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A-B-C-D-E-F-G-H-I-JK-L-M-N-O-P-Q-R-S-T-U-V-W-XYZ

Specialized Glossaries:


Mortgage / Real Estate
Life Insurance
Estate Planning

Retirement / RSP / RIF
Mutual Funds
Credit / Financing

Abbreviations / Acronyms

Glossary of Life Insurance Terms

The purpose this special glossary is to provide brief definitions, while not necessarily legally accurate, are tailored to suit the meaning(s) given to the special terms you may come across in dealing with Life Insurance. Additional meanings for the terms may be found in a dictionary.

Actuary:

An actuary is a business professional with strong mathematical skills. Actuaries are generally involved in pricing insurance products and defined benefit pension plans.

   

Actuarial Present Value:

The actuarial present value is the value placed on future contingent payments and is the methodology forming the core of actuarial science.

Essentially, future payments are discounted with interest and the probability the payments will occur. Assumptions must be made by the actuary as to probabilities and discount factors.

Annuitant:

An individual who purchases an annuity and will receive payments from that annuity.

Annuity:

A series of regular periodic payments comprising principal and interest. An annuity is a contract providing for a series of payments. In the case of retirement, an annuity is usually purchased from an insurance company who then pays the purchaser a monthly amount while still alive. Annuities may have more complicated features such as indexing, guarantee periods and benefits payable to a spouse or other beneficiary after death.

When an individual purchases an annuity, they usually pay a lump sum from their RRSP, or other source of funds, to an insurer. The insurer then takes this (premium) and divides by an annuity factor based on mortality, current interest rates and payment features.

Annuitize: The accumulated value of the annuity is converted into a guaranteed stream of income.

   
Application: Form supplied by the insurance company, usually filled in by the agent and medical examiner (if applicable) on the basis of information received from the applicant. It is signed by the applicant and is part of the insurance policy if it is issued. It gives information to the home office underwriting department so it may consider whether an insurance policy will be issued and at what premium rate.
   

Beneficiary:

One who is to receive the benefits of any type of contract.

Bequest:

A disposition of personal property by will.

   

Binding Agreement (Insurance):

A form of buy-sell agreement. a binding agreement is the most effective means of guaranteeing a fair price from the point of view of the deceased family or the disabled shareholder. The compulsory purchase of the deceased or selling shareholder's interest by the remaining shareholders protects the surviving or remaining shareholders in that no other parties can become involved in the business without their consent.

   

Buy-Sell Agreement:

An agreement between shareholders or business partners to purchase each others' shares in specified circumstances.

   

Cash-Value Life Insurance:

Combines basic life insurance protection with tax-deferred investing. The larger portion of your annual premium pays for insurance, while a smaller amount goes into the policy's investment or cash-value account. Your investment earnings accumulate free of taxes until you withdraw them, it may takes over 10 years or more for the tax-deferral benefits to overcome the drag of the commissions charged by insurers.

Cash Surrender Value: The amount that is available in cash for a loan and could be available for withdrawal and may reduce the death benefit and could increase the risk of lapse.
   

Convertible Term Insurance:

This type of insurance can be exchanged (converted), at the policy holders option, without evidence of insurability, for a permanent insurance policy.
   

Common Disaster (Insurance):

An event, or series of events, causing the death of both spouses within a specified amount of time.

 
Consumer Price Index:
The statistical device that measures the change in the cost of living for consumers. It is used to illustrate the extent that prices have risen or the amount of inflation that has taken place.
   

Comprehensive General Liability Insurance:

A broad liability insurance policy designed to protect you from a wide range of liabilities risks, including product and professional liability.

   

Concealment:

Failure of the insured to disclose to the company a fact material to the acceptance of the risk at the time application is made.

   
Conditional Receipt: Given to policy owners when they pay a premium at time of application. Such receipts bind the insurance company if the risk is approved as applied for, subject to any other conditions stated on the receipt.
   
Contingent Beneficiary: Person or persons named to receive proceeds in case the original beneficiary is not alive. Also referred to as secondary or tertiary beneficiary.
   
