7 – INSURANCE RECOMMENDATION, CONTRACT AND SERVICE NEEDS

Table of Contents

7.1 Insurance recommendation

An effective accident and sickness (A&S) insurance recommendation begins with a complete understanding of the client’s:

  • 👤 Personal situation
  • 💰 Financial position
  • 🛡️ Existing insurance coverage
  • 🎯 Goals and priorities

💡 The advisor’s role is to identify protection gaps and recommend practical, affordable solutions that best match the client’s needs.

7.1.1 Basis for the recommendation

📋 The foundation of every recommendation is the client profile.

💡 Advisors compare:

  • Existing resources
    against
  • Current and future risks

Existing resources may include:

  • 💵 Income
  • 📈 Investments and assets
  • 🏢 Employee benefits
  • 🛡️ Existing insurance policies

Identifying coverage gaps

⚠️ After reviewing the client’s profile, the advisor must determine whether there are:

  • Insufficient benefits
  • Missing protection
  • Waiting period concerns
  • Overlapping coverage
  • Unnecessary costs

Modifying existing coverage first

💡 Before recommending entirely new policies, advisors should consider whether current policies can be improved by:

  • Adding riders
  • Increasing benefits
  • Adjusting waiting periods
  • Changing benefit periods

📌 New products should complement existing protection and complete the overall insurance strategy.

7.1.2 Recommendations to manage premiums

💰 A&S insurance premiums can sometimes be expensive because claims for illness and disability occur more frequently than many other insurance claims.

⚠️ Cost concerns may prevent clients from purchasing adequate protection.

💡 Advisors may need to adjust recommendations to balance:

  • Affordability
  • Coverage quality
  • Client needs

7.1.2.1 Extending waiting period, shortening benefit period, reduced benefits and nature of the contract

Several policy features can be adjusted to reduce premiums.

📋 Common adjustments include:

  • Extending waiting periods
  • Shortening benefit periods
  • Reducing benefit amounts
  • Changing contract type

Waiting period

⏳ The waiting period is the time between:

  • Start of disability or illness
    and
  • Beginning of benefit payments

💡 Longer waiting periods usually reduce premiums significantly.

Example:

  • Extending a disability policy waiting period from 60 days to 90 days may lower costs substantially.

⚠️ However, the client must have enough savings or resources to survive financially during the longer waiting period.

Benefit period

📅 The benefit period is the maximum length of time benefits are payable.

💡 Shorter benefit periods reduce insurer risk and lower premiums.

⚠️ Advisors must ensure the shortened period still adequately protects the client against prolonged disability or care needs.

Benefit amounts

💵 Reducing the amount of monthly or lump-sum benefits also lowers premiums.

⚠️ This should generally be considered a last resort because it may reduce protection below the client’s actual needs.

💡 Advisors may instead calculate needs based on actual expenses rather than standard income replacement percentages.

Nature of the contract

📄 The type of contract selected also affects premium cost.

Non-cancellable contracts

🛡️ Non-cancellable contracts provide strong guarantees:

  • Premiums cannot increase
  • Coverage cannot be cancelled by the insurer (if premiums are paid)

⚠️ These contracts usually have higher premiums.

Guaranteed renewable contracts

🔄 Guaranteed renewable contracts are often less expensive.

💡 Coverage continues as long as premiums are paid, but insurers may increase premiums for an entire class of policyholders.

📌 If affordability becomes a concern, switching from a non-cancellable contract to a guaranteed renewable contract may help maintain coverage.

7.1.3 Head office modifications for non-standard risks

🩺 Insurance companies evaluate applicants through underwriting.

📋 Applicants are generally classified as:

  • ✅ Standard risk
  • ⚠️ Non-standard risk
  • ❌ Uninsurable risk (decline)

Handling non-standard risks

💡 Insurers may still offer coverage to higher-risk applicants by modifying the policy.

📋 Common modifications include:

  • Exclusions
  • Limitations
  • Premium ratings
  • Deductibles

7.1.3.1 Suggesting exclusions, limitations and ratings

Exclusions

🚫 Exclusions remove coverage for specific:

  • Activities
  • Conditions
  • Injuries
  • Illnesses

Example:

  • Excluding injuries related to hazardous sports.

Limitations

📉 Limitations may restrict:

  • Benefit amounts
  • Benefit periods
  • Eligible conditions

Ratings

💰 A rating means charging a higher premium due to increased risk.

💡 Higher premiums help insurers compensate for the greater likelihood of future claims.

7.1.3.2 Suggesting deductibles

💳 A deductible is the amount the insured must pay before benefits begin.

💡 Deductibles help reduce insurer exposure and lower premiums.

Common use of deductibles

📋 Deductibles are most common in:

  • Extended health insurance
  • Dental plans

⚠️ Deductibles often reset every coverage year.

7.1.4 Providing quotes

📄 Advisors may present:

  • One recommended solution
    or
  • Multiple suitable options

Presenting one solution

💡 The advisor researches the market and presents the “best” recommendation.

📌 The client decides whether to accept the recommendation.

Presenting two suitable options

⚖️ Presenting two options may help involve the client in the decision-making process.

💡 Comparisons should remain simple and focus on key differences.

Important comparison factors

📋 Advisors should compare:

  • Definitions of disability or illness
  • Waiting periods
  • Benefit periods
  • Premium costs
  • Inflation protection
  • Policy guarantees

⚠️ Too many options may overwhelm the client and create “analysis paralysis.”

7.1.5 Documenting the recommendation

📝 Proper documentation protects both:

  • The client
  • The advisor

📋 Advisors should document:

  • Recommendations made
  • Reasons for recommendations
  • Product comparisons
  • Client discussions
  • Client decisions

7.1.5.1 Rationale for recommendation

💡 Advisors should clearly explain why a particular recommendation was made.

📋 Documentation may include:

  • Research performed
  • Product comparisons
  • Risk analysis
  • Suitability considerations

⚠️ Keeping detailed records is extremely important for future reference and compliance.

