grouped cii

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For insurance representative use only.This document is not intended for public distribution.

Protection Solutions

Your guide to

Making Retirement BetterGrow. Protect. Live. Transfer.

ProtectaGrouped Critical Illness Insurancewith Standard Life

For insurance representative use only.This document is not intended for public distribution.


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Hello.Grouped critical illness coverage (grouped CI) is not agroup insurance plan. A group insurance plan is a group ofemployees covered under a single contract.

A grouped, or common, plan is where the employer putsin place an arrangement whereby employees are coveredunder individual CI contracts as part of a common planinvolving two or more employees.

The employer puts the arrangement in place. The company is the policyholder (or

owner) and the employee is the beneft recipient. The employer pays the premiums,

which are then tax-deductible a big advantage to the employer. The employer-paid

premiums are not taxable to the employee a big advantage to the employee.1

For the employee, the beneft received, should a claim be paid, is non-taxable to them

and can be used at their discretion.

1 ForresidentsoQuebec,theemployer-paidpremiumsareataxablebeneftorprovincialtaxpurposesonly.

The Grouped CI Advantage A Tax Efficient Benefit ArrangementFor the employer, it allows them to offer a valuable benefit to existing employeesin appreciation of work well done, and a way to attract new employees. Thebenefit helps relieve their employee of the immediate financial stress of acritical illness and allows them to concentrate on a speedy recovery.

The employee is free to use the lump-sum benefit as needed to pay themortgage, reduce debt, provide homecare or childcare. The benefit is there forwhen it is needed most.

Standard Lie


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Standard Lie

Requirements

The ollowing are required to implement this concept and maintain its tax eectiveness:

Two or more insurable employees

Individually issued CI policies

An umbrella agreement under which all the policies are grouped together.

How does Grouped CI work?

The arrangement is considered a GroupAccident

andSicknessPlan or tax purposes. Each contract is

issued on an individual basis. There must be two

or more insurable employees participating (this

is crucial to ensure that the plan qualifes under

paragraph 6(1)(a) o the Tax Act). The employer,

who is also the owner o the policy, pays the

premiums, which are deductible or tax purposes.

The employee is the insured and the beneft

recipient.2

In the event the employee contracts one o the

illnesses covered under the plan, the beneft is paid

tax-ree directly to the employee or their named

benefciary. Once a ull beneft is paid, the critical

illness contract or that employee is over.3

The umbrella agreement

In order to ensure that the plan meets the

requirements or a grouped or common plan

it will need to be documented. We recommend

that the employer distribute a copy o the plan

description to their employees.

2 PleasereertotheollowingTaxing Issuesoradditionaltaxinormation:Grouped CI as an EmployeeBeneft(PC5786B-10-2006)andThe Taxationo Corporately-Owned Critical Illness Insurance(PC5772A-10-2006).

3 Theemployershouldensurethatbeneftsprovidedbythearrangementcannotbeconstruedasperiodicwage-lossbeneftsortheemployee.

The umbrella agreement would document the

details o the plan and its members. In it, the

employer would state that it is implementing the

group accident and sickness arrangement and

would provide a description, including, but notlimited to, the ollowing:

The purpose o the arrangement

Defnition and description o the plan Members

Plan unding (i.e., with the employer paying the

premiums or the individual CI contracts being

acquired)

The type o critical illness policies (i.e., number

o illnesses and amount o the beneft) to be

included in the plan

Record management

Termination o employment

We can oer you guidance on how to set up this

type o umbrella agreement.

Plan membership

The umbrella agreement defnes the employees

who will participate in the plan, known as

Members. These Members may all into dierent

Classes, which will allow the employer to structure

a plan tailored to the employees he has. For

example, there could be an Executive Class made

up o management, and an Ordinary Class o

Members or all other employees. These Classes

will also defne the eligibility o a Member to jointhe plan, based on things such as length o service

with the company and their position.

TIP

Where participants are both shareholders and employees,

they should be able to demonstrate that they participatein the arrangement by virtue of their employment, nottheir shareholding. They should be receiving employmentincome, as reported on a T4 slip.

Protecta Grouped Critical Illness Insurance

Requirements


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TIP

Each employee Class should havethe same type of plan. For example:

All Executive Members havecoverage under Protecta 65Enhanced for $150,000.

All Ordinary Members havecoverage under Protecta 10 for$25,000 or $50,000.

This is determined by the employerand spelled out in the umbrellaagreement.


Making it Happen

Making it Happen

We can provide you with suggestions in making the arrangements in the most efcient

manner, rom presentation to implementation.

Applying for the individual plans

Each employee applies or the critical illness policy

and is underwritten on an individual basis. The

employer is the owner/payor and the employee is

the beneft recipient.

The medical underwriting requirements or the

Protecta Critical Illness policies are based onthe age o the applicant (insured) and coverage

amount (see PC4439 UnderwritingRequirements

on Advisor Source), as they would normally be.

However, there will be no CI oered on children

or this type o arrangement.

The type o plan (Protecta 10, Protecta 65,

Protecta 75, Protecta 100), coverage (Protecta

or Protecta Enhanced) and beneft amount are

determined by the employer. These may vary by

Member Class. The coverage is not transerable

rom one Member (insured) to another.

TIP

To facilitate the medical requirements, such as aparamedical or UHIV, we could arrange for the medicalsupplier to be on site for a day for the preliminaryenrolment.

