CH 6

Segregated Fund Contract Competency

  • Competency Components:
    • Analyze available products to meet client needs.
    • Implement recommendations tailored to the client's situation.
    • Provide customer service during the coverage period.
  • Competency Sub-components:
    • Analyze the advantages of segregated funds compared to other investments, considering the client's needs.
    • Confirm the requirements for implementing the recommendation.
    • Validate the appropriateness of contract amendment, renewal, and termination applications based on the client's situation.
    • Inform the claimant of the claims process.

Segregated Funds and Annuities

  • Only licensed life insurance agents can prepare and submit segregated fund contract applications.
  • The application process involves:
    • Agent's recommendation in a reason-why letter.
    • Financial contribution to the contract.
  • The finalized contract is evidence of the agreement between the insurer and the investor, obligating both parties to the investment terms.

Contracts

  • Contracts are legal documents binding parties to specified terms and conditions.

Segregated Fund Contract

  • The segregated fund contract (Individual Variable Insurance Contract or IVIC) outlines conditions for buying, terminating, withdrawing, and receiving benefits.
  • Disclosure documents reveal what the investor is buying and reinforce the risks and costs.
  • Contractual Commitments by the Insurer:
    • Guarantees and benefits.
    • Method to determine the value of benefits related to the market value of each fund and their surrender value.
    • Percentage of premium allocated to provide maturity and death benefit guarantees.
    • When the value of the fund and benefits are determined.
    • Fees and charges, or how fees and charges are calculated.
    • Right to make changes to the contract.
  • Contract Information Includes:
    • Identification of each segregated fund available.
    • Costs, including fees, expenses, and the Management Expense Ratio (MER) for each fund.
    • Risk disclosure.
    • Details of the guarantees.
    • Right to cancel (rescission right).
    • Statement of the accuracy of Fund Facts information and the remedy for any error.
  • Rescission Details:
    • The contract can be rescinded in writing within two business days after receiving confirmation of purchase.
    • The contract owner receives the lesser of the amount invested or the fund's value on the valuation day following the rescission request. Fees are also refunded.
    • Confirmation is deemed received five business days after being mailed by the insurer.
  • All segregated fund contracts must provide this information to protect the investor's contractual rights.
  • The contract may be attached to the application or provided after the insurer receives the application.
  • A sample contract does not constitute purchase; confirmation comes with the effective date of the contract, after which a confirmation notice is sent.
  • The effective date is the valuation date after the first deposit and when all contract criteria are met.
  • Each contract is assigned a unique policy number for all communications between the contract owner and insurer.

Investor Requirements

  • The investor must provide accurate and truthful information to prepare the contract.
  • Decisions should align with the investor's needs and objectives, based on the agent's recommendations or independent decisions.
  • The agent ensures the investor understands the decisions and consequences.
  • If the agent is unsure of the client’s understanding, they should seek advice from a supervisor.
  • The investor must deposit funds into the contract.

