Buying insurance from lenders, dealerships, and other merchants

Certain businesses are allowed to offer insurance products as an additional service, secondary to their main business. This is called an incidental sale of insurance.

There are limitations on the types of insurance products and services that can be sold this way, and there are regulations that those selling the insurance must comply with.  These rules are in place to protect consumers.  In particular, in New Brunswick, the seller must now hold a restricted insurance representative (RIR) licence issued by the Financial and Consumer Services Commission of New Brunswick. 

Licensing helps protect consumers because it sets out requirements for those selling insurance to be knowledgeable, accountable and to provide enough information for you to make an informed decision. Email insurance.licensing@fcnb.ca to see if the business is licensed before purchasing any insurance product.

Here are some things to keep in mind when considering these insurance products: 

Only certain types of businesses can sell these products

Business who can apply for a RIR license to sell insurance incidentally in New Brunswick include:

• Vehicle dealerships (including automobile, RV and watercraft dealers)
• Banks, credit unions and trust and loan companies (deposit-taking institutions)
• Funeral providers
• Mortgage brokerages 
• Vehicle rental businesses

You do not have to buy the insurance being offered by the business 

Tied selling is prohibited. Tied selling is when:

• a business makes buying the incidental insurance product from them (or from a specific company or agent) a requirement for buying the primary product or service.  
• a business tells you that you may only buy the insurance from them (or from a specific company or agent).  

Sometimes customers are required to purchase an insurance product as a condition for obtaining a credit product – this protects the lender if you are unable to pay back the loan. But they cannot tell you that you may only buy the insurance from them (or from a specific company or agent). 

You may still want to consult a licensed insurance agent

An individual or business with a RIR license is not a licensed insurance agent.  They can sell certain products, but a licensed insurance agent may be able to provide you with further information or guidance on your insurance needs and options.

Know the Details Before you Buy – Make an Informed Decision

Disclosure means sharing important facts and details, so you have enough information to make an informed decision about your purchase.  A restricted insurance representative or their employee has these disclosure requirements:  

Commissions Earned: Insurance companies usually pay the business holding a RIR license or the business’ employees a commission for selling insurance on their behalf.  If the amount paid is more than 30 per cent of the price of the insurance, the business or its employee must disclose the commission amount or explain how the commission is calculated.

Written Information: Within 20 days of the insurance becoming active, the business holding a RIR license must provide, in writing:

• a summary of the contract terms, including any limitations, exclusions, and restrictions
• an explanation of when the insurance starts and ends and how to make a claim
• the cost of the insurance 
• a copy of your application and documentation describing the insurance
• the policy or a certificate for group insurance
• written documentation showing proof of the insurance

If you applied for insurance on a loan (disability insurance, life insurance, critical illness insurance or loss of employment insurance), the written summary of terms must include clear information on: 

• the coverage and pre-existing conditions that may prevent you from being paid if you make a claim 
• the consequences of any misrepresentation in the insurance application

Cancellation information: When you buy certain types of insurance from a business holding a RIR license, you have 20 days from the day you receive the documents mentioned above to cancel the insurance and receive a full refund. After the 20 days, you can still cancel the insurance; however, you will likely not get a full refund.   The business must notify you of your “right to rescind” at the time of purchase.

The right to rescind for a full refund applies to:

• credit-related insurance on a loan (creditor’s critical illness insurance, creditor’s disability insurance, creditor’s life insurance, and creditor’s loss of employment insurance)
• funeral expense insurance
• guarantee asset protection insurance
• replacement cost insurance

 
If you have purchased insurance on a loan, the cost of the insurance may be added to your loan. Should you cancel the insurance within the 20-day period, your monthly loan payments might not change. Instead, the refund might be applied to the loan. Ask the business holding the RIR license for details.

Contact information: When you buy insurance incidentally, you will be asked to sign an insurance contract. The contract is with an insurance company. The business holding an RIR license needs to give you the name and contact information of the insurance company. If you have questions, you should contact the insurance company and not the business holding the RIR license.

Do I need the insurance?

The risk of illness, theft, damage, fire, accident, or death is real. Many New Brunswickers choose to minimize the chance of a resulting financial hardship by purchasing insurance. If you think you may not be able to afford potential financial loss or damage from an unexpected event, then you may want to consider buying insurance.

In deciding whether you need the insurance, review your existing coverage or speak with your licensed insurance agent to see if you are already covered through an existing insurance policy. Shop around for other options; you may be able to find a similar insurance product for a better price elsewhere. 

Always be honest

Finally, always provide complete and accurate information when applying for insurance. Falsifying or leaving out information could result in the contract being voided and having a claim being denied. 

Learn more about insurance in New Brunswick.