer does offer temporary insurance, the representative is held responsible for informing the client so he can take advantage of it.

Example – Temporary insurance and first premium paid

On December 2, 2016, Léopold purchases life insurance of $200,000 for the life of his daughter Martine, who is 21 years old. His personal insurance representative, François, informs him that if he would like to take advantage of temporary life insurance, the insurer will require payment of the first premium. Léopold gives François a cheque made out to the insurer as payment for the first premium, and François gives Léopold a cover note indicating a life insurance amount of $200,000. On Saturday, December 3, Martine is seriously injured in a car accident. She is kept alive artificially and her death is declared on Monday, December 4 at 9:00 p.m. On the morning of December 4, Léopold calls his representative to inform him of his daughter’s accident. François goes to the insurer immediately to deliver the proposal and the copy of the cover note, and advises the insurer of the accident that occurred the day before, December 3. François does not give the premium payment cheque to the insurer, as he forgot it at his office. On December 5, the insurer informs François that they are refusing to pay the life insurance benefit stipulated in the temporary insurance contract because they did not receive payment for the first premium. François informs his client of the insurer’s decision.

François should know that the insurer cannot refuse to pay the life insurance benefit because they have not received payment for the first premium. In reality, the cheque Léopold gave to François is considered a payment made to the insurer, which means that the first premium was paid to the insurer on December 2, when the proposal was signed, before Martine’s death.



To purchase life insurance or accident and sickness insurance, the purchaser must have an insurable interest in the life or health of the insured, depending on the situation.

Generally, the purchaser may purchase insurance on his life or on the life or health of the following people:

  • His spouse
  • His descendants or his spouse’s descendants
  • His subordinates or employees
  • People in whose life and health the purchaser has a pecuniary or moral interest
  • People who contribute to the purchaser’s support or education

In individual insurance, this insurance interest must exist when the contract is finalized. Its importance is tied to the fact that we want to prevent someone from speculating on the life of another person by threatening their safety. If there is no insurance interest when the contract is finalized, the contract is void. However, the insured person may agree in writing to be covered by insurance if this interest does not exist when the contract is finalized. A verbal agreement is not valid. Furthermore, insurers stipulate specific questions on this topic in the insurance proposal.

For example, if a person purchases life insurance for their spouse when the contract is finalized and then the couple separates while the contract is still in effect, the purchaser doesn’t lose the insurance interest in the life of his ex-spouse because this interest existed when the contract was finalized.

We must remember that insurance interest also applies when the purchaser would like to transfer his contract to another person, called the transferee. The contract transferee must also have an insurance interest in the life of the insured person at the time of the transfer, unless the insured person agrees otherwise in writing.

In group insurance, the purchaser is not required to have an insurance interest because he is acting only as the contract administrator.


Designating a beneficiary

In life insurance, the beneficiary is the person who will receive the insured capital in the event of the insured person’s death. If the insurance holder would like to designate a beneficiary, he can do so:

  • in the policy itself, usually on the beneficiary designation form included in the proposal
  • in a will; however, any designation made in a will with the intent of replacing a former designation must mention the insurance in question, unless the testator’s intention leaves no doubt
  • in a separate document, for example a letter sent by the holder to the insurer or a separate beneficiary designation form that the insurer provides to his clients

Clarity of the designation

The beneficiary must exist at the time the insured capital becomes payable, and the designation must be sufficiently clear for identification of the beneficiary.


Charles completes a life insurance proposal. He designates his wife, Sylvie, and his son, Francis, as beneficiaries and adds the note “legal heirs” next to their names. This designation is not sufficiently clear, because the term “legal heirs” constitutes a lack of designation, as do the terms “assigns,” “liquidators,” “legal representatives,” and other similar expressions. Upon Charles’ death, a cautious insurer would be wise to receive specific instructions from the liquidator of the estate and beneficiaries before proceeding with the payment of the insured capital. In reality, if Charles wants the insured capital to be paid to his beneficiaries and not to his estate (see the paragraph “No beneficiary designated” below), he must designate them without using the expression “legal heirs.” This way, Charles’ beneficiaries will receive their portion of the insured capital even if they are also his legal heirs.

It is important, therefore, when filling out the insurance proposal, that the personal insurance representative checks the beneficiary designation form and informs his client accordingly.


Charles designates his unborn child as a beneficiary. This designation is sufficiently clear, but Charles’ child must be alive and viable and his beneficiary status must be recognized when the capital becomes payable.