Application Form

  • The application form is completed by the investor and agent together, potentially virtually.
  • The investor provides the necessary information, and the agent records it on the form.
  • The application form requires time to complete accurately and comprehensively.
  • The agent explains aspects of the form to ensure the investor understands their options and commitments.
  • If the investor cannot comprehend the application (e.g., due to a language barrier), completion should be postponed until understanding is established.
  • The investor must review and correct any inaccuracies on the form.
  • The investor and annuitant (if different) sign and date the application, electronically if needed, confirming agreement with the information.
  • The agent must provide specific information for the application to be processed.
  • Power of Attorney (POA):
    • An exception to the signature requirement exists when the contract owner is represented by someone with POA for property.
    • The attorney may complete and sign the application, depending on the POA's wording, but may not have beneficiary naming rights.
    • POA laws vary by province/territory; legal advice should be sought.
  • The agent must record information carefully, as it forms the basis of the contract.
  • Incomplete applications will be rejected.
  • Reason-Why Letter:
    • Prepared at the time of application or shortly after, it's a pillar of insurance sales suitability.
    • The agent prepares the letter and provides it to the client.
    • It proves that the agent has addressed a relevant insurance need or needs by making recommendations to a client, together with the basis for the recommendations, and whether or not the client has accepted or refused those recommendations.
    • The letter:
      • Confirms facts.
      • Verifies instructions from the client.
      • Identifies the client’s needs that the product meets and the needs that will be left uninsured.
      • Documents that the sale is suitable and the reasons why it is suitable.
      • Substantiates the client’s understanding of his purchase.
    • The reason-why letter is not optional; the agent reviews it with the client, and both must keep a copy.
Registered or Non-Registered Form
  • Segregated fund contracts can be held on a non-registered or registered basis.
  • Registered investments are categorized as locked-in or non-locked-in.
  • Age restrictions may apply when purchasing contracts or opening registered/non-registered accounts.
  • The contract must be set up accurately; incorrect setup can be financially disadvantageous.
  • The contract owner needs to provide their Social Insurance Number (SIN) for tax purposes.
  • A registered contract requires the owner to be the same person as the annuitant.
  • Ownership cannot be transferred while the owner is alive, and the contract cannot be used as collateral.
  • Non-registered contracts (not registered for tax purposes) may specify an annuitant who is not the contract owner.
  • The owner may be an individual, a group, or a corporation and needs to provide a SIN or business number for tax purposes.
  • Non-registered contracts can be purchased until the annuitant reaches a specified age (e.g., 90).
  • Benefits of a Non-Registered Contract:
    • Ownership can be transferred according to the insurer's rules.
    • It can be used as collateral for securing a loan by collaterally assigning the contract to the lender.
Naming Annuitant and Beneficiary
  • The contract owner has ownership rights, such as selecting and switching funds.
  • They name the annuitant and beneficiary to the contract.
  • The annuitant is the person on whose life the guarantees are based and whose death triggers the death benefit payment.
  • If the contract pays out an annuity, the length depends on how long the annuitant lives (for a life annuity).
  • Once named, the annuitant may not be changed.
  • In a non-registered contract, a contingent annuitant may be named to replace the initial annuitant if allowed under the contract.
  • The contract continues until the death of the last surviving annuitant, at which point the death benefit is paid out.
  • The beneficiary receives the contract's benefit after the death of the last surviving annuitant.
  • If the contract pays a life annuity, no benefit may be payable to the beneficiary if there is no guaranteed period.
  • Beneficiaries can be named revocably or irrevocably.
  • If named irrevocably, the owner's rights are limited, and withdrawals may require the beneficiary's consent.
  • In some provinces/territories, withdrawals may be impossible if the irrevocable beneficiary is not old enough to consent.
  • Naming an irrevocable beneficiary is rarely advisable.
  • More than one beneficiary can be named; a percentage of the death benefit must be allotted to each.
  • Contingent beneficiaries should also be named to ensure the money goes where the owner wants if a beneficiary predeceases the annuitant.
  • Spousal RRSP Example:
    • In a spousal RRSP, the owner and annuitant are the person who benefits from the deposits.
    • The person who makes the deposits does not have ownership rights; the recipient names the beneficiary.
    • Example: Jill sets up a spousal RRSP for Jack; Jack is the owner/annuitant and names the beneficiary.
  • After the contract owner dies, the insurer may release information about the contract to the beneficiary and the owner’s estate.
Rider Election Form
  • If a contract owner chooses a Guaranteed Minimum Withdrawal Benefit (GMWB), they may need to complete a rider election form.
  • The rider election form:
    • Specifies that the GMWB is being elected.
    • Provides a payment option (lifetime or to an end-date).
    • Offers space to fill in the correct fund codes (must be those that offer the rider).
    • Describes minimum initial deposit requirements.
    • Gives a choice for payments.
    • Instructs on the frequency of payments and how they are made.
  • The rider addresses the impact of excess withdrawals from a GMWB because they can significantly reduce the contract's value.
  • The contract owner may not receive his expected amount in payments in the future if excess withdrawals have been made.
