How a Death Claim Is Paid in Canada

A death claim is the moment a life insurance contract does the one thing it was bought to do, and it is the moment nobody involved has rehearsed. This page sets out how the claim is actually paid: what the claimant sends, the period the statutes give the insurer once the proof is in, the two-year window during which the contract can still be contested, the suicide clause, and where the money goes when the designation names nobody who is still alive. It does not cover what was said on the application, which is set out separately, and it does not cover what a creditor can reach, which is also set out separately.

Everything below is general information written by a licensed insurance professional. It reads two statutes, the Civil Code of Quebec and the Insurance Act of British Columbia, because those are the two this page verified on the review date, and it treats neither as the law of any other province. Whether any of it reaches a particular claim is a legal question for a lawyer or, in Quebec, a notary. Canadian Wealth Creation Centre Inc., trading as IBC Financial, is not authorized to give legal, tax or notarial advice and gives none here.

What does the claimant send to the insurer?

Three things: proof that the person insured has died, proof that the claimant is the person entitled to be paid, and the contract or its number so that the insurer can find the file. Insurers dress those three in their own forms, and the forms differ, but no insurer is entitled to less and none is obliged to accept less.

Article 2436 of the Civil Code of Quebec ties the insurer's obligation to receipt of the required proof of loss, without listing what that proof is. In practice the proof of death is an act of death issued by the Directeur de l'état civil or a death certificate, and many insurers accept a funeral director's statement or an attending physician's statement to open the file. The proof of the claimant's right is identity where the claimant is the named beneficiary, and the will or the document appointing the liquidator where the claim is made for a succession.

British Columbia is more specific. Section 73(1) of the Insurance Act names four things the insurer must have sufficient evidence of: the happening of the event on which the insurance money becomes payable, the age of the person whose life is insured, the right of the claimant to receive payment, and the name and age of the beneficiary where there is one. Age appears twice because the premium was priced on the age the application stated, and a misstatement of age adjusts the amount rather than the claim.

The practical rule that falls out of both statutes is the same. The insurer is entitled to a complete file, and the clock the statutes set does not start until the file is complete. Asking the insurer for its own list in writing before sending anything, and sending everything at once, is the single thing a claimant can do that shortens the wait, and it costs nothing.

How long does the insurer have once the proof is in?

Thirty days after it receives the required proof, in both statutes this page read, and the day of the death is not the day the period begins. The period is counted from the file, so a claim that arrives incomplete has not started the clock, and a claimant who sends everything at once starts it sooner.

Article 2436 of the Civil Code of Quebec provides that the insurer is bound to pay the sums insured and the other benefits provided in the contract, in accordance with its conditions, within 30 days after receipt of the required proof of loss. The same article gives accident or sickness insurance 60 days, unless the insurance covers loss of income arising from disability, which is a reminder that a life insurance contract and a disability contract sold by the same insurer are not on the same schedule.

Section 73(1) of the British Columbia Insurance Act requires the insurer, within 30 days after receiving the sufficient evidence described above, to pay the insurance money to the person entitled to it. Where the insurer admits the validity of the insurance but does not admit that the evidence is sufficient, section 78 lets either side apply to the court, on notice, for a declaration as to the sufficiency of the evidence, and section 79 lets the court order payment. A dispute about whether a file is complete therefore has a statutory exit rather than an indefinite one.

Interest is the point on which the statutes say less than people expect. Part 3 of the British Columbia Insurance Act contains no section imposing interest on an insurer that pays late; section 85 concerns money the insurer holds under the contract at an agreed or declared rate, which is a different arrangement. The insurance chapter of the Civil Code of Quebec sets no specific rate either, and whether the general law of obligations gives interest on a sum paid after its due date is a question for a lawyer or, in Quebec, a notary, not a figure this page will supply.

What is the two-year contestability window?

The first two years of a contract are the period during which an innocent misstatement on the application can still cost the beneficiary the claim. After two years both statutes close that door, and only fraud keeps it open. A death inside the window is examined more closely for that reason and no other.

Article 2424 of the Civil Code of Quebec provides that, in the absence of fraud, a misrepresentation or concealment as to the risk cannot found the nullity or reduction of insurance that has been in force for two years. The second paragraph of the same article excludes disability insurance where the disability began during the first two years, which does not concern a death claim but is the reason the two contracts are read separately.

