What is return of premium?

Wouldn’t it be nice to pay nothing for your insurance coverage if you don’t end up using it? While some types of insurance – like car insurance – can decrease in cost as you prove you have little need for it, most forms of your personal insurance protection cost more as you age.

However, in Canada, some forms of living benefit insurance, such as critical illness insurance and disability insurance, allow you a partial or full refund on your premiums paid. This is offered through a life insurance rider called return of premium (ROP).

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How does a return of premium work?

As mentioned, return of premium is available only on critical illness insurance and disability insurance policies. It is usually available as an add-on rider. A policy with a return of premium rider works just like a regular policy: you pay the monthly premiums and the policy coverage continues. If there is a critical illness or disability claim, the policy pays out.

When return of premium rider is added, an insurance provider pays back a portion or all of the premiums paid by the policyholder under certain circumstances.

There are generally three ROP variants:

Upon death or Return of Premium on Death (ROPD)

ROPD refunds all returnable premiums paid if the policyholder passes away while the policy is in force. The premiums returned are paid to the beneficiary appointed by the insured, upon the passing away of the insured individual.

Different providers have their own individual definitions of what constitutes a returnable premium but generally will remove any advanced payments made for long-term care or child policies if they were part of the original coverage.

At the end of the contract or Return of Premium on Expiry

In this case, the insurance provider refunds premiums paid if the policy term expires without any claim being made.

When the contract is cancelled or Return of Premium on Cancellation/Surrender

In the case of Return of Premium on Cancellation or Surrender, most insurance companies will allow a partial or full return of premiums at predefined ages or depending on how long the policy has been in force.

For instance, a policyholder may have 50% of the premiums returned back to them 20 years after your coverage has begun. That percentage will increase with the insured’s age, with full return of premiums at the age of 65 or 75.

Providers have different rules and guidelines on how returnable premiums are defined, including when you can claim them. Schedule a call with our experienced life insurance advisors so we can help you select the return of premium option that works best for your needs.

Can I get return of premium on term life insurance?

Unlike in other jurisdictions like the United States, Canadian insurance companies do not offer return of premium for term life insurance policies.

For those Canadian life insurance seekers also looking to get back some or all of the premiums they pay for their coverage, there are permanent insurance options available with accessible cash value to explore.

What are the benefits of return of premium riders?

The number one benefit of a return of premium rider is the refund of the premium that you or your beneficiary could receive. While insurance is something you buy and hope you never need, such a feature can be a helpful push for those on the fence about getting more specialized coverages like critical illness and disability.

For the risk-averse, ROP can also act as a guaranteed savings account that simultaneously provides you with income protection. Should you decide you don’t need or cannot afford the policy, you can cancel or surrender your policy and access those funds.

What are the drawbacks of return of premium (ROP) riders?

Cost: Nothing in life is free, adding a ROP rider to your policy can increase your monthly premium. You could decide that cash is better used elsewhere, like adding more coverage to your policy or taking out another kind of coverage that you may also require.

Opportunity cost of capital: As mentioned above, some ROP riders can only be exercised at certain ages.

And, while you do have the guarantee that you or your beneficiaries will get your premiums back, there are alternatives for saving and investing your money that would offer a better return than parking your money in a ROP rider.

Availability of providers: Lastly, insisting on ROP at expiry or cancellation option may limit who you can choose as an insurance provider, as not all companies offer the full suite of ROP variations. ROP options may also vary based on your chosen term; for instance, Return of Premium on Surrender options are typically only available on longer-term policies. The provider that offers ROP on expiry, cancellation, or surrender may not have other insurance features you seek or charge a higher premium than another provider.

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Which critical illness insurance providers offer return of premium riders?

Many Canadian insurance providers offer riders for return of premium. Below is a list of some of the companies offering Return of Premium on Death (ROPD), Return of Premium on Expiry (ROPX), Return of Premium on Cancellation (ROPC), and Return of Premium on Surrender (ROPS).

Company ROP Offerings
Beneva Insurance ROPD, ROPX, ROPC
Sun Life Insurance ROPD, ROPX, ROPC
RBC Insurance ROPD
Industrial Alliance ROPD, Flexible ROP (different rules for different terms)
Desjardins Insurance ROPD, ROPX, ROPC
Manulife Insurance ROPD, ROPX, ROPS

How do I get return of premium coverage?

