A subsidiary of the Equitable Group (no link to Equitable Life Insurance), Equitable Bank announced on its website that customers can borrow up to 90% of the surrender value of their policy tax-free. This small Toronto-based bank that employs over 650 professionals has $26 billion in assets under management and specializes in loans and mortgage lines of credit, deposit services and commercial lending. 

This new line of credit follows on the heels of its reverse mortgage PATH Home Plan, launched in May. A reverse mortgage lets homeowner borrow on a portion of the home equity to free up liquid assets for retirement. Equitable Bank CEO Andrew Moor thinks demand for this type of product is strong in Canada. The bank plans to expand its offer of financial solutions tailored to aging Canadians. 

Billion-dollar market

Equitable Bank notes that 22 million Canadians hold some form of life insurance, for total coverage of over $4.3 trillion. As the population ages, the overall value of policies will increase. Equitable Bank estimates that the value of loans backed by life insurance will expand to $1 billion by 2023.

“The Equitable Bank CSV Line of Credit gives a growing Canadian demographic financial flexibility to retire comfortably and pursue their retirement dreams, whether that is supporting a business venture or helping a loved one,” Moor explains. He says he wants to offer a variety of financial options to meet diverse needs. 

Alternative to large banks 

Mahima Poddar, Vice President, Product and Corporate Development, at Equitable Bank, told Insurance Journal in an interview that the Bank is highlighting products intended for older people across Canada because traditional banks are not meeting their needs very well. “Their loan products, like mortgage and line of credit, require underwriting usually depending on regular income. Often, the income of aging people might be lower or more unpredictable than required by the big banks. We’ve streamlined our process and made our products available to the mass market.” She adds that Equitable Bank targets a similar niche to that of competitors like Manulife Bank.

What’s more, needs are growing. Poddar cites Statistics Canada figures that put the number of Canadians ages 65 and over at 4.2 million in 2005; the figure will rise to 10.1 million in 2035. “It’s an increase of 140%,” she says. 

Contact your advisor

The new line of credit is similar to what the industry calls a collateral loan. “You’ll get quick access to cash and no ongoing payments are typically required while your policy continues to grow,” the bank explains. In its marketing brochure, Equitable Bank recommends that clients meet with an advisor to purchase the line of credit. “Meet with your financial advisor or a professional insurance broker to fill out an application. By working with them, we’ll review your eligibility to determine if you qualify,” it says.

The document mentions that clients who are accepted have four financing options: a single one-time amount, an ad-hoc advance, an advance scheduled on a monthly basis or a combination of these options. Poddar says the minimum amount of the loan equal to 90% of the surrender value is $15,000.

Paul Desmarais III, partner

Co-founder of Portag3 Ventures, Paul Desmarais III (member of the family that owns Great-West and subsidiaries) is excited to partner with Equitable Bank in this offer to help people make the most of their life insurance contracts, which he considers traditionally an underused asset.

Expansion underway

In terms of the ventures available, Mahima Poddar said that Great-West and its subsidiaries were just a starting point. “We’re actively looking for other insurance companies,” she adds.

Poddar also said that Equitable Bank wanted to continue extending its offer to other insurance-based products such as Insurance Financial Agreements.