Can I Sell My Term Life Insurance Policy In Canada
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“Can I sell my life insurance policy?” is a question Canadian insurance professionals are often asked. This might seem counterintuitive—after all, we purchase life insurance to safeguard the financial security of our loved ones in the event of death, not to provide an infusion of cash while we’re still alive.
But some policyholders do sell their own policies, usually because of a personal cash flow crisis or an inability to continue paying premiums. Since life insurance can be considered an “investment,” so to speak, selling could make sense. It likely isn’t an easy decision to make, but selling a life insurance policy can be a relatively quick and simple way to ease financial pressure in a time of need.
Can You Sell A Life Insurance Policy In Canada?
The short answer is: “Yes!” But in the majority of Canadian provinces, there are laws in place that limit how and to whom you can sell your policy.
This has been a controversial issue for decades—in fact, New Brunswick and Nova Scotia recently amended their individual insurance acts to make the selling of life insurance policies more restrictive, while a private member’s bill currently making its way through the Ontario legislature seeks to increase the freedoms associated with selling a personal life insurance policy. Saskatchewan, meanwhile, introduced new restrictions to the selling of life insurance policies in 2015, but has yet to enforce them.
Susan Murray, vice president of government relations and policy at the Canadian Life and Health Insurance Association (CLHIA), explains that what the majority of provincial governments have chosen to outlaw is “life settlements” (also known as “viatical settlements”). A life settlement is when a policyholder sells his or her life insurance policy to a third party—usually an individual or a company that specializes in the trafficking of insurance policies—in exchange for a one-time cash payment. When the policyholder dies, the third party receives the full value of the policy.
Conclusion
The process of buying a life insurance policy that belongs to someone else is pretty much the same as if you were buying one for yourself. Obviously, the person from whom you want to buy the policy has to be willing to sell it to you. But if you’re both in agreement, your first step is to go to a financial advisor who can facilitate the sale for you.
