Can a life insurance company deny a claim in Canada?
Yes, but only on limited grounds. Common reasons are material misrepresentation on the application (undisclosed health conditions or smoking), death by suicide within the two-year exclusion period, or death during the two-year contestability period where the insurer alleges fraud. After two years, the policy becomes incontestable except for fraud.
What is the contestability period for life insurance in Canada?
Under provincial Insurance Acts, insurers can contest a policy for material misrepresentation within the first two years. After two years, the policy is incontestable and can only be voided for fraud. This is a critical distinction — many denials made after two years are improper.
Does the insurer owe interest on a delayed life insurance payment?
Yes. Most provincial Insurance Acts require the insurer to pay the death benefit within 30 days of receiving proof of death, and interest accrues after that. If the insurer delays unreasonably or in bad faith, a court may also award aggravated or punitive damages (Whiten v. Pilot Insurance).
What happens to a policy loan when the insured dies?
Any outstanding policy loan, plus accrued loan interest and unpaid premiums, is deducted from the death benefit before it is paid to the beneficiary. The beneficiary receives the net amount.