Insurers normally include the option to designate a subrogated or second-tier beneficiary on their beneficiary designation forms. A subrogated beneficiary is a person who will receive the insured capital in the event of predecease or nonexistence of the first-tier beneficiary. If the client wishes to prevent the insured capital from being paid to his estate, he must designate a subrogated beneficiary.



Charles designates his wife, Sylvie, as beneficiary and his son, Francis, as subrogated beneficiary. Charles and Sylvie die in a car accident. Because Sylvie is deceased, the insurer will pay the insured capital to Francis.


No beneficiary designated

When no beneficiary is designated or the holder designated his “legal heirs,” “assigns,” “liquidators,” “legal representatives,” or other similar expression, there is no designation and the insured capital is paid…

  • either to the holder’s estate (if the holder and the insured person are the same person)
  • or to the holder (if the insured person is not the holder)

Revocable and irrevocable beneficiaries

When the life insurance policyholder designates a beneficiary, it is revocable unless the holder expressly states that it is irrevocable. In such a case, the holder cannot revoke this beneficiary without his written authorization. If the irrevocable beneficiary refuses to give his consent, the holder cannot replace him with another. When the designation is made in a will, it is always revocable. Therefore, unless specified in a form or document (other than a will) that the designation is irrevocable, the holder can always change his mind and designate another person as beneficiary. Designation of a beneficiary, just like revoking one, is only valid as such starting on the day the insurer receives it.

If the holder designates his spouse (through marriage or civil union) as beneficiary, the designation is irrevocable unless the revocability is stipulated in a separate document, or if this designation is made in a will. It should be noted that as of December 1, 1982, all divorces cancel the designation of the married spouse as beneficiary or subrogated holder, even if they were designated as irrevocable. As of 2002, the same principle applies in the event of dissolution or nullity of the civil union, which also results in cancellation of any designation of the spouse as beneficiary or subrogated holder. The holder may then designate a different person. It should be emphasized, however, that legal separation does not automatically lead to cancellation of the spouse’s designation, but the court, at the time it announces its ruling, may declare it revocable or void.


Charles and Sylvie get married in 2010. In 2011, Charles purchases life insurance for himself and designates his wife as beneficiary, without stipulating that this designation is revocable. Charles leaves their family home on December 1, 2016. He files for divorce from Sylvie on December 15, 2016. The following day, Charles dies suddenly. Sylvie is entitled to the insured capital because she and Charles were only de facto separated, and no ruling of legal separation was pronounced to void the beneficiary designation. Further, Charles could not change his designation of Sylvie in his written consent because this designation was irrevocable.

Additionally, the courts ruled that when the spouse’s designation takes place before the marriage or civil union, divorce or dissolution of the civil union does not cancel the designation. The holder may therefore modify it as he wishes, under the condition that it is revocable. Therefore, it is important to properly establish the time of the designation to determine the effect of a divorce (or dissolution of a civil union) on this designation.

In 2010, Charles and Sylvie decide to live together. That same year, Charles designates Sylvie as revocable beneficiary of the individual insurance policy he purchased for himself. In 2011, Charles and Sylvie get married. In 2016, Charles and Sylvie get divorced. If Charles wants the insured capital to be paid to another person at the time of his death, he must make a new beneficiary designation, because at the time of designating Sylvie, he was not married and this designation was revocable.


Validity of the beneficiary designation

All beneficiary designations that are not included in the policy (that is, in the proposal) are not valid until the day the insurer receives it. Further, if the holder makes multiple irrevocable designations independently from one another, priority is given to the one the insurer receives first. If the holder cancels a beneficiary designation, the law does not require this revocation to be made during his lifetime (if he is also the insured person), but it must have been received by the insurer in order to be valid for him. It may so happen that after the death, the estate or a family member finds a beneficiary designation that was made during the holder’s lifetime, but was not sent to the insurer. If this new designation is sent to the insurer, it is valid for him and the insured capital must be paid to the new beneficiary. However, if the new designation is not sent to the insurer within 30 days of the receipt of the documents confirming the event leading to the benefit, the insurer may pay the insured capital to the beneficiary for whom they received the last designation; they will then be exempt from their payment obligation.

It is important for the personal insurance representative to know that these rules are followed by insurers because they are required to carefully check if the person claiming the payment of the insured capital is entitled to it. It is helpful for the representative to know these rules because he may be called to advise and guide his client or the liquidator of the estate upon the insured person’s death.


