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   Advance death benefits evolve
More clients with short life expectancies may be able to qualify
by Michelle Schriver
If your client is terminally ill and struggling finan- cially, their permanent life insurance policy might pro- vide relief by paying the death benefit early, by way of a
loan against the benefit. Such payments typically require a life expectancy of no more than a year, but that’s start- ing to change.
Last year, BMO Insurance introduced a program that provides an advance death benefit payment for clients experiencing financial hardship whose life expectancy is less than five years. The program will provide as much as
50% of the benefit, up to a maximum of $250,000, pay- able in annual instalments over the course of five years. The idea is to provide an option for policyholders facing unexpected medical expenses.
Steven Cooney, senior vice-president and head of individual life and annuities at BMO Insurance, says he’s unaware of other programs with a five-year duration that are similar to BMO’s program.
“We’re taking a bolder stance,” he says. “We think it’s the right thing to do.”
Advisors cautioned about life settlements
ing provisions, the potential for fraud and compensation conflicts.
At the same time, most insurers acknowledge that the type of activity that would cause an advisor to fall within the trafficking prohibition
is somewhat subjective, requiring discussions with the advisor before deciding to terminate their contract.
For example, facilitating a private sale (i.e., to a third party not in the business of purchasing policies) without payment of a finder fee to the advisor might not be treated as traf- ficking by the insurers, the note said.
Still, CALU suggests advisors “exercise extreme care” when a
client asks for support to sell their policy, even where the client lives in a province that permits life settlements.
“Where it is unclear whether your participation might be considered ‘trafficking,’ having a discussion with the insurance company that issued that policy is recommended,” it said.
CALU also suggested advis- ors review their errors and omissions insurance to see if they have coverage for claims arising from life settlement activity, from either policyhold- ers or investors.
The provinces without life insurance anti-trafficking rules are Quebec, New Brunswick, Nova Sco- tia and Saskatchewan (though the latter is in the process of amending its insurance act). Life settlement companies can purchase insurance policies from policyholders in these four provinces.
However, if an advisor facili- tates an insurance transfer from
a client in Ontario, for example,
to an investor group in Quebec, Ontario’s anti-trafficking provisions would apply, says Kevin Wark,
tax advisor for the Conference
for Advanced Life Underwriting (CALU). In provinces where an advisor breaches the anti-trafficking provisions, the insurance acts allow for various penalties, potentially including fines and loss of licence.
Also, contractually, advisors can’t facilitate the purchase or sale of poli- cies without risking loss of their con- tracts with most insurance companies. That’s because “Canadian life insur- ers are opposed to life settlements generally and to [stranger-targeted life insurance] in particular,” a CALU practice note said. The note lists sev- eral concerns, including anti-traffick-

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