Definition of Irrevocable Beneficiary

Irrevocable Beneficiary

Legal designation that cannot be contested. (See beneficiary)

Beneficiary

This is the person who benefits from the terms of a trust, a will, an RRSP, a RRIF, a LIF, an annuity or a life insurance policy. In relation to RRSP's, RRIF's, LIF's, Annuities and of course life insurance, if the beneficiary is a spouse, parent, offspring or grand-child, they are considered to be a preferred beneficiary. If the insured has named a preferred beneficiary, the death benefit is invariably protected from creditors. There have been some court challenges of this right of protection but so far they have been unsuccessful. See "Creditor Protection" below. A beneficiary under the age of 18 must be represented by an individual guardian over the age of 18 or a public official who represents minors generally. A policy owner may, in the designation of a beneficiary, appoint someone to act as trustee for a minor. Death benefits are not subject to income taxes. If you make your beneficiary your estate, the death benefit will be included in your assets for probate. Probate filing fees are currently $14 per thousand of estate value in British Columbia and $15 per thousand of estate value in Ontario.
Another way to avoid probate fees or creditor claims against life insurance proceeds is for the insured person to designate and register with his/her insurance company's head office an irrevocable beneficiary. By making such a designation, the insured gives up the right to make any changes to his/her policy without the consent of the irrevocable beneficiary. Because of the seriousness of the implications, an irrevocable designation should only be made for good reason and where the insured fully understands the consequences.
NoteA successful challenge of the rules relating to beneficiaries was concluded in an Ontario court in 1996. The Insurance Act says its provisions relating to beneficiaries are made "notwithstanding the Succession Law Reform Act." There are two relevent provisions of the Succession Law Reform Act. One section of the act gives a judge the power to make any order concerning an estate if the deceased person has failed to provide for a dependant. Another section says money from a life insurance policy can be considered part of the estate if an order is made to support a dependant. In the case in question, the deceased had attempted to deceive his lawful dependents by making his common-law-spouse the beneficiary of an insurance policy which by court order was supposed to name his ex-spouse and children as beneficiaries.

Preferred Beneficiary

Used in older contracts to confer the same rights as an irrevocable beneficiary. Applied to family members.

Contingent Beneficiary

This is the person designated to receive the death benefit of a life insurance policy if the primary beneficiary dies before the life insured. This is a consideration when husband and wife make each other the beneficiary of their coverage. Should they both die in the same car accident or plane crash, the death benefits would go to each others estate and creditor claims could be made against them. Particularly if minor children could be survivors, then a trustee contingent beneficiary should be named.

Beneficiary

The person designated to receive proceeds entitled by a benefit. Payment of a benefit is triggered by an event.

Beneficiary (Credit Insurance)

The person or party designated to receive proceeds entitled by a benefit. Payment of a benefit is triggered by an event. In the case of credit insurance, the beneficiary will always be the creditor.

Preferred Rates

As non-smoking rates caused a major reduction in the cost of life insurance in the early 1980's, the emergence of preferred non-smoker rates in 1998 has caused another noteworthy reduction in rates. A growing number of insurance companies are offering better rates which go beyond simply looking at gender or smoking habits. Other health related factors such as physical build, lifestyle, avocation and personal and family health history indicating longer life expectancy can add up to significant cost savings to new life insurance applicants. Make certain to ask about these new preferred rates.

Segregated Fund

Sometimes called seg funds, segregated funds are the life insurance industry equivalent to a mutual fund with some differences.The term "Mutual Fund" is often used generically, to cover a wide variety of funds where the investment capital from a large number of investors is "pooled" together and invested into specific stocks, bonds, mortgages, etc.
Since Segregated Funds are actually deferred annuity contracts issued by life insurance companies, they offer probate and creditor protection if a preferred beneficiary such as a spouse is named. Mutual Funds don't have this protection.
Unlike mutual funds, segregated funds offer guarantees at maturity (usually 10 years from date of issue) or death on the limit of potential losses - at times up to 100% of original deposits are guaranteed which makes them an attractive alternative for the cautious and/or long term investor. On the other hand, with regular mutual funds, it is possible to have little or nothing left at death or plan maturity.

