The average Canadian is expected to live to be 81.67 years old.
Despite this assuring number, everyone will eventually die at some point.
Many people with children or other close family members they want to look after will take out a life insurance policy. These policies can help your loved ones stay afloat financially even after you pass away.
But once you or the benefit holder passes away, how does the family collect the policy?
In this article, we'll go over the ways in which your loved ones can collect your death benefits or your pension.
You don't have to have a life insurance plan for your loved ones to collect on death benefits. If you've paid into a pension and meet certain criteria, your loved ones may be able to collect a one-time lump sum payment.
In order to qualify, you must have paid into the Canada Pension Plan (CPP) for either 10 years, or one-third of the years that you were eligible for the CPP plan. This cannot be less than two years.
If you've lived abroad, you may be able to satisfy the requirement with your salary from that country.
The beneficiary of your estate will receive the lump sum, which they must apply for within 60 days of your death. The maximum payout is $2500, with most people receiving about $2300.
If you have no estate or executor, the money will go to the funeral home if there are any costs left over from your service and burial. It will then go to your common-law spouse or spouse, followed by the next-of-kin.
If you have life insurance, your loved ones can claim the money the insurance company owes them through a few steps.
First, they will need a certified copy of your death certificate. This is to prove that they aren't faking your death in order to receive an insurance payout. Unfortunately, people do wild things for money, so they need to be sure your death is real.
They will then need a copy of the insurance policy. This is so that the insurance company is aware of the original policy they sold you.
Then, they will need to fill out a claims form. This can typically be done online, though some insurance companies will request that they do this the old-fashioned way.
Your insurance company may also request further evidence about your death. This can include a newspaper obituary or other further evidence. This is because many insurance policies will not pay out in certain causes of death. Therefore, they want to ensure your death does not fall into this category.
After the claim has been received, the insurance company will mail or email a claims packet to your loved one. This will involve all of the paperwork that they need to do in order to support the claim that you have passed away.
Once all of this is gathered, they will receive the claim within about 14 business days. Sometimes this can be sooner or take a little longer depending on the insurance company.
Your insurance company will likely tell you upfront the circumstances of deaths that are not covered in your policy. These are to prevent them from paying out too many claims. This is also to prevent people from murdering parents or spouses in order to receive a lump sum insurance payout. Unfortunately, this happens, so they need to be sure they're not party to it.
Typically, if you die within two years of buying the policy, or what is known as the Contestability Period, your insurance company will further investigate the cause of your death.
Additionally, if you die of homicide, your loved ones may receive the death benefits, but the insurance company may need to investigate further before cutting a check. Again, this is to ensure that no foul play was involved that lead to the circumstances of your death.
Some insurance companies will flat out deny any claim where the insured individual died of suicide. Others will allow it, but only if the suicide occurred after the Contestability Period.
If you die within the Contestability Period doing a life-risking hobby like, say climbing Mount Everest, your beneficiaries may also be denied. This is especially the case if you did not disclose that you are interested in partaking in risky hobbies like mountain climbing.
Your beneficiaries may not receive any money if you passed away doing something illegal. For instance, if you died while robbing a bank, and were killed by an armed civilian or police officer, your loved ones would not receive a payout. Likewise, if you die driving whilst drunk or high, your beneficiaries will not receive any money.
Therefore, once you take out an insurance benefit, it is important that you continue to live as responsibly as possible. Doing things like driving while under the influence can mess with your family's future and security.
Death benefits exist in order to protect your family from the inevitable. While we will all die, a life insurance policy means that your family will always be taken care of, even when you're no longer around.
Taking out a life insurance policy is one of the smartest things you can do, and is very much encouraged for those who are married or have children.
For more information on insurance in Canada, visit our website.