PolicyAdvisor’s team of licensed brokers have decades of experience helping Canadians navigate living-benefit insurance and ROP riders. Reach out today to speak to an advisor, get instant quotes, and find the right coverage for your budget and needs.

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What is a life insurance rider? How do they work?

As we often say – life insurance is not a one-size-fits-all product. Canadians purchase life insurance policies for a variety of reasons: to cover a mortgage loan or debt, to provide a financial cushion to their loved ones, or to cover the costs of their children’s education – in case the insured passes away. With such diversity in use cases for life insurance, individuals choose different coverage amounts and periods to align life insurance policies with their needs.

But, life insurance can be personalized even further with a life insurance rider.

How do insurance riders work?

A life insurance rider is an optional feature that can be added on to a life insurance policy to enhance and customize it to better address one’s unique needs.

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Types of Life Insurance Riders: Quick Reference Guide

Click on any rider name to jump to the full description below.

Rider Name Description
Term Rider Additional term life insurance on top of the base policy. Can be used to offer different amount of coverages for different time periods for the life insured under the base policy, or can also cover someone else, such as children
Child Term Rider Term life insurance for life insured’s children
Guaranteed Insurability Option to purchase additional coverage without medical underwriting at future specified intervals
Business Insurability Option to purchase additional insurance coverage without medicals as business value grows
Accidental Death and Dismemberment (AD&D) Additional payout upon: death of insured in an accident, or loss of limbs or body function as a result of an accident
Accelerated Death Benefit Early access to portion of death benefit in case of terminal illness
Critical Illness Lump sum payout if the life insured contracts a covered critical illness
Child Critical Illness Critical illness insurance for life insured’s children
Return of Premiums Premiums paid are returned when term ends, if no claim
Disability Waiver of Premium Premium waiver if life insured becomes totally disabled
Parent/Payor Waiver of Premium Premium waiver upon policy owner’s death or total disability
Credit/Mortgage Disability Insurance Covers all or part of the insured’s debt or mortgage payments in the event of their disability
Extreme Disability Benefit (EDB) Early access to a portion of death benefit in case of total permanent disability
Long Term Care (LTC) Payment to meet long term care expenses at insured’s home or in a facility
Hospitalization Income Daily cash payout in case of hospitalization
Fracture Lump sum payout if insured suffers a fracture in an accident

How do you add a rider to your life insurance?

Adding a rider to your life insurance application is a simple process. Once you decide what riders you wish to add to your life insurance policy, make sure they are offered by the insurance provider you choose.

There is much variation in the numbers and types of riders offered by various insurance companies. To ensure you get the right policy and type of coverage you want, we suggest enlisting the help of a licensed insurance broker. Insurance experts, like those at PolicyAdvisor, have extensive knowledge of all the riders offered by Canada’s best insurance companies, and can make certain you choose the provider which best suits your needs.

Our experienced advisors can help make sure all the appropriate riders are added to your policy application. Or if you feel confident enough to try it out yourself, we have created an easy-to-use tool for you to compare different life insurance companies and the riders and benefits they offer.

Can you add a rider to an existing life insurance policy?

Life insurance riders are typically added to insurance policies at the time of submitting the application or during the underwriting process.

While these riders may be used to enhance the quality of coverage for the applicant, they also increase the potential risk or total amount of payout for the insurance company. The insurance company underwriters, therefore, require riders to be included at the time of the application process, so any additional risk can be evaluated and priced upfront.

If you did not add a rider at the time of initiating the coverage and were looking to add the rider after the policy coverage has begun, then you will need to seek the insurance company’s approval. In most cases, you will have to repeat medical underwriting or at least complete a health questionnaire to establish continued good health, before a new rider can be added to your policy.

In some cases, a rider may not be available to be added after the policy has been initiated. Therefore, it is essential to review the available riders with your advisor and identify what works best for your needs.

Can you drop a rider from an existing life insurance policy?

Yes, you can generally drop a rider from an existing life insurance policy. Many insurance companies allow you to remove additional riders via a straightforward process.

Typically, one fills out a form indicating which rider(s) they wish to remove and submits it to their provider. The insured’s base coverage however continues, uninterrupted.

