Life Insurance Claims: What the Executor Does in Ontario

One of the first questions an executor asks is whether the life insurance goes through the estate. The answer depends mainly on who is named as the beneficiary on the policy, and that can differ from policy to policy.

This article explains the difference between a named beneficiary and a policy payable to the estate, why it matters for creditors and the will, and the practical steps involved in making a claim. Individual policies have their own terms, so the policy documents and the insurer have the final word.

Named beneficiary versus the estate

The key question is who the policy says will receive the money. If no beneficiary is named, the insurer assumes the estate is the beneficiary. The benefit then passes under the will, and creditors may claim it.

That is why the beneficiary designation matters. A policy with a named person is a different situation from one payable to the estate. Check the policy documents or ask the insurer to confirm in writing who is listed.

Revocable and irrevocable beneficiaries

A revocable beneficiary can be changed at any time, while an irrevocable beneficiary needs to give written permission before a change is made. This can matter if the deceased changed the designation shortly before death, or if a separation or divorce left an old designation in place.

If you find that the designation looks wrong, outdated or contested, do not try to resolve it yourself. A dispute between a named beneficiary and the estate's beneficiaries is a legal question that depends on the documents and the facts, and a lawyer can advise.

When the proceeds go to the estate

When the estate is the beneficiary, the estate trustee's ordinary duties apply. The trustee winds up the deceased's affairs, collects assets, pays taxes, bills and other debts, and distributes the residue to those entitled. Under a will, distribution follows liquidation of assets and payment of funeral and burial expenses and any debts.

Because creditors may claim insurance paid to the estate, an executor should not distribute the money to beneficiaries before understanding what the estate owes. The estate trustee also has to keep in mind the surviving spouse's rights: a spouse who wants an equalization payment must file the Election of Surviving Spouse no later than six months from the date of death, and Land Registration Bulletin 86009 states that no distribution should be made within six months of death unless the spouse consents in writing or the court authorizes it. Whether a particular payment is caught by that rule depends on the facts, so ask before paying out.

Whether insurance proceeds affect the value of the estate for Estate Administration Tax purposes depends on how the policy is set up. Estate Administration Tax is charged on the value of the estate at the date of death, so confirm the treatment with a lawyer or accountant before filing the return.

Steps to make a claim

Insurers set their own claim forms and requirements, so start by contacting the insurer and ask what proof of death they need. A death must be registered before a death certificate can be issued, and only the next of kin or the executor can apply for a certified copy of death registration.

Ontario lists a death certificate at $15 for regular online service or $45 for premium online service. Regular online takes 15 business days plus delivery, premium takes 5 business days, and registration itself can take up to 12 weeks. Fees and timing can change, so check before ordering. Order enough copies for the insurer, banks and other institutions.

• Locate the policy, or ask the insurer whether the deceased held one.
• Confirm in writing who the named beneficiary is.
• Order the death certificate or certified copy.
• Return the insurer's claim forms with the documents requested.
• Keep copies of everything you send and receive.

What to do next

• Gather every policy, including those through an employer, a bank or a credit card.
• Ask each insurer who the beneficiary is, in writing.
• Order death certificates as soon as the death is registered.
• Before paying out any proceeds that are payable to the estate, find out what the estate owes, since creditors may claim them.
• Keep records of every claim and payment.
• Ask a lawyer if the beneficiary designation is disputed or unclear.

Frequently asked questions