Conversion Privilege: Allows the policy-owner, before an original insurance policy expires, to elect to have a new policy issued that will continue the insurance coverage. Conversion may be effected at attained age (premiums based on the age attained at time of conversion) or at original age (premiums based on age at time of original issue).

Critical Illness Insurance:

A form of health insurance that provides payments to replace income when an insured person is unable to work as a result of a critical illness.

   
Credit Insurance: Health, life, accident, or disruption of income insurance designed to pay the outstanding balance of debt.
Cross-Purchase Plan: An agreement that provides that upon a business owner's death, surviving owners will purchase the deceased's interest, often with funds from life insurance
   
Dividend: A return of part of the premium on a participating insurance that's based on the life insurance company's investment, expense, and mortality experience. Dividends are not guaranteed.
   

Disability Insurance:

Insurance that is designed to replace earned income in the event that accident or illness prevents you from pursuing your livelihood.

Disability Income Rider: A type of health insurance coverage, it provides for the payment of regular, periodic income should the insured become disabled from illness or injury.

   

Domicile:

The "official" residence of an individual.

For insurance contracts, the province of domicile determines under which provincial laws the deceased estate will be probated.

Everyone has a "domicile of origin" until they adopt a "domicile of choice".

   
Double Indemnity: A provision in a life insurance policy, subject to specified conditions and exclusions, under the terms of which double the face amount of the policy is payable if the death of the insured is the result of an accident. In general, the conditions are that the insured's death occurs prior to a specified age and results from bodily injury effected solely through external, violent and accidental means independently and exclusively of all other cause, within 60 or 90 days after such injury.
   

Estate:

All assets owned by an individual at the time of death. The estate includes all funds, personal effects, interest in business enterprises, titles to property, real estate and chattels, and evidence of ownership, such as stocks bonds and mortgages owned, and notes receivable.

Estate Planning:

The orderly arrangement of one's financial affairs to maximize the value transferred at death to the people and institutions favored by the deceased, with minimum loss of value because of taxes and forced liquidation of assets.

   
Evidence of Insurability: A Statement or proof of a person's physical condition, occupation, etc., affecting acceptance of the applicants for insurance
   

Executor:

The person named in a will to manage the estate of the deceased according to the terms of the will.

Exclusions: Specified hazards listed in a policy for which benefits will not be paid.

   
Face Amount: The amount stated on the face of the insurance policy. Special provisions could increase this amount, such as "accidental death" or through the application of policy dividends.
   

Family Trust:

An inter vivos trust established with family members as beneficiaries:

   

Fiduciary:

An individual or institution occupying a position of trust. An executor, administrator or trustee. Hence, "fiduciary" duties.

Final Expenses: Expenses incurred at the time of a person's death. These will include the funeral costs, outstanding bills or debts, taxes and expenses associated probating a will.
   

Fixed Term - Annuities:

Fixed Term Life Annuity: An annuity under which payments are guaranteed for the life of the annuitant.

A series of regular periodic payments comprising principal and interest. An annuity is a contract providing for a series of payments. In the case of retirement, an annuity is usually purchased from an insurance company who then pays the purchaser a monthly amount while still alive. Annuities may have more complicated features such as indexing, guarantee periods and benefits payable to a spouse or other beneficiary after death.

Grantor:

The person establishing and transferring assets to a trust or individual, also known as the settlor.

The original owner of a property.

   

Grace period:

A period of time after the due date of a premium during which the policy remains in force without penalty

   
Group Insurance: A form of insurance designed to insure classes of persons rather than specific individuals.
   

Guaranteed Interest Annuities (GIA):

A type of debt security contract sold to individuals by life insurance companies. Much like the GIC, it carries deposit insurance. Comcorp is the name of the industry insurance scheme. GIAs are offered in both redeemable and non-redeemable formats, and pay interest at a fixed rate.

   

Guaranteed Term:

The length of time for which annuity payments are guaranteed. If the annuitant dies before the specified term, payments to the beneficiary will continue until the term ends.

