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


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Disability, Life, and Anti-Money Laundering



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


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Disability, Life, and Anti-Money Laundering



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


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Disability, Life, and Anti-Money Laundering



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


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