Few would be surprised to hear that Canada's aging population has created challenges for many professionals, particularly those who do estate planning.
Recent changes to Ontario's Insurance Act respond to some of those challenges and will be of interest to insurers, financial planners and insurance agents in Ontario. On July 1, 2016, amendments to sections 221 and 322 of the Insurance Act took effect. These amendments provide that where it appears to an insurer that a representative of a beneficiary who is a minor may accept payments on behalf of the beneficiary under the law of the jurisdiction in which the beneficiary resides, the insurer may make payment to the representative and the payment discharges the insurer to the extent of the amount paid. Previously, these sections only applied to representatives of beneficiaries under legal incapacity. You can read a more in-depth review of the amendments here.
Sections 221 and 322 of the Insurance Act are important for two reasons:
- In today's globalized world, it is not uncommon for people who purchase insurance in Ontario to have beneficiaries elsewhere: e.g. an Ontario grandfather has designated his mentally incapable son in British Columbia and a minor granddaughter in New York as the beneficiaries of his life insurance. Under the amendments to the Insurance Act if the son has a guardian under British Columbia law, and the grand-daughter a custodian under New York State law, each of whom has the authority to accept payments, the insurer may pay the funds to the guardians and be discharged to the extent of the amount paid.
- The Insurance Act provides clear direction on what is required by an insurer to obtain a discharge where benefits are to be paid out under a life and accident and sickness insurance policy. In contrast, the Succession Law Reform Act ("SLRA"), which governs the designation of beneficiaries to, among other things, RRSPs and RRIFs, does not offer the same guidance as the Insurance Act does for how payment to a beneficiary of a pension or RRSP is to be made upon the death of the plan participant. One can only hope that the SLRA will eventually be amended along the lines of the Insurance Act.
The Insurance Act is an excellent example of how well-crafted legislation can help facilitate payments to beneficiaries upon the death of the policy owner.