7.1.5.2 Client expectations

🎯 Managing client expectations is a critical part of the recommendation process.

📋 Clients may have expectations regarding:

  • Coverage amounts
  • Premium cost
  • Eligibility
  • Underwriting outcomes
  • Policy features

Importance of documenting expectations

📝 Advisors should record:

  • Client expectations discussed during fact-finding
  • Whether recommendations met those expectations
  • Reasons for any differences

⚠️ If the issued policy differs significantly from expectations, the advisor may ask the client to sign a waiver acknowledging the differences.

7.1.6 Presenting complementary policies

🛡️ One insurance policy may not fully address all risks.

💡 Advisors may recommend combining policies such as:

  • Disability insurance
  • Critical illness insurance
  • Long-term care insurance
  • Extended health coverage

Importance of discussing future needs

📋 Even if the client cannot purchase all recommended coverage immediately, advisors should explain:

  • Remaining protection gaps
  • Future coverage needs
  • Risks of incomplete protection

7.1.7 Revising the recommendation

🔄 Insurance recommendations should remain flexible.

⚠️ If the original recommendation is unsuitable because of:

  • Cost
  • Features
  • Client concerns
  • Underwriting changes

the advisor should revise the recommendation appropriately.

Advisor’s responsibility

💡 Advisors have both:

  • Ethical responsibilities
  • Legal responsibilities

to provide solutions that best meet the client’s needs under the circumstances.

Possible revisions

📋 Adjustments may include:

  • Different products
  • Modified benefits
  • Alternative waiting periods
  • Different insurers
  • Reduced premiums

📌 Key Takeaway

An effective insurance recommendation balances:

  • 🛡️ Adequate protection
  • 💰 Affordability
  • 📋 Suitability
  • 🎯 Client goals and expectations

💡 Advisors must carefully analyze risks, compare products, manage expectations, and document recommendations thoroughly to create a strong and appropriate insurance solution.

7.2 Application for insurance

📄 The insurance application is one of the most important parts of the underwriting process.

💡 The information collected in the application helps the insurer determine:

  • Eligibility for coverage
  • Premium rates
  • Policy terms
  • Exclusions or limitations
  • Risk classification

⚠️ Incomplete or inaccurate information may lead to:

  • Delayed underwriting
  • Coverage denial
  • Incorrect policy issuance
  • Future claim disputes

7.2.1 Attention to detail required

🛡️ The agent must ensure the application is:

  • Complete
  • Accurate
  • Clear
  • Easy for underwriters to interpret

📋 The agent’s role includes:

  • Asking all required questions
  • Explaining unclear questions
  • Recording answers accurately
  • Clarifying incomplete responses

Importance of accurate information

⚠️ Incorrect or missing information can create serious problems.

Possible consequences include:

  • Unnecessary coverage declines
  • Improper policy approval
  • Future claim denial due to misrepresentation
  • Legal disputes

💡 Underwriters rely heavily on the accuracy of the application when assessing risk.

Important application details

📋 Particular attention should be given to:

  • Product type and coverage details
  • Policy owner, life insured, and beneficiary
  • Premium estimates
  • Optional riders

Product type and coverage details

🛡️ The application must clearly identify:

  • Type of insurance
  • Coverage amount
  • Benefit structure

📋 Examples include:

  • Disability insurance
  • Critical illness insurance
  • Long-term care insurance

Owner, life insured and beneficiary

👤 Different parties may be involved in a policy.

📋 Important roles include:

  • Owner of the contract
  • Life insured
  • Beneficiary

💡 In many personal policies, these may all be the same person.

⚠️ In business insurance situations, they are often different parties.

Premium

💰 Premium quotes are generally based on:

  • Standard underwriting assumptions
  • Age
  • Gender
  • Smoking status
  • Coverage type

⚠️ Final premiums may change after underwriting if:

  • Ratings are applied
  • Exclusions are added
  • Additional risks are identified

Riders

📄 Riders are optional policy benefits added to the base contract.

📋 Common riders include:

  • Waiver of premium
  • Partial disability benefits
  • Future purchase options
  • Cost-of-living adjustments

💡 Riders usually require additional underwriting and premiums.

7.2.1.1 Naming of beneficiary

👤 In most personally owned A&S insurance policies:

  • Owner
  • Life insured
  • Beneficiary

are usually the same person.

Business insurance situations

🏢 In business-related policies, the beneficiary may differ for:

  • Practical reasons
  • Tax planning purposes

⚠️ Correct beneficiary designation is extremely important to avoid future disputes or tax complications.

7.2.2 Agent’s contribution to application

👨‍💼 The agent does more than simply record answers.

💡 The agent acts as the insurer’s first point of contact with the applicant and may provide valuable underwriting insights.

Agent involvement includes:

📋 Key contributions include:

  • Agent comments
  • Medical questionnaires
  • Inspection reports
  • Hazardous activity questionnaires

7.2.2.1 Agent’s comments

📝 Most applications include a section for additional agent comments.

💡 This section allows the agent to explain:

  • Special circumstances
  • Clarifications
  • Important observations
  • Additional underwriting concerns

Examples of useful agent comments

📋 Examples may include:

  • Pending job change
  • Expected salary increase
  • Lifestyle observations
  • Future business plans

⚠️ The insurer is generally considered legally aware of information known to the agent.

💡 Accurate comments help protect both the insurer and the client.

7.2.2.2 Medical questions

🩺 A major part of the application process involves completing non-medical questionnaires.

📋 Applicants may be asked about:

  • Personal medical history
  • Family medical history
  • Medications
  • Previous illnesses
  • Surgeries
  • Smoking or alcohol use

Agent’s role in medical questionnaires

💡 The agent must:

  • Clarify questions
  • Encourage complete disclosure
  • Obtain additional details where needed
  • Record responses accurately

⚠️ Incomplete medical information may affect future claims.

7.2.2.3 Inspection report

🔍 Insurers may request an inspection report from a third-party investigation company.

