Insurance on loans: rights and responsibilities
Insurance on a loan or debt is an optional service. When a Canadian bank offers you an optional service, it must inform you about any charges that will apply. You must also be given the option to opt out of—or cancel—the service.
These requirements apply to loan and debt products such as mortgages, car loans, credit card balances and lines of credit.
Voluntary Code of Conduct: authorized Insurance Activities
Canada’s banks have agreed to be bound by a voluntary code of conduct that obliges them to provide clear, understandable disclosure in the documents related to authorized insurance products. Each bank is responsible for ensuring that its representatives implement, understand and follow this voluntary code. Each bank has a designated officer responsible for compliance with the code.
Under the code of conduct, banks must provide each eligible customer who is accepted for insurance coverage with disclosure documents that set out the following:
- the fact that the product being applied for is an insurance product
- the key terms and definitions related to the insurance
- all of the customer fees and charges associated with the insurance product, and how they would be payable
- the fact that insurance coverage from a specific company is optional, if a separate charge is levied for the coverage
- the name of the primary insurance company underwriting the insurance product
- how and when the customer would be notified of acceptance or rejection of the insurance coverage
- when the insurance coverage would come into effect and when it would terminate
- the duration of any “free look” period, during which all premiums charged would be refunded if the customer decides to cancel the insurance coverage
- the customer’s responsibilities and the right to cancel the insurance coverage at any time
- the terms and conditions that might limit or exclude coverage
- the claims procedures
- how to obtain additional information about the insurance coverage.
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