Accidental Death Insurance – A type of insurance that provides a payment if a person has an illness, are injured or dies from an accident. It includes both disability income insurance and accidental death and dismemberment insurance.

Accidental Death and Dismemberment Insurance – A type of insurance that makes a payment to the insured if they die from an accident or lose a full or partial use of limb, hearing, or eyesight. This type of insurance can be on its own or added to a life insurance policy.

Accidental Death Insurance – A type of insurance that makes a payment if the insured dies from an accident. Accidental death insurance can be purchased its own or added to a life insurance policy.

If added to a life insurance policy, and death of the insured occurs from an accident, the insurance company pays both the life insurance amount and the accidental death insurance amount.

When the amount of the accidental death insurance is equal to the amount of the life insurance, the amount payable is double the original amount of the life insurance policy, and is known as “double indemnity“.

Actuary – Is a person employed by an insurance company who is professionally trained to compile and analyze statistics, economics and mathematic skills and tools to calculate insurance risks, premiums and even dividends. They basically help to design and price insurance policies for their companies.

Advisor – See Agent

Adjustable Policy – Is a type of policy that allows the insurance company to make changes to the policy under certain conditions. These changes may include the amount of insurance, the premiums charged, and the cash value.

Agent – A person who is licensed by a provincial or territorial regulator to sell a range of life insurance products, including segregated funds. Commonly referred to in the industry as Life Insurance Broker, Life Insurance Agent or Life Insurance Advisor (See Broker)

Application – A formal request submitted to an insurance company for insurance coverage. It provides the information and the type of insurance the insured wants. The information provided to the insurance company helps them to decide if the person submitting the application meets the requirements to qualify for insurance. In some circumstances, a series of health questions and undergoing medical testing may be included as part of the application process.

Annuity – A contract that pays an income at regular intervals, typically monthly, in exchange for an upfront payment. The income can start immediately or in the future. Annuities are often used to provide a retirement income. When offered by an insurer, annuity contracts can be registered as RRSPs, RRIFs, TFSAs as well as offered through group retirement and savings plan.

Annuitant – The term used to describe a person receiving income payments from an annuity.

Annuity Trust – See Charitable giving and Uni-trust. Instead of a percentage of the asset value, the donor is paid a fixed amount annually.

Automatic premium loan – A feature in a permanent life insurance policy that permits the insurance company to pay for overdue premiums by taking a loan out against the policy (as long as the policy has a cash value). Paying for overdue premiums using this feature prevents the policy from being canceled or lapsing.

Asset Allocation – Is the process of selecting a mix of asset classes that closely matches an investor’s financial profile in terms of investment preferences and risks.

Annual Return – Is the actual return an investment provides over time, expressed as a time-weighted percentage. Sources of returns can include dividends, returns of capital (also called gains) and capital appreciation.

Average Rate of Return – The rate of return on an investment is calculated by taking the total cash inflow over the life of the investment and dividing it by the number of years in the life of the investment. The average rate of return doesn’t guarantee that the cash inflows are the same in a given year; it simply guarantees that the return averages out to the average rate of return.

Balanced Mutual Funds – Are a type of investment fund that are geared towards investors looking for a mixture of safety, income and modest capital appreciation (growth). The actual dollar amount invested in each asset class must remain within a set minimum or maximum.

Beneficiary –  A beneficiary is the person you name to receive the payment from your insurance company upon your death. If you don’t name a beneficiary, the death benefit payment goes to your estate. Benefits of having a beneficiary include avoiding probate fees, potential creditor protection, and immediate payment of funds with less estate litigation or estate administration involvement. Also known as a beneficiary designation. (See also Irrevocable Beneficiary).

Benefit – The payment the insurance company makes when they approve an insurance claim. In a life insurance policy, the benefit is referred to as the Death Benefit.

Broker – Another term to refer to a life insurance agent (Life Insurance Broker, Life Insurance Advisor).

Cash flow – A term used in business but applicable to personal finance that refers to how much money is coming in, how easily accessible that money is, and how much it actually flows in and out of a business or household, especially as affecting liquidity (the speed at which assets that are tied up or locked-in can be converted to cash).

Cash flow index – A scoring system to help a person identify the efficiency of each of their loans, essentially allowing the most inefficient loans to be paid off first and then reprioritize the repayment order of all remaining loans first to maximize results.

