Wondering what would happen if your life insurance company went bankrupt? It’s a valid question and there is prescient for this. So, let’s dive and learn what the risk is, and what protection consumers have when life insurance companies go bankrupt.
Even the most reputable insurance companies can face financial failure. Canada has witnessed the bankruptcy of three insurance companies in the past: Les Coopérants in 1992, Sovereign Life in 1993, and Confederation Life in 1994.
More recently, in 2002, American insurers FedNat, Weston Property & Casualty, and Southern Fidelity fell into bankruptcy.
In Canada, failures are especially rare. However, Union Life failed in 2012.
Thankfully, consumers are protected when this happens.
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Assuris, a non-profit organization established in 1990, provides protection to Canadian policyholders in the event of an insurance company’s insolvency. In the past, through Assuris, policyholders could receive:
As of May 25, 2023, Assuris has made some changes. The new coverage amounts are now 90% in the following categories, or whichever stated amount is higher:
Illustrative case: Life Insurance Company BankruptcyLet’s look at an example. If you are a health insurance policyholder in a life insurance company that is protected by Assuris and the company goes bankrupt, up to $250,000 of coverage is protected. Should you have a life insurance policy with a $500,000 face value, $450,000 is protected. | Expert intro: Paul Petrelli How long have you been in the life and health insurance industry and what were you doing before joining Assuris? I joined Assuris as the President and CEO in 2021. Prior to that I worked at Sun Life for over 20 years holding a variety of leadership positions. I am passionate about the value of sound financial planning and the critical role of life and health insurers in helping protect the life, health and wealth of Canadians. At Assuris, we support financial advisors to provide peace of mind and help their clients in making the best decisions for themselves and for their families. Assuris has developed a toolbox and resources to help financial advisors talk about Assuris’ protection to their clients. Visit: Assuris.ca How does Assuris help protect Canadians in the event of a life and health insurance insolvency? Assuris is the not-for-profit organization that protects Canadian policyholders, if their life and health insurance company fails. Assuris’ protection applies to all individual and group products issued by member companies. The guaranteed levels of protection by product benefit are as follows:
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Assuris, a non-profit organization established in 1990, provides protection to Canadian policyholders in the event of an insurance company’s insolvency.
In the past, through Assuris, policyholders could receive:
As of May 25, 2023, Assuris has made some changes. The new coverage amounts are now 90% in the following categories, or whichever stated amount is higher:
Let’s look at an example.
If you are a health insurance policyholder in a life insurance company that is protected by Assuris and the company goes bankrupt, up to $250,000 of coverage is protected. Should you have a life insurance policy with a $500,000 face value, $450,000 is protected.
How long have you been in the life and health insurance industry and what were you doing before joining Assuris?
I joined Assuris as the President and CEO in 2021. Prior to that I worked at Sun Life for over 20 years holding a variety of leadership positions. I am passionate about the value of sound financial planning and the critical role of life and health insurers in helping protect the life, health and wealth of Canadians. At Assuris, we support financial advisors to provide peace of mind and help their clients in making the best decisions for themselves and for their families. Assuris has developed a toolbox and resources to help financial advisors talk about Assuris’ protection to their clients. Visit: Assuris.ca
How does Assuris help protect Canadians in the event of a life and health insurance insolvency?
Assuris is the not-for-profit organization that protects Canadian policyholders, if their life and health insurance company fails. Assuris’ protection applies to all individual and group products issued by member companies. The guaranteed levels of protection by product benefit are as follows:
It is not usual for an insurance company to go bankrupt. While it has happened from time to time, most companies are very solvent. However, with high interest rates impacting solvent insurers, it does not hurt to take some precautions.
To mitigate the risk, one strategy is to divide policies across multiple insurance companies. Rather than having one $400,000 policy, it may be wise to opt for two separate $200,000 policies. However, it is important to note that policies must be with different insurance companies for Assuris to consider them as separate. Keep in mind, though, that this strategy may result in paying multiple policy fees. Additionally, many insurance companies offer volume discounts, meaning the higher the coverage amount, the lower the cost per thousand.
The best way to protect yourself is to be informed. Our brokers are happy to discuss insurance strategies with you, and to let you know how (and which) investments are protected by Assuris.
Contact us today for a no-obligation discussion by completing a quoting form on this page. We look forward to helping you.
