Disability, Life, and Anti-Money Laundering

 

Table of Contents

 

Protecting Income: Disability Insurance

1

 

Assessing Contributions

5

 

Canada’s Disability Insurance Plan

7

 

STD and LTD Benefits

10

 

Disability Impacts the Family

11

 

Historically Speaking

12

 

Disability Statutes and Programs

15

 

Council of Canadians with Disabilities

15

 

Employment Issues Facing Those with a Disability

17

 

Disability Costs to Society

18

 

Disability and Human Costs

19

 

Disability and Physical Costs

20

 

Disability and Social Interaction

21

 

Disability and the Resulting Financial Costs

21

 

Insuring Disability Through Private Insurance

23

 

Earned Income is an Asset

23

 

Defining Disability for Insurance Purposes

24

 

“Regular Occupation” Definition

24

 

“Transitional Your Occupation” Definition (TYO)

26

 

“Modified Own Occupation” Definition

27

 

“Disability in Any Occupation” Definition

27

 

Involuntary Unemployment

27

 

Can the Policy Be Canceled or non-Renewed by the Insurer?

28

 

Policy Elimination Period

29

 

Disability Benefit Period

30

 

Occupational Classification

30

 

General Description of Occupational Classes (Chart)

31

 

Benefit Limitations Based on Occupational Classes (Chart)

32

 

The uninsurable

33

 

Partial Disability

34

 

Medical Underwriting

36

 

Financial Underwriting

38

 

Guaranteed Future Insurability

39

 

Renewability

39

 

Policy Pricing

40

 

Group Disability Insurance

40

 

Disability Insurance and Hobbies

41

 

Selecting Financially Strong Insurance Companies

41

 

Insurance Rating System Criteria

42

 

The Insurance Rating System’s Values

42

 

Is the Rating Trustworthy?

43

 

Financial Security Ratings

44

 

Insurer Risk

45

 

Ethical Issues Relating to the Financial Industry

46

 

Suitability

49

 

Conflicts of Interest

50

 

Prioritizing the Needs of the Client

50

 

Canadian Council of Insurance Regulators (CCIR)

50

 

Face-to-Face Presentations

50

 

Adequate Communication Skills

51

 

Finding the Right Products

52

 

Full Disclosure

52

 

Recognizing and Addressing a Conflict of Interest

53

 

Placing the Client’s Interests First

54

 

CCIR Considers Issues in the U.S.

56

Life Insurance

57

 

Insurance Agents

57

 

Life Insurance Contracts (terminology)

58

 

Life’s a Gamble

59

 

Defining Risk

60

 

Comfort Level

61

 

Insurance Risks, Perils, & Hazards

62

 

Chance of Loss

62

 

Morale & Moral Hazards

63

 

Law of Large Numbers

63

 

Types of Risk

64

 

Investment Risk

65

 

Issuance

65

 

Insurable Interest in Life Insurance

67

 

A Fairytale Case Study

68

 

Stranger-Originated Life Insurance (STOLI)

69

 

Charitable Use of STOLIs

72

 

Life and Viatical Settlement Agreements

74

 

Definitions

74

 

Understanding the Viatical Product

76

 

How do Viatical Settlements Work?

77

 

Purchasing Partial Policies

77

 

Viatical Participant Confidentiality

77

 

Paying the Viator

78

 

Buyer’s Remorse

78

 

Following Payment for the Life Policy

78

 

Checking Health Status through Physicians

79

 

Extra Policy Benefits

79

 

Other Available Options (Besides Selling the Policy)

79

 

What Every Policyowner Needs to be Aware Of

79

 

Viatical Settlement Development

80

 

Medical Underwriting

81

 

Insurance Underwriting

82

 

Consumer’s View

83

 

Policy Ownership Transfer

85

 

Policy Premium Payments

85

 

Outstanding Policy Loans

88

 

Additional Investment Fees

88

 

Escrow Trust Accounts

89

 

Viatical and Life Settlement Disclosures

90

 

Personal Information Protection & Electronic Documents Act

91

 

Insurance Policy Effective Dates

92

 

Material Facts

92

 

Beneficiary Designations in General

93

 

Estate Creation

95

 

Changing Social Times

96

 

Two Basic Insurance Terms: Premium & Peril

96

 