If you are paying for the rider and have dropped the rider from your coverage, then your premium will accordingly reduce too. However, there won’t be any refund for the period that you had a rider attached to your policy.

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Should I get a life insurance rider?

Insurance riders are a great way to personalize your coverage to meet your specific needs. The need for riders depends on your circumstances. For some, riders may not be necessary while for others, it presents a cost-effective way to get additional or better coverage without purchasing a separate insurance policy. For example, term riders can be a valuable and affordable tool to align coverage with your future protection needs that change with age.

Similarly, riders for accidental death and disability ensure that one’s family is adequately protected for sudden unexpected circumstances. But, this isn’t to say that all life insurance riders are worth it for everyone looking for augmented coverage. For example, if you have adequate life insurance coverage, you may not wish to add a separate accidental death rider. Or if you have a standalone comprehensive disability insurance policy, you may not see the value of adding a disability rider that waives your premium payments in the event of a disability.

Ultimately, the best way to identify which riders to choose is by determining one’s insurance needs and comparing different structures that address those needs. Speak to one of our licensed insurance agents today; they can help you figure out your insurance needs, whether you need the extra benefit that riders provide, and present you with the best avenues to get covered.

Glossary: Types of Life Insurance Riders

There are various types of riders that can be added to a life insurance policy, depending on what aspect you choose to augment in the policy. We have segregated them below into riders that either augment the life insurance coverage or provide a critical illness benefit or a disability or other income benefits.

Life insurance riders

Life Insurance Coverage Riders

What is a Term rider?

A term insurance rider is an option available to provide additional temporary life insurance cover, under the insured individual’s base life insurance policy. Term life riders are essentially an individual term life insurance policy that is shorter in term length than the base policy. Multiple term riders or life policies can be stacked on top of each other, to provide different layers of coverage for different time periods.

As the term riders gradually expire over time, the coverage and life insurance premium reduce allowing the insured individual to only pay for coverage that they truly need. This approach of using term riders is called ‘laddering’ and is particularly useful for circumstances where a higher death benefit is required in the early years of a policy e.g. while mortgage debt is outstanding. The term riders have a length smaller than the base policy e.g. you can add a Term 10 or a Term 20 rider to a 30-year policy.

What is a Child Term rider?

A Child Term rider provides low-cost term life coverage for the insured’s child or children. The aim is to provide a death benefit rider, albeit of a limited amount, if one or more children of the insured pass away while the policy is in force. This rider allows the grieving parents and families to cover funeral expenses and help pay for counselling or other services.

A single child rider will usually cover all children of the insured, including any future additions. Generally, these riders offer a maximum of $20,000 to $30,000 in coverage. The rider typically covers natural-born children, adopted children and stepchildren named in the application and approved for coverage.

The child or children do not have to go through medical underwriting (no medical tests are required), though companies will ask a few questions to determine their insurability. Children are usually covered up to the age of 25 and have the option of converting the coverage into a permanent life insurance policy. These policies usually have fixed prices per $1,000 of coverage.

What is a Parent Protection rider?

A Parent Protection rider lets a policyholder take life insurance coverage for their parents as a rider on their base policy. Each parent requires a separate rider. The rider’s purpose is to cover estate costs (funeral costs, settling debts, taxes) on the passing away of the parents.

What is a Guaranteed Insurability rider?

Also known simply as an Insurability rider, a Guaranteed Insurability rider allows the insured to increase the amount of their death benefit. The amount and intervals at which it is allowed vary across different providers. This is helpful for those looking to increase their cover when achieving certain milestones like marriage, starting a family, or buying a home. This rider is also a good option for those expecting their income to increase significantly in the future, but cannot afford to pay for higher coverage or do not require a larger amount of coverage at present.

What is a Business Value Protector rider?

The Business Value Protector rider is a unique optional feature offered by a few insurance companies to help with the unpredictable rate at which a business can grow and the added coverage a business owner may therefore need over the years. The Business Value Protector rider gives a business owner the option to purchase additional coverage, without medical underwriting, based on the value of the business. It can also be used to protect other stakeholders in the insured’s business(es), to fund buy/sell agreements, or to pay capital gains tax if the business owner passes away.

What is an Accidental Death & Dismemberment rider?