Risk class

A group of insureds who present similar risk to the insurance company. Risk classes include - standard, preferred, nonsmoker, substandard, uninsurable.

Polyethylene Vapor Barrier

Plastic film used to prevent moisture from passing through unfaced insulation. Both 4- and 6-mil polyethylene are preferred because they are less likely to be damaged during construction.

Annuity

A contrAct which provides an income for a specified period of time, such as a certain number of years or for LIFe. An annuity is like a LIFe Insurance policy in reverse. The purchaser gives the LIFe Insurance company a lump sum of mOney and the LIFe Insurance company pays the purchaser a regular income, usually monthly.

Accrued Income

income that has been earned but not yet received. For instance, if you have a non-registered Guaranteed Investment Certificate (GIC), Mutual Fund or Segregated Equity Fund, growth accrues annually or semi-annually and is taxable annually even though the gain is only paid at maturity of your investment.

Attribution Rules

Legislation under which interest, dividends, or capital gains earned on assets you transfer to your spouse will be treated as your own for tax purposes. Interest or dividends relating to property transferred to children under 18 also will be attributed back to you. The exception to this rule is that capital gains relating to property transferred to children under 18 will not be attributed back to you.

Back To Back Annuity

this term refers to the simultaneous issue of a LIFe annuity with a non-guaranteed period and a guaranteed LIFe Insurance policy [usually whole LIFe or term to 100]. The face value of the LIFe Insurance would be the same amount that was Used to purchase the annuity. this combination of LIFe annuity providing the highest payout of all types of Annuities, along with a guaranteed LIFe Insurance policy allowed an uninsurable person to convert his/her RRSP into the best choice of annuity and guarantee that upon his/her Death, the full value of the annuity would be paid tax free through the LIFe Insurance policy to his family members. However, in the early 1990's, the Federal tax authorities put a stop to the issuing of standard LIFe rates to rated or uninsurable applicants. Insuring a LIFe annuity in this manner is still an excellent way to provide guaranteed tax free funds to family members but the application for the annuity and the application for the LIFe Insurance are separate transActions and today, most likely conducted through two different Insurance companies so that There is no suspicion of preferential treatment given to the LIFe Insurance application.

Cash Surrender Value

this is the amount available to the owner of a LIFe Insurance policy upon voluntary termination of the policy before it becomes payable by the Death of the LIFe insured. this does not apply to term Insurance but only to those policies which have reduced paid up values and cash surrender values. A cash surrender in lieu of Death benefit usually has tax implications.

Canadian Deposit Insurance Corporation

Better known as CDIC, this is an organization which insures quaLIFying deposits and GICs at savings institutions, mainly banks and trust companys, which belong to the CDIC for amounts up to $60,000 and for terms of up to five years. Many types of deposits are not insured, such as mortgage-backed deposits, Annuities of duration of more than five years, and mutual funds.

Captive Agent

A licensed Insurance agent who sells Insurance for only One company.

Co-insurance

In medical Insurance, the insured person and the insurer sometimes share the cost of services under a policy in a specified ratio, for example 80% by the insurer and 20% by the insured. By this means, the cost of coverage to the insured is reduced.

Contingent Beneficiary

this is the person designated to receive the Death benefit of a LIFe Insurance policy if the primary beneficiary dies before the LIFe insured. this is a consideration when husband and wife make each other the beneficiary of their coverage. should they both die in the same car accident or plane crash, the Death benefits would go to each others estate and creditor claims could be made against them. particularly if minor children could be survivors, then a trustee contingent beneficiary should be named.

Contingent Owner

this is the person designated to become the new owner of a LIFe Insurance policy if the original owner dies before the LIFe insured.

Conversion Right

Term LIFe Insurance products are offered as non-convertible or convertible to a certain time in the future. The coversion right has a time limit, usually to the policy holder's age 60 or possibly even age 70. this right means that the policy holder has the right to convert their existing policy to Another specific different plan of permanent Insurance within the specified time period, without providing evidence of insurability. There is a slightly higher cost for a term policy with the conversion priviledge but it is a valuable feature should a policy holder's health change for the worst and continued Insurance coverage becomes a necessity.
Most often this right is also granted to individuals covered under employee group benefit policies where individuals leaving the employee group have a limited amount of time, usually anywhere from 30 to 90 days, to convert to a specific permanent individual policy without evidence of insurability.