   
Guaranteed Insurability (Guaranteed Issue): Arrangement, usually provided by rider, whereby additional insurance may be purchased at various times without evidence of insurability.
   

Guardianship Provisions:

Are used to designate who will physically care for a child should the parents die, and typically found in a will. Legal advice is recommended and the successor designates should be unable and willing to become the guardian.

   

Income Averaging Annuity:

A special type of annuity to spread the impact of income tax on certain types of taxable lump sum receipts.

   
Incontestable Clause: Provides that, for certain reasons such as misstatements on the application, the company may void a life policy after it has been in force during the insured's lifetime, usually one or two years after issue.
   

Indexed Plan:

A benefit plan whose level of benefits is related to a recognized index.

Irrevocable Beneficiary: A beneficiary that cannot be changed without that beneficiary's consent
   

Insurance (Life):

Life insurance is one way to provide financial security for you, your dependents or business partners.

Term Insurance: This is a life insurance pure and simple. You choose the number of years (the term) you are insured and the amount your survivors get if you die within that term. The term you choose can be for a given number of years, for example 10 or 20, or up to a certain age, for example 65 or 100. The main features of term-to-100 policy are: 1. Fixed premiums, 2. Fixed death benefits, 3. No cash value.

Increasing Term Insurance: Term life insurance in which the death benefit increases periodically over the policy's term. Usually purchased as a cost of living rider to a whole life policy.

Decreasing Term Insurance: Term life insurance on which the face value slowly decreases in scheduled steps from the date the policy comes into force to the date the policy expires, while the premium remains level. The intervals between decreases are usually monthly or annually.

Convertible Term: Contract that may be converted to a permanent form of insurance without medical examination.

Annually Renewable Term: A form of renewable term insurance that provides coverage for one year and allows the policy owner to renew their coverage each year, without evidence of insurability. Also called Yearly Renewable Term (YRT).

Permanent Life Insurance:The most common types are whole and universal . Both offer lifetime protection. Renewal is not necessary as long as you pay the premiums. Some of the main features of eac

Whole Life: 1. Fixed premiums, 2. Fixed death benefits, 3. Fixed cash value

Universal Life:- 1. Flexible premiums, 2. Flexible death benefits, 3. Cash value (depends on how the premiums have been invested) 4. Policyholder directs where the premium funds are invested.

   
Insurability: The acceptability to the insurance company of an application for coverage
   
Insured or Insured Life: The person on whose life the policy is issued
 
Insurable Interest:: Requirement of insurance contracts that loss must be sustained by the applicant upon the death of another and it must be sufficient to warrant compensation.

Insurer:

A group or agency that shares another party's risk in return for the payment of a premium.

   

Inter Vivos:

From the Latin for "between living persons," usually refers to a trust established during the lifetime of the person setting up the trust (the "settlor"), as opposed to a "testamentary" trust in a will which takes effect only at death.

   

Inter Vivos Trust:

A trust created while the person making the trust is still alive.

   

Intestacy Laws:

The provincial laws governing distribution of the assets of a person who dies without a will.

   

Intestate:

Not having made and left a valid will. The term is also used to refer to a person who dies without leaving a valid will.

   

Joint and Last Survivor:

1) A type of annuity that pays benefits until both annuitant and the annuitant's spouse die.

2) The Banking industry will register a Guaranteed Investment Certificate with the same type of effect, the certificate is with the words "JTWRS" (Joint Tenants With Rights to Survivor) allows the full ownership the be transferred to the other registered person named on the note.

   
Key Employee (person) Insurance: Protection of a business against financial loss caused by the death or disablement of a vital member of the company, usually individuals possessing special managerial or technical skill or expertise. Also called key executive insurance.
   
Lapse: Termination of a policy upon the policy owner's failure to pay the premium within the grace period.
   

Letters of Administration:

A certificate confirming the authority set out in the will to administer a particular estate, issued to an administrator by the proper court.

Letters Probate:

A certificate of authority to administer a particular estate, issued to an executor by a proper court.

Level Premium: Life insurance premiums that remain the same year over year.