Section 52(2) of the British Columbia Insurance Act reaches the same place in its own words: subject to the group insurance rule in subsection (3), where a contract, or an addition, increase or change referred to in section 51(3), has been in effect for two years during the lifetime of the person whose life is insured, a failure to disclose or a misrepresentation of a fact required to be disclosed by section 51 does not, in the absence of fraud, render the contract voidable. The words "during the lifetime" matter: a death in month twenty-three leaves the contract contestable.

What this means at the claim desk is that a death inside two years brings a request for the attending physicians' records and a comparison of those records with the application. That is the statute working, not the insurer stalling, and it is the reason a claim of this kind takes longer than one on a contract issued a decade earlier. What counts as a misrepresentation, and what the insurer must prove, is examined on its own page and is not repeated here.

What does the suicide clause actually do?

It limits, for a period, what the insurer will pay where the person insured took their own life, and in Quebec the statute caps that period at two years of uninterrupted insurance. In British Columbia the statute makes the clause enforceable and governs how a reinstatement resets it, but the period itself comes from the contract.

Article 2441 of the Civil Code of Quebec provides that the insurer may not refuse to pay the sums insured by reason of the suicide of the insured unless it expressly stipulated an exclusion of coverage for that case, and that even then the stipulation is without effect if the suicide occurs after two years of uninterrupted insurance. The exclusion has to be written into the contract; silence favours the beneficiary.

The second paragraph of article 2441 deals with an increase. Any amendment raising the amount of insurance is, as to the additional amount, subject to the exclusion initially stipulated for a fresh period of two years of uninterrupted insurance running from the date the increase took effect. The original amount keeps its original date. Section 56(2) of the British Columbia Insurance Act deals with the other interruption: where a contract provides that suicide within a period voids it or reduces the amount, and the contract lapses and is later reinstated, the period runs from the date of the latest reinstatement.

Section 56(1) of the British Columbia Insurance Act says only that an undertaking, express or implied, to pay insurance money where the person insured commits suicide is lawful and enforceable. It sets no period. The two years commonly seen in a British Columbia contract is therefore a contractual term, and it is the contract that has to be read, clause by clause, before anyone tells a family what to expect.

What delays a claim, and is any of it the insurer's choice?

Three things delay a death claim more than everything else together: the claimant's own file, a contested designation, and a death inside the two-year window. None of the three is the insurer's discretion. The honest sentence is that a clean claim on an old contract pays inside the statutory period, and that many claims are not clean.

The first cause is the file. A death certificate that has not been issued yet, a claimant's statement signed by the wrong person, a claim made for an estate before anyone holds the document that names the liquidator or the executor, or a contract number nobody can find, each stops the clock before it starts. The insurer is not obliged to guess, and section 73(1) of the British Columbia Insurance Act and article 2436 of the Civil Code of Quebec both count from receipt of the proof, not from the first telephone call.

The second cause is a dispute over who is entitled. Where two people each claim to be the beneficiary, where a designation in a will contradicts the one on the insurer's file, or where a former spouse was never removed, the insurer cannot safely pay either. Section 82 of the British Columbia Insurance Act lets an insurer that admits liability apply to the court to pay the money into court where there are adverse claimants, and the money then waits for the court rather than for the insurer. How a Quebec designation ranks against the insurer, and why the file governs, is on the designation page.

The third cause is time since issue. A death in the first two years is contestable, medical records take weeks to arrive from clinics that have no reason to hurry, and the comparison with the application is done by people who are paid to be careful. The bridge to avoid, in any conversation with a grieving family, is the sentence that the money is paid within days and without questions. It is paid within the statutory period once the questions the statute allows have been answered, and that is a different promise.

Who receives the money when the designation is silent?

The estate, in both systems, unless a contingent beneficiary was recorded. A designation that names a person who died first, or that names nobody at all, leaves the sum insured with only one place to go, and once it is there it is ordinary property of the estate rather than money paid on proof of death.