Client Identification Requirements
  • FINTRAC operates under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA).
  • FINTRAC is Canada's financial intelligence unit (FIU), assisting in detecting, preventing, and deterring money laundering and terrorist financing.
  • The agent has obligations under the PCMLTFA to properly identify clients and keep records about the client and the transaction if the client is expected to deposit 10,00010,000 or more to the contract over its lifetime or if a beneficiary will receive 10,00010,000 or more over the duration of an annuity or policy.
  • The agent must also determine whether the client is acting on instructions from a third party.
  • The agent is also required to submit a terrorist property report under specified circumstances to FINTRAC.
  • These requirements do not apply when the account or contract is registered.
  • Requirements are also specified for the agent if a large cash transaction is made as cash or a virtual currency (VC).
  • A large cash transaction is a single cash deposit of 10,00010,000 or more, or multiple cash deposits equaling 10,00010,000 or more made in a 24-hour period.
  • Cash means cash – notes and coins – not cheques, not transfers, not a bank draft or other instrument.
  • Cash transactions are often prohibited by most companies.
  • When an account is opened (or a contract applied for), the account or contract is reviewed, or a suspicious fact is detected, the agent has to confirm whether the client is a politically exposed foreign person (PEFP), a domestic politically exposed person (PEP), head of an international organization (HIO) or a family member or close associate of one of these people.
  • In general, a PEFP is a person who has held a government or judicial position in a foreign country.
  • A domestic PEP is a person who holds – or has held within the last five years – a specific office or position in or on behalf of the Canadian federal government, a Canadian provincial government, or a Canadian municipal government.
  • An HIO is the head or chief executive officer of an international organization set up by the governments of more than one country.
  • If the client is identified as being high risk, you have specific obligations for the client, his family members, and close associates that apply to record keeping, establishing the source of funds, and obtaining the approval of senior management to keep the account owner.
  • FINTRAC has three methods to establish suitable client identification:
    • Photo Identification (physically present individuals):
      • Must be issued by a federal, provincial, or territorial government.
      • Name and photograph must match.
      • Must be valid, current, and authentic.
      • Must include a unique identifying number.
      • Foreign-issued ID is acceptable if equivalent to Canadian-issued photo ID.
      • Examples: Canadian passport, permanent resident card, secure certificate of Indian status, provincial/territorial ID cards, U.S. passport.
    • Credit File:
      • Must have existed for at least three years.
      • Name, address, and date of birth must match.
      • Providers: Equifax Canada and TransUnion Canada.
    • Dual Process:
      • Two original, valid, and current documents from independent and reliable sources must be provided.
      • Name, address, and date of birth must match.
      • Documents must be valid and current.
      • Two sources are used as follows:
        • One source to verify an individual’s name and address (such as a Canadian passport) and a second source to verify their name and date of birth (such as a birth certificate or permanent resident card).
        • One source to verify an individual’s name and address and a second source to verify their name and confirm a financial account (such as a credit card statement).
        • One source to verify an individual’s name and date of birth and a second source to verify their name and confirm a financial account.
  • Ontario, Manitoba, Nova Scotia and Prince Edward Island prohibit the use of their provincial health cards for identification.
  • Corporations and other entities must supply acceptable identification (e.g., certificate of corporate status) and names of directors.
  • The agent must be confident that the person appearing in the identification papers is the same person making the application.
  • If there is any suspicion that the applicant is acting for a third party, then a form for third party determination must be completed.
  • Any suspicious transaction or attempted transaction may be of interest to FINTRAC.
  • Suspicious transactions are a combination of facts, context, and money-laundering indicators.
    • Facts are actual events, actions, occurrences or elements that exist or are known to have happened.
    • Context is provided through general awareness of events in the client’s business or community, knowledge of typical financial activities, regular know-your-client activities, information based on risk assessments and the background and/or behaviour of a client.
    • Indicators are potential red flags that could initiate suspicion or indicate that something may be unusual without a reasonable explanation.
  • Suspicion itself has three thresholds.
    • The lowest is simple suspicion in which a hunch or gut feeling leads an agent to believe that money laundering or terrorist financing is happening.
    • Next is when there are reasonable grounds to suspect that there is a probability of money laundering or terrorist financing.
    • The highest threshold is when there are reasonable grounds to believe and support the probability that money laundering or terrorist financing is occurring.
  • An attempted or completed suspicious transaction must be reported to FINTRAC.
  • There is no monetary threshold to be met: if the agent is suspicious for good reasons, he must report the individual.
  • The agent may wish to first bring the situation to the attention of a supervisor or manager.
  • All members of the financial services industry have a responsibility to follow the FINTRAC guidelines in an effort to curtail, with a goal of eliminating, money laundering and terrorist financing.