Life Annuity:

An annuity under which payments are guaranteed for the life of the annuitant.

Life Annuity (With a Guaranteed Term):

An annuity with a special clause that guarantees payments will continue for a specified period, even if the annuitant dies before the end of the term.

Life Estate (Insurance):

Title to a property only for the duration of the life of some specified party. A life tenant is the holder of a life estate.

Life Expectancy:

Life expectancy represents the average future time an individual can expect to live. To perform this calculation assumptions are made as to the mortality table the life will follow. Life expectancies have been increasing steadily over the past century and may continue to increase in the future. As people are living longer the cost of retirement is increasing.

Life Expectancy Adjusted Withdrawal Plan:

A plan though which a mutual fund investor's holdings are fully depleted while providing maximum periodic income over the investor's lifetime.

Life Insurance:

Life insurance is a policy agreement (contract) between you and an insurance company. You agree to pay a specified amount (premium) to the company for the policy coverage, and in return, the company agrees to pay you or your beneficiaries based on the terms of the policy. Most life insurance is designed to provide funds to your heirs in the event of your death.

Lifestyle Expenditures:

The cost you incur to sustain your lifestyle, including the money you spend on housing, food, clothing, household expenses, transportation, insurance, entertainment and gifts. Also included are the interest charges associated with financing a major capital purchase such as a house or a car. Lifestyle expenditures do not include income tax expense or any capital transactions.

Living Benifits: Living benifits form part of most life insuranve polices. They allow for the partial payment of death benift in advance of actual death, if the insured person is suffering from a terminal illness.

Living Will:

If you become incapacitated this document will preserves your wishes and act as your voice in medical decisions, if you are unable to speak for yourself as a result of medical reasons.

   
Loan (Policy Loan): A loan made by the life insurance company from its general funds to a policyowner on the strength of the cash value if a policy.
Medical Examination: Usually conducted by a licensed physician; the medical report is part of the application, becomes part of the policy contract and is attached to the policy. A "non-medical" is a short-form medical report filled out by the agent. Various company rules, such as amount of insurance applied for or already in force; applicant's age, sex, past physical history; data revealed by inspection report, etc., determine whether the examination will be "medical" or "non-medical."
   

Medical Power of Attorney:

This special power of attorney document allows you to designate another person to make medical decisions on your behalf, also review the Substitution Decisions Act in the Money Management Newsletter Library.

Misrepresentation: Act of making, issuing, circulating or causing to be issued or circulated an estimate, an illustration, a circular or a statement of any kind that does not represent the correct policy terms, dividends or share of surplus or the name or title for any policy or class of policies that does not in fact reflect its true nature
   
Mortally Table: A table showing the incidence of death at specified ages
 
Mortality: The relative incidence of death within a given group.

No Fault Insurance:

Government-mandated insurance designed to provide automatic compensation for automobile accident victims, regardless of who is to blame.

Non-Medical Insurance: Issued on a regular basis without requiring a regular medical examination. In passing on the risk, the company relies on the applicant's answers to questions regarding his or her physical condition and on personal references or inspection reports.
   

Ordinary Annuity:

A series of equal payments over a fixed number of years where the payments are made at the end of each period.

Paid-up Insurance: An insurance policy that with remain in force without the need for additional premiums.
Participating Policy: A policy that is eligible for the payment of dividends by the insurer (see dividend)

Permanent Life Insurance:

The most common types are whole and universal . Both offer lifetime protection. Renewal is not necessary as long as you pay the premiums.

Per Capita (Life Insurance):

The death proceeds of a contract or policy are divided equally among the living beneficiaries. For example if three beneficiaries are named but one is no longer living, the remaining to will each receive 1/2 of the proceeds. For contrast see per stirpes.

Per Stirpes (Life Insurance):

The death proceeds of a contract or policy are divided equally among the named beneficiaries. The share of any deceased named beneficiary is distributed to his/her living dependents. For contrast see per capita.

Policyowner: The person who owns a life insurance policy. This is usually the insured person, could also be a relative of the insured, a corporation or partnership.

