What happens if my life insurance company goes bankrupt?

Posted on September 23, 2008 and updated January 23, 2019 in Canadian Life Insurance Companies, Life Insurance Canada News, Life Insurance Questions - We Have The Answers 3 min read

company-goes-bankruptLife insurance companies have been front page news the last week. American International Group (AIG) one of the world’s largest life insurance companies has had three quarters of staggering housing-related loses and it has lost over 90% of its stock price.

Many policyholders of AIG and other insurance companies are asking the questions how safe is my life insurance policy? It’s a reality of the 21st century that even the largest and most reputable insurance companies can become subject to financial failure. In Canada three insurance companies have gone bankrupt:

  • Les Coopérants on Jan 3rd 1992

  • Sovereign Life on January 18th 1993

  • Confederation Life on August 11th 1994

In each of these instances Assuris – which was founded 1990 and is not for profit organization that protects Canadian policyholders in the event that their life insurance company should fail – was called upon to deal with the insolvency. Through the three insolvencies, Assuris’ coverage has protected almost three million people representing over 10 % of Canadians.

Below is a summary of how Assuris protects Canadian policyholders if a member insurance company becomes insolvent. You can find out if your insurance company is a member company if you visit the website of Assuris.

• Life Insurance death benefits up to $200,000 or 85% of the promised Death Benefit,
• Life Insurance cash values up to $60,000 or 85% of the Cash Value, whichever is higher.
• Critical Illness benefits up to $60,000 or 85% of the promised benefits, whichever is higher
• Disability Insurance benefits up to $2,000 per month or 85% of the promised Monthly Income benefit, whichever is higher.
• Long Term Care benefits up to $2,000 per month or 85% of the promised Monthly Income benefit, whichever is higher

One strategy to minimize risk of an insurance company bankruptcy is to take out policies with multiple insurance companies i.e. rather than an applicant taking out one $400,000 policy, he/she could take out two separate $200,000 policies. The policies have to be with separate insurance companies or Assuris will treat it as one policy. This strategy does have a downside you will be paying multiple policy fees and many insurance companies give volume discounts – the higher the coverage amount the lower the cost per thousand.

avatar
Tom
Tom

Who took over AIG Canada and is my policy still good … TY

frank
frank

i bought term life insurance from confederation life and was told i would not have to pay penelties or taxes if i took it out early to buy buriel plots, and now manulife took over and hit me with 18,000 in taxws for doing that. is that leagal when they tell you one then change it on you

G. Couture
G. Couture

Hello,

I live in Canada and have 4 separate life insurance policies (permanent, temporary, etc.) worth 4 separate amounts. A friend just informed me that I am only allowed ONE life insurance policy and that 3 will be cancelled when I die; AND, the one worth the LEAST will be the only valid insurance policy. Is this true.