For tax purposes, we would suggest not adding

the Return o Premium on Death (ROPD) or Return

o Premium on Surrender (ROPS) options. There

is also some uncertainty rom CRAs perspectiveabout whether this may cause the arrangement

not to be an A&S arrangement. In any event,

where an employer has deducted the premiums

originally paid, any ROP benefts it receives

generally represent a recovery o these expenses,

and will be included in income.

Standard Lie


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Making it Happen

At implementation, applications or the CI

coverage should be submitted concurrently to

establish the necessary group, and ensure there

are at least two insurable lives. New Members willbe added as they become eligible under the terms

o the agreement. All applications must be marked

GroupedCIat the top o the frst page.

Portability and flexibility are keyfeatures of the Grouped CI plan, notto mention CI coverage is not widelyavailable for group insurance. Inaddition, with group insurance, theemployee would be expected to paypremiums, while with Grouped CI, theemployer pays the premiums on theemployees behalf and still deducts thepremiums as an expense.

Rated employees

Reasonable ratings are acceptable under the plan.The employer reserves the right to determine a

Members eligibility under the plan only i that

employee is excessively rated. This is stipulated in

the umbrella agreement.

The employer determines the limits ofthe plan, as it is the employer who paysthe premiums.

Records and statements

The employer should make available a copy o the

agreement to the plan Members or review during

normal business hours. All inormation pertaining

to the individual policies are confdential and must

be kept in a secure place.

All Grouped CI policies will begin with LGCI or

the policy number. Standard Lie will provide

statements to the employer upon request.

As the employer is the owner, all changes to the

individual policies must be signed by the company

representative (as determined by the employer)

and the employee. We would suggest that the

employer assign an individual or this purpose.

Benefciary designations are determined by the

employee (insured), and the employer is obligated

to respect all direction in that regard. This right is

protected under the umbrella agreement.

Termination of employment

I they should change employer, the employees

can assume the policy themselves. Unlike most

group insurance plans that may provide coverage

convertibility at an attained age cost when an

employee leaves, this plan is ully portable with no

change to issue age, beneft or cost.

There is no loss to the employer when an

employee leaves the plan. The employer had

deducted the premiums as an expense, and gained

tax advantages rom doing so.

The employee would now pay the premiums, but

at the same cost the employer paid there would

be no increase.

The umbrella agreement will speciy the terms o

transer o the policy rom employer to employee,

and will cover the unearned premium as well as

the time rame or the transer. The employer

must oer the employee the right to take over the

coverage in writing.

Standard Lie

TIP

Employers could make direct contributions to anindividual or group RRSP for employees who are highlyrated or declined. While this will be a taxable benefit tothe employee, the employee will have an offsetting RRSPcontribution. (Of course, RRSP contribution room needs to

be checked).


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Standard Lie


Benefits

This document must not be relied upon as proessional advice o any kind whatsoever.Legal, as well as, proessional advisors should be contacted or advice with respect to anyparticular circumstances.

With Protecta critical illness coverage, i an employee is diagnosed with one o the

critical illnesses covered by the policy, such as heart attack, cancer, stroke, or coronary

artery bypass surgery, and survives a period o usually 30 days, they will receive a lump

sum payment.

The employee is ree to use this beneft as needed to pay the mortgage, reduce debt,provide childcare. It is their choice.

A companys greatest asset is its employees.

Protecta Grouped CI is an important

benefit for employees financial health.


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Standard Lie

Protecta Grouped Critical Illness

Requirements

Marketing materials to provide employers with:

5864 Protection Solutions Folder

PC 6085 Prospecting letter or Protecta Grouped CI

6084 This is all about Protecta Grouped CI with Standard Lie

6078 Q&A on Grouped Critical Illness Insurance

4776 This is all about Protecta Critical Illness Insurance rom Standard Lie5866 This is all about Protecta Critical Illness Insurance or business owners

4900 Protecta Critical Illness Insurance (At a Glance)

PC 5786 Grouped CI as an Employee Beneft

PC 5772 The Taxation o Corporately-Owned Critical Illness Insurance

PC 5787 Corporately-Owned Critical Illness Insurance

5628 Have you thought about the fnancial impact o a critical illness?

PC 5870 Sample cover letter to doctor

5016 Insurability checklist

5071 Comprehensive Application Form

Marketing materials to provide employees with:

6078 Q&A on Grouped Critical Illness Insurance

4776 This is all about Protecta Critical Illness Insurance rom Standard Lie

5628 Have you thought about the fnancial impact o a critical illness?

5016 Insurability checklist

Feel ree to consult Your Guide to Protecta Critical Illness Insurance with Standard Lie (4213) and

Protecta Critical Illness Insurance (At a Glance) (4900) or more inormation on critical illness insurance.

Marketing Materials

Eastern Region

[email protected]

Central Region

[email protected]

Western Region

[email protected]

Ask about our Business Markets Program

The materials listed below can be used to provide your clients with a kit or the employer

as well as some inormation or the employees. These materials are available, both in

print and PDF ormat, on Advisor Source at www.advisors.standardlie.ca. Printed copies

can be ordered through the regular distribution channels.

Standard Lie


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Retirement

Investments

Insurance

09-1-00

The Standard Life Assurance Company of Canada

18884994995

Talk soon.

www.standardlife.ca

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