Creditor Proof Protection

The creditor proof status of such things as LIFe Insurance, non-registered LIFe Insurance investments, LIFe Insurance RRSPs and LIFe Insurance RRIFs make these attrActive products for high net worth individuals, professionals and business owners who may have creditor concerns. under most circumstances the creditor proof rules of the different provincial Insurance Acts take priority over the federal bankruptcy rules.
The provincial Insurance Acts protect LIFe Insurance products which have a family class beneficiary. family class beneficiaries include the spouse, parent, child or grandchild of the LIFe insured, except in Quebec, where creditor Protection rules apply to spouse, ascendants and descendants of the insured. Investments sold by other financial institutions do not offer the same security should the holder go bankrupt. There are also circumstances under which the creditor proof Protections do not hold for LIFe Insurance products. Federal bankruptcy law disallows the Protection for any transfers made within One year of bankruptcy. In addition, should it be found that a person shifted mOney to an Insurance company fund in bad faith for the specific purpose of avoiding creditors, these funds will not be creditor proof.

Dead Peasants Insurance

Also known as "Dead Janitors Insurance", this is the prActice, where allowed, in several U.S. states, of numerous well known large American Corporations taking out corporate owned LIFe Insurance policies on millions of their regular employees, often without the knowledge or consent of those employees. Corporations profiting from the Deaths of their employees [and sometimes ex-employees] have attrActed adverse publicity Because ultimate Death benefits are seldom, even partially passed down to surviving families.

Deferred Annuity

An annuity providing for income payments to commence at a specified future time.

Disability Insurance

Insurance that pays you an ongoing income if you become disabled and are unable to pursue employment or business Activities. There are limits to how much you can receive based on your pre-disability earnings. Rates will vary based on occupational duties and length of time in a particular industry. this kind of coverage has a waiting period before you can begin collecting benefits, usually 30, 60 or 90 days. The benefit paying period also varies from 2 years to age 65. A short waiting period will cost more that a longer waiting period. As well, a long benefit paying period will cost more than a short benefit paying period.

Errors and Omissions Insurance

Insurance coverage purchased by the agent/broker which provides Protection against loss incurred by a client Because of some negligent Act, error, oversight, or omission by the agent/broker.

Fiat Money

Fiat MOney is paper currency made Legal tender by law or fiat. It is not backed by gold or silver and is not necessarily redeemable in coin. this prActice has had widespread use for about the last 70 years. If governments produce too much of it, There is a loss of confidence. Even so, governments print it routinely when they need it. The value of fiat mOney is dependent upon the performance of the economy of the country which issued it. Canada's currency falls into this category.

First To Die Coverage

this means that There are two or more LIFe insured on the same policy but the Death benefit is paid out on the first Death only. If two or more persons at the same address are purchasing LIFe Insurance at the same time, it is wise to compare the cost of this kind of coverage with individual policies having a multiple policy discount.

Grace Period

A specific period of time after a premium payment is due during which the policy owner may make a payment, and during which, the Protection of the policy continues. The grace period usually ends in 30 days.

Group Life Insurance

this is a very common form of LIFe Insurance which is found in employee benefit plans and bank mortgage Insurance. In employee benefit plans the form of this Insurance is usually One year renewable term Insurance. The cost of this coverage is based on the average age of everyOne in the group. Therefore a group of young people would have inexpensive rates and an older group would have more expensive rates.
some people rely on this kind of Insurance as their primary coverage forgetting that group LIFe Insurance is a condition of employment with their employer. The coverage is not portable and cannot be taken with you if you change jobs. If you have a change in health, you may not quaLIFy for new coverage at your new place of employment.
Bank mortgage Insurance is also usually group Insurance and you can tell this by virtue of the fAct that you only receive a certificate of Insurance, and not a complete policy. The only form in which bank mortgage Insurance is sold is reducing term Insurance, matching the declining mortgage balance. The only beneficiary that can be chosen for this kind of Insurance is the bank. In both cases, employee benefit plan group Insurance and bank mortgage Insurance, the coverage is not guaranteed. this means that coverage can be cancelled by the Insurance company underwriting that particular plan, if they are experiencing excessive claims.