Betting Against the Insurance Company

97

 

Good Financial Plans Involve Life Insurance Contracts

97

 

The Intent

98

 

Estate Planning: Procedures, Not Products

99

 

Providing for Others Through Planning

100

 

Using Discipline to Achieve Security

100

 

Clarifying Client Objectives

101

 

The Need for Broader Knowledge

101

 

Basic Goals of Life Insurance

102

 

Life Insurance Trusts

102

 

Trust Beneficiaries

103

 

Kinds of Life Insurance

103

 

An Estate Planning Tool

103

 

Term Insurance: No Money, Just Coverage

104

 

Whole Life Insurance: the Granddaddy

104

 

Endowment Insurance: Forced Savings

105

 

Universal Life: Separating Expenses

105

 

Variable Universal Life (VUL): Few Guarantees

106

 

Survivorship Life: Insuring Two or More People

108

 

Single Premium Whole Life: One Payment

108

 

Buy-Sell Agreements

109

Annuities

110

 

Annuity Terminology

110

 

General Policy Provisions

114

 

Planning for Increased Life Spans

115

 

Longevity Risk

116

 

Variable Annuities (Segregated Funds)

116

 

Maturity Guarantees / Death Benefit Guarantees

117

 

Performance of Funds is Not Guaranteed

118

 

Types of Contracts

118

 

Registered Retirement Savings Plans (RRSP) Section 146 of the Income Tax Act

119

 

Non-Registered Annuities

120

 

Prescribed Treatment / Non-Prescribed Treatment

121

 

RRSP Types

123

 

Contributions

123

 

Spousal RRSP

124

 

Taxation of Deferred Annuities

124

 

The Decision to Buy

124

 

Life Income Funds

125

 

Immediate Annuities

126

 

Payout Options

126

 

Single Life Payout Option

127

 

Joint-and-Survivor Payout Option

128

 

Installment Refund Life Payout Option

128

 

Variable Annuity Payout Option

129

 

Term Certain Payout Option

129

 

Other Products

129

 

Dollar Cost Averaging

130

 

Annuity Beneficiary Designations

131

 

Annuity Contingent Beneficiaries

131

 

The Insurance Contract

132

 

Deposits

133

 

Surrender Penalties

134

 

Retirement Savings Plan (RSP) Endorsements

134

 

Switches

135

 

Investment Options

135

 

Product Suitability

136

 

Saving Adequately

136

 

The Reason for the Goal (the Reward)

137

 

Determining Goals

140

 

Basic Product Information Requirements

141

 

Determining Product Suitability

142

 

Product Replacement

144

 

Identifying Suitability Issues

145

 

It is Not a Liquidity Issue, But Rather a Suitability Issue

146

 

A Comprehensive Financial Plan

147

 

Suitability in the Retail Sale of Financial Products

149

 

Determining Suitability According to the Report

154

 

Annuity Surrender Values and Penalties

155

 

Financially Sound Insurers

156

Anti-Money Laundering

157

 

Client Due Diligence

158

 

Determining Identification in a Face-to-Face Interview

159

 

Identification of New Business Clients

160

 

Confirming the Client’s Business

161

 

Collection of Beneficial Owner & Director Information

161

 

Not-For-Profit Organizations

161

 

Exceptions to Requirements for Business Clients

162

 

Third-Party Determination

162

 

Politically Exposed Foreign Person (PEP) Requirement

163

 

Retention of Client Records

163

 

Suspicious Transactions

164

 

“Red Flag” Indicators

164

 

Tipping Off

164

 

Large Cash Transaction Reporting

164

 

The Proceeds of Crime and Terrorist Financing Administrative Monetary Penalties Regulations

165

 

Terrorism Produces Insurer Risk

165

 

Proceeds of Crime and Terrorist Financing Act

166

 

Object of the Act

167

 

Company Objectives

168

 

Policy Application

169

 

Restricted Businesses and Entities

169

 

AML Education

169

 

A Change in Thinking

170

 

Product Identification

171

 

Money Laundering Indicators Not Unique to Insurance Products

174

 

Characteristics of the Money Launderer

175

 

Last Page

177

 

United Insurance Educators, Inc.

8213 – 352nd Street East

Eatonville, WA  98328