Power of Attorney:

Gives signing authority for your affairs to a spouse or other trusted person in case of accidental or other circumstances that leave your own unable to manage your own affairs.

Pre-Authorized Chequing Arrangement (PAC):

An arrangement you can make with your bank to remove a predetermined amount from your account at regular intervals and place it elsewhere. This method is a convenient means of savings.

   

Premium:

The amount of money that is required to be paid to the insurance company for insurance coverage.

Preferred Risk:

 

 

A risk whose physical condition, occupation, mode of living and other characteristics indicate a prospect for longevity superior to that of the average longevity of unimpaired lives of the same age. (See standard risk.)

Principal: The face amount or par value of a contract.
   

Private Health Insurance:

Insurance plans provided by private insurance companies, in contrast to health insurance provided by government or public agencies such as Blue Cross.

Primary Beneficiary: In life insurance, the beneficiary designated by the insured as the first to receive policy benefits.
   

Probate:

The process used to make an orderly distribution and transfer of property from the deceased to a group of beneficiaries. The probate process is characterized by court supervision of property transfer, filling of claims against the estate by creditors and publication of a last will and testament.

Proceeds: Net amount of money payable by the company at the insured's death or at policy maturity.
   

Public Liability Insurance:

Insurance designed to indemnify you of losses that arise out of negligence in your work, volunteer activists.

   

Public Trustee:

The official appointed by the provincial government to supervise the administration of assets owing to a charity, or mental incompetent in an institution or a public trust.

   

Registered Annuity:

An annuity purchased from registered funds.

   
Rebating: Returning part of the commission or giving anything else of value to the insured as an inducement to buy the policy. It is illegal and cause for license revocation in most states. In some states, it is an offense by both the agent and the person receiving the rebate.
Reinstatement: Putting a lapsed policy back in force by producing satisfactory evidence of insurability and paying any past-due premiums required.

Replacement:

Act of replacing one life insurance policy with another; may be done legally under certain conditions. (See twisting.)

Representation:
Statements made by applicants on their applications for insurance that they represent as being substantially true to the best of their knowledge and belief but that are not warranted as exact in every detail.
   

Rider:
Strictly speaking, a rider adds something to a policy. However, the term is used loosely to refer to any supplemental agreement attached to and made a part of the policy, whether the policy's conditions are expanded and additional coverages added, or a coverage or condition is waived.
   
Risk Selection: The method a home office underwriter uses to choose applicants that the insurance company will accept. The underwriter must determine whether risks are standard, substandard or preferred and set the premium rates accordingly.

Renewable Term:

A term life insurance policy that may be renewed at prescribed rates without evidence of insurability.

Right of Survivorship:

The right to succeed to the ownership or part ownership of property as the result of the death of an owner or part owner.

Salary Continuation Plan:

An arrangement whereby an income, usually related to an employee's salary, is continued upon his or her death; often paid to the employee's beneficiary.

Secondary Beneficiary: An alternate beneficiary designated to receive payment, usually in the event the original beneficiary predeceases the insured.
   
Self-Insurance: Accepting financial responsibility for the results of insurable hazards rather than transferring that responsibility to an insurer by taking out an insurance contract and paying premiums to provide such protection.
Single Premium Policy: A whole life policy for people who want pay a single one-time lump sum (premium), and then be covered for the rest of their lives without paying any additional premiums.
Standard Risk: A person who, according to a company's underwriting standards, is entitled to insurance protection without extra rating or special restrictions.
 
Substandard Risk:
A person who is considered an under-average or impaired insurance risk because of a physical condition, occupation, personal or family disease or dangerous habits or hobbies.
Suicide Clause: Most life insurance policies provide that if the insured commits suicide within a specified period, usually two years, after the issue date, the company's liability will be limited to a return of premiums paid.

Term Insurance:

Life insurance which pays if death occurs within a stated period of time. There is not usually a cash value under a term insurance policy.

This is a life insurance pure and simple. You choose the number of years (the term) you are insured and the amount your survivors get if you die within that term. The term you choose can be for a given number of years, for example 10 or 20, or up to a certain age, for example 65 or 100. The main features of term-to-100 policy are: 1. Fixed premiums, 2. Fixed death benefits, 3. No cash value.