Cash flow optimization – Is the ability to manage hard dollar the most efficient way possible, to ensure money is never going into destructive areas but rather being used and spend productivity while providing an abundance lifestyle and growing wealth safely for your future. Plus, optimizing cash flow also means never interrupting the growth of your money when money is needed to fund life’s necessities.

Cash surrender value – The amount an insurance company pays to the insured when a permanent life insurance policy is canceled that has built up a cash value. The insurance will deduct any outstanding policy loans or overdue premiums before paying out the cash value to the insured.

Cash value – The amount built up in a permanent life insurance policy, such as whole life and universal life insurance policies. The insured can take a policy loan out against the cash value of their policy. If the policy is canceled, the insurance company will surrender the cash value to the insured.

Charitable giving – A gift made by an individual or an organization to a non-profit organization, charity or private foundation. Charitable donations are commonly in the form of cash, but can also take the form of real estate or other assets. Tax deductions are given for current contributions and for estate owners, charitable gifts can reduce the size of the estate to help minimize estate taxes. An individual may also designate a charitable beneficiary in their will to benefit the organization after the individual has passed.  By using charitable gifting techniques, a donor may be able to benefit the charity while living without having to sacrifice the income that an asset can generate.

Charitable Lead Trust – See Income Trust

Claim – A formal request made to an insurance company for benefit of payment.

Claimant – A person who makes a claim.

Compound Interest – Is one of the most useful concepts in finance. It is interest earned each year that is added to the principal, so that the balance doesn’t merely grow, it grows at an increasing rate. It is the basis of everything from a personal savings plan to the long term growth of the stock market.

Contestability – Is the legal right of an insurance company to question or “contest” you insurance coverage. For example, if you have provided the insurance company with incorrect or incomplete information when submitting your claim, they will re-examine what impact the missing information may have had their decision to insure you. If the decision may have been different, the insurance company may cancel coverage and deny any claims. Most policies have a two-year contestability period. After that time, the only way an insurance company can contest coverage is in case of fraud.

Contingent Beneficiary – A contingent beneficiary is someone naming more than one beneficiary to receive the benefit of an insurance policy. The primary beneficiary is first in line to receive benefits. If the primary beneficiary dies before the benefit is payable, a secondary beneficiary (contingent) will receive the benefit.

Conversion right – The right of the policyholder to exchange their policy for another one, without giving much proof of good health. A common example is exchanging a term insurance policy for a permanent insurance policy.

Cost-basis – Refers to the original value of an asset for tax purposes, usually the purchase price, adjusted for stock splits, dividends and return of capital distributions.

Creditor Protection – If you have unpaid debts, the people you owe the money to (creditors) may legally have access to your assets, such as property, investments or valuables, to pay off the debt. This can happen through a bankruptcy or other legal proceedings.

The funds in your insurance policies may be protected from creditors in certain circumstances. For example, if you make certain beneficiary designations, declare bankruptcy, or if the policy is registered (such as a Registered Retirement Savings Plan). However, the protection may not apply if you put your money into an insurance policy to avoid paying your creditors.

Critical Illness Insurance – Critical illness insurance provides you with a tax-free lump-sum payment to use however you need while recovering from life-altering illnesses or specific critical conditions such as cancer, heart disease or stroke. Other critical illnesses commonly covered by critical illness insurance include Alzheimer’s disease, loss of limbs (from illness not accident), organ failure, organ transplant, severe burns, brain tumours, coma, kidney failure, deafness, blindness, paralysis, Multiple Sclerosis, and Parkinson’s disease.

Death Benefit – The amount paid to a beneficiary upon the death of an insured person.

Deductible – Is the amount of a covered expense payed by the insured before an insurance company makes any payment. Deductibles are common in health insurance plans.

Deferred Annuity – A contract that pays you income at regular intervals, starting at a future date. See Annuity.

Dental Insurance – A type of insurance that provides coverage for dental expenses that is typically provided as a part of a group plan, but that can be purchased separately on its own.

Destructive Expenses – Any expense that you incur that doesn’t add value to your life or inhibits your ability to create and be productive. For example, vices such as smoking, gambling or destructive expenses. Other destructive expenses include paying too much money in taxes, or high interest rates on a credit card.

Disability Insurance – Is a type of insurance that is designed to replace a portion of your income if you become disabled or are no longer able to earn an income due to illness or injury. Payment is usually a fixed sum for fixed period of time. It can be purchased as a part of a group plan or separately on its own.