The Accidental Death & Dismemberment rider (AD&D) provides additional financial protection. An additional benefit payment is made if the life insured dies or suffers a loss of limbs or bodily function (such as loss of hearing, sight) due to an accident.

Due to its narrower scope of coverage, accidental death benefit riders are usually cheaper to add than increasing the overall life insurance coverage amount on your policy. Many people use accidental death riders to augment their coverage without significantly increasing the cost of coverage or to provide additional support to their families in the event of an unexpected passing away from an accident. This rider also allows for lump-sum payments in the event of a loss of limbs or other bodily injuries. There are some restrictions and exclusions with accidental death & dismemberment riders. To receive benefits related to an accident, injuries or death generally must occur within a specified duration, generally within 180 days. This time period is usually within a few months of the accident date.

The rider usually expires once the insured reaches the age of 65. Also, the benefit is paid only if the death occurs from a covered accident and injuries are a direct result of the accident. Death or losses incurred due to self-inflicted injuries, war, or the commission of a crime are generally excluded.

What is an Accelerated Death Benefit rider?

An Accelerated Death Benefit rider helps you (life insured) access a portion of your death benefit, prior to when it would ordinarily be available i.e. prior to your passing away. Payment of an accelerated death benefit is usually triggered by an extreme health situation such as the advent of a terminal illness.

A terminal illness is defined as a serious ailment expected to result in limited life expectancy or death within a fixed time span, usually 12 months. Many insurance companies build terminal illness benefit riders into their policies, in which case a policyholder is not required to pay any extra premium. The terminal illness benefit is typically restricted to a maximum amount, which may be a percentage of the original death benefit.

Companies generally impose a limit on the amount of the accelerated death benefit to 50% of the policy amount or $250,000, whichever is less. That means if you have a $1 million policy, the amount that can be paid out in the event of a terminal illness is limited to $250,000. If the accelerated death benefit is claimed and approved, it reduces the tax-free, lump-sum paid upon the death of the life insured by the amount of the death benefit advanced upfront.

Accelerated death benefit riders may also be made available in the event of a permanent disability.

Critical Illness Benefit Riders

critical illness riders

What is a Critical Illness rider?

A Critical Illness rider pays out a tax-free lump sum when the life insured is diagnosed with a covered illness (subject to certain conditions). This is known as a living benefit. With some policies, you may be able to choose the number of illnesses covered as well as the amount of coverage and the term length of the rider. Critical illness riders typically have a 30 day survival period that needs to be completed, before the policy can pay out the proposed benefit of the rider.

What is a Child Critical Illness rider?

A Child Critical Illness rider provides coverage for the insured’s children if they are diagnosed with a childhood illness. The exact list and number of illnesses covered vary across insurers. This rider can help parents cover the costs associated with treating some of the more serious children’s illnesses. Similar to the child term rider, this benefit can cover multiple children without necessitating medical tests.

What is a Return of Premium on Death or Expiry rider?

A Return of Premium on Death or Expiry rider returns all or a part of the premiums one has paid over the course of their policy when the policy term ends or when the individual passes away. Such riders are typically associated with a critical illness policy or critical illness insurance riders.

Disability Income Riders

disability riders

What is a Disability Waiver of Premium rider?

There are two types of Disability Waiver of Premium riders:

Total Disability Waiver: for the insured

Under this rider, life insurance premiums are waived if the life insured suffers a permanent total disability. This rider covers disabilities due to accidents as also those suffered due to a permanent illness. To claim under this rider, the life insured must:

  • not be able to perform essential duties of their occupation,
  • not be engaged in any other occupation, and
  • be receiving medical care for the condition that has caused total disability.

Generally, disability waiver riders only pay out after the individual has been totally disabled for at least 4 or 6 consecutive months. The premiums can be waived retrospectively, including for the initial 4 or 6 months waiting period. The rider is valid till a certain age of the person to be insured, most often up to the age of 60 or 65.

Parent/Payor Disability Waiver: for the policy owner or payor

The Disability Waiver rider can also be obtained on the policy owner or the payor of the policy. A Parent/Payor Disability Waiver rider is useful in cases where the policy owner or the payor of the policy and the insured are different people. As the name suggests, Parent disability waiver riders are usually applicable in cases where the life insured is the policy owner’s child while the payor waiver covers the individual making the payments for the policy (eg spouse paying premiums for a policy).