📋 These reports may examine:

  • Lifestyle habits
  • Occupation
  • Financial situation
  • Recreational activities
  • Drinking habits
  • Smoking habits

💡 Information may be gathered from:

  • Employers
  • Neighbours
  • Public records
  • Other sources

⚠️ The applicant authorizes these investigations when signing the application.

7.2.2.4 Hazardous sports and occupations questionnaires

⚠️ Applicants involved in dangerous activities may need additional questionnaires.

📋 Examples include:

  • Skydiving
  • Private aviation
  • Rock climbing
  • Firefighting

Purpose of additional questionnaires

📄 Insurers may assess:

  • Frequency of participation
  • Future participation plans
  • Level of danger involved

💡 Insurers may then:

  • Apply exclusions
  • Increase premiums
  • Limit benefits

7.2.3 Necessary documents and procedures

📋 Insurance applications often require supporting documents and medical evidence.

💡 Requirements vary depending on:

  • Type of insurance
  • Amount of coverage
  • Applicant’s age
  • Medical history
  • Business involvement

7.2.3.1 Medical exam

🩺 Some applicants may need to complete:

  • Medical examinations
  • Blood tests
  • Urine tests
  • Specialized medical reports

When medical exams are commonly required

📋 Exams are often required when:

  • The applicant is older
  • Coverage amounts are high
  • Medical history raises concerns

💡 Underwriters may request additional information if risk factors are identified.

7.2.3.2 Confirmation of income

💰 Proof of income is especially important for disability insurance applications.

⚠️ Disability benefits are usually limited to a percentage of pre-disability income.

📋 Common limits:

  • 60–70% of income
  • Some policies up to 85%

Common income verification documents

📄 Applicants may be asked to provide:

  • T4 slips
  • T5 slips
  • T1 General tax returns
  • CRA Notices of Assessment

💡 Insurers may request several years of records to confirm income stability.

Business insurance applications

🏢 Business-related applications may require:

  • Financial statements
  • Income statements
  • Balance sheets

📋 Often covering:

  • The previous 3 years

7.2.3.3 Replacing existing coverage

🔄 Replacing an existing policy requires careful comparison and disclosure.

⚠️ Clients must fully understand the differences between:

  • Old coverage
  • New coverage

Important comparison factors

📋 Advisors should compare:

  • Premiums
  • Covered conditions
  • Exclusions
  • Riders
  • Expiry dates
  • Waiting periods
  • Benefit periods
  • Definitions of covered conditions

Risks of replacing coverage

⚠️ Replacing an existing policy may create:

  • Coverage gaps
  • Loss of favorable terms
  • New exclusions
  • Higher premiums

💡 Existing policies should generally remain active until the new policy is fully approved and issued.

📌 Key Takeaway

The insurance application process is critical to successful underwriting and future claim protection.

💡 Advisors must ensure:

  • Accurate information collection
  • Complete disclosure
  • Proper documentation
  • Clear client understanding
  • Careful replacement analysis

Proper attention to detail helps protect both the client and the insurer throughout the life of the policy.

7.3 Underwriting by insurer

🛡️ Underwriting is the process insurers use to evaluate the risk of providing accident and sickness (A&S) insurance coverage.

💡 The insurer’s goal is to determine:

  • Whether coverage should be issued
  • Appropriate premium levels
  • Possible exclusions or limitations
  • The level of risk presented by the applicant

Main areas of underwriting

📋 Insurers generally evaluate:

  • 💰 Financial risk
  • 🩺 Medical risk
  • ⚠️ Lifestyle and occupational risk

7.3.1 Factors affecting premiums

💵 Insurance premiums are influenced by several business and risk-related factors.

📋 Major factors include:

  • Administrative costs and expenses
  • Investment returns
  • Lapse rates
  • Morbidity rates
  • Ratings and exclusions

Administrative costs and expenses

🏢 Insurance companies incur ongoing operating expenses such as:

  • Staff salaries
  • Marketing costs
  • Policy administration
  • Record keeping
  • Claims processing

⚠️ Higher operating expenses generally lead to higher premiums.

Investment returns

📈 Insurers invest premium income to generate returns.

💡 Strong investment performance can help reduce premiums because insurers rely less on premium income alone to pay future claims.

Lapse rates

📄 A lapse occurs when a policy terminates due to:

  • Non-payment of premiums
  • Policy cancellation

💡 Higher lapse rates may reduce future claims exposure, which can help lower premiums.

⚠️ However, excessive lapse rates may also affect insurer profitability and long-term planning.

Morbidity rates

🩺 Morbidity refers to the rate of illness, injury, or disability within a population.

⚠️ Higher morbidity means:

  • More claims
  • Greater insurer risk
  • Higher premiums

Ratings and exclusions

📋 Insurers may adjust coverage for higher-risk applicants using:

  • Premium ratings
  • Exclusions

Ratings

💰 A rating means charging higher premiums than standard rates because of increased risk.

Exclusions

🚫 Exclusions limit or deny coverage for specific:

  • Medical conditions
  • Activities
  • Causes of loss

💡 Ratings and exclusions help insurers offer coverage to non-standard applicants while controlling risk.

7.3.1.1 Morbidity rates

📊 Morbidity tables help insurers estimate the likelihood of future disability or illness claims.

💡 These tables predict:

  • How many people in a certain age and gender group are likely to become disabled or ill

Purpose of morbidity tables

📋 Morbidity data helps insurers estimate:

  • Expected claim frequency
  • Expected duration of claims
  • Future pricing needs

⚠️ Morbidity tables do not predict:

  • Which specific individuals will become disabled
  • Exact claim amounts

💡 Actual claim experience may differ from projections, affecting future premiums and insurer profitability.

Claim exposure

💰 The insurer’s financial exposure also depends on:

  • Amount of coverage issued
  • Benefit duration
  • Policy design

⚠️ Large benefit amounts increase the insurer’s potential claim costs.

