Glossary of Terms for Insurance and Investment Industry Definitions

A B C D E F G H I J K L M N O P Q R S T U V W X Y Z

A

Absolute Liability: Liability for damages even though fault or negligence cannot be proven.

Accelerated death benefit riders: Supplementary life insurance policy benefit riders that allow an insured to receive a specified portion of the policy's death benefit before his/her death if certain conditions are met. Also known as living benefit riders.

Accident and Health Insurance: A type of coverage that pays benefits, sometimes including reimbursement for loss of income, in case of sickness, accidental injury, or accidental death.

Accidental death benefit: A supplementary life insurance policy benefit under which the insurer pays the beneficiary an amount of money in addition to the basic death benefit if the insured dies as a result of an accident.

Accidental death and dismemberment (AD&D): Coverage, built into a disability policy or available as an optional benefit, which pays scheduled amounts in the event of accidental death or dismemberment.

Accumulated value: The net amount paid for a deferred annuity, plus interest earned, less the amount of any withdrawals. 

Accumulation at interest dividend option: The dividend option under which policy dividends are left on deposit with the insurer to accumulate at interest.

Accumulation period:

1. The time between the first premium payment and the first benefit payout under a deferred annuity;
2. A specified period of time, such as 90 days, during which the insured person must incur eligible medical expenses at least equal to the deductible amount in order to establish a benefit period under a major medical expense or comprehensive medical expense policy.

Accumulation units: Ownership shares in a separate investment account during the accumulation period of a variable deferred annuity.

Actual Cash Value (ACV):

1. The cost of replacing or restoring property at prices prevailing at the time and place of the loss, less depreciation, however caused;
2. replacement cost minus.

Administrator: the person, firm, corporation, or other entity appointed by the Company to perform certain administrative services with regards to the Plan on the Company’s behalf.

Actuarial Cost Method: One of several systems for determining either the contributions to be made under a retirement plan, or level of benefits when the contributions are fixed. In addition to forecasts of mortality, interest and expenses, some of the methods involve estimates of future labor turnover, salary scales and retirement rates.

Actuarial Equivalent: If the present values of two series of payments are equal, taking into account a given interest rate and mortality according to a given table, the two series are said to be actuarially equivalent on this basis. For example, a lifetime monthly benefit of $67.60 beginning at age 60 (on a given set of actuarial assumptions) can be said to be the actuarial equivalent of $100 a month beginning at age 65. The actual benefit amounts are different but the present value of the two benefits, considering mortality and interest, is the same.

Actuarially Fair: The price for insurance which exactly represents the expected losses

Actuary: A person professionally trained in the technical aspects of pensions, insurance and related fields. The actuary estimates how much money must be contributed to an insurance or pension fund in order to provide future

Additional insured: An assured party specifically named under an insurance policy.

Additional term insurance dividend option: The dividend option under which the insurer uses each policy dividend to purchase one-year term insurance on the insured's life. Also known as Fifth Dividend Option.

Adjustable life insurance: A form of cash value life insurance that allows the policyholder to vary the type of coverage as his/her insurance needs change.

Age Limits: Stipulated minimum and maximum ages below and above which the company will not accept applications or may not renew policies.

Agent: An insurance company representative licensed by the province who solicits, negotiates or effects contracts of insurance, and provides service to the policyholder for the insurer.

Ambulatory Care: Medical services that are provided on an outpatient (nonhospitalized) basis. Services may include diagnosis, treatment, and rehabilitation.

Amendment: A formal document changing the provisions of an insurance policy signed jointly by the insurance company officer and the policy holder or his authorized representative.

Annual Statement: The annual report, as of December 31, of an insurer showing assets and liabilities, receipts and disbursements, and other financial data.

Annually renewable disability income: Cost for this form of disability income policy increases each year, but can initially be as much as 40% lower than fixed cost policies.

Annuitant: An individual on whose life the annuity and death benefit guarantees are based. The annuitant can be either the policy owner or an individual you designate. At plan issue, the annuitant must be no older than the maximum age set by the Company. If the plan is registered, the policyowner and the annuitant must be the same individual. If the plan is registered, you can name your spouse as a successor annuitant; if this option is chosen, any guaranteed benefits will be based on the life of the surviving spouse.

Annuity: A contract that provides an income for a specified period of time, such as a number of years or for life.

Annuity Benefit (Maturity Guarantee): The value of your investments held within the plan on your annuity date subjuct to various guarantees provided within your contract.

Annuity Date (Maturity Date): Theoretically, the date the plan matures. It is the date on which the annuity or maturity benefit applies.

Applicant: The person or business that applies for an insurance policy.

Application: A signed statement of facts made by a person applying for life insurance and then used by the insurance company to decide whether or not to issue a policy. The application becomes part of the insurance contract when the policy is issued. Arbitration">Arbitration: A form of alternative dispute resolution where an unbiased person or panel renders an opinion as to reponsibility for or extent of a loss.

Assets: All funds, property, goods, securities, rights of action, or resources of any kind owned by an insurance company. Statutory accounting, however, excludes non-admitted assets, such as deferred or overdue premiums, that would be considered assets under generally accepted accounting principles (GAAP).

Assignee: The owner of property who transfers his/her rights in that property to another party by means of an assignment.

Assignment: The legal transfer of one person's interest in an insurance policy to another person.

Attained age: The current age of the insured.

Attained age conversion: The conversion of a term life insurance policy to a cash value life insurance policy at a premium rate based on the insured's age at the time the coverage is converted.

Attending physician statement (APS): A report, filled out by a prospective insured's (or, in a claim situation, the insured's) physician documenting current and prior health history. An APS helps the insurance company in the evaluation process of approving an application (or a claim).

Automatic Coverage Enhancement (ACE): A built-in policy feature or optional benefit that increases annually an insured's monthly benefit without evidence of either medical or financial insurability.

Automatic dividend option: The dividend option that the insurer will apply if the owner of a participating life insurance policy does not choose an option. The most typical automatic dividend option is the paid-up additional insurance option.

