12.3 Delivery, Free Look, Revocable vs Irrevocable Beneficiaries, Minors/Trustees, Creditor Protection

Delivery closes underwriting; it does not replace it

CISRO 3.3 bundles application and delivery into one process. Issue of a policy is the insurer’s offer on paper. Delivery is how that offer is accepted on the taking-effect conditions taught in section 12.1.

The agent should meet the applicant (the person who must accept the contract), not courier the booklet to a roommate or drop it in a mailbox and call the file closed. At that meeting you:

• walk through the issued plan, face amount, riders, extras, exclusions, and premium, and compare them with what was applied for;
• collect any outstanding initial premium (a rated extra is a new amount);
• obtain a declaration of insurability — health, smoking, occupation, and other changes since the application;
• obtain a confirmation of delivery receipt;
• explain how to use the free look if the issued contract is not what the client expected.

If insurability has changed, stop. Do not pretend delivery occurred. Return the file to underwriting. A policy handed over after a material health change may never have taken effect under the common statutory trio of delivery, premium, and unchanged insurability.

If the policy is a counter-offer (rating, exclusion, lower face), delivery includes a clear accept-or-refuse decision. Silence is not acceptance of extra premium.

Free look / 10-day rescission

Newly delivered individual life (and often accident and sickness) contracts commonly give the owner a short window to rescind after reading the real policy. The Canadian Life and Health Insurance Association (CLHIA) Guideline G10 calls for a 10-day “free look” from the time the purchaser can review the policy, with a refund of premiums paid if the purchaser cancels. Many provincial rules and issued contracts follow that 10-day pattern. Treat 10 days from delivery (not from the application date) as the usual exam pattern, and confirm the start date, length, and refund mechanics in the e-book. Some contracts run the period from the day the owner receives the policy; remote or electronic delivery should still produce a dated receipt.

Using the free look annuls the contract. It is not a lapse, not a surrender for cash value, and not a grace-period issue. On a brand-new term policy there is typically no cash value to haggle over — the owner wants premiums back. On a permanent policy delivered with a large dump-in, the same rescission idea is why you do not “implement” a universal-life deposit until the owner has actually seen the issued contract.

Exam trap: free look protects the owner who just received a contract. It is not a beneficiary’s right to unwind a claim, and it is not extra time to pay a renewal premium.

Revocable versus irrevocable beneficiaries

A beneficiary is the person to whom, or for whose benefit, insurance money is payable. Beneficiaries are not parties to the contract in the way the owner and insurer are, but they have enforceable rights to payment once the proceeds are payable.

Revocable is the default in the common-law provinces unless the owner takes the extra irrevocable steps. The owner may alter or revoke the designation by a later declaration (including, in Ontario, an electronic declaration that meets regulator rules). Naming “estate,” “heirs,” or “next of kin” is treated as a designation of the owner’s personal representative — which is an estate payment, with probate and estate-creditor consequences.

Irrevocable designations follow a strict form. Under the common pattern (Ontario s. 191; British Columbia s. 60 is the same idea):

• the owner designates the beneficiary irrevocably in the contract or in a declaration that is not part of a will;
• the declaration is filed with the insurer at its head or principal office in Canada during the lifetime of the person whose life is insured;
• while that beneficiary is living, the owner may not alter or revoke without the beneficiary’s consent;
• the insurance money is not subject to the owner’s control, is not subject to the owner’s creditors, and does not form part of the owner’s estate.

If the owner tries to make a designation irrevocable in a will, or files nothing, the statute typically says the designation has the same effect as if it had not been made irrevocable. That is a high-yield 3.3 / 3.2 fact: intent on a will is not filing at head office.

While an irrevocable beneficiary who is 18 or older has not consented, the owner generally cannot assign, surrender, or take a policy loan that impairs that interest. Some regulator rules allow a narrow list of administrative acts; do not assume the owner can still strip cash value.

Quebec is different on spouses. Under the Civil Code of Québec, designation of a married or civil-union spouse as beneficiary is irrevocable unless the contract stipulates that it is revocable. A de facto (common-law) spouse does not get that automatic irrevocability. Divorce or nullity can revoke a spousal designation under Quebec rules that the Ethics/Civil Law module develops in more depth; on the Life paper, know that Quebec spouse ≠ rest-of-Canada revocable default.