Dividends – If you are the policy owner or policyholder of a participating whole life insurance policy, a dividend is a payment made by your insurance company to you when the company performs well and makes a profit. One important thing to note is dividends are not guaranteed per se. They are contingent on factors such as the total number of claims the company pays out, its overhead and expenses and investment performance. See also Policyholder Dividend.

Dividend Scale – A scale that is used to determine dividend payments to participating whole life policyholders. The policyholder pays premiums into a participating whole life policy that cover expenses and benefits, as well as contribute to the company’s surplus. This participating account is then impacted by returns earned on investments, and by death benefits. The share of the earnings in the participating account are then credited annually to the policyholder account (policy) as a dividend payment. Dividends aren’t guaranteed and can be affected by low interest rates that impact returns on investments in a participating account. If this happens, the dividend scale may be adjusted. See alsoDividends and Policyholder Dividends

Dividend Paying Whole Life Insurance  –  see Participating Whole Life Insurance 

Diversified Portfolio – A portfolio that includes a variety of securities so that the weight of any security is small. The risk of a well-diversified portfolio closely approximates the systematic risk of the overall market, and the unsystematic risk of each security has been diversified out of the portfolio. A portfolio that includes a variety of securities so that the weight of any security is small. The risk of a well-diversified portfolio closely approximates the systematic risk of the overall market, and the unsystematic risk of each security has been diversified out of the portfolio.

Double Indemnity – See Accidental Death Insurance.

Eligible Expenses – Expenses that are usually covered under a health or dental plan. Depending on the type of coverage provided, the insured may have to pay a share of expenses.

Eligibility Period – Is the length of time required to be a member of a group before meeting eligibility requirements under the group plan.

Elimination Period – With a disability insurance claim, you have to be continuously disabled for a certain about of time before making a claim. This period of time is the elimination period or waiting period. No benefits are received during the elimination period.

Endow – the maturation of a whole life policy, usually at a specific age often at 100 or 121

Endowed – The point in a life insurance policy where the cash value equals the value of the death benefit.

Endowment insurance – A type of insurance that pays the insured a set amount if they live to the maturity date of their policy. If you die before the maturity date, the insurance makes the payment to the beneficiary.

Estate – Is everything you own at your while living or after your passing after payment of debts and taxes. It includes the sum of your assets – legal rights, interests and entitlements to property of any kind – less all liabilities.

Estate Planning – Is the act of preparing for the transfer of a person’s wealth and assets after death while aiming to minimize gift, estate, and generation skipping transfer and income tax. Life insurance, pensions, real estate, vehicles, investments, personal belongings, and debts are considered part of an estate.

Exclusions – Are items not covered by an insurance policy which can include certain medical conditions the insured may have had prior to applying for insurance and high-risk activities such as skydiving.

Exempt policy – A life insurance policy where the savings growth (cash value) doesn’t exceed limits set under income tax law. The savings growth isn’t subject to annual taxation.

Extended health care insurance – A type of insurance that pays for hospital and medical expenses not covered by the insured’s provincial health plan. It can be part of a group plan or you can buy it on its own.

Extended term insurance – An option in a permanent life insurance policy that allows the insured to extend the period they’re covered without having to pay additional premiums. It uses the cash value in the policy but insurance coverage stays the same. How long the policy continues depends on how much cash value is available.

Equity – Equity is ownership in a particular thing or asset and the value that is built up after all loans or liabilities against that particular thing or asset is settled or paid off. In the context of life insurance, many permanent life insurance policies offer an equity component in the form of a cash value.

Face amount – Is the amount stated on the insured’s policy that the insurance company guarantees to pay when the insured person dies. It doesn’t include amounts payable under accidental death coverage or other special provisions.

Financial needs analysis – A tool used by a life insurance broker to decide how much insurance will be needed when an individual submits an application for coverage. It looks at a person’s current financial and personal situation and goals. It also takes into account dependents as well as debt owed, assets and liabilities.

Flexible premium policy or annuity – A type of life insurance policy or annuity contract where the insured can vary the amount of premium payments and when they are made. For example, premiums can be paid for six months and then stop being paid t for the next six months. There may be minimums and maximums that apply to payments.

Funeral insurance – Insurance that covers the cost of burial of a deceased loved one and is a good alternative for someone who doesn’t have or can’t afford life insurance which would often be used to cover funeral expenses. It is also called final expense insurance or burial insurance.

Grace period – A period in which an insurance policy is not effective even though the premium is past due.

Group Insurance – A type of insurance that provides coverage for a group of people (for example employees or members of an association) under one contract called a group plan or group policy.