7.3.1.2 Ratings and exclusions

⚠️ Not all applicants fit within standard underwriting guidelines.

💡 Instead of declining coverage entirely, insurers often manage risk through:

  • Higher premiums
  • Exclusions
  • Coverage limitations

Purpose of ratings and exclusions

📋 These tools help insurers:

  • Control excessive claims risk
  • Offer coverage to higher-risk applicants
  • Protect overall insurer profitability

7.3.2 Financial underwriting

💰 Financial underwriting evaluates the applicant’s:

  • Income
  • Cash flow
  • Financial stability
  • Ability to maintain premiums

Disability insurance benefit limits

⚠️ Disability income replacement insurance is usually limited to a percentage of pre-disability income.

📋 Typical limits:

  • 60–70% of income
  • Some policies up to 85%

💡 Benefits are coordinated with:

  • Group insurance
  • Government benefits
  • Other disability policies

Purpose of limiting benefits

📌 Insurers do not want the insured to earn more while disabled than while working.

⚠️ Excessive coverage could encourage:

  • Fraudulent claims
  • Claim exaggeration
  • Prolonged disability claims (malingering)

Evaluating affordability

💡 Insurers also assess whether the applicant can realistically afford the premiums long-term.

📋 Important factors include:

  • Income stability
  • Monthly expenses
  • Existing debt obligations
  • Cash flow patterns

Why affordability matters

⚠️ Policies are expensive for insurers to issue and maintain.

💡 Insurers prefer applicants likely to:

  • Keep the policy active long enough
  • Maintain regular premium payments

Red flags during financial underwriting

🚩 Potential concerns include:

  • Applying for unusually high coverage
  • Requesting coverage beyond financial capacity
  • Unstable income patterns

⚠️ These situations may suggest elevated claim risk.

7.3.3 Medical underwriting

🩺 Medical underwriting evaluates the applicant’s health status and future claims risk.

📋 Insurers may use:

  • Medical exams
  • Physician reports
  • Laboratory tests
  • MIB reports

Purpose of medical underwriting

💡 Insurers assess:

  • Current health
  • Past medical conditions
  • Family health history
  • Future risk of illness or disability

7.3.3.1 Attending Physician’s Statement (APS)

📄 An Attending Physician’s Statement (APS) is a report requested from the applicant’s doctor.

When an APS may be required

📋 Common reasons include:

  • Higher insurance amounts
  • Older applicants
  • Concerning medical history
  • Family medical history concerns

Additional medical requirements

🩺 Insurers may also request:

  • Blood tests
  • Urine tests
  • Electrocardiograms (ECGs)
  • Paramedical exams

💡 The insurer pays the cost of these requirements.

7.3.3.2 Medical Information Bureau (MIB)

🏢 The Medical Information Bureau (MIB) is an organization used by life and health insurers to share underwriting-related information.

Purpose of the MIB

💡 The MIB helps insurers identify:

  • Undisclosed medical conditions
  • Existing insurance coverage
  • Previous coverage declines
  • Possible over-insurance

Information shared with the MIB

📋 Insurers may report coded information related to:

  • Health concerns
  • Insurance applications
  • Existing coverage
  • Underwriting decisions

⚠️ The information is general in nature and not detailed enough to independently underwrite a policy.

Protection against over-insurance

🛡️ The MIB helps insurers prevent applicants from:

  • Applying for excessive coverage with multiple insurers
  • Hiding previous coverage declines
  • Failing to disclose health issues

Applicant authorization

✍️ Applicants must sign authorization forms allowing insurers to:

  • Request MIB information
  • Share underwriting data with the MIB

⚠️ This authorization is typically part of the insurance application process.

📌 Key Takeaway

Underwriting helps insurers assess and manage the risks associated with accident and sickness insurance.

💡 Key underwriting areas include:

  • 💰 Financial underwriting
  • 🩺 Medical underwriting
  • ⚠️ Risk classification

Insurers use tools such as:

  • Morbidity data
  • Medical reports
  • Financial analysis
  • MIB information

to determine appropriate premiums, policy terms, and coverage decisions.

7.4 Insurance contract

📄 Once underwriting is completed and the insurer approves the application, the insurance contract is issued and delivered to the policyholder.

💡 Proper contract delivery and explanation are extremely important because they help ensure:

  • The policy is legally in force
  • The client understands the coverage
  • Expectations are clear
  • Future disputes are minimized

7.4.1 Need for prompt delivery

⏳ Accident and sickness (A&S) insurance underwriting can take:

  • Several weeks
  • Sometimes several months

📋 Delays may occur because insurers may need:

  • Medical exams
  • APS reports
  • Additional underwriting review
  • Financial verification

Importance of quick delivery

⚠️ Once the policy is approved, the agent should deliver it as quickly as possible.

💡 Prompt delivery is important because:

  • The client receives protection sooner
  • The “free look” period begins
  • The risk of changes in health or finances is reduced

10-day free look period

📄 New policyholders generally receive a:

  • 10-day free look period

💡 During this period, the policyholder may:

  • Cancel the policy
  • Return the contract
  • Receive a refund of premiums paid

⚠️ The free look period begins only after the policy is physically delivered to the client.

Why delays are risky

⚠️ Delays increase the possibility that:

  • Health may worsen
  • Income may decline
  • Financial circumstances may change

📌 These changes could affect whether the policy should remain in force.

Delivery interview

👨‍💼 During delivery, the agent should review:

  • The purpose of the coverage
  • Key contract features
  • Client protection needs

💡 This reinforces the value of the recommendation and helps ensure the client keeps the policy.

7.4.2 Need for agent awareness of change between the signature of the application and the delivery of the contract

⚖️ Provincial insurance laws establish conditions that must be met before the contract becomes legally effective.

📋 Common requirements include:

  • Policy delivery to the owner
  • Payment of the initial premium
  • No material change in health or financial status

Importance of confirming no material change

⚠️ The agent must confirm whether the applicant’s:

  • Health
  • Income
  • Financial situation

has changed since the application date.