Automatic nonforfeiture benefit: A specific nonforfeiture benefit that will become effective automatically if a renewal premium is not paid within the grace period and the insured has not elected another nonforfeiture option. The most typical automatic nonforfeiture benefit is the extended term insurance benefit.

Automatic Premium Loan: Cash borrowed from a life insurance policy's cash value to pay an overdue premium after the grace period for paying the premium has expired.

Averages: Statistical tools that measure the state of the stock market or the economy, based on the performance of stocks or other meaningful components e.g., the Dow Jones Industrial Average, the Consumer Price Index, etc.

B

Bad faith: the allegation that insurers have failed to act in good faith, i.e., that they have acted in a manner inconsistent with what a reasonable policyholder would have expected.

Beneficiary: The individual who will receive the value of the plan upon the death of the annuitant. If the beneficiary is of a preferred status, for example, spouse, parent, child, the plan may provide protection from your creditors in the event of bankruptcy. You can name an irrevocable beneficiary. If this option is chosen, you will need to obtain the written permission of the beneficiary to perform certain transactions.

Benefit period: The length of time specified in a policy that disability benefits will be paid to a disabled insured, e.g., five years, to age 65.

Benefits: The amount payable by the insurance company to a claimant, assignee or beneficiary under each coverage.

Beta: A measure of how sensitive a security or portfolio is to the return of the market. For example, a beta of 1.1 means that a portfolio is expected to increase (or decrease) by 1.1% when the market increases by 1%. Similarly, a beta of 0.9 indicates that a portfolio is expected to increase (or decrease) 9/10ths of 1% when the market increases (or decreases) by 1%.

Book of Business: the number, size and type of accounts (policyholders) that an agent "owns".

Book Value: the purchase price minus accounting depreciation.

Branch Office System: Type of life insurance marketing system under which branch offices are established in various areas. Salaried branch managers, who are employees of the company, are responsible for hiring and training new agents.

Broker: A marketing specialist who represents buyers of property and liability insurance and who deals with either agents or companies in arranging for the coverage required by the customer.

Business continuation insurance plan: An insurance plan that enables the owner(s) of a business to provide for the continued operation of the business if the owner or a key person dies.

Business overhead expense: Coverage which helps keep a business operating when a business owner is disabled. Provides short-term benefits to cover fixed operating expenses during total or partial disability.

Business Insurance: A policy which primarily provides coverage of benefits to a business as contrasted to an individual. It is issued to indemnify a business for the loss of services of a key employee or a partner who becomes disabled.

Business Life Insurance: Life insurance purchased by a business enterprise on the life of a member of the firm. It is often bought by partnerships to protect the surviving partners against loss caused by the death of a partner, or by a corporation to reimburse it for loss caused by the death of a key employee.

Buy-sell (or buy-out): Disability policy which provides funds for the purchase of a disabled partner's share of a business.

C

Cafeteria plan: An employee benefit arrangement allowed by Internal Revenue Code Section 125 where employees are allowed to pay for certain employee benefits on a pre-tax rather than an after-tax basis. Disability income insurance is one of those benefits.

Capital Gains: A profit from the sale of investments or property. Capital Gains can be 'realized' (the sale took place) or 'unrealized' (growth on paper only - no sale took place). Taxes are generally due on realized capital gains.

Cash dividend option: The dividend option under which the insurer sends the policyholder a check in the amount of the policy dividend that was declared.

Cash refund annuity: A refund annuity under which the refund is paid in a lump sum.

Cash surrender value: The amount that a contractholder will receive if he/she surrenders a deferred annuity policy. This amount is equal to the accumulated value of the annuity less any surrender charges specified in the policy.

Cash surrender value nonforfeiture option: A nonforfeiture option under which a policyholder who stops paying premiums for a permanent life insurance policy can elect to surrender the policy for its cash surrender value.

Cash Value: is the amount that is available for redemption and sometimes referred to as the redemption value. It is equal to the accumulated value (market value) of your investments less any applicable plan expenses or deferred sales charges.

Cede:To obtain reinsurance on insurance policies by transferring all or part of the risk to a reinsurer.

Ceding company: An insurance company that obtains reinsurance on insurance policies it has issued.

Certificate of insurance: A document that describes the coverage provided by a group insurance policy and that is distributed by the group policyholder to each group insured.

Claim: A request for payment under the terms of an insurance policy.

Commission: The amount of money, usually a percentage of the premiums, that is paid to an insurance agent for selling an insurance policy.

Conditionally renewable disability income: With this type of policy, the insurance company agrees to renew the policy provided the insured meets certain criteria, such as full time employment.

Consideration: One party's offer or promise of something that will be of value to the other party. In order to form a valid informal contract, the parties must exchange legally adequate consideration.

Consumer Price Index: An index that tracks the change in price over time of a set list of consumer goods.

Contingency reserves: The monetary reserves an insurer maintains to cover unusual conditions that may occur.

Contingent beneficiary: The party named to receive the proceeds of a life insurance policy if the primary beneficiary should die before the insured dies. Also known as secondary beneficiary or successor beneficiary.

Contingent Life: Similar to joint first-to-die coverage, but with different insurance amounts on each life.

Contingent payee: The person or party who will receive any proceeds of a life insurance policy still payable under a settlement option at the time of the primary payee's death. Also known as successor payee.

Continuous premium whole life policy: An insurance policy for which premiums are payable throughout the life of the policy. Also known as a straight life insurance policy.

Contract: A legally enforceable agreement between two or more parties.

Contractholder: The person who applied for and purchased an individual annuity contract.

Contractual capacity: The legal capacity to make a contract.

Contributory plan:

1. A group insurance plan under which insured group members must contribute some or all of the premium for their coverage.
2. A retirement plan that requires plan participants to make contributions to fund the plan. See also noncontributory plan.