Primary and contingent (subrogated) designations still matter: if a primary beneficiary predeceases the life insured and the contract does not dispose of that share, the usual pattern pays surviving beneficiaries, or if none, the owner or the owner’s personal representative. Several beneficiaries named without shares take equal shares. A beneficiary may disclaim in writing at head office; disclaimer is typically irrevocable and is treated like a predecease.

Minors and trustees

You may name a child as beneficiary. A minor generally cannot give a valid discharge for a large insurance cheque. Provincial statutes let the owner appoint a trustee for a beneficiary in the contract or by declaration, and let the owner change that trustee by a later declaration. Payment to the trustee discharges the insurer to the extent of the payment.

If insurance money is payable to a minor and no trustee is appointed, a common-law pattern (British Columbia and Ontario manuals both teach this) is that the insurer pays the Public Guardian and Trustee (or the similarly named official) in trust for the minor, unless the child has reached a stated age and can give a discharge. Paying a parent in cash because “the kids are young” is not a valid shortcut. Appoint the trustee on the designation form at implementation.

A trustee is not automatically a guardian of the person. The trustee’s job is to hold and use the insurance money for the beneficiary on the terms of the appointment. For a beneficiary under disability, the same practical rule applies: name a trustee or expect payment into a court or public-guardian channel.

Creditor protection: proceeds, the contract, and no national dollar cap

CISRO Ethics contents speak of exemption from seizure resulting from beneficiary designation. The Life module expects the conceptual map, with provincial variation.

Under the common-law Insurance Act pattern (Ontario s. 196 is the example):

1. Named beneficiary (even revocable): from the moment the insured event happens, insurance money is not part of the insured’s estate and is not subject to the insured’s creditors. That is why “pay my estate” is usually the weak choice if the goal is to keep proceeds away from estate claims and probate delay.
2. Family-class / protected-class designation: while a designation in favour of a spouse, child, grandchild, or parent of the person whose life is insured (or any of them) is in effect, the owner’s rights and interests in the insurance money and in the contract are exempt from execution or seizure. This is the modern descendant of older preferred beneficiary language. It can protect cash value and the policy itself during the owner’s lifetime, not only the death cheque. Exact family lists and whether a common-law spouse counts as “spouse” vary by province — confirm in the e-book.
3. Properly filed irrevocable designation: adds consent control and the statute’s statement that the money is not subject to the insured’s control or creditors and is not part of the estate.

Do not invent a uniform Canada-wide dollar cap on exempt cash value. There isn’t a single national “first $X is protected” life-insurance rule for the LLQP Life exam to memorize. Bankruptcy timing, provincial execution law, and fraudulent conveyance (a designation made to hinder creditors can be attacked) all sit outside a simple dollar table. Quebec’s exemption-from-seizure rules follow the Civil Code and the relationship between the participant and the beneficiary; they are not a photocopy of Ontario s. 196.

Loss of protection is as testable as the protection itself: designation of the estate; no beneficiary alive; a corporate owner (the corporation’s creditors are a different analysis); and a designation made to defeat creditors.

Worked delivery and designation example

Priya is delivered a $750,000 whole life policy on a Tuesday evening. She signs the delivery receipt and declaration of insurability. On day 8 she decides the rating is not what she agreed to in the meeting. Under a 10-day free-look pattern she can rescind and seek a premium refund. That is not a grace-period claim.

Priya wants the proceeds to reach her two children, ages 8 and 11, without going through her estate, and she is worried about personal creditors. Naming the children revocable with a trustee (her sister) is the implementation that pays the insurer’s cheque to the trustee and, in a common-law province, can place the death benefit outside Priya’s estate. If she also wants the contract itself shielded while she is alive, a family-class designation (children of the life insured) is the pattern Ontario-style statutes use — still not a promise of a dollar cap. If she names the children irrevocable and files the declaration at head office, she cannot later take a policy loan or change the trustee’s payee without consent, which may be impractical while they are minors. If she writes “irrevocable to my sister” only in her will and never files it, the designation is not irrevocable.

If Priya instead names “estate,” the $750,000 is available to estate creditors and waits on probate. That is the opposite of creditor-protection planning, even though the policy was “implemented” in a technical sense.