Claim Disputes, Mistakes and Official Sources
12 costly life and disability insurance mistakes Canadians make (and how to avoid them)
The mistakes that cost Canadians their life or disability claims: incomplete applications, outdated beneficiaries, relying on group plans, missed deadlines and lapsed policies.
The most expensive life and disability insurance mistakes in Canada are rarely about picking the wrong insurer. They are: leaving something out of the application, which lets the insurer contest the policy within two years; relying only on group coverage that ends when the job does; never updating the beneficiary after a separation or a new child; naming minor children directly with no trustee; letting a policy lapse during an illness because a payment failed; cancelling an old policy before the new one is in force; and missing deadlines such as the 90-day window to ask for reconsideration of a refused CPP disability application. Each is avoidable with a few minutes of checking, set out below with the guide that covers it in detail.
This is the overview for the claims, mistakes and sources section.
Mistakes at the application stage
1. Answering health questions from memory
Applications ask about diagnoses, tests, medications and consultations, often over the past 5 or 10 years. Forgetting a specialist visit or a prescription is the classic way an honest applicant ends up with a disputed claim. Insurers in Canada can void a policy for material misrepresentation in the first two years, and for fraud at any time. Get dates from your pharmacy and your doctor's office before applying. Details: contestability and misrepresentation.
2. Letting the advisor fill in the answers
If an advisor types your answers, you are still responsible for them. Read the completed application before signing and keep a copy.
3. Buying on monthly price alone
Two policies at the same price can differ in renewability, conversion rights, definitions of disability and exclusions. Read the clauses first, then compare price.
Mistakes in how much and what kind
4. Counting on group coverage
Group life of 1 or 2 times salary and group LTD usually end when you leave the employer, retire, or sometimes when you go on unpaid leave. People who change jobs in their 50s with a new health condition can find individual coverage expensive or unavailable.
5. Insuring the mortgage, not the family
A policy that only pays the mortgage leaves the family without income. Calculate the full need, including income replacement, as shown in the needs calculation.
6. Ignoring disability
Many households carefully insure against death and leave a long disability, which is more likely during working years, uncovered.
Mistakes with beneficiaries
7. Not updating after a life change
A beneficiary designation is not changed automatically by most life events outside Quebec. An ex-spouse can remain the beneficiary years after separation unless you change it or a separation agreement requires something else. In Quebec, a divorce or the dissolution of a civil union generally causes a designation of the former spouse to lapse, but a de facto (common-law) partner is not covered by that rule.
8. Naming minor children with no trustee
An insurer cannot pay a large sum directly to a minor. Outside Quebec, without a trustee the money may be paid into court or to a court-appointed guardian until 18; in Quebec, the child's tutor administers it, with oversight. Appoint a trustee or set up a testamentary trust. See beneficiary designations in Canada and Quebec.
9. Naming "my estate" without a reason
Proceeds paid to the estate pass through the will, are exposed to the estate's creditors and, outside Quebec, can attract probate fees. Name individuals unless you have a specific reason.
Mistakes during and after a claim
10. Letting the policy lapse while sick
A payment that fails while you are in hospital can end a policy after the grace period. Check whether you have a waiver of premium benefit and claim it; set up payments from an account a spouse can manage. See grace periods and reinstatement.
11. Missing deadlines
| Deadline | Typical time limit |
|---|---|
| Asking Service Canada to reconsider an EI decision | 30 days |
| Asking for reconsideration of a CPP disability refusal | 90 days |
| Appealing after reconsideration | 90 days for CPP (Social Security Tribunal); for EI, the EI Board of Appeal since April 2026, deadline stated in the letter |
| Giving notice and proof of an LTD claim | As set in the policy; often within months of the disability |
| Suing an insurer | Provincial limitation periods, often 2 years from when the claim was refused, sometimes shorter under policy terms |
See CPP disability and EI reconsiderations and what to do when an LTD claim is denied.
12. Replacing a policy carelessly
Cancelling an existing policy before the new one is issued, or replacing an old policy without weighing what you lose (a new two-year contestability period, a new suicide exclusion, higher age), can leave you uninsured or worse off.
Quick self-check
- Do I have personal coverage that does not depend on my job?
- Are my beneficiaries correct today, with a contingent beneficiary and a trustee for minors?
- Would my premiums keep being paid if I were in hospital for two months?
- Do I know who to call and which deadlines apply if a claim is refused?
- Do my executor and family know which insurers hold my policies?
Frequently asked questions
How do I find a lost life insurance policy?
Check bank statements for premium payments, old tax files, and the deceased's mail and email. Contact the employer's benefits department about group life, and any insurer you suspect. The Canadian Life and Health Insurance Association has offered a service to help heirs locate a deceased person's policies; check its website for the current process.
Can my employer cancel my group LTD?
The employer can change or end the group plan at renewal, but an approved claim normally continues under the policy that was in force when you became disabled.
Where do I complain?
Use the insurer's internal process, then the OmbudService for Life and Health Insurance. Contact details are in the official sources guide.
When should I see a lawyer?
When a large claim is denied for misrepresentation, when an LTD claim is terminated at the 24-month change of definition, or when there is a dispute between possible beneficiaries.
Sources
- OmbudService for Life and Health Insurance — free complaint help
- Canadian Life and Health Insurance Association — consumer guides and policy search for heirs
- Social Security Tribunal of Canada — CPP appeals and EI second-level appeals
- Autorité des marchés financiers — Quebec complaints and advisor register
