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	172
	Money Laundering Indicators Not Unique to Insurance Products	175
	Characteristics of the Money Launderer	176
	Last Page	178

United Insurance Educators, Inc.

PO Box 1030

Eatonville, WA 98328

(800) 735-1155