Stewart McKelvey

Life and Disability Insurance in Atlantic Canada By Stephen Hutchison and Vanessa Paton LIFE INSURANCE DEFINED At its most basic, life insurance is a contract between a policy-holder and an insurance com- pany whereby the insurer agrees to pay money upon death. There are several different types of life insur- ance available, including term insurance, which re- mains in place until a specifi ed age, and whole life insurance, which stays in place for the duration of the insured's life. Also available is creditor's group life insurance, which is designed to provide protection against having to repay the balance of a debt (such as a mortgage or car loan) in the event of death. DISABILITY INSURANCE DEFINED Disability insurance is a type of coverage whereby the insurer agrees to pay money or other benefi ts in the event that the insured individ- ual becomes disabled as a result of bodily injury or disease. employees. Group disability insurance is often available to Self-employed individuals may wish to consider individual plans. Individual plans are easily tailored to one's specifi c needs and can give fl exible and comprehensive coverage. Creditor's group disability insurance is some- times offered in conjunction with mortgages, car loans, lines of credit and other debts. These types of policies can ensure that one's debt payments are covered in the event of disability. BUSINESS USES FOR LIFE AND DISABILITY INSURANCE There are a variety of ways that life insurance can be used by self-employed persons to protect their various interests. In addition to the provision of life insurance for employees and key persons in the business, this could include using life insurance as collateral for busi- ness loans and for funding buy- sell agreements so that surviving part- ners can purchase the deceased's share of the business from his or her heirs. Self-employed per- sons can have unique needs. Individual dis- ability insurance plans can be tailored to cover such costs as overhead, pay- ing deferred income taxes and bank loans. APPLICATIONS AND THE DUTY TO DISCLOSE It is crucial to provide accurate information when applying for any type of insurance – other- wise, coverage could be invalidated. Life insur- ance is no exception to this general rule. There is a duty upon a potential insured to disclose any facts which are material to the application. This duty exists independently of any questions asked by the insurer. If the insured conceals a material circum- stance from the insurer, whether he or she knows the circumstance to be material or not, the policy is avoided. This duty is codifi ed in the legislation of each Atlantic province. Simply answering the questions posed by the insurer may not guarantee compliance with the duty to disclose. (See Feder- ated Life Insurance Company of Canada v. Fleet and Bellefontaine, 2009 NSCA 76) It should be noted, however, that each Atlantic province also has legislation stipulating that after a period of two years, a life insurance policy is DOING BUSINESS IN ATLANTIC CANADA SPRING 2012 7

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