Early Death Benefit Provisions of Canadian Life Insurers

Most Canadian Life Insurance companies provide policyholders diagnosed with a terminal illness with some form of early access to a portion of the death benefit. However, the specific terminology, eligibility requirements, and benefit amounts vary considerably. Living benefit, Early Death Benefit, Terminal Illness Benefit, and Accelerated Death Benefit are commonly used terms. Life insurers recognize the immediate financial needs that can arise when a policyholder is diagnosed with a terminal illness. These “living benefit” features within life insurance policies allow the insured to access a portion of their death benefit while they are still alive.

Potential uses for the early death benefit:

The death benefit can augment available income and help pay for the terminally ill person’s special medical needs. It can help cover short-term cash needs or supplement the survivor’s pension income. It can also replenish savings used for the deceased’s medical expenses. Funds can accelerate inheritances to children and may help with educational costs. If there is a buy-sell agreement, business owners can use the funds to buy the surviving spouse’s shares. Naming a beneficiary for the early death benefit may help to avoid probate while maintaining privacy. ¹

Note: It is crucial to review the specific policy contract to understand the rules and conditions associated with the early death benefit, as they can vary. The feature may not be added after the policy is issued, and generally, it requires all insured individuals to be insurable when it is added.

^{1 Advisor.ca}