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New Limits on Minimum Interest Rate Guarantee Premiums
Posted in Canada Life · · (permalink)
The continuing low interest rate environment has cause Canadian insurers to re-evaluate prices and policies related to products with guaranteed minimum interest rates.
Effective May 14, 2012, Canada Life will limit subsequent premium deposits to the guaranteed interest options, and daily interest options in contracts with guaranteed minimum interest rate provisions at $1,000 annually.
Contracts containing these provisions were generally issued in the late 1980s and early 1990s and include subsequent premiums related to these comprehensive annuity policies.
What’s Changing
- Lump sum premiums will be capped at $1,000 per year.
- Existing pre-authorized chequing (PACs) under $1,000 can only be increased to a total amount of $1,000 per year
- Existing PACs that exceed $1,000 per year can’t be increased
- If existing PACs are changed, they will be subject to the above limits
What isn’t Changing
- Canada Life will continue to provide minimum guaranteed interest rates on existing assets within these contracts.
- Existing PACs are unaffected as long as no chances are made.
Increases to PACs in excess of this limit will be declined. Lump sum premiums that exceed the limit will be returned to clients.