Proposed Amendments to the Insurance Act Affecting Donations of Life Insurance Policies
November 2020 Charity & NFP Law Update
Published on November 26, 2020

By Theresa L.M. Man

On October 20, 2020, Ontario private members’ Bill 219, Life Settlements and Loans Act, 2020 (“Bill 219”) was introduced to amend section 115 of the Ontario Insurance Act to permit a life insurance policy be donated to a charity, sold or assigned by the original policyholder or a transferee, or used as collateral security. Currently, section 115 of the Insurance Act prohibits any person, other than an insurer or its duly authorized agent, from trafficking or trading in life insurance policies. At this time, Bill 219 passed second reading and was referred to the Standing Committee on Finance and Economic Affairs.

The preamble to Bill 219 indicates that Ontario has a large and growing population of seniors on fixed incomes, who are currently prohibited from surrendering their policies to anyone other than their insurer, and as a result receive significantly less value than they would receive in a well-regulated secondary market. As such, the preamble indicates that the intent of the Bill is to modernize the Insurance Act to allow life settlements and life loans to provide Ontario seniors with an alternative financial resource, and allow them to access the fair market value of their life insurance policies, and thereby allowing Canadian seniors to benefit from secondary markets similar to those in the United States, United Kingdom, Europe, Japan and Quebec.

Bill 219 also requires that the original policy holder or transferee has held the policy for at least 24 months before donating it to a charity, selling or assigning it, or using it as collateral security; the transaction is in accordance with an agreement that provides full, true, and plain disclosure; the transaction is subject to a 10-day cooling-off period during which time the transaction may be cancelled without any reason; and the person or entity to whom the life insurance policy is sold or assigned, or who receives it as collateral security or as a donation, is prescribed by regulations.

Charities interested in the progress of Bill 219 may monitor the page of the Standing Committee on Finance and Economic Affairs at the Ontario Legislative Assembly for any notices of hearings, agendas and reports.

Read the November 2020 Charity & NFP Law Update