Conversion privilege:

1. A term life insurance policy provision that allows the policyholder to change (convert) the policy to a cash value insurance policy without providing evidence of the insurability of the insured.
2. A group life insurance policy provision that allows a group insured whose coverage terminates for specified reasons to convert his/her group coverage to an individual policy of insurance without presenting evidence of his/her insurability.

Convertible term insurance policy: A term life insurance policy that gives the policyholder the right to convert the policy to a cash value insurance policy.

Cost of living rider: A benefit that can be added to a disability policy that increases the monthly benefit annually during a claim.

Coverage Rider: Additional insurance coverage that you can purchase in conjunction with the insurance on the main life or lives (e.g., term rider, children 's coverage rider, disability waiver rider).

Credit life insurance: Term life insurance that pays the balance due on a loan if the borrower dies before the loan is repaid.

Creditor Protection: Provided certain members of a family class are named as beneficiary or that a beneficiary designation is made irrevocable, some policies may be protected from claims of the policyowner’s creditors.

Cross-purchase method: A method of purchasing a deceased partner's interest in a partnership in which each partner agrees to purchase a proportionate share of a deceased partner's interest.

Critical Illness: An individual insurance plan specifically to help offset the unexpected costs that can arise if you're diagnosed with a critical illness. Basic coverage includes cancer, heart attack, stroke, and coronary artery by-pass surgery, which will be clearly defined in the policy for benefit purposes. You can opt for enhanced coverage that includes approximately 20 impairments.

D

Decreasing term life insurance policy: A term life insurance policy that provides a death benefit that decreases over the term of coverage.

Deferred annuity: An annuity under which periodic benefits are scheduled to begin more than one annuity period after the date on which the annuity was purchased.

Deferred Sales Charges: are often referred to as redemption charges. It is a fee that is applied to withdrawals (redemptions) that occur during a specified period of time.

Deferred Profit Sharing Plan (DPSP): A plan that allows an employer to set aside a portion of company profits for the future benefit of employees.

Defined benefit pension plan: A pension plan that defines the amount of the benefit that a participant will receive at retirement. See also defined contribution pension plan.

Defined contribution pension plan: A pension plan that describes the annual contribution the employer will deposit into the plan on behalf of each plan participant. See also defined benefit pension plan.

Deposit: Deposits are defined as the amount that is available for investment or, in other words, to purchase units in a fund. If the initial sales charge option is chosen, the deposit is equal to the amount received for investment less the amount of the initial sales charge paid to the financial advisor. If the deferred sales charge option is chosen, the deposit is equal to the total amount received for investment.

Disability: 'Disability' is specifically defined in each insurance policy or group contract. In reference to individual life insurance, depending upon the benefit, disability refers to total disability, occupational disability, or a critical condition.

Disability income benefit: A supplementary life insurance policy benefit that provides a monthly income benefit to an insured who becomes totally disabled.

Disability income coverage: A type of health insurance that provides income replacement benefits to an insured who is unable to work because of sickness or injury.

Disability income insurance: A policy which pays a monthly benefit to an insured in the event of an accident or sickness to help replace lost earnings. A living benefit to provide income replacement also sometimes referred to as paycheque insurance.

Disability ('Non-Occupational): For individual disability insurance, the definition of total disability is related to the inability to perform the client's regular occupation. If you're unemployed, on leave or sabbatical when an injury or sickness occurs, a total disability claim can still be payable. Under this provision, your disability will be determined based on your ability to perform the regular substantial activities being performed prior to the onset of your disability. Furthermore, if you were scheduled to return to work (e.g., sabbatical, maternity leave), the definition of disability would change to the regular one on the date when you were scheduled to return.

Under group benefit plans, 'non-occupational disability' means a disability not resulting from an injury or illness caused by your employment (as these would normally be covered by Workers' Compensation).

Distribution: A payout of income and net realized capital gains earned and declared on investments held within a segregated fund. On a distribution day, any income or net realized capital gains earned and declared by a given fund is distributed to policyowners investing in that fund in the form of additional units.

Dividend options: Choices available to the owner of a participating policy concerning how the policyholder's share of the insurer's divisible surplus will be distributed. 

Divisible surplus: The amount of an insurer's surplus that is available for distribution to owners of participating policies.

Dollar Cost Averaging: Systematically investing a fixed amount of money in a specific security at regular intervals over a period of time, thereby reducing the average cost paid per unit.

Double indemnity benefit: An accidental death benefit that is equal to the face amount of the life insurance policy.

E

Electronic funds transfer (EFT) method: An automatic premium payment technique whereby the policyholder authorizes his/her bank to withdraw funds from his/her account to pay each renewal premium.

Elimination period: The policy deductible, or the amount of time (usually a number of days) the insured elects to wait before disability benefits are paid. Typically, the longer an individual can wait before receiving funds from the insurance company, the lower the price of the policy.

Endorsement: A document that is attached to an insurance policy and is a part of the policy.

Endorsement method:

1. A method by which the owner of a life insurance or an annuity policy may transfer all ownership rights in the policy to another party by notifying the insurer in writing of the change.
2. A change of beneficiary procedure that requires the name of the new beneficiary to be added to the policy itself in order for the beneficiary change to be effective.

Endowment insurance: A type of life insurance that provides a specified benefit amount whether the insured lives to the end of the term of coverage or dies during that term. estate plan — A plan that addresses how best to preserve an individual's assets after the individual dies.

Equities: The ownership interests in companies, generally represented by share certificates or other evidence.

Exclusions: Life insurance policy provisions that describe circumstances under which the insurer will not pay the policy proceeds following the death of the insured.

Extended term insurance nonforfeiture option: A nonforfeiture option under which the policy's net cash value is used to purchase term insurance for the full coverage amount provided by the original policy for as long a term as the net cash value can provide.

F

Face amount: The amount payable under a life insurance policy if the insured person dies while the policy is in force. Also known as face value.

Field underwriting: Process by which an agent conducts his or her own evaluation of the insurability of a prospect through the completion of an insurance application.

Financial Advisor: An advisor who is independent of any financial services company can provide objective and independent opinions to help you choose the options that are best suited to your particular circumstance.