Responsibilities at the time of declaration of risk

In life insurance, the purchaser and the insured person, if they are separate people, must declare all known circumstances that may significantly influence an insurer in the establishment of the premium, the appraisal of risk, or the decision to accept it. The insured person’s duty to inform the insurer stems from the principle that he is the only one who knows the accurate and true answers to the questions asked by the insurer in the proposal. The insured person must therefore provide all the necessary information to the insurer, because the insurer cannot take on a risk if they are not aware of the main elements required to evaluate it. This is why courts describe life insurance contracts as those with the most good faith.
It is important to know that the law does not require the insured person to be an expert on risk evaluation, as this falls on the insurer. In fact, it is enough for the insured person to declare what a cautious person would declare, without being a life insurance specialist. Therefore, there should not be any major concealment by the insured person and the circumstances he is aware of must be the same in substance as what was indicated on the insurance proposal. Otherwise (except in the case of false declaration of the insured person’s age), the insurer may request cancellation of the life insurance contract or invalidity if it has been in effect for less than two years, even if a death or disability is not related to the false information or concealment

Incontestability clause

A clause included in personal insurance contracts under which, when the contract has been in effect for two years, the representative renounces the right to contest its validity if the insured person has made a false declaration or has not declared important facts that impact the risk. In disability insurance, this clause does not apply if the disability occurs within two years of the contract’s entry into effect. When the life or disability insurance contract has been in effect for two years, the insurer must prove the insured person’s fraud to request cancellation of the contract.

Failure to uphold responsibility to declare risk


In practice, the insured person fulfils his obligation to declare risk through the representative’s explanations and warnings. The representative must not advise his client regarding his answers to questions in the proposal or suggest answers. It is better to take note of all the client’s answers and record them in the proposal.

Failures to uphold the responsibility to declare risk can be divided into three categories:

  • False statements or concealment (no deliberate intention to mislead the insurer)
  • Fraudulent false statements or concealment (deliberate intention to mislead the insurer)
  • False declaration of age
  • False statements or concealment

Making a false statement means giving incomplete or false information that may have an impact on the premium amount or could influence the insurer’s decision to accept the risk.


Example 1

When completing her life insurance proposal, Sylvie states, with no ill intent, that she has no heart issues. In reality, she has a slightly high cholesterol level, which she manages with medication.

Concealment is the voluntary or involuntary omission of information. The insured person fails to provide information because he believes it is not necessary for appraising the risk. In this example, the insured person does not intend to mislead the insurer.

Example 2

In the proposal, Francis states that he does not smoke. In fact, he occasionally smokes cigarettes at dinners with friends or when he goes out.

In these two examples, the discovery of false statements or concealment on a fact that is important for risk may lead to the reduction or cancellation of the life insurance coverage if the contract has been in effect for less than two years. However, if the insurer discovers false statements or concealment when the contract has been in effect for at least two years, they cannot request cancellation of the contract or refuse to pay the insured capital in the event of a death.

Fraudulent false declarations or concealment
Fraudulent false declarations or concealment are declarations or omissions made with the intent of misleading the insurer.
The client makes a fraudulent false declaration if he deliberately lies to the insurer, knowing full well that he would not obtain the insurance coverage being offered if he told the truth.

Example 1

Francis states that he has never used heroin, even though he has. He knows that if he makes this statement, the insurer will refuse the risk or accept it with an additional premium.

Example 2

Over the last three years, Charles has had two cardiac arrests. He would like to purchase insurance and designate his spouse as beneficiary to provide a certain financial security in the event of his death. He knows full well that due to his health status, the insurer will refuse the risk or accept it with a considerable additional premium. When completing his life insurance proposal, Charles states that he is in good health and makes no mention of his two cardiac arrests. This is, therefore, a fraudulent declaration because his failure to divulge these important facts prevented the insurer from fully understanding the risk.

False declaration of age
False declaration of the insured person’s age does not result in the cancellation of the life insurance contract, but rather an adjustment of the insured capital. The insured amount may therefore be readjusted based on the premium received and the premium that should have actually been received by the insurer. There is still a possibility for the insurer to request cancellation of the contract if, when the contract is established, the insured person’s age is outside of the age limit set by the insurer. To do so, the insurer must request cancellation of the contract…

  • during the insured person’s lifetime
  • within three years of the contract finalization
  • within 60 days of the date the insurer becomes aware of the false declaration