Guaranteed Death Benefit – The minimum amount an insurance company pays to the beneficiary when the insured person dies.

Guaranteed Insurability Option (or benefit) – An option in a life insurance policy. It gives the insured the right to buy additional insurance coverage at set future ages without having to give proof of good health. It’s also called “Guaranteed Insurability Option” (GIO).

Guaranteed Maturity Benefit – The amount that your insurance company guarantees to pay you on the policy maturity date. This benefit is most common with segregated fund contracts.

Guaranteed Minimum Withdrawal Benefit (GMWB) – An option within a segregated fund contract that guarantees to pay the insured a stated income as long as they live, or for a specified period, even if the market value of the contract drops. If the market value grows, then the income paid to can increase.

Guaranteed Renewable Policies – A feature of an individual insurance policy where the insurance company guarantees to renew the insurance at the end of a certain period, regardless of any changes in your health. Premiums may increase at renewal times.

Health Insurance – A type of insurance that covers medical expenses (such as drugs, dental expenses, vision expenses, and paramedical expenses) or loss of income if you’re sick or injured. Types of health insurance include accident and sickness insurance; accidental death and dismemberment insurance; critical illness insurance; disability income insurance; health care insurance; and long-term care insurance.

Health and Welfare Trust – A health and welfare trust is an alternative health benefits plan sanctioned by the Canadian Revenue Agency that provides a tax-free vehicle for financing a corporation’s healthcare and dental costs. It is a spending account set up by a business to cover their healthcare and dental expenses as well as those of their employees and dependents. Think of it as an innovative self-insurance model that provides business owners more control over health planning than typically provided through “one-size-fits-all” traditional group insurance plans.

Illustration – A document provided by a life insurance broker or advisor explaining how a policy would work when purchasing life insurance. It will show the cost and values of the policy under different conditions and what is guaranteed and what is not. It is primarily used for the applicant’s information and isn’t part of a legal contract (policy).

Immediate Annuity – Is a type of annuity product that is purchased with lump-sum payment and starts paying a guaranteed amount almost immediately.

Impaired Annuity – Is a type of annuity product designed for an individual with a serious medical condition that provides a higher payment amount because life expectancy will be shorter than that of a healthy person.

Impaired Risk – In life and health insurance, a person who has physical or health problems, or who has a risky occupation or hobby, is known as an impaired risk and may not qualify for coverage. If they do qualify, they may pay higher premiums for their coverage. For example, someone with a history of strokes would be an impaired risk.

Income Trust – A charitable giving vehicle that transfers the income rights to the charitable organization. Generally, the income rights are assigned for a specified period of time after which the remainder passes to the donor. Also known as a charitable lead trust.

Individual Insurance – Insurance you buy as an individual from an advisor or insurance company rather than through group insurance offered through an employer.

Individual Variable Insurance Contract – An annuity contract where premiums are invested in segregated funds managed by the life insurance company. The value of the plan will vary over time based on the value of those investments. An individual is guaranteed to receive at least 75% of what they’ve paid into the plan on death or maturity, even if the investments have dropped in value.

Infinite Banking Concept – 
Insurer – The insurer is the actually insurance company that issues and administers life insurance policies and promises to pay benefits to the policyholder.

Insured – See Policyholder

Integration of benefits – The process where an insurance company takes into consideration income you receive through other benefit plans, such as the Canada pension plan, when determining your disability benefit amount. Insurance is usually off-set or reduced by the amount of CPP benefits that you receive while disabled.

Irrevocable Beneficiary – A type of beneficiary designation where the written permission is needed before changing a beneficiary designation or making certain changes to a policy. (See also Beneficiary)

Joint and last survivor annuity – See Annuity

Key Person insurance – A type of insurance on the life of a key employee in a business. It’s designed to provide cash to hire and train a replacement and replace lost revenues and profits, if the key employee dies.

Lapsed Policy – An insurance policy that has ended because the policyholder stops paying premiums or there is not enough money built in the cash value to cover premiums or keep payments up to date.

Legacy Planning – Legacy planning is a financial strategy that prepares a person to bequeath their assets to a loved one or family after death.
Level Premium Life Insurance – A type of life insurance where the premium stays the same through the life of the policy.
Liability – Refers to a person or company’s debt or obligations that are a result or outcome of business operations (or household operations). Liabilities are usually settled over time through the transfer of economic benefits including money, goods or services. Recorded on the right side of the balance sheet, liabilities include loans, accounts payable, mortgages, deferred revenues, and accrued expenses.

