Do you understand your pension fund?

Page 16

Are you involved in a Registered Pension Plan with your employer? If

you are you need to be sure you understand your protection in the event

of company or fund bankruptcy or insolvency.

If the company your pension money is invested in is a federally

registered life insurance company, chances are the company is a member

of the Consumer Protection Plan for Canadian Life & Health Insurance

Policyholders (Compcorp). What is most important is that you realize

only guaranteed (eg. 1, 3 5 yr. GIC's) are protected by Compcorp.

Segregated Funds, Diversified Funds, Mortgage, Bond Balanced Funds, just

to name a few, are not protected by a Compcorp Insurance.

CompCorp was created by the life and health insurance industry in

Canada to provide Canadian policyholders with protection, within limits,

against loss of policy benefits in the event of the insolvency of their

insurance company. It is funded by Compcorp's more than 200 members.

There is no need to apply for protection since protection is

automatically extended to eligible policies issued by member insurance

companies.

Here is some information about CompCorp.

All insurance companies, with very few exceptions, that are licensed in

Canada to sell life and /or health insurance to the public are members.

Fraternal benefit societies or associations and mutual benefit

societies would not normally qualify for membership. Some prepaid

hospital, medical and dental service organizations also do not qualify

for membership.

CompCorp protects policy- holders of member insurers with life

insurance, health insurance, disability income, money-accumulation or

annuity policies that promise to pay either a fixed or at least a

minimum amount of money to a person, or on a person's death.

Policyholders are protected for as long as the policy remains in force.

Policies are divided into three classes, and each class has its own

separate and independent limits of coverage.

Class A: In this class are:

- life insurance policies;

- accumulation annuities (similar to bank and trust company GIC's);

- Registered Retirement Savings Plan (RRSPs)

- Registered Retirement Income Funds (RRIFs); and

- any other policies that provide life insurance protection or for the

saving and investment of money.

The limits for this class are:

- $200,000 of life insurance protection

- $60,000 in cash withdrawal for non-registered policies (including

life insurance cash values)

- accumulation annuity, an RRSP and a RRIF will be protected for up to

$200,000 of life insurance and for up to the following withdrawable

amounts:

- life insurance cash value plus accumulation annuity -- $60,000

RRSP plus RRIF -- $60,000 Class B: In this class are:

- life and fixed term annuities under which an income is being paid

annually or more frequently (e.g. monthly) and disability income

policies (e.g. weekly income, long-term disability and/or disability

expense coverage). Excluded are those annuities where the annuitant is

allowed to take a lump sum cash payment instead of a stream of future

income payments, as these are included under the Class B limits.

The limit for this class is:

- $2,000 income per month.

Class C: In this class are:

- health benefits, including supplementary health care and dental

benefits. Not included are disability income policies, which are

covered under Class B.

The limit for this class is:

- $60,000 in total payments to each covered person, including each

dependent separately.

Compcorp "tops-up" to CompCorp's limit for the amount paid by the

liquidator, if a top-up is required.

For example: Suppose there are sufficient assets left in the insolvent

insurer for the liquidator to pay policyholders 90 per cent of their

claims.

If the claim is for a $50,000 cash value, the liquidator would pay 90

per cent of $50,000 which is $45,000. Since the coverage limit is

$60,000 and this claim is below that limit, CompCorp would pay $5,000.

This policyholder would receive the full $50,000.

If, however, the claim was fo a $100,000 cash value the liquidator

would pay $90,000 and CompCorp would pay nothing. That is because

$$90,000 exceeds CompCorp's limit. The policyholder would receive

$90,000

The limits apply to the combined total amount payable under all

policies in the same class with the same insurer covering the same

person.

Next month Windspeaker will look at what a "person" means in applying

person limits and will discuss more about Compcorp. If, however, you

have questions about this protection call 1-800-268-8099.