The answer is no in Ontario.  Currently, only a limited number of Canadian provinces (Quebec, New Brunswick, Nova Scotia, and Saskatchewan) will allow a policy holder to sell his/her insurance policy to a third party.

Life insurance policies are commonplace in Canada.  A life insurance policy is a contract with the insurance company and it is a contract to pay out a sum of money upon the death of the life insured.  While most people may be content to maintain their life insurance policy, as is, until their death, those who are in need of cash during their lives may wish to sell the policy for a present-day payout while the purchaser maintains the premiums (and any other obligations to the insurance company) in exchange for the payout on the death.  The sale of a life insurance policy by the policy holder is also known in the industry as a “life settlement”.

According to Tyler Wade’s article on ratehub.ca, the practice of selling one’s own insurance policy was popularized in the U.S. when investors saw the AIDS epidemic in the 1908’s as an opportunity where they could offer those suffering from AIDS a payout during their lifetime in exchange for the death benefit in their policies believing, then, that this group of individuals had a shorter life span.  The vulnerability of the individuals within this market group and the potential for financial abuse are often cited as the reasons why life settlements ought to be prohibited for public policy reasons.

In Ontario, life settlements are prohibited under section 115 of the Insurance Act, as follows:

“Trafficking in life insurance policies prohibited

115 Any person, other than an insurer or its duly authorized agent, who advertises or holds himself, herself or itself out as a purchaser of life insurance policies or of benefits thereunder, or who trafficks or trades in life insurance policies for the purpose of procuring the sale, surrender, transfer, assignment, pledge or hypothecation thereof to himself, herself or itself or any other person, is guilty of an offence.”

In 2017 and 2018, there was an attempt to legalize life settlements by amending section 115 (through Bill 162) and by amending the Act to allow third-party lenders to use life insurance policies as collateral (through Bill 20).  Both Bills received opposition from non-profit groups like the Canadian Life and Health Insurance Association due to the potential for financial abuse and section 115 of the Act has remained as is in Ontario.

While it is difficult to comment on how the potential for financial abuse can be mitigated by implementing countermeasures, it is unfortunate that Ontarians have limited options once the policy is in place.

Thanks for reading!

Doreen So