Article 2447 of the Civil Code of Quebec presumes that the designation of a beneficiary was made on the condition that the beneficiary exists when the sum insured becomes exigible. Where that condition fails and no subrogated beneficiary was named, article 2456 finishes the sentence: insurance payable to the succession, or to the assigns, heirs, liquidators or other legal representatives of a person under a stipulation using those or similar expressions, forms part of the succession of that person. The same article adds that the rules of representation in successions do not apply to insurance, which means a deceased beneficiary's children do not step into the share by operation of law.

Section 63(1) of the British Columbia Insurance Act is written for the same event. Where a beneficiary predeceases the person whose life is insured and the contract or a declaration makes no provision for that share, the share is payable to the surviving beneficiary, to the surviving beneficiaries in equal shares where there is more than one, or, where none survives, to the insured or the insured's personal representative. The estate is the last stop, not the first.

The consequence is not only delay. Money in the estate waits for the administration, answers the estate's debts before it reaches anyone, and can be reached by creditors that a named beneficiary would have kept out, which is the subject of the creditor page rather than this one. The fix is a contingent beneficiary on the insurer's form, and it is the cheapest correction in the whole of estate planning.

What if the beneficiary is a minor, or two people claim?

A minor cannot give the insurer a valid discharge, so the statutes route the money to someone who can, and an insurer facing two claimants routes it to the court. Both are outlined here only in outline, because how a particular family's money is held for a child is a question for a lawyer or, in Quebec, a notary.

Section 88 of the British Columbia Insurance Act provides that where an insurer admits liability for insurance money payable to a minor, it must, within 30 days after receiving the evidence referred to in section 73, pay the money in trust to a trustee appointed for the beneficiary or, where none was appointed, to the Public Guardian and Trustee. Section 62 of the same Act is the provision under which a trustee for a beneficiary is appointed in the contract or by declaration, and a designation made without one leaves the public official as the default.

Quebec does not write a separate rule into the insurance chapter. The property of a minor is administered under the rules of tutorship in Book One of the Civil Code, and a sum insured payable to a child is received and administered by the tutor under those rules, with the supervision the Code attaches to larger amounts. A designation that names a child directly, without naming who administers the money, is lawful and is also the source of most of the questions a notary is later asked. The contract mechanics that sit underneath are on the Civil Code page.

Is the death benefit income to the beneficiary?

As a general rule it is not, and that sentence carries conditions this page does not restate. The provisions of the Income Tax Act that govern, what an outstanding policy loan does at death, what a corporation may credit to its capital dividend account and what an estate has to report are all on the taxes on death benefits page.

Nothing in the claim process changes that character. An insurer's cheque, a delay, a payment into court or a payment to the estate does not turn a death benefit into something else, and nothing an insurer writes in a settlement letter is a tax opinion. The one person entitled to give one is a Chartered Professional Accountant with the contract and the return in front of them.

Who this suits, and who it does not

It suits a named beneficiary who wants to know what the insurer is entitled to ask for before the questions arrive. It suits a liquidator or executor unsure whether the estate is the claimant. It suits an owner who has never checked whether a contingent beneficiary is recorded, and anybody who was told a claim pays within days, without questions.

It does not suit a person whose claim has already been refused, because a refusal is a legal dispute and belongs to a lawyer or, in Quebec, a notary from the first letter. It does not suit anybody in a province other than Quebec or British Columbia who wants the section number for their own statute, because this page did not read that statute and will not pretend it did. And it does not suit a reader who wants to know how much a particular contract will pay, which is answered by the insurer in writing and by nobody else.

Everything here is written by a person paid by commission from an insurer when a contract is issued, which is stated at the foot of every page. Insurance is insurance, it is not an investment, and a well-handled claim is what the contract was for rather than a reason to own one. The strategy is the Canadian application of the approach known as The Infinite Banking Concept®, originated by R. Nelson Nash; the mark belongs to Infinite Banking Concepts, LLC, with which this practice has no affiliation. The strategy is practised here under the practice's own registered mark, Infinite Financial Sovereignty®, which describes the state of holding the highest practical level of control over the capital-flow function in one's own affairs, and a death claim that arrives clean is the last act of that control. Every legal question raised on this page belongs to a lawyer or, in Quebec, to a notary.