Financial underwriting: Process by which an agent evaluates all elements of a prospect's compensation to determine the amount of monthly benefit for which the prospect qualifies.

Fixed-amount option: A settlement option under which the insurer pays the policy proceeds and interest in a series of equal payments for as long as the proceeds last.

Fixed benefit annuity: An annuity under which the insurer guarantees to pay at least a specified monthly benefit amount for each dollar applied to purchase the annuity.

Fixed period option: A settlement option under which the insurer pays the policy proceeds and interest in a series of equal installments for a specified period of time.

Flexible Premiums: A premium payment in excess of the set premiums for the individual life insurance policy. These can be made regardless of the payment frequency of the policy.

Flexible-premium annuity: An annuity for which the contractholder pays periodic premiums that may vary between a set minimum and a set maximum amount.

Free examination provision: An insurance policy provision that gives the policyholder a stated period after the policy is delivered in which to examine the policy and to return it to the insurer for a full refund. Also known as 10 day free look.

Fund Transfer: The process by which you make a change in your fund allocation.

Funding vehicle: The means for investing retirement plan assets as they are accumulated.

Future purchase option benefit: A supplemental benefit that allows an insured to increase the benefit amount payable under a disability income policy in accordance with increases in the insured's earnings.

Futures: A contract to purchase (or sell) a specified commodity or index during a specified future month at a price agreed upon when the contract is negotiated.

G

Grace period: A specified length of time within which a renewal premium may be paid without penalty. grace

Graded-premium policy: A whole life insurance policy for which there are three or more levels of annual premium payment amounts, ultimately reaching a level premium amount payable for the remaining life of the policy.

Gross Earned Income: Gross earned income is defined as income that depends on the ability to work; salary, bonus, commissions and fees - any amount that you earn before taxes and deductions, but after expenses.

Group creditor life insurance: Group term insurance that is issued to a creditor and covers the lives of the creditor's current and future debtors.

Group deferred annuity: A retirement plan funding vehicle under which contributions for each plan participant are used to purchase a series of single-premium deferred annuities.

Group insurance policy: An insurance policy that is issued to an organization that is purchasing insurance coverage for a specific group of people.

Group LTD: Disability income insurance issued as a master policy to an employer to provide an income for employees should they suffer a long term disability.

Group policyholder: The employer or other party that enters into a group insurance contract with an insurer.

Group short-term disability income coverage: Group disability income coverage under which the maximum benefit period is less than one year.

Guarantee of insurability: An optional disability income policy benefit that enables an insured to make increases to the policy on specified dates with evidence of financial insurability only required (no evidence of medical insurability is required).

Guaranteed Death Benefit: An amount that is guaranteed upon death of the annuitant.

Guaranteed Lifetime Withdrawal Benefit (GLWB): Also referred to as a GMWB, the retirement income solution to guarantee retirement income for life.

Guaranteed Maturity Value: An amount that is guaranteed on a plan’s annuity date (or maturity date).

Guaranteed Minimum Withdrawal Benefit (GMWB): A segregated fund investment providing guaranteed retirement income for life. Introduced by Manulife Financial in October 2006, the plan offers individuals the opportunity to invest in their own personal pension plan.

Guaranteed renewable: This policy provision guarantees that the insurance company will renew an insured's policy provided the insured pays the policy premiums on time. The insurance company can increase premiums with prior notification, but policy provisions can never be changed.

H

Health Insurance: Insurance providing for the payment of benefits as a result of sickness or injury. Includes various types of insurance such as accident insurance, disability income insurance, medical expense insurance, accidental death insurance, and dismemberment insurance.

Hedging: Technique for transferring the risk of unfavorable price fluctuations to a speculator by purchasing and selling options and futures contracts on an organized exchange.

Home Buyers Plan: A program set up by Revenue Canada, under which you can, generally, withdraw up to $20,000.00 from your RRSP to buy or build a qualifying home. These withdrawals are non-taxable, but must be repaid within a period of no more than 15 years.

Human Life Value: For purposes of life insurance, the present value of the family's share of the deceased breadwinner's future earnings.

I

Immediate annuity: An annuity under which benefit payments are scheduled to begin one annuity period after the annuity is purchased. immediate participation guarantee.

Income Replacement: Your individual disability insurance plan pays you a regular income each month during your disability. Your basic coverage and premiums are linked to your occupation, income and other sources of insurance at the time of application.

For group insurance, benefits are based on the premiums paid as well as on your salary and other income benefits payable. Please note, under most group insurance plans, other income such as Canada Pension Plan, are offset from the disability benefit payment.

Increasing term life insurance: Term life insurance that provides a death benefit that increases by some specified amount or percentage at stated intervals over the policy term.

Indices: See Averages

Individual insurance policy: An insurance policy that is issued to insure the life or health of a named person or persons.

Inflation: A term used to describe rising prices of goods and services within an economy.

Initial premium: The first premium that is paid for an insurance policy and that is part of the consideration the policyholder gives for the policy.

Initial Sales Charge: When an initial sales charge option is chosen, a sales charge is deducted from the amount received for investment and paid to the financial advisor with the remaining amount invested in the chosen fund options.

Installment refund annuity: A refund annuity under which the refund is payable in a series of periodic payments.

Insurable interest: The likelihood that a policyholder or beneficiary of an insurance policy will suffer a genuine loss or detriment if the event insured against occurs.

Insurance Amount: For individual life insurance, 'insurance amount' means the dollar value payable at the death of the life insured. Policy loans and death benefit options may impact the total benefit to the beneficiary.

Interest: Money that is paid for the use of money.

Interest option: A settlement option under which the insurer invests the proceeds of a life insurance policy and pays interest on these proceeds to the payee.

Initial Sales Charge: When an initial sales charge option is chosen, a sales charge is deducted from the amount received for investment and paid to the financial advisor with the remaining amount invested in the chosen fund options.

Investment Income Tax (IIT): A charge levied by the Federal Government on the funds in insurance policies.

