Capital Benefits under a Security Fund Contract
Although this may sound like Disability income or Critical illness insurance, it is really a method that was devised to take advantage of the income tax act to enable you to access your tax-sheltered capital on a tax-free basis.
At one time, most people will qualify under the definitions as listed below. Having the ability to accumulate tax-sheltered capital is a significant advantage unique to Universal Life; however, having tax-free access to that capital, either in a lump-sum or in periodic payments, is a feature unique to Security Fund from RBC. In effect, this puts the policy owner in control of the tax trigger. The definitions below apply to any lives underwritten in the policy.
Security Fund give the policy owner the option of claiming capital benefits — in addition to income replacement, critical illness and long term care benefits — if the insured becomes occupationally disabled, is afflicted with a critical condition, suffers a loss of independent existence, or qualifies for facility or home care benefits. The maximum capital benefit that may be claimed cannot exceed the value of the accumulation fund of the policy (after deducting any applicable market value adjustments and early liquidation amounts). Capital benefits are received as tax-free disability benefits.
Lump-Sum or Periodic Benefits
Capital benefits may be claimed after a specified waiting period depending on the nature of the disability. They may be claimed either as a lump sum or in the form of periodic payments made as long as the disability continues. Capital benefits may be particularly valuable to:
- provide periodic tax-free payments to supplement income replacement benefits.
- provide lump sum benefits to pay off debts.
- fund buy/sell provisions of share –holder agreements triggered on disability.
- pay extraordinary medical or other expenses incurred as a result of disability.
- fund long-term care.
Occupational disability
For purposes of claiming capital benefits, an individual is considered to be occupationally disabled if, because of injury or sickness, he or she is unable to perform the substantial duties of his or her regular occupation and is not working in any other gainful occupation. The individual must also be under the regular care of a physician. Capital benefits may also be claimed under occupational disability if an individual is engaged in his or her own occupation, but due to illness or injury is earning 80% or less of their prior earned income, or if the individual is unable to perform the substantial duties of his or her occupation and is not working in any other gainful occupation.
Critical condition
Capital benefits are also avail able if the insured is afflicted with a critical condition at any time, regard less of age. Critical conditions are defined as critical illnesses and are listed in the policy contract and any condition which has been diagnosed by a physician as terminal where death is expected to occur as a result of that condition within 24 months. In general terms, the conditions covered are:
- Alzheimer’s disease
- aorta surgery
- blindness
- cancer
- coma
- coronary artery bypass
- deafness
- heart attack
- kidney failure
- loss of limbs
- loss of speech
- major burns
- major organ trans plant
- Multiple Sclerosis
- paralysis
- Parkinson’s disease
- stroke
- valve replacement.
Complete definitions of these conditions appear in the policy contract.
Loss of independent existence
Capital benefits are also avail able if the insured suffers a loss of independent existence. A loss of independent existence occurs if an insured loses two or more limbs or if the insured cannot, without the continual assistance of someone else, perform one of the following daily activities:
- ability to take a bath or shower or otherwise maintain adequate personal cleanliness, with or without the aid of special equipment;
- dressing and undressing, including putting on and taking off medically necessary surgical appliances usually worn;
- getting to and from the toilet, getting on and off the toilet and maintaining an adequate level of personal hygiene;
- voluntarily control ling bowel and bladder function, with or without the use of catheters, incontinence pads or other artificial aids;
- moving in and out of a chair or bed with or without the aid of equipment;
- and eating and drinking after food or drink has been prepared and made avail able.
Loss of independent existence includes cognitive impairment, meaning a significant loss in intellectual ability accompanied by deterioration in memory, orientation, and reasoning, which is sufficiently severe to require continual daily super vision. The determination of cognitive impairment must be made on the basis of clinical data and valid standardized measures of such impairments. In such a case, the individual will qualify for capital benefits. If long term care benefits are payable, capital benefits are also payable.