Examples of important changes

📋 Possible changes include:

  • New illness or injury
  • Reduced income
  • Job loss
  • Financial deterioration

If negative changes occur

🚨 If the applicant’s situation worsens:

  • The policy should not be delivered immediately
  • The insurer must reassess the risk

📄 The agent should:

  • Record the details
  • Return the policy to the insurer
  • Allow re-underwriting if necessary

Income increases

📈 If the client’s income increases after application:

💡 This generally increases the client’s risk exposure rather than the insurer’s.

📌 In many cases, the advisor does not need to report this positive change to the insurer.

7.4.2.1 Dealing with rated cases

⚠️ Some policies are issued with:

  • Higher premiums (ratings)
  • Exclusions
  • Reduced benefits

💡 Clients may react negatively if the issued policy differs from the original application.

Common client reactions

📋 Possible reactions include:

  • 😟 Policy feels too expensive
  • 😕 Disappointment about exclusions
  • 😲 Surprise about underwriting decisions
  • ❌ Rejection of the policy

How agents can help

👨‍💼 Advisors should carefully explain:

  • Why the rating or exclusion was applied
  • Whether it may be temporary
  • Why the coverage is still valuable

Preparing the client early

💡 If the advisor suspects underwriting concerns during the application process, it is helpful to prepare the client in advance for the possibility of:

  • Ratings
  • Exclusions
  • Modified coverage

Reinforcing the importance of coverage

🛡️ Even if modified, the need for protection often remains extremely important.

💡 Additional health risks may actually increase the need for insurance coverage.

7.4.3 Providing contract disclosure

📄 Clients often do not fully understand insurance contracts.

💡 The advisor must explain important policy provisions clearly at delivery.

Important contract areas to explain

📋 Key items include:

  • Benefit limits
  • Riders
  • Definitions of covered conditions
  • Exclusions

Importance of definitions

⚠️ Definitions are especially important in:

  • Critical illness insurance
  • Long-term care insurance
  • Disability insurance

📌 Coverage applies only if the client meets the exact contract definition.

Importance of exclusions

🚫 Exclusions remove or limit coverage for certain:

  • Conditions
  • Activities
  • Situations

⚠️ Exclusions are often added during underwriting after the application is submitted.

💡 Clients must clearly understand what is not covered.

Managing expectations

📋 Proper disclosure helps:

  • Reduce misunderstandings
  • Minimize future claim disputes
  • Ensure realistic client expectations

7.4.3.1 Factors that limit coverage (statutory provisions)

⚠️ Insurance benefits are not always unlimited.

📋 Several rules may limit benefits when multiple policies exist.

Coordination of benefits

💡 Clients generally cannot collect duplicate reimbursement for the same loss.

📌 One policy may supplement another, but not duplicate benefits.

Priority of payers

📄 Policies often specify:

  • Which insurer pays first
  • Which insurer pays second

when multiple coverages apply.

Maximum disability benefit limits

⚠️ Disability insurance benefits from all sources combined are usually limited to:

  • Approximately 85% of pre-disability income

Critical illness insurance

💰 Critical illness benefits are generally not tied to:

  • Income
  • Actual expenses

💡 Therefore, multiple CI policies may provide multiple lump-sum benefits.

Long-term care insurance

🏥 LTC insurance generally reimburses only actual eligible expenses incurred.

⚠️ Clients cannot receive reimbursement exceeding actual expenses, even if multiple policies exist.

7.4.3.2 Tax treatment of premiums benefits

💰 Clients commonly ask:

  • “Are premiums tax-deductible?”
  • “Will benefits be taxable?”

Advisor caution regarding tax advice

⚠️ Advisors should be careful not to provide detailed tax advice unless properly qualified.

💡 Tax treatment depends on many factors, including:

  • Policy ownership
  • Premium payer
  • Type of coverage
  • Business structure

Advisor’s role

📋 Advisors should:

  • Discuss general tax considerations
  • Explain common treatment patterns
  • Refer clients to accountants or tax specialists for detailed advice

7.4.4 Policy feature opportunities

📄 Many A&S policies include features that create future opportunities to review and improve coverage.

💡 These policy events also provide opportunities for advisors to reconnect with clients.

Common review opportunities

📋 Frequent opportunities include:

  • Future Purchase Option (FPO) riders
  • Conversion options
  • Review of ratings or exclusions

Future Purchase Option (FPO) rider

📈 An FPO rider allows the insured to increase disability coverage later with:

  • Limited or no medical underwriting

⚠️ Financial underwriting is still usually required.

Benefits of FPO riders

💡 FPO riders help clients increase protection when:

  • Income rises
  • Responsibilities increase
  • Business grows

Conversion options

🔄 Some group disability plans allow conversion to an individual policy when leaving the group plan.

📋 Important rules:

  • Conversion usually must occur within 31 days
  • No medical evidence of insurability is required

💡 This protects individuals who may no longer qualify medically for new coverage.

Timing factors for ratings and exclusions

⚠️ Some ratings and exclusions may later be reviewed or removed.

📋 Common situations include:

  • Improved medical conditions
  • Discontinuation of hazardous activities
  • Occupational changes

Reviewing ratings and exclusions

👨‍💼 Advisors may help clients apply for:

  • Rating reductions
  • Removal of exclusions

💡 Reduced ratings may lower premiums and create opportunities for additional coverage.

📌 Key Takeaway

The insurance contract delivery process is a critical part of accident and sickness insurance planning.

💡 Advisors must:

  • Deliver contracts promptly
  • Confirm no material changes occurred
  • Explain ratings and exclusions clearly
  • Review important contract definitions
  • Manage client expectations
  • Identify future policy opportunities

Proper contract delivery and disclosure help ensure clients fully understand and benefit from their insurance protection.

7.5 Policy claims

📄 A claim occurs when the insured requests benefits after experiencing a covered illness, injury, disability, or healthcare expense.