Investment Management Fee: The fees you pay to invest in a segregated fund in addition to the operating expenses of the fund.

Investment Management Fee: The fees you pay to invest in a segregated fund in addition to the operating expenses of the fund.

Investment Mix: The combination of investment options selected by you to grow your policy values.

Investment Only Pension Plan (IOPP): A pension plan whereby we provide investment management services with no member level reporting.

J

Joint and survivor annuity: An annuity that provides a series of payments to two or more individuals until both or all of the individuals die.

Joint and survivorship life income option: A settlement option under which the policy proceeds are used to purchase a joint and survivor annuity.

Joint-First-To-Die: The case in which two lives are covered, with the insurance amount paid when the first death occurs.

Joint-Last-To-Die: The instance in which two lives are covered, with the insurance amount paid when the last death occurs.

Joint whole life insurance policy: A whole life insurance policy that insures two lives and that provides for the payment of the proceeds when the first insured dies.

Juvenile insurance policy: An insurance policy that is issued on the life of a child but is owned and paid for by an adult.

K

Key person: Any person or employee whose continued participation in a business is necessary to the success of the business and whose death would cause the business a significant financial loss.

Key person policy: An insurance policy that reimburses a business for financial loss during a key employee's disability until recovery or a suitable replacement can be found.

L

Lapse: The termination of an insurance policy because a renewal premium was not paid within the grace period.

Last survivor life insurance policy: A joint whole life insurance policy that provides for payment of the proceeds when both insureds have died.

Level premium system: A life insurance pricing system that allows the purchaser to pay the same premium amount each year.

Level term life insurance policy: A term life insurance policy that provides a death benefit that remains the same over the term of coverage.

Leveraging: Borrowing against collateral for the purpose of investment, with the expectation that investment growth will exceed cost of borrowing. These concepts are not for use by everyone and require professional expertise and advice.

LIF: Similar to a RRIF, a LIF or life income fund is an extension of an RRSP and provides you with greater flexibility to vary your income and control over your investment decisions for your retirement income. It can be created at any time, but only with money transferred from a LIRA, another LIF, or directly from an employer-sponsored pension plan. No other source of fund is allowed. There is a prescribed maximum payment that prevents you from collapsing the plan. This ensures the funds are used to provide a pension income throughout your life as was intended by the pension plan from which the funds originated. By December 31 of the year you turn 80, the LIF must be converted to an annuity that meets the requirements of the applicable pension legislation. Not all provinces or jurisdictions allow LIFs.

Life annuity: An annuity that provides periodic benefit payments for at least the lifetime of a named individual with no minimum or maximum time horizon.

Life income annuity with period certain: An annuity that guarantees that annuity benefits will be paid during the lifetime of the annuitant and that payments will be made for at least a certain period.

Life income option: A settlement option under which the insurer pays the policy proceeds and interest in a series of periodic installments over the payee's lifetime.

Life income with period certain option: A settlement option under which the policy proceeds are used to purchase a life income annuity with period certain.

Life income with refund annuity: An annuity that provides annuity benefits throughout the annuitant's lifetime and guarantees total benefit payments of at least the purchase price of the annuity.

Life insurance policy: A policy under which the insurance company promises to pay a benefit upon the death of the person who is insured.

Limited-payment whole life policy: An insurance policy for which premiums are payable for some stated period that is less than the insured's lifetime i.e. 20 Pay Whole Life.

LIRA: If deposits originate from a pension plan, they continue to be locked-in under a locked-in retirement account (LIRA) or locked-in RRSP. 'Locked-in' refers to the restrictions and limitations that are imposed by the applicable provincial pension legislation.

Locked-In Plans: If deposits originate from a pension plan, they continue to be locked-in under this plan. “Locked-in” refers to the restrictions and limitations that are imposed by the applicable Provincial legislation.

Locked-in Registered Income Fund (LRIF): While similar to a LIF, a locked-in registered income fund's (LRIF) regulation differs in that you aren't required to purchase an annuity at age 80. Minimum payments are calculated differently. The maximum annual payment is equal to the greater of investment earnings in the previous year, the accumulated value less net amount transferred into the plan, or the RRIF minimum payment. Currently, LRIFs are only available if you have pension plans registered in Saskatchewan, Manitoba, and Alberta.

Lump sum payment: In a disability buy-sell policy, benefits are usually payable all at once, in one lump sum, on the date that the buy-sell takes effect.

M

Malingering: The practice of feigning illness or inability to work in order to collect insurance benefits.

Management Expense Ratio: A ratio that illustrates fund expenses to fund assets. It is calculated by dividing the total of the investment mangement fee and the operating expenses paid by the segregated fund over a financial year (as stated in the Financial Report) by the average net asset value of the fund over that same financial year.

Market Price (or Market Value): The price at which a security can be bought or sold at any particular time.

Market Value Adjustment (MVA): A charge against a fixed interest or income option upon surrender, withdrawal or transfer to another investment option.

Master Policy: A policy that is issued to an employer or trustee, establishing a group insurance plan for designated members of an eligible group.

Maturity date:

1. The date on which an endowment insurance policy's face amount will be paid to the policyholder if the insured is still living.
2. The date on which an insurer begins to pay periodic benefits under an annuity.

Medical Examination: The examination given by a qualified physician to determine to the insurability of an applicant. A medical examination may also be used to determine whether an insured claiming disability is actually disabled.

Medical underwriting: The process of reviewing a potential insured's individual medical history to determine approval of the prospect's disability income application.

Minimum Benefits: A provision that a minimum amount of annuity will be paid if the regular benefit formula produces less. This minimum is usually payable only if certain service requirements are met at retirement.

Misrepresentation: A false, incorrect, improper, or incomplete statement of a material fact, made in the application for a policy.

Mode of Premium Payment: The frequency with which premiums are paidþmonthly, quarterly, semiannually, or annually.