Licence – Official certification that a provincial or territorial regulator gives an individual to prove they are authorized to sell life insurance.

Life Annuity – See Annuity.

Life Income Fund – A type of retirement plan containing funds that are transferred from a pension plan. If you leave a pension plan, the value of the pension can be transferred to a LIF.

Life Income Option – An option that is only available to beneficiaries to receive their life insurance payout where the insurance company pays the beneficiary regular, equal payments for as long as they live.

Life Insurance – A type of insurance that pays a death benefit when the insured person dies. Three most common types of life insurance are term, whole life and universal.

Life Insured – A person whose life is insured. 

Living Benefits – Since the benefit of life insurance is realized at the death of policyholders, the living benefits of an insurance policy are any benefits the insured can use while living such as the cash value and dividends of a whole life insurance policy.  The cash value can be used as a retirement fund. Annual dividends can be used to pay premiums. Living benefits also refer to any type of insurance that provides financial survivors who face issues due to aging, illness, accidents or dependency while they are still living.

Liquidity – Is a term used to describe the degree to which an asset, investment or security can be quickly bought or sold in the market without affecting its price. It can also refer to the accessibility or availability of “liquid assets” which is cash.

Locked-in Retirement Account (LIRA) – A type of Registered Retirement Savings Plan (RRSP) containing funds transferred from a pension plan and where the money is locked-in.

Locked-in Retirement Income Fund – A type of retirement plan similar to a Life Income Fund. LRIFS are governed by pension laws and not available in all provinces.

Long-term care insurance – A type of insurance that provides financial support for people who become unable to care for themselves due to debilitating, severe or chronic illness.

Long-term disability insurance – A type of group insurance usually available through an employer that replaces part of a person’s income if they become disabled and are unable to work. Long-term disability claims often starts after short-term disability ends and typically provides coverage for two or more years.

Material facts – Information or a fact you’re aware of that could affect an insurance company’s decision about whether to insure you and at what cost. For example, if you’re being checked for a medical condition when you’re applying for insurance, you must tell the insurance company. If you don’t, the company could cancel your policy and refuse to pay any claims. See also Misrepresentation and Contestability.

Maturity Date – The date at which the insurance company will pay a maturity benefit when the policy ends. For an endowment policy or annuity contract, including segregated fund contracts, the maturity date is a predetermined age or date.

Misstatement of age – When the insurance company received the wrong age for the person being insured. In some cases, the insurance company can cancel coverage if the wrong age is given but it is more common for them to adjust the coverage and premiums taking into account the correct age.

Misrepresentation – A false or misleading statement made by an applicant when applying for insurance coverage. An insurance company has the right to cancel a policy if the applicant has given them false or misleading information. See also Material Facts

Mutual Funds –  A mutual fund is a collection of investments, such as stocks, bonds and other funds owned by a group of investors and managed by a professional money manager. The investment objective of the mutual fund determines what types of securities it buys. A mutual fund can focus on specific types of investments such as government bonds, stocks from large companies, or stocks from certain countries or be invested in a variety of investments. When you buy a mutual fund, you’re pooling your money along with other investors. You put money into a mutual fund by buying units or shares of the fund. As more people invest, the fund issues new units or shares. The investments in a mutual fund are managed by a portfolio manager. They manage the fund on a day-to-day basis, deciding when to buy and sell investments according to the investment objectives of the fund. Mutual funds involve a greater risk because they are not guaranteed or insured like Segregated funds. 

Mutual Insurance Company – An insurance company owned by policyholders also called participating policyholders. A mutual insurance company doesn’t have shareholders and management is directed by an electoral board.

Non-cancellable policy – A type of insurance policy where the insurance company guarantees not to cancel the policy until the insured person reaches a set age (usually 65) and usually used for disability insurance. Also known as non-cancellable and guaranteed renewable policy.

Non-Contributory Pension Plan – A pension plan where employees don’t contribute and the employee funds the entire cost of the plan.

Non-forfeiture options – A feature of some permanent life insurance policies that provide the policyholder with some choices if they stop paying premiums on a policy. Choices may include cash value or cash surrender value, reduced paid-up amount of insurance, automatic premium loan to cover the full sum insured, or extended term insurance for the full sum of the insured over a specific period.

Non-participating insurance – A policy that does participate in the insurance company’s distribution of earnings and dividends.