Term to 90 Annuity:

An annuity that pays a fixed amount each year until it is exhausted in the year that the annuitant turns 90.

Term of Policy: Period for which the policy runs. In life insurance, this is to the end of the term period for term insurance.
   
Tertiary Beneficiary: In life insurance, a beneficiary designated as third in line to receive the proceeds or benefits if the primary and secondary beneficiaries do not survive the insured.
   
Third-Party Owner: A policyowner who is not the prospective insured.
   

Testamentary Trust:

A trust created under the terms of a will and takes effect on the death of the testator.

Testator:

The person who is making a will in their own name.

Trust Officer: A person who works in the estate planning department of a trust company.
Trustee: A person who administers assets held in trust for another person.
 
Trust:
A bequest or device which puts legal title and control of property in the hands of a party (trustee) for the benefit of another party (beneficiary).
   
Twisting: Practice of inducing a policyowner in one company to lapse, forfeit or surrender a life insurance policy for the purpose of taking out a policy in another company. Generally classified as a misdemeanor, subject to fine, revocation of license and sometimes imprisonment.

Underwriter (Life):

The Insurance company receiving premiums and accepting responsibility for fulfilling the policy contract. Also, a company employee who job is to decide whether the company should assume a particular risk.

Undivided Interest:

When two or more people hold title to property are tenants in common, this refers to their equal entitlement to use the entire property.

Uniform Simultaneous Death Act: Model law that states when an insured and beneficiary die at the same time, it is presumed that the insured survived the beneficiary.
   

Universal Life Insurance:

Universal life insurance (like whole life insurance) provides coverage for your entire life and builds up savings over time. Unlike whole life, you can use the interest from your accumulated savings to help pay your premiums, which are flexible. The people you name as beneficiaries collect a death benefit if you die while covered.

Uninsurable risk: A person who is not acceptable for insurance due to excessive risk.

Variable Life Annuity:

An annuity providing a fluctuating level of payments, depending on the performance of its underling investments.

Variable Life Insurance:

This type of insurance provides coverage for your entire life and builds up savings over time, much like "whole life insurance". People you name as beneficiaries collect a death benefit if you die while covered. Unlike "whole life" and "universal life insurance", you can invest your savings in one of several mutual funds, which often are managed by the insurance company.

Vested:

You are vested if you are entitled to receive benefits (normally a pension plan or a deferred profit sharing plan) from a current or former employer.

Some companies may grant full benefits, others gradually increase the benefits ("percentage of vesting") after you work for them a predefined number of years.

Vesting:

The process by which an employee obtains full credit for the employer contributions into a benefit plan (normally a pension plan or a deferred profit sharing plan).

Viatical Settlement:

The proceeds received from the sale of a life insurance policy, on the life of a terminally ill individual, to a third party.

Settlement companies purchase these policies at a discount of the face vale and the insured receives a lump sum payment.

The company becomes the owner and beneficiary of the policy, pay all future premiums and collects the proceeds when the insured dies.

Waiver of Premium: Rider or provision included in most life insurance policies exempting the insured from paying premiums after he or she has been disabled for a specified period of time, usually six month
   

Whole Life:

Life insurance which pays whenever death occurs. Whole life insurance has cash values. (Also called straight life or ordinary life.)

Will Executing:

The process of making your will valid. Usually involves formalities in regard to signing by the testator and witnessing of that signature.

Will:

A legally enforceable declaration of a person's wishes relating to matters to be dealt with after his death and inoperative until his death. A will is revocable or can be amended by a codicil up to the time of death, and is applicable to the situation which exists at the time of death.

 

This Glossary of financial terms was created by Fiscal Agents Financial Information Services, Research Department. All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, mechanical, electronic, photocopying, recording, or otherwise, without the prior written permission of Fiscal Agents. Copyright Fiscal Agents © 2000. All Worldwide Rights Reserved. See Notes and Credits or see permissions page.





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