💡 The claims process is one of the most important parts of accident and sickness (A&S) insurance because it is when the policy protection is actually used.

⚠️ Proper documentation and timely reporting are essential to avoid delays or denial of benefits.

7.5.1 Requirements for a claim

📋 Most insurance claims follow several basic steps.

Step 1 — Notify the insurer

📞 The insured must notify:

  • The insurance company
    or
  • The agent/advisor

about the illness, injury, diagnosis, or event triggering the claim.

Step 2 — Claim forms provided

📄 The insurer then provides the required claim forms.

💡 Forms may be:

  • Mailed directly to the insured
  • Delivered electronically
  • Provided through the advisor

Step 3 — Submit completed forms

📝 The insured must:

  • Complete the claim forms
  • Attach supporting documents
  • Submit all required information to the insurer

📋 Supporting documents may include:

  • Receipts
  • Medical reports
  • Treatment records

Step 4 — Additional investigation

🔍 The insurer may request further information such as:

  • Physician statements
  • Additional medical tests
  • Independent medical exams
  • Interviews with the insured

Step 5 — Claim adjudication

⚖️ The insurer reviews all information and then:

  • ✅ Pays the claim in full
  • ⚠️ Pays partial benefits
  • ❌ Denies the claim

Importance of prompt notification

⏳ Most insurers require claims to be reported within a specific time period.

📋 Common timelines include:

  • Claim notification within 30 days
  • Absolute maximum reporting period of 6 months

⚠️ Clients should notify the insurer as soon as possible to avoid complications.

7.5.1.1 Receipts

🧾 Many extended health and reimbursement-based claims require proof of expenses.

📋 Common examples include:

  • Dental treatments
  • Prescription drugs
  • Chiropractic care
  • Physiotherapy
  • Medical equipment

Original receipts required

📄 Insurers generally require:

  • Original receipts
  • Detailed invoices

💡 Receipts help insurers verify:

  • Amount paid
  • Type of treatment
  • Eligibility for reimbursement

Submission process

📋 Receipts are usually submitted together with:

  • Completed claim forms
  • Supporting medical documentation

7.5.1.2 Medical proof of diagnosis or treatment

🩺 All A&S insurance claims require proof that a qualifying medical event occurred.

Examples of required medical events

📋 Different policies require different triggering events.

Disability insurance

💼 Requires proof that the insured:

  • Cannot work
  • Cannot earn income
  • Due to illness or injury

Critical illness insurance

❤️ Requires diagnosis of a covered condition such as:

  • Heart attack
  • Stroke
  • Cancer

⚠️ The condition must meet the policy’s exact definition.

Long-term care insurance

🏥 Requires proof that the insured cannot independently perform a required number of:

  • Activities of Daily Living (ADLs)

📋 Examples of ADLs include:

  • Bathing
  • Dressing
  • Eating
  • Mobility

Business overhead expense insurance

🏢 Requires proof that the insured cannot contribute to the business due to disability or illness.

Extended health insurance

💊 Some treatments may require prior approval or medical assessment before reimbursement.

Examples:

  • Extensive dental procedures
  • Specialized treatments

Medical evidence requirements

📄 Insurers generally require reports from the treating physician explaining:

  • Nature of the condition
  • Severity
  • Diagnosis
  • Prognosis
  • Treatment plan

Additional insurer examinations

⚠️ The insurer may also request:

  • Additional medical tests
  • Independent medical examinations
  • Specialist opinions

💡 These examinations help verify the claim.

Ongoing proof of treatment

📋 For long-term disability claims, insurers may require continuing evidence that the claimant is:

  • Receiving treatment
  • Following medical advice
  • Attempting recovery

💡 Reports may come from:

  • Doctors
  • Physiotherapists
  • Chiropractors
  • Other healthcare practitioners

7.5.1.3 Review factors that reduce benefits

⚠️ Benefits paid may sometimes be:

  • Lower than expected
    or
  • Denied completely

💡 Advisors should help clients understand the reasons for benefit reductions or denials.

Common reasons for reduced or denied benefits

📋 Possible reasons include:

  • Contract exclusions
  • Limitations in coverage
  • Misrepresentation on the application
  • Financial underwriting adjustments

Standard exclusions

🚫 Many policies exclude claims related to:

  • Criminal activity
  • Drug or alcohol abuse
  • Self-inflicted injuries
  • Suicide-related situations

⚠️ Exclusions vary by contract and coverage type.

Material misrepresentation

📄 Benefits may be denied if the insurer discovers that the applicant failed to disclose important information during underwriting.

Examples:

  • Undisclosed medical conditions
  • Incorrect smoking status
  • Misstated income

⚠️ Material misrepresentation can lead to:

  • Claim denial
  • Policy cancellation
  • Rescission of the contract

Financial underwriting adjustments

💰 Some disability benefits depend on the insured’s actual income at the time of claim.

⚠️ If income has declined since the application:

  • Benefits may be reduced

Example:

  • Disability benefits based on lower current income rather than higher past income

Importance of advisor support

👨‍💼 Advisors play an important role by helping clients:

  • Understand policy provisions
  • Submit complete documentation
  • Navigate the claims process
  • Clarify benefit calculations

💡 Proper guidance can reduce stress and improve the overall claims experience.

📌 Key Takeaway

The claims process requires:

  • 📄 Proper documentation
  • 🩺 Medical proof
  • ⏳ Timely reporting
  • ⚠️ Careful review of policy limitations

💡 Understanding claim requirements helps clients avoid delays, improve claim outcomes, and better understand how their insurance protection works during times of illness or disability.

7.6 Client service

🤝 An insurance advisor’s responsibilities continue even after the policy is issued.

💡 Ongoing client service helps ensure that:

  • Coverage remains suitable
  • Policy changes are handled properly
  • Claims are processed efficiently
  • Client relationships remain strong

⚠️ Good service protects both the client and the advisor.

7.6.1 Agent’s service role

👨‍💼 The advisor’s first responsibility is recommending suitable insurance solutions.

