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WORST LIFE INSURANCE COMPANIES IN CANADA

10/17/23

There really isn’t any ‘worst’ life insurance company in Canada. There are a variety of attributes where some companies are mildly better than others, and there are a few things you can do that are under your control that can help improve your experience with any life insurance company in Canada. We’ll take you through all of this in the following article.

Company strength, stability, and age

All life insurance companies in Canada are highly regulated in terms of insolvency. The government regulators monitor all life insurance companies on a regular basis and require that they fulfill minimum requirements. 

The government uses a Life Insurance Capital Adequacy Test (LICAT) on all life insurance companies. This test basically assures us that the companies have enough available cash and reserves to meet their obligations. All companies meet these requirements because if they don’t, the government regulators are able to step in, take control of the company and guide it back to solvency.

Further, all life insurance companies belong to an organization called Assuris. Members of this organization guarantee each other’s policies, subject to some limits. This organization is our assurance that if for some reason the government was unable to guide a company back to insolvency, that all the other life insurance companies in Canada, through Assuris, have agreed to step up and guarantee those policies. 

Recognizing that all LICAT ratio for all life insurance companies are sufficient to ensure that life insurance companies can pay their claims, one of the highest LICAT ratios in the industry is held by Foresters Financial. Foresters is a fraternal organization that’s existed in various forms for hundreds of years. So if you’re looking for a high LICAT ratio, then consider Foresters Financial. However, this is not to suggest that other companies with lower LICAT ratios are problematic – they’re not. 

Age of life insurance companies has little to nothing to do with stability. Many life insurance companies are over 100 years old, and most of the rest are almost 100 years old. For example, one of the younger life insurance companies in Canada is Equitable life – which is over 100 years old now. And while being one of the smaller life insurance companies in Canada, they still experience sustained long term growth and stability. Is a company that’s 150 years old somehow better than a company that’s only 100 or even 80 years old? We don’t think so. 

Customer Service

Most life insurance companies in our experience have customer service that is somewhere between mediocre to OK. This is commonplace with large bureaucracies such as life insurance companies. If you know the question and call customer service, you’re likely to speak to someone who’s newer to life insurance (there’s high turnover in life insurance company call centres, as people move on to higher paying jobs), and most of them will have a predefined set of questions that they are able to answer. As long as your question isn’t overly complex or vague, most life insurance company customer service departments are able to assist you with any questions you may have.

Our experience has been that customer service is fairly consistent across most life insurance companies, with one exception. The exception is Wawanesa Life, and like the Foresters example, they don’t stand out because they’re worse than others; they stand out because they’re better than others. Our customers’ experience with Wawanesa customer service has been outstanding; call centre employees are knowledgeable, vested, and able to make decisions and implement them. So while there’s no ‘worst’ company for customer service, they’re all at least OK, if you want better than most customer service we would recommend Wawanesa Life Insurance.

Payment of Claims

If you pass away with a life insurance policy in force, all companies have to pay the claim; with two exceptions. The first is death by suicide in the first two years of the policy will result in claims denial – this is true of all individual life insurance companies in Canada.

The second way a company can deny a claim is with the incontestability clause. To paraphrase, this means that you failed to disclose information during the application. It doesn’t matter if what you failed to disclose was inadvertent, it doesn’t matter if what you failed to disclose was because you thought it wasn’t important, and it doesn’t matter if what you failed to disclose was related to how you died. It’s been our experience that most companies are consistent in these two matters.
Therefore, when you do your life insurance application, you should pay close attention to your life insurance medical exam and answer it fully and completely to the best of your ability. Doing so reduces any opportunity for a life insurance company to deny a claim – and that’s true of all life insurance companies.

Type of policy

Purchasing some types of policies may expose you to future problems, without regard to what life insurance company you purchased from.
The first is mortgage life insurance (typically purchased through your bank, or your mortgage broker). These policies are answered briefly by consumers while doing their mortgage, without advice from an experienced life insurance advisor. Full review of your answers aren’t completed until after you pass away and a claim is made. At that time if they find missing or incomplete information they can possibly deny your claim. And the probability of finding missing or incomplete information is higher, since you would have completed the medical questionnaire at the bank, likely under a fast timeframe and likely just answering briefly Yes or No. 

Therefore, if you don’t want to have a bad experience at claim time from any company, you should avoid mortgage life insurance offered by your bank or mortgage broker.

The second type of policy that has similar problems, are simplified issue policies. These are policies that consumers tend to like because there’s no upfront medical requirements; just a quick series of Yes/No questions. Unfortunately, answering these questions correctly is often impossible for a Canadian consumer. Answering these questions correctly is also very difficult or impossible even for an experienced life insurance advisor. And companies are not available for clarification on questions – you’re on your own to ‘self-underwrite’ by answering the questions correctly. And like mortgage life insurance, if you answer the question incorrectly this isn’t reviewed until after you pass away, at which point the company may deny your claim.
Therefore, if you don’t want to have a bad experience at claim time from any company, you should avoid simplified issue or ‘no medical exam’ policies unless you have no other choice.
That’s it! All life insurance companies are strong, stable and financially solid as far as Canadians need to be concerned. Customer service is almost unanimously ‘reasonable, but rarely exceptional’. And at claims payment, if you’ve purchased a fully underwritten life insurance policy and have taken care to answer fully when doing the medical history questionnaire then you should expect no problems when it comes time to pay a claim.