Depending on the policy, premiums may be waived upon the policy owner’s death or if they suffer a permanent total disability. This rider requires both the policy owner and life insured to provide proof of insurability at the time of the application.

What is a Disability Income rider?

A Disability Income rider provides monthly payments to the life insured in case they become disabled and unable to work. The policyholder will need to choose the time period for which the payments are to be made and the monthly payment (which is usually capped). This rider typically has a 30 or 90 day waiting period, with retrospective payments that start after the waiting period is over.

What is a Mortgage Disability or Credit Disability Insurance rider?

A Mortgage Disability rider covers all or part of the life insured’s monthly mortgage or line of credit payments in the event of their temporary or permanent disability. The payments are made for a specified period of time such as 2 years from disability, 5 years from disability, or up to the age of 65. Credit riders typically have a waiting period of 90 days, although can be retroactive to 31 days in the event of disability from an accident. Proof of the outstanding loan is usually required at the time of the claim.

What is an EDB (Extreme Disability Benefit) rider?

An Extreme Disability Benefit rider is available exclusively from Beneva as part of their term life insurance coverage at no additional cost. In the unfortunate event of a permanent and irrecoverable disability, you may receive a portion of your life insurance benefit (up to $250,000) in advance of your death. This rider generally expires at the age of 60.

Other Riders

What is a Long Term Care rider?

A Long Term Care rider pays out a portion of your death benefit if you are unable to live independently and require assistance (either at home or in an assisted care facility). This means you are no longer able to perform two or more activities of daily living (ADLs) independently.

What is a Hospitalization Income Benefit rider?

A Hospitalization Income Benefit rider provides a steady income if the life insured is hospitalized. The rider pays out a daily fixed cash amount. Typically, there is a limit on the number of days of hospitalization covered, as well as the total amount paid out. There may or may not be a limit to the number of claims.

What is a Fracture rider?

A Fracture rider provides a benefit if the insured suffers a bone fracture or total breakage following an accident. An applicant can purchase units of fracture coverage. Generally, different amounts are paid out depending on the nature and placement of the fracture (facial bones/ribs/skull, etc).

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What is a guaranteed insurability rider and how does it work?

We don’t know where life will take us. We may suddenly need more life insurance coverage due to events such as marriage or having another child. In a few years, we might face new health conditions or lifestyle changes that work adversely against our insurability. 

To partially solve this issue, a guaranteed insurability rider (GI rider) allows individuals to expand their prior life insurance coverage without worrying about their future health or lifestyle conditions. 

In this article, we explain GI riders and insurance riders more generally. This post also describes how GI riders work, how much they cost, and who should consider them.

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What are insurance policy riders?

Life insurance riders are an optional add-on to enhance your policy’s coverage. If your life insurance policy were a burrito, a rider would be the option to add guacamole! The variety of riders available allow you to customize your policy to further fit your bespoke needs. 

The rider availability and costs depend on your insurer, the rider details, your health, and more. Some riders include: 

  • Hospitalization income: regular payouts in case you’re hospitalized
  • Extreme disability benefit: early access to your death benefit if you face a severe disability 
  • Return of premiums: returns some of the premiums you’ve paid over the policy’s lifetime if you’ve never made a claim
  • Critical illness: A critical illness insurance rider pays a lump sum should you be diagnosed with a covered illness

What is a guaranteed insurability option rider?

A guaranteed insurability rider allows you to increase your policy’s death benefit up to a pre-determined amount, without another medical examination. At set times throughout your policy’s life, you have the option to add this additional coverage up to the pre-determined amount. This rider is excellent for those that need a policy that can accommodate future changes that they may not be able to predict. 

Although providing a medical examination to an underwriter might not be a lot of work, your premiums could skyrocket if the test discovers new health issues. If you suspect you may face future health problems through means like genetic testing or due to a history of family health issues or lifestyle choices, a GI rider might be useful to add to your life insurance policy. It’s also beneficial if you currently have a limited budget, but want to ensure that you’ll have the option for purchasing additional coverage later on, as your budgeting flexibility improves over time.

Some insurers may offer this rider on term and permanent life insurance, but it’s most common for permanent life policies.

How does a guaranteed insurability rider work?