Mortality Table: A table showing how many members of a group, starting at a certain age, will be alive at each succeeding age. It is used to calculate the probability of dying in, or surviving through, any period, and for the valuation of an annuity. To be appropriate for a specific group, it should be based on the experience of individuals having common characteristics, such as sex or occupation.

Mortgage redemption insurance: Decreasing term life insurance that provides a death benefit amount corresponding to the decreasing amount owed on a mortgage.

Mutual insurance company: An insurance company where policyholders who own participating policies are considered members of the company. Membership rights include being able to vote for the board of directors, sharing in the results of the company through participating dividends and receiving some pro rata share of the remainder of the company if it is ever dissolved.

MVR: motor vehicle report

N

Nasdaq 100: Return is linked to Nasdaq 100 Composite Index, including several high-tech companies such as Cisco Systems, Intel, Microsoft, and Qualcomm.

Negligence: Failure to use the care that a reasonable and prudent person would have used under the same or similar circumstances.

Net Assets: The net assets of a fund are determined by calculating the market value of all of its assets (its investments) and subtracting its liabilities (such as the fund's operating expenses).

Nikkei 225: Includes 225 of the largest and most liquid companies listed on the Tokyo Stock Exchange.

Net cash value: The amount a policyholder who elects to surrender his/her policy will receive after the cash surrender value is adjusted for amounts such as paid-up additions, advance premium payments and policy loans.

Net premium: The amount of money an insurer needs in order to provide benefits for a policy.

Net premium rates: Life insurance premium rates that are based only on expected mortality rates and investment earnings.

Noncontributory plan:

1. A group insurance plan under which insured group members are not required to contribute any part of the premium for their coverage.
2. A retirement plan that does not require plan participants to make contributions to fund the plan.

Nonparticipating policy: An insurance policy under which the policyholder does not share in the insurer's surplus.

Net Assets: The net assets of a fund are determined by calculating the market value of all of its assets (its investments) and subtracting its liabilities (such as the fund’s operating expenses).

Net Premium: The portion of the premium rate which is designed to cover benefits of the policy, but not expenses, contingencies, or profit. The term is also used to describe the portion of the premium remitted to the home office by an agent after deduction of the agent's commission.

Net written premiums: premium income retained by insurance companies, directly or through reinsurance, after payments made for reinsurance.

Noncontributory plan:

1. A group insurance plan under which insured group members are not required to contribute any part of the premium for their coverage.
2. A retirement plan that does not require plan participants to make contributions to fund the plan.

Nonparticipating policy: An insurance policy under which the policyholder does not share in the insurer's surplus.

Non-cancellable: The renewal feature of a disability income policy under which the insurance company cannot change any policy provisions or increase premiums after the policy has been issued as long as the insured pays policy premiums on time.

Noncancellable Guaranteed Renewable Policy: An individual policy which the insured person has the right to continue to force until a specified age, such as to age 65, by the timely payment of premiums. During this period, the insurer has no right to unilaterally make any changes in any provision of the policy while it is in force.

Nondisabling Injury Benefit: A benefit in some disability income policies providing payment for medical expense due to injury when medical care is necessary but the insured is not totally disabled.

O

Occupation class: The category assigned to an insured by the insurance company based on the individual's job duties that dictates the policy premium and contractual grouping that would apply to the insured.

Option A plan: A universal life policy that provides a level death benefit, which is always equal to the policy's face amount.

Option B plan: A universal life policy that provides a death benefit that increases over the life of the policy and that is equal to the policy's face amount plus the amount of the policy's cash value also referred to as “Face Plus”.

Options: A right to buy or sell specific securities at a specified price within a specified time.

Overriding Commission (Overwrite): A commission paid to general agents or agency managers in addition to the commission paid the soliciting agent or broker.

Own Occupation: A term defining the most liberal interpretation of total disability where only one test is applied to determine the insured's eligibility for total disability benefits: the ability to perform the duties of one's own occupation.

P

Paid-up additional insurance dividend option: The dividend option under which the insurer uses each policy dividend to purchase paid-up additional insurance on the insured's life.

Paid-up additions option benefit: A supplementary benefit that allows the owner of a whole life insurance policy to purchase single-premium, paid-up additions to the policy on stated dates in the future. paid-up policy — An insurance policy that requires no further premium payments.

Partial disability: Built into some disability policies, available as a rider with others, this provision pays a portion of the total disability benefit to insureds unable to perform one or more of their occupational duties because of disability.

Partial Withdrawal: An amount withdrawn from the cash values of an investment policy or certain life insurance policies.

Participating policy: An insurance policy under which the policyholder shares in the insurance company's divisible surplus.

Payout option provision: An annuity policy provision that lists and describes each of the payout options available to the contractholder. payout period — The period during which annuity benefit payments are made.

Payroll deduction method: An automatic premium payment technique whereby the policyholder authorizes his/her employer to deduct premium payments directly from his/her paycheck.

Pension: A lifetime monthly income benefit paid to an individual who has retired.

Pension plan: An agreement under which an employer establishes a plan to provide its employees with a lifetime monthly income benefit that begins at their retirement.

Period certain: The stated period over which the insurer will make benefit payments under an annuity certain.

Period provision: A policy provision that allows the policyholder to pay a renewal premium within a stated grace period following the renewal premium due date. Both group and individual life and health insurance policies contain a grace period provision.

Periodic level-premium annuity: An annuity for which the contractholder pays equal premiums at regularly scheduled intervals.

Permanent Life Insurance: Permanent insurance solutions allow you to insure against the unexpected while increasing the value of your investment over time. Advantages include tax-advantaged investment growth and tax-free insurance benefits.

Policy: A written document that contains the terms of the contractual agreement between an insurance company and the owner of the policy.

Policy benefit: A specified amount of money that an insurance company agrees to pay when a specific loss occurs.

Policy dividend: A policyholder's share of an insurer's divisible surplus.

Policy Lapse: If the conditions for keeping the policy in-force have not been met (for instance, there isn't a cash value and premiums remain unpaid after the grace period) then the policy will lapse, and coverage will end.