Off-set – See Integration of benefits

Opportunity Cost – Opportunity cost represents the benefits an individual, investor or business misses out on when choosing one alternative over another (such as leasing equipment vs buying equipment or investing business revenue in the stock market to generate capital gain returns or into a whole life insurance policy). In simple terms, opportunity cost can be seen as the return of a best forgone option, less the return on your chosen option (opportunity cost = FO – CO).  Considering opportunity costs can guide you to make more profitable business and personal financial decisions, especially if you’re willing to assess the relative risk of each option in front of you in addition to it’s potential returns.

Paid-Up Additions (PUA) – Life insurance on which all the required premiums have been paid and coverage continues. The owner will never have to make further payments on that addition. Each paid-up addition increases the policy’s benefit and its cash value. Paid-up additions also have the ability to earn dividends on their own. These dividends in turn, can be used to purchase additional paid-up additions, which in turn earn additional dividends and so on.

Paid-Up Addition Riders (PUAR) – Is a rider that incorporated into the design of a policy that allows the owner to fund the purchase of paid-up additions with additional premium payments. The more flexible a rider is, the more flexibility the owner has with regard to the timing and amount of the purchase of paid-up additions.

Participating whole life insurance – Participating whole life insurance or dividend-paying whole life insurance as it is also called, is whole life insurance where a portion of your premium payment is collected and placed in a participating account. These funds are invested on your behalf by the insurance company managing your policy. This account is primarily impacted by returns on investments, by death benefits, expenses, taxes and contributions to surplus. Whatever funds remain from premiums after these factors are accounted for, flow into the participating account. These funds are pooled with funds from other policyholders and get invested by an asset management group using a top-down approach to ensure the best return for you and other policyholders. Any earnings from this participating account are then annually credited to your policy as dividend payments. 

Partial Disability Benefit – A disability benefit that pays a monthly amount that’s less than a total disability benefit. In this situation, the insured person can’t work fulltime or is prevented from performing one or more important daily duties of their occupation, but isn’t considered totally disabled under the policy.

Pension Plan – A type of savings plan that is designed to provide a person with a monthly income during their retirement and can include a workplace plan, government plan or individual plan.

Permanent Life Insurance – A type of life insurance that provides coverage for the lifetime of the person insured provided the required premiums are paid. Permanent life insurance usually has a cash value. Whole Life, Term to 100 and Universal Life are examples of this type of insurance.

Policy (Contract) – The legal agreement between an insurance company (insurer) and a person (insured) that sets out the terms of your insurance coverage.

Policyholder Dividend – If you are the policy owner or policyholder of a participating insurance policy, a dividend is a payment made by your insurance company to you when the company performs well. One important thing to note is dividends are not guaranteed per se. They are contingent on factors such as the total number of claims the company pays out, its overhead and expenses and investment performance. As a policyholder, you can receive dividend payments in different ways.

• Cash
• Leave them in the policy to grow
• Use them to pay premiums on the policy (reducing insurance costs)
• Use them to purchase additional paid-up insurance

Policy loan – A loan made by a life insurance company to a policyholder based on the policy’s cash value. A policy loan reduces the cash value and the insurance company usually charges interest.

Policy Owner – Is the individual who owns an insurance policy and pays the premiums on the policy. Also called the policyholder or referred to as the “insured”.

Pooled Income Fund – Donors can pool their donated assets in a fund that is operated by the charitable organization. The donors then receive a proportionate share of income from the fund that is paid throughout their lifetime.  Payments can vary each year based on the valuation of the underlying assets in the fund.

Policy reserves – A pool of funds that an insurance company must keep to specifically meet its policy obligations and is required by law so that enough reserve is available to pay all future claims.

Predetermination of benefits – A claim procedure required by many group plans before a person can incur large expenses. For example, if you need major dental work, your plan may require you to obtain and submit an estimate of the costs so your insurer can determine what portion of the costs your plan will cover (called a pre-determination of benefits) before you receive treatment. You can then budget for the expense knowing how much your plan will pay and how much you’ll have to pay. You may be able to cover some of your costs under your spouse’s or partner’s plan.

Pre-existing condition – A medical condition for which a person had symptoms, consulted a medical professional and received treatment before applying for insurance or before insurance coverage takes effect. Some types of insurance have pre-existing condition clauses which may limit or exclude benefits if a claim is made related to that condition.

Premium – The amount a person pays to buy insurance coverage and that is usually paid on a monthly, quarterly or annual basis.

Premium offset – Is a payment arrangement made with the insurance company that permits the use of policy dividends or the cash value to pay premiums.