Income Splitting

this is a tax planning strategy of arranging for income to be transferred to family members who are in lower tax brackets than the One earning the income, thus reducing taxes. Even though attribution rules limit income splitting, There are still a number of legitimate ways to do so, such as through the use of spousal RRSPs.

Insured

this is the person covered by the LIFe Insurance policy. upon this person's Death, a tax free benefit will be paid to that person's estate or a named beneficiary.

Insured Mortgage

An insured mortgage protects only the mortgage lender in case you do not make your mortgage payments. this coverage is provided by CMHC [Canada Mortgage and Housing Corporation] and is required if a person has a high-ratio mortgage. [A mortgage is high-ratio if the amount borrowed is more than 75% of the purchase price or appraised value, whichever is less.]

Insured Retirement Plan

this is a recently coined phrase describing the concept of using Universal LIFe Insurance to tax shelter earnings which can be Used to generate tax-free income in retirement. The concept has been described by some as "the most effective tax-neutralization strategy that exists in Canada today."
In addition to LIFe Insurance, a Universal LIFe policy includes a tax-sheltered cash value fund that cannot exceed the policy's face value. Deposits made into the policy are partially Used to fund the LIFe Insurance and partially grow tax sheltered inside the policy. It should be pointed out that in order for this to work, you must make deposits into this kind of policy well in excess of the cost of the underlying Insurance. Investment of the cash value inside the policy are commonly mutual fund type investments. upon retirement, the policy owner can draw on the accumulated capital in his/her policy by using the policy as collateral for a series of demand loans at the bank. The loans are structured so the sum of mOney borrowed plus interest never exceeds 75% of the accumulated investment account. The loans are only repaid with the tax free Death benefit at the Death of the policy holder. any remaining funds are paid out tax free to named beneficiaries.
Recognizing the value to policy holders of this use of Universal LIFe Insurance, Insurance companies are reworking features of their products to allow the policy holder to ask to have the relationship of Insurance to investment growth tracked so that investment growth inside the policy may be maximized. The only potential downside of this strategy is the possibility of the government changing the tax rules to prohibit using a LIFe Insurance product in this manner.

Intestate

this means dying without a will, in which case the provincial laws of the province in which the Death occurred apply to the manner in which assets will be distributed. In other words, if you don't write your own will, the government will do it for you after your Death and it may not be as you would have wished.

Last To Die Coverage

this means that There are two or more LIFe insured on the same policy but the Death benefit is paid out on the last person to die. The cost of this type of coverage is much less than a first to die policy and it is generally Used to protect estate value for children where There might be substantial capital gains taxes due upon the Death of the last parent. this kind of policy is also valuable when One of two people covered has health problems which would prohibit obtaining individual coverage.

Level Premium Life Insurance

this is a type of Insurance for which the cost is distributed evenly over the premium payment period. The premium remains the same from year to year and is more than Actual cost of Protection in the earlier years of the policy and less than the Actual cost of Protection in the later years. The excess paid in the early years builds up a reserve to cover the higher cost in the later years.

Life Expectancy

The average number of years of LIFe remaining for a group of people of a given age and gender according to a particular mortality table.

Life Income Fund

Commonly known as a LIF, this is One of the options available to locked in registered Pension Plan (RPP) holders for income payout as opposed to registered Retirement Savings Plan (RRSP) holders choice of payout through registered Retirement income Funds (RRIF). A LIF must be converted to a unisex annuity by the time the holder reaches age 80.

Living Benefit

some Insurance companies include this benefit option at no cost to their policy holders. The insurer considers on a case to case basis, the need for Insurance funds before Death. If the insured can demonstrate a shortened LIFe of less than two years and with some insurers One year, the insurer will consider releasing up to 50% or a maximum of $100,000 of the LIFe Insurance coverage held by the insured. Not all insurers offer this benefit for free. The need has resulted in specific stand alOne living benefit/critical illness policies coming into existence. Look under "Different types of LIFe Insurance" for further information. you might have heard of "Viatical Settlements", the prActice of seriously ill people selling the rights to their LIFe Insurance policies to third parties. this prActice is common in the United States but has not caught on in Canada.