Policy loan: A loan that an insurer makes to the owner of a life insurance or annuity policy and that is secured by the policy's cash (accumulated) value.

Policy loan provision: A policy provision that grants the owner of a life insurance or annuity policy the right to take a loan for up to the policy's net cash (accumulated) value less one year's interest on the loan.

Policy reserves: Liabilities that represent the amount an insurer estimates it needs to pay policy benefits as they come due.

Policy rider: An amendment to an insurance policy that either expands or limits the benefits payable under the policy.

Policy withdrawal provision: A policy provision that permits the owner of a universal life insurance policy or a deferred annuity policy to withdraw funds from the policy's cash (accumulated) value.

Policy Owner: The individual who is the legal owner of the policy. The policy owner can also be a group of individuals, subject to any applicable legislation. The policy owner can be no younger than the age of majority. All policy reporting will be sent to the policy owner.

Policy Surrender: Request from the policyowner to cease coverage and return the cash value. The policyowner surrenders the contract to the insurance company.

Pooled Registered Pension Plan (PRPP): A new plan introduced November 17, 2011 to provide Canadians additional registered investment plans through their employers. Tax rules are under development and will be released in draft.

Preauthorized check (PAC) system: An automatic premium payment technique whereby the policyholder authorizes the insurer to generate a check against the policyholder's bank account to pay each renewal premium.

Preferred risks: The risk category that is composed of proposed insureds who present a significantly less-than-average likelihood of loss.

Premium: A specified amount of money that the insurer receives in exchange for its promise to provide a policy benefit when a specific loss occurs.

Premium reduction dividend option: The dividend option under which the insurer applies policy dividends toward the payment of renewal premiums.

Principal:

1. A sum of money that is invested over a period of time.
2. An individual or organization that authorizes an agent to act on its behalf.

Q

Qualification period: A term used in conjunction with residual disability benefits which refers to the number of days at the start of a disability that the insured must be totally disabled before becoming eligible for residual benefits.

Quote: a price estimate given to the potential consumer as he/she decides to which company a formal application will be submitted. Company may be legally bound to honor this quote in some jurisdictions and/or lines of business.

R

Rate of return: The cumulative rate of interest an investor achieves on their investment.

Recurrent disability: Term used to describe situations where a disability occurs, the insured recovers for a short period of time, then experiences a recurrence of the same or a related disability. Insureds with recurrent disabilities do not have to wait until their elimination period is over before they receive benefits.

Reduced paid-up insurance nonforfeiture option: A nonforfeiture option under which the policy's net cash value is used as a net single premium to purchase paid-up life insurance of the same plan as the original policy.

Refund life income option: A settlement option under which the policy proceeds are used to purchase a life income with refund annuity.

Registered Disability Savings Plan (RDSP): A savings plan to help parents and others save for the long-term financial security of a person who is eligible for the disability tax credit. Contributions to an RDSP are not tax deductible and can be made until the end of the year in which the beneficiary turns 59.

Registered Pension Plan (RPP): For a pension plan to have tax exempt status, it must be registered under the Income Tax Act and under either the federal Pension Benefits Standards Act or under a provincial Pension Benefits Act. Contributions are tax deductible by an employee and employer within the federal taxation limits.

Reinsurance: A type of insurance that one insurance company, known as the ceding company, purchases from another insurance company, the reinsurer, in order to transfer risks on insurance policies that the ceding company issued.

Reinsurer: An insurance company that accepts the risk transferred from another insurance company in a reinsurance transaction.

Renewable term insurance policy: A term life insurance policy that allows the policyholder to renew the policy at the end of the policy.

Renewal premiums: Premiums that are payable after the initial premium and that are a condition for continuation of the policy and are not consideration for the policy.

Renewal provision:

1. A term life insurance policy provision that allows the policyholder to renew the insurance coverage at the end of the specified term without submitting evidence of insurability.
2. An individual health insurance policy provision that describes the circumstances under which the insurer has the right to refuse to renew or to cancel the coverage and describes the insurer's right to increase the policy's premium rate.

Residual disability benefit: Built into some policies, available as an option with others, this benefit pays the insured a portion of the total disability benefit after a return to work based on the percentage of income lost due to the disability.

RRIF: When you convert your RRSP to a RRIF or Registered Retirement Income Fund, you continue to enjoy the benefits that you had with your RRSP including tax-sheltered growth, investment control and flexibility. RRIFs bring other benefits: they allow you to vary your income stream from year to year (subject to a minimum amount set by Canada Customs and Revenue Agency) and to make additional withdrawals when needed.

RRSP: Any Canadian resident who is under age 69 with qualified earned income can contribute to a Registered Retirement Savings Plan (RRSP). The amount you can contribute depends on the income you earned in the previous year and limits established by Canada Customs and Revenue Agency. Benefits include tax-sheltered growth, investment control and flexibility.

S

S&P 500 Index: Standard & Poor's measure of 500 widely held stocks listed on the New York Stock Exchange, American Stock Exchange and the over-the-counter market.

Segregated Fund: An investment or co-mingled fund offered by a Canadian life insurance company that invests in a portfolio of securities on behalf of several investors, is held separate from the insurer’s general assets and provides various insurance benefits.

Separate account contract: A retirement plan funding vehicle under which the insurer invests the plan's assets in specialized investments chosen by the plan sponsor.

Single-premium annuity: An annuity that is purchased by the payment of a single, lump-sum premium.

Spousal RRSP: A member of an RRSP may contribute all or part of their allowable RRSP contributions to an RRSP on behalf of their spouse. The contributor spouse gets the income tax deduction. The other spouse actually owns the funds.

Standard risks: The risk category that is composed of proposed insureds who have a likelihood of loss that is not significantly greater than average.

Straight life annuity: An annuity that provides periodic payments for only as long as the annuitant lives.

Straight life income option: A settlement option under which the policy proceeds are used to purchase a straight life annuity.

Substandard risks: The risk category that is composed of proposed insureds who have a significantly greater-than-average likelihood of loss.