The Initial Deposit

  • A deposit must accompany the application. It can be in the form of a cheque made payable to the insurer for a lump sum, by transfer, or by providing the date on which the first pre-authorized deposit will be made.
  • Pre-authorized deposits or debits (PADs) specify frequency (weekly, bi-weekly, monthly, bi-monthly, quarterly, semi-annually or annually), the date of the first withdrawal from the account and the regular subsequent date for withdrawals.
  • Banking information for the institution from which withdrawals will be made and a personalized void cheque or stamped confirmation from the bank must be provided.
  • The deposit is allocated to the selected fund or funds.
  • If more than one fund is chosen, the contract owner also indicates either the dollar amount or percentage of deposit he wants applied to each fund.
  • In some jurisdictions, when locked-in funds are being transferred, the spouse must give consent to the purchase of the investment.
  • The spouse may also choose to sign a spousal waiver form to release his rights to the pension contributions and to any subsequent account to which those contributions are deposited; the form is issued by the applicable pension jurisdiction.
  • An RRSP or a locked-in retirement account (LIRA, also called an LRSP or locked-in retirement savings plan) contract can accept deposits until the end of the calendar year in which the contract owner turns 71.
  • To continue tax deferral, the RRSP can be converted to a registered retirement income fund (RRIF) and the LIRA/LRSP converted to a life income fund (LIF) or life retirement income fund (LRIF), or prescribed registered retirement income fund (PRRIF) for Saskatchewan and Manitoba pension plan members.
  • If a contract must be changed, or an account must be transferred from one form to another due to attained age, the insurer handles the change; the contract owner is set up in the proper account with the same fund and same unit value as prior to the switch.
  • There may be a minimum value required to open an account and for different forms of account; these should be verified with the insurer.
  • The investor is informed of the unit value for each deposit. This is true of single deposits and deposits made over time in a PAD plan.
  • The unit value of the fund at the time of purchase forms a benchmark against which the future performance is monitored.

Agent Requirements

  • The agent is required to meet expectations of the client and the insurer he represents for pre-sale activities, completion of the application, delivery of documents and post-sale service.

Meeting Carrier Expectations

  • The agent is expected to meet all expectations of the carrier for volume of business, client contact, accuracy in dealing with the carrier and clients, and necessary record keeping.

Document Delivery

  • The contract must be delivered to the investor in person or through registered mail for the purchase to be completed and the contract issued.
  • The contract includes the policy and other specified documents like the information folder, Fund Facts and contract confirmation.
  • If a delivery receipt is part of the package of documents, it must be completed, signed and witnessed before it is returned to the issuing insurer.
  • Other forms may be required during the period the contract is in force if the client’s situation changes or evolves, such as the change of beneficiary form and that used for a death claim.
Information Folder
  • The information folder describes the features of segregated funds and how they work.
  • Specific fund details are provided in Fund Facts, which usually accompany the information folder.
  • The purpose of the information folder is to provide brief and plain disclosure of all material facts relating to the segregated fund contracts (IVICs) issued by the insurer.
  • One information folder is typically issued by the insurer that includes Fund Facts documents for all the funds it provides although every fund has a unique identifier code.
  • This is helpful to the agent since it means all relevant information is put into the hands of the investor at the same time; there can be no omissions.
  • An information folder must lead off with a summary of key facts, which is simply an overview of details provided again in the information folder itself.
  • The agent is expected to review the information folder with the client before accepting the application for a segregated fund contract, with a focus on the key facts and relevant Fund Facts documents.
Fund Facts
  • Fund Facts are the details of the particular funds offered by the insurer through its segregated fund contract, and listed within the information folder.
  • One is prepared for each fund as of December 31 of the preceding year.
  • The information is presented consistently for every fund across all segregated fund offerings so that comparisons can be easily made between funds.
  • It is written in plain English to enhance client understanding.
  • It is essential for the agent to review the Fund Facts for the funds he has recommended with the investor to ensure the investor understands the recommendation and to answer any questions.
  • Fund risks are plotted on a scale with six classifications: very low, low, low to moderate, moderate, moderate to high, and high. However, as said in the previous chapter, insurers tend to adopt a five-band classification scale (without the “very low” class) similar to the mutual funds’ one.
Customer’s Instructions
  • Instruction by the investor is required to:
    • Finalize purchase
    • Switch funds
    • Reset
    • Withdraw money from the contract
    • Terminate the contract.
  • Confirmation may be provided to the investor electronically or in writing.
  • On occasion the client may be given the opportunity to provide instructions to the insurer verbally.
  • These instructions are as binding as if they were written, but the agent should keep a record of the date, time and method by which the customer gave those instructions (e.g., by telephone or in person).