Probate – A legal process that takes place after an individual’s where the courts decide the legal validity of the deceased’s last will and testament before giving power to the estate’s executor. The executor cannot redistribute assets until he or she has been granted probate. Depending on the nature of the deceased’s assets, amongst a number of other factors, a will may or may not need to go through the probate process.

Productive Expenses – Life-enhancing and value-based expenses such as investing in education to increase your skills and in your business to make it grow. 

Protective Expenses – Expenses that safeguard your family, your productivity and your way of life such as an emergency cash fund or life insurance.

No glossary terms under Q.

Rate of Return – Is a financial term that refers to the gain or loss of an investment over a specified time period, expressed as a percentage of an investment’s costs. Gains or investments are defined as income received in addition to any capital gains realized on the actual sale of an investment.

Rated Policy – An insurance policy where the insured person doesn’t meet the insurance company’s standard insurance requirements. This may be due to pre-existing conditions or a risky occupation. Therefore the policy will have higher risks and higher premiums.

Reduced paid-up insurance – A form of paid-up life insurance available as a non-forfeiture option, meaning the policy will continue but for a reduced amount.

Registered Educations Savings Plan – A government sponsored post-secondary educational savings plan for children or a grandchild that doesn’t provide a tax-deduction for contributions. Payouts to the student are based on meeting specific conditions and qualified educational programs.

Registered Pension Plan – Pension plans are subject to regulation by the Canada Revenue Agency, and such plans are called “registered pension plans”. See also Pension plan.

Registered Retirement Income Fund –  A Registered Retirement Income Fund (RRIF) is a tax-deferred retirement plan under Canadian tax law. Individuals use a RRIF to generate income from the savings accumulated under their RRSP. As with an RRSP, an RRIF account is registered with the Canada Revenue Agency. 

Registered Retirement Savings Plan – A type of government sponsored and controlled retirement savings plan. The amount you can contribute to an RRSP is based on your income and is set by the federal government. The amount contribute reduces the income tax paid at the time but is generally only deferred when money is later withdrawn in retirement. If money is withdrawn from an RRSP prior to retirement, a percentage of the funds are withheld as a withdrawal fee.

Reinstating a Policy – Is the ability to apply to restart insurance coverage if it has ended and premiums were not paid. In order to “reinstate a policy” a person must usually apply within two years of the date the required premiums were not paid. A person must also provide evidence of insurability and pay any outstanding costs, plus interest.

Reinsurance – Is an agreement among insurance companies to share insurance risk. One company may transfer some of its risk to another company, known as the reinsurer. Reinsurance is a way for insurance companies to manage the risks it takes on.

Renewable Term Insurance – A type of term insurance that can be renewed at the end of a designated term automatically, or as an option to the policyholder, without having to provide evidence of insurability. Premiums are usually fixed and guaranteed not to change the length of the term. When the term expires and insurance comes up for renewal, the premium increased based on age.

Replacement – The act of replacing one insurance policy with another policy.

Rescission right – Is a policyholder’s right to cancel an insurance policy for a set period and be given a refund on any premiums paid. It ensures that the policyholder has an opportunity to review a given policy to ensure it meets their needs.

Revocable beneficiary – Refers to a type of beneficiary designation that can be changed by a policyholder at any time.

Rider – A change or addition to an insurance policy that either expands or limits coverage and benefits.

Right of Survivorship – When you own property or joint bank account with another person such as spouse, you are legally considered joint tenants with the right to survivorship. Your interest in that property automatically passes to the survivor of that property and not according to the terms of your will. However, if you own property jointly with another person with “right of survivorship” your interest in that property will according to the provisions in your will.

Risk – The likelihood that an insured event will occur while a policy is in place. In life and health insurance the risk is the likelihood the insured will become ill, injured or die.

Risk Capacity – Risk capacity, unlike tolerance, is the amount of risk that the investor “must” take in order to reach financial goals. The rate of return necessary to reach these goals can be estimated by examining time frames and income requirements. Then the rate of return information can be used to help the investor decide upon the types of investments to engage in and the level of risk to take on.

Risk Tolerance – Risk tolerance is the degree of variability in investment returns that an investor is willing to withstand. Risk tolerance is an important component in investing. You should have a realistic understanding of your ability and willingness to stomach large swings in the value of your investments; if you take on too much risk, you might panic and sell at the wrong time

Segregated Funds –  Segregated funds are an investment product sold by life insurance companies also called seg funds for short. They are individual insurance contracts that invest in one or more underlying assets, such as a mutual fund. Unlike mutual funds, segregated funds provide a guarantee to protect part of the money an individual invests (75% to 100%). Even if the underlying fund loses money, you are guaranteed to get back some or all your principal investment. The investment needs to be held for a certain length of time (usually 10 years) to benefit from the guarantee and an additional fee must be paid for this insurance protection.