Survival Period: For a critical illness insurance policy, this is the number of days you must survive following the diagnosis of a covered impairment in order for the benefit to be payable. This period is normally 30 days following diagnosis in the definition of the corresponding covered impairment.

Short term disability: Usually associated with group insurance, this type of insurance pays a monthly benefit for total disability after a brief waiting period for a short period of time (typically up to three, six, nine or 12 months).

Social Security offset: A policy provision or optional benefit that coordinates with benefits received through Social Security disability (and typically other government programs) to avoid either underinsurance or overinsurance.

Split Funding: The use of two or more funding agencies for the same pension plan. An arrangement whereby a portion of the contributions to the pension plan are paid to a life insurance company and the remainder of the contributions invested through a corporate trustee, primarily in equities.

Standard Provisions: A set of policy provisions prescribed by former laws setting forth certain rights and obligations of both the insured and the company under an individual policy of health insurance. These were originally introduced in 1912 and have now been replaced by the Uniform Provisions.

Standard Risk: A person who, according to a company's underwriting standards, is entitled to purchase insurance protection without extra rating or special restrictions.

Step rate: A method of premium payment offering a low initial premium that increases after a set number of years to a higher, level premium.

Stock Insurance Company: A company in which the legal ownership and control is vested in the stockholders.

Stock Life Insurance Company: A life insurance company owned by stockholders who elect a board to direct the company's management. Stock companies, in general, issue nonparticipating insurance, but may also issue participating insurance. Stock Redemption Plan: an entity purchase form of buy-sell agreement within a corporation that involves the corporation buying back shares from a departing owner.

Subrogation: Process by which one insurance company seeks reimbursement from another company or person for a claim it has already paid.

Substandard (Impaired Risk): A risk that cannot meet the normal health requirements of a standard health insurance policy. Protection is provided in consideration of a waiver, a special policy form, or a higher premium charge. Substandard risks may include those persons who engage in certain sports and persons who are rated because of poor habits or morals.

Surrender charge: an amount retained by the issuer of a life insurance policy when a policy is canceled, typically assessed only during the first five to ten years of a policy.

Synthetic Securities (Derivatives): A security that derives its value in whole or in part from an underlying security.

Systematic Withdrawal Plan: If elected, you will receiv equal payout amounts at an interval you specify.

T

TSE 300 Index: A capitalization-weighted index of 300 stocks listed on the Toronto Stock Exchange. Larger companies have a greater influence on index returns than smaller companies.

Tax-Exempt: Investment income within an exempt individual life insurance policy will grow tax-sheltered, maximizing the net worth of the capital invested. Death benefit is paid to the beneficiary tax-free.

Temporary life annuity: An annuity that provides periodic benefit payments until the end of a specified number of years or until the annuitant's death, whichever comes first.

Term life insurance: A type of life insurance that provides a death benefit if the insured dies during a specified period.

Total Accumulated Value (Market Value): is determined as the sum of the accumulated value of units credited to your plan in each segregated fund.

Total disability: Under our professional standard definition, Aetna Life considers insureds totally disabled if they are unable to perform the important duties of their regular occupation because of injury or sickness and are under a physician's care.

Transfer: Moving a dollar amount to or from one or more of the investment options within an applicable life or investment policy.

U

Underlying Fund: A fund is said to be investing in underlying funds when it invests all or a portion of its assets in units of one or more underlying mutual or segregated funds.

Underwriting: The confidential process of evaluating personal, financial and medical data for the purpose of approving or disapproving an applicant's disability income coverage.

Unit Value: The unit value is used to measure the market value of one unit (or share) of a segregated fund.

Universal Life Insurance: A form of life insurance that is characterized by its flexible premiums, face amounts and unbundled pricing factors with self directed investment options.

V

Valuation Day: The day on which a fund’s assets are valued and for which income or expenses are accounted.

Variable annuity: An annuity under which the policy's accumulated value and the amount of monthly annuity benefit payments fluctuate with the performance of the underlying separate investment accounts.

Variable life insurance: A form of life insurance under which the death benefit and the cash value of the policy fluctuate based on the investment performance of the underlying separate investment accounts.

Variable universal life insurance: A type of universal life insurance that combines the premium and death benefit flexibility of universal life insurance with the investment flexibility and risk of variable life insurance.

Vesting Period: Vesting is the amount of time you must be a member of a pension plan before earning the right to the employer portion of the contributions in the pension plan.

W

Waiver: An agreement attached to a policy which exempts from coverage certain disabilities or injuries that otherwise would be covered by the policy.

Waiver of premium: A policy provision that exempts the insured from making premium payments until they recover once they've been disabled for a specified number of days.

Waiver of Premium While Disabled: For an individual disability insurance policy, this feature means that premiums are waived while disability benefits are being paid. The required premium payments made during the elimination period will be refunded. Waiver of premium during disability may also be included with group insurance plans and is an optional feature on many life and critical illness policies.

Waiting Period: The length of time an employee must wait from his/her date of employment or application for coverage, to the date his/her insurance is effective.

Whole life insurance: Life insurance that provides lifetime insurance coverage at a level premium rate that does not increase as the insured ages.

Will: The legal statement of a person's wishes concerning the disposal of his or her property after death.

Withholding Tax: Tax required by Canada Customs and Revenue Agency withheld on the payment of interest or dividends, or on income from a registered plan or tax-exempt insurance policy, in order to reduce the amount of income tax owed at the end of the tax year.

Workers' Compensation: A system administered at the provincial level that provides benefits to workers who are hurt or contract an illness on the job.

Written Premiums: The entire amount of premiums due in a year for all polices issued by an insurance company.

Y

Yearly renewable term (YRT) insurance: Term life insurance that gives the policyholder the right to renew the coverage each year, over a specified period of time.

YMPE: Yearly Maximum Pensionable Earnings is an amount established each year under the Canada Pension Plan (CPP). It determines the earnings on which contributions are made and benefits calculated under the CPP and is adjusted annually to approximate the average industrial wage in Canada.