Ongoing Service Requirements

  • Sales activity for a segregated fund contract does not end with the confirmation of purchase.
  • The wise agent recognizes the confirmation as just one step along the path of providing exemplary customer service.
Post-Sale Follow-Up
  • The agent should follow up with the client once the sales process is completed to see whether he is satisfied with the product and whether it continues to meet the client’s needs.
  • Keeping the lines of communication open between client and agent reinforces the agent’s value to the client and can help to pave the way for additional business or recommendations.
Need to Monitor Client
  • The agent needs to inform the client that he must notify the agent or insurer of changes to his personal situation that might affect the contract in place.
  • Such a change may be the need to change the beneficiary.
  • The agent should also periodically check that all information, such as the client’s address of residence, is up-to-date.
  • It would also be important to know if financial affairs of a client have transferred over to a power of attorney (POA) because the client is no longer competent to handle his own affairs, in which case the client could no longer provide directions for the contract.
  • There are provincial differences in POA. A legal opinion should be sought in this circumstance.
Need to Monitor Product
  • New segregated funds are introduced continually, others are combined, and others are discontinued.
  • Agents need to know their products well and keep on top of changes, such as a change in portfolio manager or the management expense ratio (MER), that may have a direct bearing on performance.
  • Significant changes to a fund should be communicated to the client immediately and this is usually done by the insurer rather than the agent.
  • However, the agent may wish to reinforce the impact, or lack of impact, of any changes to the client.
  • If there is a substantial loss in value of a fund, the client must be informed.
  • Although no one likes bad news, providing the information shows that the agent is monitoring the fund and can answer questions and concerns that may arise as a consequence.
Annual Review
  • At a minimum the agent should meet in person or virtually with the client once a year to review the selected investment and its (their) performance.
  • The agent should be prepared to discuss the return since the last review, whether good or bad, expectations, and his understanding for the reasons underlying performance.
  • He should use this opportunity to check with the client as to whether there are changes in his personal situation of which the agent should be aware.
  • This is also a time to ensure the investor is aware of any significant changes that have occurred in the fund if applicable.
Handling Deposits
  • When a cheque accompanies the application, it must be handled securely and immediately sent to the insurer.
  • There is no room for error in the handling of money and any other banking information.
  • The cheque should show the contract number to which the payment is to be applied.
Making a Fund Switch
  • A fund switch is a change in investment from one fund to another.
  • Units in the first are sold and the money used to purchase units in the other fund.
  • Fund switches may be scheduled or unscheduled.
  • An unscheduled switch is simply made by request to the agent or insurer.
  • The switch may be requested because the investor wishes to rebalance the investment or is dissatisfied with fund performance, for instance.
  • The request can happen at any time.
  • A minimum amount is required for the switch and the minimum balance for the fund must be met.
  • Each insurer provides a number of switches a year for free.
  • A withdrawal fee may be charged when switches exceed this limit.
  • Some switches will not be allowed depending on the sales charge or contract guarantees.
  • It is also possible for a switch to act as a reset that changes both the maturity date and contract guarantees.
  • If units are switched within 90 days of purchase, a short-term trading fee may be charged or the switch may not be permitted.
  • A short-term trading fee is a charge against the value of units in the fund, e.g. 2%. The information about the amount of the fee is in the Fund Facts.
  • A scheduled switch is one set up on a regular basis, such as at the end of every year.
  • There is no need for the client to make the switch request in this case.
  • Fees are not charged when switches are scheduled.
  • However, the insurer can cancel the switches or redirect switched funds.
  • If this occurs, the investor will be notified in advance and provided with options for the future.