The typical GI rider works by allowing the insured individual the option to purchase additional coverage periodically in the future, without providing new evidence of insurability (i.e. a new application or exam). The standard timeline to exercise the rider would be 5 years from the effective date of the original policy. Many policies will also allow exercising the option to purchase additional coverage upon certain life events such as the purchase of a new house, or marriage or birth/adoption of a child. Generally, you must exercise the option within a pre-defined period upon any of these life events.

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When can you buy a guaranteed insurability (GI) rider?

The availability of a guaranteed insurability rider depends on your insurer. But, the decision of whether to add it is generally decided upon when you apply for your life insurance policy. The addition of the GI rider is approved at the stage of the underwriting process. At this stage, the insurer can view the additional financial risks of providing you with a GI rider and approve the proposed costs.

The guaranteed insurability rider cannot be added after the initial policy contract is issued, so it’s important to review its need at the time of the policy application. 

For example, if during the medical exam, the underwriter discovers that you have had cancer or other condition that commonly resurfaces after years of remission, increasing your death benefit may be financially risky to the insurance company, as the likelihood that they would have to pay out the larger death benefit would be high. (Read more about how cancer affects life insurance.)

Your insurer may let you add a GI rider after this point, but it depends on their procedures.

How often can you use a guaranteed insurability rider?

There are usually two ways to apply the guaranteed insurability option — at a set number of years or upon predetermined life milestones. These are also referred to as option dates. 

Your option dates may arrive every three to five years. Or, your policy may allow you to have your option dates coincide with events such as marriage, having a child, or other significant life events. Increasing your death benefit at life milestones may be beneficial to accommodate such significant changes as your needs may change during these times. Perhaps before one of these events, such as buying a house, you had fewer liabilities, but after you want to make sure they are covered upon your death. GI riders can help cover your increasing life insurance needs.  

To calculate your insurance needs right now, try out our life insurance calculator. This calculator takes factors such as your current liabilities (debts, mortgages, credits) and determines the amount of death benefit coverage you need for full protection.

Check out PolicyAdvisor's life insurance calculator.

How much does a guaranteed insurability rider cost?

The guaranteed insurability rider is a relatively inexpensive rider to add to your policy. But some insurers may add a guaranteed insurability rider option for free. Even when there’s a charge, it’s usually inexpensive — a few extra dollars a month depending on your insurer. 

Guaranteed Insurability Rider Options

If you are looking to have $100,000 coverage added to your death benefit in the future, the guaranteed insurability rider cost varies depending on age and gender. Keep in mind that your premiums may also increase at the time you actually exercise this rider—the following prices are for the rider only, not the increase in coverage. 

 

Age Male Female
25 $3.06 $2.55
30 $3.06 $2.55
35 $3.26 $3.06
40 $10.71 $8.36
45 $21.02 $14.99

After the initial cost of adding the option of a GI, there is another cost associated with the actual exercising of the GI option when it’s available (such as the pre-determined 3 or 5 years or upon a significant life event). Your insurer ultimately increases your annual premium to accommodate the extra death benefit they will be providing. The overall monthly premium will increase to reflect the higher death benefit being made available for you. The calculation of the increase is based on the age at which you have exercised the GI option. The later you exercise the option, the higher the price of the exercise.

Who needs a guaranteed insurability rider?

A GI rider benefits you if you have prior medical conditions or family health histories that may worsen your circumstances later. If you are concerned about health issues or lifestyle choices in the future but need additional coverage, the rider lets you obtain the additional coverage without another medical examination. So, you can protect your loved ones with adequate life insurance but without a significantly higher premium, that may be associated with adverse health or lifestyle circumstances. 

A GI rider is also beneficial where you want

Riders provide numerous ways to customize your life insurance policies. A GI rider, specifically, can help you expand your coverage in the future without an additional medical examination.

PolicyAdvisor’s licensed insurance experts can help you learn more about the life insurance and rider options available to you. Book some time with us and see how you can customize a life insurance plan for you and your family’s needs.

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Does COVID-19 affect life insurance? Coronavirus FAQ

The coronavirus pandemic dramatically changed the world. In this article, we take a look at how it can impact your life insurance application or your existing policy, if at all.

On May 4, 2023, the World Health Organization (WHO) declared that COVID-19 is no longer a global health emergency.

Remember to always get COVID-19 information from verified sources, such as official government of Canada or provincial websites.

