Compare Life Insurance Quotes

From 50+ of Canada’s leading providers in 3 minutes.


Many Canadians own life insurance, without ever really knowing how it works. A lump sum is generally paid to beneficiaries when the insured pays their premiums.

However, there is much more to it than that.

Depending on the type of policy being used, there are all kinds of other factors to take advantage of. Specifically, with permanent policies, cash accumulation can be borrowed from over time.

Understanding how life insurance works is the best way to find a policy that works best for each person’s situation.

To help people get a better understanding of the payout situation, the following offers information on how life insurance is paid out.

The Basics of Insurance Payouts  


If an insured person has paid all of their premiums, then a full lump sum will be given to their beneficiaries upon their death.

Beneficiaries need to send a request to the life insurance company, along with a certified copy of the death certificate. It takes around 30 days for an insurance company to look at the claim.

At this time, they can pay the lump sum, deny the claim or ask for more information.

In general, beneficiaries can expect to have their money within 30-60 days. Although there is no time limit for insurance companies, they will have to pay interest on money owed.

As a result, they are often quick to pay the claim on time.

Delayed Insurance Claims

There a few different reasons that an insurance company might delay paying a claim. If an insured person dies within two years of their policy beginning, insurance companies may look into this.

Beneficiaries could wait anywhere from six months to a year, based on what is known as the “Contestability Clause”.

In this case, the insurance company might suspect that fake information was provided to them at the beginning of the policy. For example, a person might claim they are not ill, or that they do not have a smoking addiction.

If the insured was, in fact, ill or suffering from a nicotine-induced illness, the insurance company may deny the claim. The entire claim will be paid out if the insurance company cannot prove the insured provided any false information.

This kind of delay might also occur if a person commits suicide within two years of their policy’s commencement. This “Suicide Clause” questions the person’s false information about mental health, stability, etc.

One last issue that could delay payout, is if the person’s cause of death was a homicide. Insurance companies will work closely with the investigation team, to make sure that the person was not charged of any crime.

Payout Options


Traditionally, the insurer’s death signals a payout. Today, in most cases, this is still the preference for most insurance policyholders.

However, as time has gone on, many companies have adopted other options for payout to accommodate their clients.

  • Installments

It was almost a decade ago when life insurance payouts became a lot more convenient for policyholders. Installments changed the way that money could be paid out to beneficiaries, instead of giving it all in one sum.

Proceeds and interest are paid out on a consistent basis. This happens while the beneficiary is still living.

This allows a beneficiary to get a pre-determined amount that comes in over a course of 5-40 years. As a result, policyholders are able to provide for their loved ones over a long period of time.

This is a great choice for many policyholders, especially those with young beneficiaries. Sometimes it is preferred to grant young adults smaller amounts of money over time instead of one lump sum.

  • Pre-Death Benefits 

While many companies continue to hold lump sums until the policyholder passes, some companies are taking a new approach.

A pre-death benefit allows policyholders to take money out against the face value of the policy. This is usually acceptable if the policyholder is facing a terminal or chronic illness.

In this case, the policyholder is their own beneficiary.


As soon as the policyholder passes, beneficiaries should file their claim with the insurance company. This ensures that they get their lump sum as soon as possible.

Beneficiaries will need to send the death certificate, as well as Request of Benefits to the proper insurance company.

Reasons for Rejected Payouts 


 There are a number of reasons why insurance companies may not pay out:

  • Fake Claims

If the policyholder made false claims about anything regarding their personal information (lifestyle, illnesses, mental health, etc.), then the company may be able to deny payment.

People should always be as honest as possible during the policy-making process, whether it means they have higher premiums or not. This will ensure that their loved ones get the money they need for the future.

  • Death Within Two Years

If the insured dies within two years of their policy’s commencement, then an insurance company may consider false information.

  • Non-Paid Premiums

In most cases, any non-paid premiums will result in that amount being taken off of the end lump sum. If the amount owing is higher than the amount, then the beneficiaries will not receive anything.


Making an insurance claim in Canada is a fairly simple process. Full payouts are made when premiums have been paid and any information provided was true.

Canadians should be sure that they have the policy that would best suit them. Having knowledge about the different options will help them to understand whether premiums are affordable and whether the extras are needed.

Some policies, such as Accidental Death only cover so many things and do not provide quite as much protection as a traditional life insurance policy.

Being educated about this kind of asset is your best bet for getting your loved ones the finances they need for the future.