  • A capital gain or loss can be incurred by a switch to the extent the amount switched exceeds or is lower than the adjusted cost base of the units.
Resets
  • Similar to switches, a reset of a guarantee to a higher value based on market value can be scheduled or unscheduled (i.e., automatic or client-initiated).
  • However, unlike switches, not all contracts and not all funds allow reset to occur.
  • When a reset is completed, the maturity date may also be reset.
  • For a 10-year term to maturity, the new maturity date will be ten years from the reset date.
  • Some insurers limit the age of the investor (or annuitant) at which a reset can be made, for instance to age 80.
  • A reset at 80 would schedule contract maturity for age 90.
  • The mortality rate in the years between 80 and 90 is very high so the insurer would very likely have to meet the death benefit guarantee obligation.
  • If the death benefit is higher than market value, the insurer must make the top-up.
  • This could become costly for the insurer.
  • An unscheduled reset is used by an investor to lock in higher guarantee values when he sees the value of his units have increased to more than the current guarantee level.
  • The contract owner informs the agent or insurer of his wish to make a reset and the request is processed.
  • The number of resets per year may be limited by the insurer.
  • Therefore, an investor could miss a market high if he has expended his allotment of resets for that year.
  • However, attempting to time the market is rarely successful; far better to try and achieve steady modest gains in reset.
  • Some contracts offer scheduled, or automatic, resets that may be restricted to the schedule set by the insurer, such as once per year.
  • No instructions from the contract owner are required.
  • The reset is done only if the market value of the investment is higher than the value of the guarantee.
Change of Beneficiary
  • Although the beneficiary is specified in the application, the need may arise to change the beneficiary if, for instance, the beneficiary dies or the contract owner decides a new beneficiary is in order.
  • This can be done at any time by the contract owner providing the existing beneficiary designation is not irrevocable.
  • As noted above, it is rarely prudent to name an irrevocable beneficiary on a segregated fund contract.
  • Naming a contingent beneficiary is always a good practice.
  • The contingent beneficiary becomes the primary beneficiary if the primary beneficiary dies.
  • This addresses several different situations, for example, where the annuitant and primary beneficiary die at the same time.
  • It can be useful to name a contingent beneficiary while the owner can still make decisions, so the contract is not left without a beneficiary if the beneficiary dies after the owner becomes incompetent to name a new one.
  • A revocable beneficiary can be changed by the contract owner at any time in a written request to the insurer or by completing a change of beneficiary form.
  • An irrevocable beneficiary can also be changed if the beneficiary is a competent adult (in case it is an individual) and consents.
  • When the beneficiary is changed, the insurer must be notified in writing.
  • The change will be effective on the date of signing, but the insurer will not be required to honour the designation until it receives the written notice.
  • Therefore, it is essential to deliver beneficiary designations to the insurer promptly.
Renewing a Contract
  • At the maturity of the contract, its value may be taken as cash or in the form of an annuity or, if the contract permits, renewed for another period.
  • When renewed, a new guarantee period begins.
  • The new maturity date depends on the age of the annuitant when the contract is renewed.
  • The initial contribution to the renewal contract is the total market value or the guarantee if the market value is lower.
  • The death benefit guarantee continues.
  • The agent will be involved in recommending the renewal and ensuring proper documentation is prepared and delivered to the insurer in a timely manner.

Claims

  • The claim for value of a contract can be made:
    • By the contract owner for withdrawal, surrender and maturity
    • By a beneficiary or an estate trustee (or equivalent) at death
    • By the person in control of the contract, when a POA for property is invoked, for withdrawal, surrender and maturity.
  • The claim sees the value of the contract or specified sum, if a withdrawal, paid minus any outstanding charges or fees.
  • The agent should not attempt to calculate the amount that will be paid since he may be unaware of enhancements to or charges against the contract.

