So you spent some time meeting with your advisor to figure out the right policy for you and your family’s needs. On your third meeting you decide that a [intlink id=”1″ type=”post”]term policy[/intlink] for 20 years to protect the mortgage is the right way to go. After all, you have a [intlink id=”94″ type=”post”]20 year mortgage[/intlink] with most of the balance still owing. You want to make sure that if something happened within that 20 year period, the policy benefit would be triggered to help your spouse and kids carry on in the same home where you all have created so many memories. You’ve paid up your first year premiums and you just covered a major gap in coverage.
As you drive home that day, you feel quite accomplished, like you’ve done right by your family. You decide to stop at the neighbourhood shopping plaza and pick up some snacks and a lottery ticket.
The next day is business as usual, except that when you check your lottery ticket, you find out that you just won big in your provincial lottery. You are an instant millionaire.
So now within a matter of days you’ve paid off all your bills including the remainder of your mortgage, you plan on setting up some college funds for your two kids, maybe some form of an annuity for you and your spouse and even after all that you are still left with 20 million dollars. Any one reading this realizes that perhaps the need for that term life policy is gone.
Now you have two options. You can continue to pay on the policy and be guaranteed the payout, assuming you die within that 20 year span or you can choose to exercise your “right of rescission” assuming you are still within the 10 day period after the policy was delivered to you.
So what is the right of rescission? In every [intlink id=”272″ type=”post”]life or health insurance[/intlink] policy sold in Canada there is something commonly known as the “10 day free look” period, also known as the right of rescission. It is a contractual right designed for the benefit of the applicant/policy owner. It simply means that any one who purchases a life or health insurance policy has the ability to hold on to and look over the policy for up to 10 days after delivery. If within the free look period, the policy owner decides they no longer wish to have the coverage, they can return all policy documents to the insurer who must then return every cent of premium paid by the policy owner to date.
So in the example above, because of the wind fall of lottery money to the family. The previous “need” may no longer exist, at least in the eyes of the policy owner. The policy owner has the right to reach out to the insurer and inform them that he or she no longer wants the 20 year term policy as long as it has only been 1 to 10 days since the policy was delivered to said policy owner. The complete 12 months of premiums initially paid to the insurer would be returned in full.
Do you have questions about life insurance or the right of rescission? Reach out to me directly and I will be happy to answer all your questions and address your concerns.