📋 However, ongoing service responsibilities are also extremely important.

Main responsibilities of the advisor

📋 The advisor’s service role includes:

  • 📄 Providing claim forms and documents
  • ⏳ Being prompt and accurate
  • 🔄 Maintaining awareness of changing client needs
  • 🛡️ Reviewing suitability of recommendations
  • 📝 Documenting all services provided
  • 📞 Maintaining regular contact with clients

7.6.1.1 Providing claim forms and other relevant documents

📄 Clients may need assistance interacting with the insurer throughout the life of the policy.

📋 Common situations include:

  • Filing a claim
  • Exercising policy options
  • Changing beneficiaries
  • Updating addresses or personal information

Future Purchase Option (FPO)

📈 Clients may need forms to:

  • Increase disability coverage
  • Exercise future purchase rights

💡 Advisors can help explain and complete these forms.

Beneficiary changes

👤 Clients may request changes after:

  • Marriage
  • Divorce
  • Birth of children
  • Estate planning updates

⚠️ Prompt processing is important to avoid future disputes.

Address or personal information changes

🏠 Clients should notify insurers if they change:

  • Address
  • Name
  • Contact information

💡 Advisors often assist with submitting the required forms.

Claims assistance

🩺 Advisors may also help clients:

  • Obtain claim forms
  • Understand claim requirements
  • Submit documentation correctly

⚠️ Claim forms usually require more detailed medical information than routine service requests.

7.6.1.2 Importance of promptness and accuracy

⏳ Prompt and accurate service is critical throughout the advisor-client relationship.

💡 Delays or mistakes can negatively affect:

  • Coverage availability
  • Claims eligibility
  • Beneficiary designations
  • Client protection

Importance during the application process

📋 Delays before coverage begins may expose clients to uninsured risks.

⚠️ If a covered illness or injury occurs before the policy is in force:

  • The client may not qualify for benefits

💡 Advisors should begin applications as quickly as possible once coverage needs are identified.

Importance during policy delivery

📄 Policies should be delivered promptly to:

  • Start coverage officially
  • Begin the free look period
  • Confirm suitability of coverage
  • Reduce risk of health changes before delivery

Importance for beneficiary changes

👤 Delays in processing beneficiary changes can create major problems.

⚠️ A claim could occur before the change is completed.

💡 Advisors should process such requests immediately.

Importance of accuracy

📝 Advisors are responsible for ensuring that:

  • Forms are complete
  • Information is accurate
  • Documents are submitted correctly

⚠️ Errors or missing information may lead to:

  • Delayed claims
  • Denied benefits
  • Legal disputes
  • Financial liability for the advisor

7.6.1.3 Strategy for ongoing awareness of client situation and needs

🔄 A client’s financial and personal situation changes over time.

💡 Insurance coverage should be reviewed regularly to ensure it remains appropriate.

Importance of regular reviews

📋 Advisors should maintain regular contact with clients through:

  • Annual reviews
  • Semi-annual reviews
  • Email communication
  • Phone calls
  • Review meetings

Reasons coverage may need updating

⚠️ Changes in circumstances may create new insurance needs.

📋 Common examples include:

  • Marriage or divorce
  • Birth of children
  • Income increases
  • Business growth
  • New debts
  • Retirement planning
  • Health changes

Advisor’s responsibility

👨‍💼 Advisors should not rely only on the client to initiate contact.

💡 Part of the advisor’s role is proactively monitoring whether:

  • Existing recommendations remain suitable
  • Additional protection is needed
  • Existing coverage should be adjusted

Review meetings

📅 During review meetings, advisors should assess:

  • Current insurance protection
  • Coverage gaps
  • Financial changes
  • New risks
  • Suitability of previous recommendations

💡 Regular reviews help ensure the client remains properly protected over time.

7.6.1.4 Documenting services provided

📝 Proper documentation is extremely important throughout the client relationship.

💡 Documentation protects:

  • The client
  • The advisor
  • The insurance company

What should be documented

📋 Advisors should record:

  • Date of client contact
  • Topics discussed
  • Advice provided
  • Actions taken
  • Forms submitted
  • Resolution of requests

Examples requiring documentation

📄 Important examples include:

  • Beneficiary changes
  • Claims discussions
  • Coverage reviews
  • Complaints or concerns
  • Policy modifications

Retaining records

📂 Advisors should retain copies of:

  • Applications
  • Waivers
  • Forms
  • Emails
  • Letters
  • Policy change requests

⚠️ Detailed records may become extremely important if:

  • A claim dispute occurs
  • A legal issue arises
  • Client concerns are investigated

Importance of documentation

💡 Good documentation helps establish:

  • What advice was provided
  • What actions were taken
  • Whether service obligations were fulfilled

📌 Proper recordkeeping is a key part of professional insurance practice.

📌 Key Takeaway

Client service is an ongoing responsibility that continues throughout the life of the insurance policy.

💡 Effective advisors must:

  • 📄 Assist with forms and claims
  • ⏳ Act promptly and accurately
  • 🔄 Conduct regular policy reviews
  • 🛡️ Monitor changing client needs
  • 📝 Maintain detailed documentation

Strong client service helps ensure policies remain suitable and clients continue receiving the protection they need.

7.7 How Insurers react in a pandemic

🌍 During a pandemic, insurers continue to apply the terms and definitions written in the insurance contract.

⚠️ Coverage is determined by:

  • Policy wording
  • Definitions of disability or illness
  • Medical evidence
  • Existing exclusions and limitations

💡 Pandemic situations such as COVID-19 highlighted how important it is for clients to understand exactly what their insurance policies cover.

Quarantine or curfew

🏠 Quarantine or curfew alone is generally not enough to qualify for disability insurance benefits.

⚠️ Simply losing income because of:

  • Government lockdowns
  • Curfews
  • Mandatory quarantine

does not automatically create a valid disability claim.