Claims Process

  • The process for claims does not have to involve the agent since forms can be ordered directly from the insurer.
  • However, as a best practice, the agent may choose to be involved to provide customer service to his client.
Claim Forms
  • Both withdrawal and death benefit claim forms can be ordered directly from the insurer.
  • They must be returned completed and signed with any attachments and information the insurer specifies.
  • Once forms are submitted, an insurance representative specializing in claims takes over handling the claim and issuing a cheque or cheques, or ensuring funds are transferred as requested.

Types of Claims

  • Both tact and sensitivity are called for when the agent is involved in a death claim.
  • Other types of client requests are simply financial transactions that call for efficiency and privacy.
  • A high degree of professionalism is expected from the agent who chooses to be involved in claims.
  • Different types of claims are discussed in the following sections.
Maturity Claims and Death Claims
  • The maturity guarantee is claimed when the contract has matured, by the contract owner or person acting under a POA for property.
  • The death benefit guarantee is paid at death of the final annuitant to the beneficiary.
  • Both guarantee amounts are contractually obligated as a percentage of deposits, adjusted upwards by any resets and adjusted downwards with respect to any withdrawals from the contract.
  • If the market value of the contract is not equivalent to the guarantee, the insurer will step in and contribute a sum equal to the difference between market value and guarantee.
  • The declaration of death is made by the beneficiary or estate trustee, who may be an executor, administrator or liquidator (in Québec).
  • The contract number is provided in addition to the signature of the claimant and the agent’s name and number.
  • Proof of death or the Attending Physician’s Statement (APS) is required.
  • The death claim must typically be accompanied by an original death certificate.
  • Additional documents may be required especially if the death occurs outside the country.
Termination and Surrender Claims
  • Termination occurs at contract maturity; surrender occurs before the contract has matured.
  • Both activities constitute a claim and terminate the contract.
  • A contract may be terminated at any time by completing the withdrawal form providing the contract has not matured and annuity payments have not started.
  • The contract owner at termination may choose to receive the value of the contract in cash, to buy an annuity, or another option provided by the insurer.
  • Locked-in accounts may be restricted as to whether the cash can be received and their value may have to be transferred to another locked-in account depending on the legislation of the province or territory that applies to the funds.
Withdrawal Form

  • The request for a withdrawal is initiated by the contract owner.

  • The withdrawal form is used to both close the contract by withdrawing the total value of the contract, and to make a partial withdrawal.

  • As discussed in the preceding chapter, charges may apply and the client must specify if the amount he wishes is net of charges or withholding tax, i.e. the actual sum he will receive, or the gross amount.

  • The form requires:

    • Contract owner information
    • Identification of contract type
    • Selection of withdrawal options
    • Selection of form of payment, i.e. cheque, direct deposit or transfer to another product or institution
    • Instructions to set up a scheduled withdrawal plan (SWP), for instance when payments from a RRIF must begin
    • Selection of fund (by its number) from which the withdrawal is to be made
    • Specified amount to be withdrawn
    • Signature of contract owner and irrevocable beneficiary if one exists
    • Signature of agent with a date and time for client instructions.

  • Withdrawal options cover many circumstances beyond a partial or full withdrawal. The contract owner can also choose to:

    • Set up or change a scheduled payment plan
    • Change the amount or date of scheduled payments
    • Change the allocation of scheduled payments
    • Change the banking information for scheduled payments
    • Stop the scheduled payments.

  • A minimum amount of annual withdrawal is required when the contract is a RRIF.

  • When the contract is a LIF or a restricted life income fund (RLIF), it must be at least the RRIF minimum and no more than the LIF maximum.

Power of Attorney (POA) Claim
  • A power of attorney (POA) for property document appoints another person to act as a substitute decision-maker for all matters pertaining to the contract owner’s property that are described in the POA when the contract owner is unable to do so.
  • As previously discussed, the individual granted POA for property typically controls the contract except, possibly, for the naming of beneficiaries.
  • The instructions for withdrawals or surrender made by the person with POA for property must be respected, and acted upon, as if he was the contract owner.
  • There are provincial differences in POA. A legal opinion should be sought in these circumstances.
  • If the agent has reasons to suspect the person with POA is not acting in