Settlement options – The choices presented to a beneficiary or policyholder when receiving payment of life insurance benefits other than an immediate cash payout. The beneficiary may have the choice to receive payment in the form of an annuity.

Short-term disability insurance – A type of insurance that replaces income for a short period of time when a person becomes disabled and is unable to work. If the disability continues, the person may be eligible for long-term disability benefits, if they have that coverage.

Standard or statutory provisions – The provisions in an insurance policy setting out certain rights and obligations that you and the insurance company have. These are required by provincial insurance laws.

Standard risk – A person who qualifies to buy insurance at the company’s regular premium rates.

Stock Insurance company – An insurance company that is listed on the stock exchange and where stocks and shares are owned by the shareholders.

Substandard risk – See Impaired Risk

Suicide clause – A provision in a life insurance policy stating that benefits will not be paid out in the event the insured commits suicide or dies as a result of self-inflicted injuries.

Sum insured – See Face amount

Surrendered policy – When the insured asks the insurance company to cancel. If the policy has a cash value, the insured receives this amount upon cancelation.

Tax-Free Savings Account – A registered account first introduced in Canada in 2009 that can be used to save money for any purpose, including retirement. Investment earnings up to a certain amount per year are tax-free and tax does not have to be paid when you withdraw money like a RRSP. However, there are no tax deductions with TFSA accounts.

Term Life Insurance – A term policy pays a specified sum if (and only if) the insured dies during the term of the policy. The term may be one, five, 10, and 20 years or longer. If the owner cancels the policy before the insured’s death, or if the policy term ends before the insured’s death, no death benefit is paid. This type of policy does not carry a cash value. Upon expiration, a term policy may be renewed, subject to policy restrictions. This may include passing a medical exam, provided the owner pays the premium then in effect, for the insured’s present age, health, and lifestyle. While term insurance is relatively in expensive in its early years, premiums will increase with each renewal, and eventually may price the policy out of the policy owner’s reach.

Term to 100 – A type of insurance that provides coverage for lifetime, as long as the required premiums are paid. The premium amount stays the same and the insured stops paying premiums after 100. This type policy has little or no cash value.

Travel Insurance – Insurance designed to cover the cost of travel outside of the insured’s home province or country of origin (Canada). Costs covered are typically emergency hospital and medical costs, trip cancellation, lost baggage. Some travel insurance may also include accidental death benefit.

Underwriting – In the life insurance industry, underwriting is the term used by insurers to describe the process of assessing risk to ensure the cost of insurance coverage is proportionate to the risks faced by the individual concerned.

Underwriter – An underwriter as a different role from an actuary that provides a general benchmark price for overall insurance plans. Underwriters assist an insurance company in evaluating if the company should take on risk based on the individual details (case-by-case basis) of the person/ company (policyholder) applying for insurance. (See Actuary and Underwriting).

Uni-trust – A unitrust the income the donor receives is based on a percentage of the current fair market valuation of a trust asset. Each year, as the asset is valued, the income is adjusted based on the new valuation.

Universal Life Insurance – A type of permanent life insurance with flexible premium payments consisting of two parts: life insurance and an investment account. The insured pays money into the investment account. The insurer takes premiums and other expenses from the account. Any investment growth accumulates in the account. The insured can increase or decrease premiums and the death benefit within certain limitations. Investment growth may not be guaranteed depending on the type of investment chosen.

Value-based Spending – A spending approach focused on purchasing goods or services aligned with your goals, personal values and the things you enjoy most. Contrary to a budget that tracks everything you earn and spend, value-based spending focuses on making conscious purchasing decisions about what you spend your money on by focusing on the value a purchase has or brings to you. 

Waiver of Premium – A feature in some life insurance policies that allow the insured to stop paying premiums if they become disabled. 

Will – A legal document that details after your passing, who is to receive your property, who will administer your estate, who will serve as guardian of your children if still dependent and other provisions.

Whole Life Insurance – A type of permanent life insurance that provides coverage for lifetime, has fixed premiums and builds up a cash value and has features in place they help the insured keep their coverage even if they can’t pay premiums.

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