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What is COVID-19?

Novel Coronavirus (COVID-19) is a new strain of coronavirus that was first identified in Wuhan City, China in December 2019 and has since been detected in more than 100 countries. The virus has been named SARS-CoV-2 and the disease it causes has been named Coronavirus disease 2019 (COVID-19). Coronaviruses are a large family of viruses that are common in humans and have typically been associated with mild illnesses, similar to the common cold. The novel Coronavirus (n-COV) is a new strain that has not previously been identified in humans.

Symptoms for COVID-19 have included fever, cough, difficulty breathing, and pneumonia in the lungs, with severe pneumonia cases leading to fatalities. Generally, Coronavirus can cause severe symptoms in people with weakened immune systems, the elderly, and those with long-term health conditions like diabetes, cancer, hypertension, and chronic lung disease. On March 11, 2020, the World Health Organization (WHO) declared the global outbreak of COVID-19 as a pandemic.

Since then, over the course of the COVID-19 pandemic, multiple variants of the virus have been identified. The most prominent ones were the Alpha, Beta, Delta, and Omicron strains. The Delta variant was classified by WHO on May 11, 2021, and quickly became the dominant variant circulating globally. Delta spreads more easily than earlier strains of the virus and is responsible for more cases and deaths worldwide. The Omicron variant was reported to WHO later that year, on November 24, 2021, and was classified as a variant of concern by WHO on 26 November 2021, due to its high transmissibility compared to other variants. As of June 2023, Omicron is still the most prominent strain being spread in North America.

As of May 4, 2023, the WHO does not consider COVID-19 a global health emergency anymore. However, it is still classified as a pandemic and a serious, ongoing health issue.

Does COVID-19 affect my existing life insurance policy?

If you already have an existing, active life insurance policy, then the short answer is you will be covered for any claims associated with COVID-19.

In other words, if you were to pass away due to COVID-19 or a Coronavirus-related ailment, your beneficiary will be able to make a life insurance claim. The claim would be treated in the same manner as a death caused by any other natural disease or ailment. Life insurance policies do not treat deaths caused by Coronavirus any differently from those caused by any other flu, infectious diseases, or natural causes.

In 2020, Canadian life insurance companies paid out over $154 million in claims for Covid-19-related deaths (CLHIA). While 2021 data has yet to be released for Canadian insurers, according to US trends life insurance payouts in 2021 were the highest they have been in over 100 years, with Covid-19-related death claims topping 2020 numbers.

Covid-19 life insurance frequently asked questions

Will receiving a COVID-19 vaccine affect my life insurance policy?

Despite what some online rumours may say, receiving a COVID-19 vaccination will not affect your insurance in any way. The Canadian Life and Health Insurance Association (CLHIA) released a statement on March 8 2021 assuring Canadians that no life insurance provider in Canada will be denied coverage or benefits when using a vaccine approved by Health Canada.

From their release:

“Getting the vaccine will not affect your insurance coverage. No one should be afraid and choose to not protect themselves from COVID-19 because they are worried about it affecting their benefits. All of Canada’s life and health insurers are supportive of Canadians receiving government-approved vaccinations to protect themselves from serious illness and death.”

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Fast facts

If you have an existing life insurance policy, your coverage is not impacted by COVID-19.

Will COVID-19 be covered under a new life insurance policy, if I apply now?

Life insurance policies have continued to provide coverage for Coronavirus-related deaths for new life insurance applications, once those have been approved.

However, if you have been recently diagnosed with Coronavirus or are currently awaiting diagnosis or treatment of the same, insurance companies will likely defer the approval, until after such treatment or diagnosis is complete. Such a deferral will be similar to deferrals required for any other ongoing health condition or treatment.

For example, some companies may implement underwriting guidelines at the time of application that state, you must not have had Covid-19-related symptoms in the last month, that your case was only mild, or that you must wait two or three months following the resolution of all symptoms. As the situation evolves, companies may continue to amend their approval guidelines, so it’s always best to check with an insurance expert at PolicyAdvisor for the latest underwriting rules.

Does my travel history to a Coronavirus-affected region affect my life insurance application?

As part of standard life insurance applications, most life insurance companies will ask questions about your recent travels in the last year – as well as ask for information on your travel plans for the next twelve months. If you have travelled to a region that has seen a wide outbreak of COVID-19, particularly in the last 1-3 months, then you can expect the insurance company to ask you additional questions.