Why quarantine alone is usually not covered

💡 Disability insurance normally requires:

  • A medically supported illness or injury
  • Inability to work due to medical reasons

📌 Quarantine itself is not considered a disability.

Possible government support

🏛️ Individuals affected by quarantine-related income loss may qualify for:

  • Government assistance programs
  • Emergency relief programs

provided eligibility requirements are met.

Group and individual disability insurance

🩺 If an insured contracts COVID-19 or another pandemic-related illness and develops medical complications, disability coverage may apply.

Requirement for medical evidence

📄 The attending physician must confirm that the insured:

  • Is medically unable to work
  • Suffers a qualifying disability under the policy

No complications = usually no disability benefits

⚠️ If the insured tests positive but:

  • Has mild symptoms
  • Has no disabling complications
  • Can still work

the disability claim will generally not qualify.

Government programs may still help

💡 In cases without qualifying disability, clients may still seek support through government programs.

Business overhead expense insurance

🏢 Business overhead expense (BOE) insurance helps cover business expenses if the owner becomes medically disabled.

Medical disability required

📄 To qualify for benefits, the insured must provide:

  • Medical proof from the attending physician
  • Evidence of inability to work due to illness

Preventive closures usually not covered

⚠️ BOE insurance generally will not cover business shutdowns caused only by:

  • Preventive measures
  • Lockdowns
  • Curfews
  • Fear of infection

without medically disabling illness.

Government support options

🏛️ Businesses affected by mandatory closures may instead rely on:

  • Government relief programs
  • Emergency business assistance

if eligible.

Critical illness insurance

❤️ Critical illness (CI) insurance only pays if the insured meets the policy’s exact definition of a covered condition.

⚠️ “COVID-19” itself is generally not listed as a covered illness.

Coverage depends on complications

💡 Benefits may be payable if COVID-19 complications result in a covered condition such as:

  • Stroke
  • Heart attack
  • Severe neurological impairment

📌 The condition must satisfy the contract definition.

Loss of autonomy clauses

🧠 Some CI contracts contain “loss of autonomy” provisions.

⚠️ These definitions differ from:

  • Long-term care insurance definitions
  • Activities of Daily Living (ADLs) tests

Pre-existing conditions

📋 Existing policies generally continue using the same definitions and exclusions already contained in the contract.

💡 Insurers do not normally change old contracts because of a pandemic.

Impact on future underwriting

⚠️ Insurers may become stricter when underwriting new policies after a pandemic.

📋 Additional attention may be given to:

  • Lung conditions
  • Asthma
  • Chronic fatigue
  • Overwork-related conditions

COVID-19 and underwriting

🩺 Underwriters may assess whether COVID-19:

  • Worsened existing conditions
  • Increased future disability risk
  • Prolonged recovery periods

Vaccines

💉 Insurance contracts generally focus on the resulting medical condition rather than the vaccine itself.

Example

⚠️ If an insured suffers a stroke after vaccination and becomes unable to work:

  • Coverage would normally depend on the resulting disability
  • Not on the vaccine itself

📌 The claim must still satisfy the policy’s disability definition.

Underwriting during a pandemic

📄 During pandemics, insurers often experience increased underwriting challenges.

⚠️ Common issues include:

  • Incomplete applications
  • Omitted medical information
  • Delays in underwriting review

Why underwriting slows down

🔍 Underwriters may need to perform additional checks and carefully review:

  • Medical histories
  • COVID-related conditions
  • Long-term health impacts

💡 This may increase the time required to issue policies.

Future underwriting impact

📊 If pandemic-related claims increase significantly, insurers may later:

  • Increase premiums
  • Tighten underwriting rules
  • Add exclusions or limitations

Long-term care insurance

🏥 Long-term care (LTC) insurance generally does not specifically define “pandemic” or “COVID-19.”

Coverage depends on loss of function

💡 Benefits are usually based on:

  • Inability to perform Activities of Daily Living (ADLs)
    or
  • Cognitive impairment

COVID-related complications

⚠️ If pandemic complications cause qualifying impairment, LTC benefits may become payable.

📌 The insured must still satisfy the policy’s contractual definitions.

Travel insurance — Definition

✈️ Travel insurance definitions vary significantly between insurers.

⚠️ Coverage depends heavily on:

  • Contract wording
  • Timing of travel
  • Known travel advisories
  • Existing symptoms

Medical emergencies

🏥 Emergency medical treatment abroad may still be covered, including some pandemic-related complications.

Common travel exclusions

🚫 Many travel policies may refuse coverage if:

  • The insured tested positive shortly before departure
  • Symptoms existed before departure
  • Government travel warnings were ignored

💡 Clients should verify coverage carefully before travelling.

Travel insurance — Quarantine and other costs

🏨 Pandemic-related quarantine costs can become very expensive.

📋 Possible additional expenses include:

  • Hotel quarantine costs
  • Flight changes
  • Extended accommodation
  • Delayed return transportation

Important coverage questions

⚠️ Clients should verify whether their policy covers:

  • Mandatory quarantine costs
  • Trip cancellation
  • Trip interruption
  • Additional travel expenses

Pandemic exclusions

💡 Depending on the insurer and severity of the pandemic, some cancellation expenses may not be reimbursed.

Death

⚰️ Death benefits remain subject to normal contract provisions and exclusions.

💡 Coverage depends on whether the death meets the contract definition.

Accidental death clauses

⚠️ Accidental death benefits generally apply only if death qualifies as an accident under the policy.

📌 Death caused by illness complications (such as COVID-19) may not qualify under accidental death provisions.

📌 Key Takeaway

During a pandemic, insurance coverage continues to depend primarily on:

  • 📄 Contract wording
  • 🩺 Medical evidence
  • ⚠️ Definitions and exclusions

💡 Pandemic-related situations may affect:

  • Claims eligibility
  • Underwriting practices
  • Travel insurance coverage
  • Business interruption exposure

Clients should carefully review their policies and seek clarification whenever uncertain about coverage during widespread health emergencies.

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