Similarly, any imminent plans to travel to any of COVID-affected regions invite additional questions about such travel plans. In some situations, where travel may indicate elevated risks to Coronavirus, insurance companies may choose to postpone the decision around approving a policy. Learn more about life insurance and travelling and applying for life insurance while quarantined.

Will a COVID-19 claim be paid out under Critical Illness Insurance policies?

A critical illness insurance policy is a contract whereby an insurance company agrees to pay out a one-time lump sum amount to the insured, upon the diagnosis of a specified critical illness and the completion of a survival period; usually 30 days.

COVID-19 by itself is not a covered condition as defined in Critical Illness policies currently sold. Therefore critical illness policies will not payout, purely, on a positive COVID diagnosis. The vast majority of people who contract the novel coronavirus are expected to make a full recovery within a relatively short period of time. However, if a claim is presented for a different covered critical illness (such as a major organ transplant, like a lung transplant) that is attributable to Coronavirus, then it will generally be viewed as a covered condition and insurance companies will consider such claims for approval.

 

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Fast facts

Life insurance companies – generally speaking – do not currently have any policy exclusions for coronavirus or other infectious diseases in their life, critical illness, or disability policies.

If you are unsure what your policy covers, reach out to our licensed insurance experts. We will help explain your current coverage.

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Am I covered for COVID-19 under my disability insurance policy?

Disability insurance products are designed to pay a monthly benefit to replace a loss of earnings if you are unable to work due to illness or injury for the length of the policy, or until you return to work. Typically, there is a waiting period before the benefit payments start. This waiting period can be between 1 to 26 weeks for short-term policies or up to 2 years for long-term disability insurance policies. Should a Coronavirus diagnosis lead to a loss of income, the insurance companies will make a payment as long as the minimum waiting period is complete. Some companies may even waive the waiting period in the case of a positive diagnosis. Learn more about Coronavirus and critical illness insurance.

Frequently Asked Questions

COVID-19 has been declared by the WHO to be a pandemic. Are there any exclusions on life insurance policies associated with pandemics that insurance providers may introduce in the future?

A pandemic is a global outbreak of disease. Pandemics happen when a new virus emerges to infect people and can spread between people sustainably. Most life insurance policies currently do not have a disease-related exclusion. The standard exclusions pertain to suicide/self-inflicted harm or criminal activity.

Currently, there are not any exclusions on coronavirus-related deaths. However, insurance companies continue to monitor the outbreak and they reserve the right to make any changes in their product or processes in the future.

Should I be buying insurance on my life or health at this time?

Regardless of this health scare, you should be buying the appropriate amount of insurance coverage to protect you and your family at the earliest time you can. Such coverage only gets more expensive with age.

COVID-19 is a reminder that life events can emerge quite quickly and it is prudent to secure coverage ahead of time. This is just as important a time as any other to protect those that depend on you for financial health. If you would like to discuss your insurance needs, our advisors are available to assist you.

Can I apply for life insurance coverage without having to meet an advisor or undergo a medical test?

When COVID-19 was still a global health emergency, many Canadians practiced social distancing to prevent the spread of Coronavirus to loved ones and community. By now, such restrictions are no longer recommended, but you may still be concerned about limiting your social interactions.

As Canada’s leading online life insurance brokers, the team at PolicyAdvisor has made finding life insurance quotes and buying life insurance an easy, quick and online process for consumers like yourself that seek the convenience of a non-face-to-face meeting to assess insurance needs. Our life insurance needs calculator can help shed light on your specific insurance requirements from your couch or kitchen table.

Our innovative algorithm parses through 100s of insurance products so you can find the best insurance policy and options for your needs. Our licensed insurance advisors are available online to answer any questions, curate your insurance choices, and help complete the application for you – all fully online.

While many life insurance products require a medical test, we have partnered with some of Canada’s leading insurance companies to arrange for life insurance coverage up to $1 million, without requiring an in-person, medical exam. We also have access to several non-medical insurance products; the coverage can be fully obtained without meeting with a medical representative.

You can easily get financial protection from the comfort of your home even if you are still practicing social distancing – like so many of us are – to protect our communities and those most vulnerable.

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