Living Will

this is a will which specifically expresses the testator's desire not to be kept alive on LIFe support machines, should the occasion arise.

Money Laundering

this is the process by which "dirty mOney" generated by criminal Activities is converted through legitimate businesses into assets that cannot be easily traced back to their ilLegal origins.

Mortgage Insurance

Commonly sold in the form of reducing term LIFe Insurance by lending institutions, this is LIFe Insurance with a Death benefit reducing to zero over a specific period of time, usually 20 to 25 years. In most instances, the cost of coverage remains level, while the Death benefit continues to decline. Re-stated, the cost of this kind of Insurance is Actually increasing since less Death benefit is paid as the outstanding mortgage balance decreases while the cost remains the same. Lending institutions are the most popular sources for this kind of coverage Because it is usually sold during the purchase of a new mortgage. The untrained institution mortgage sales person often gives the impression that this is the only place mortgage Insurance can be purchased but it is more efficiently purchased at a lower cost and with more flexibility, directly from traditional LIFe Insurance companies. No matter where it is purchased, the reducing term Insurance Death benefit reduces over a set period of years. Most consumers are up-sizing their residences, not down-sizing, so it is likely that more coverage is required as years pass, rather than less coverage.
The cost of mortgage lender's Insurance group coverage is based on a blended non-smoker/smoker rate, not having any advantage to either male or female. Mortgage lender's group Insurance certificate specifies that it [the lender] is the sole beneficiary entitled to receive the Death benefit. Mortgage lender's group Insurance is not portable and is not guaranteed. generally speaking, your coverage is void if you do not occupy the house for a period of time, rent the home, fall into arrears on the mortgage, and There are a few others which vary by institution. If, for example, you sell your home and buy Another, your current mortgage Insurance coverage ends and you will have to quaLIFy for new coverage when you purchase your next home. Maybe you won't be able to quaLIFy. Not being guaranteed means that it is possible for the lending institution's group Insurance carrier to cancel all policy holder's coverages if they are experiencing too many Death benefit claims.
Mortgage Insurance purchased from a LIFe Insurance company, is priced, based on gender, smoking status, health and LIFestyle of the purchaser. Once obtained, it is a unilateral contrAct in your favour, which cannot be cancelled by the Insurance company unless you say so or unless you stop paying for it. It pays upon the Death of the LIFe insured to any "named beneficiary" you choose, tax free. If, instead of reducing term LIFe Insurance, you have purchased enough level or increasing LIFe Insurance coverage based on your projection of future need, you can buy as many new homes in the future as you want and you won't have to worry about coverage you might loose by renewing or increasing your mortgage.
It is worth mentioning mortgage creditor Protection Insurance since it is many times mistakenly referred to simply as mortgage Insurance. If a home buyer has a limited amount of down payment towards a substantial home purchase price, he/she may quaLIFy for a high ratio mortgage on a home purchase if a lump sum fee is paid for mortgage creditor Protection Insurance. The only Canadian mortgage lenders currently known to offer this option through the distribution system of banks and trust companies, are General Electric Capital [GE Capital] and Central Mortgage and Housing Corporation [CMHC]. The lump sum fee is mandatory when the mortgage is more than 75% of the value of the property being purchased. The lump sum fee is usually added onto the mortgage. It's important to realize that the only beneficiary of this type of coverage is the morgage lender, which is the bank or trust company through which the buyer arranged their mortgage. If the buyer for some reason defaults on this kind of high ratio mortgage and the value of the property has dropped since being purchased, the mortgage creditor Protection Insurance makes certain that the bank or trust company gets paid. However, this is not the end of the story, Because whatever the difference is, between the disposition value of the property and whatever sum of unpaid mortgage mOney is outstanding to either GE Capital or CMHC will be the subject of collection procedures against the defaulting home buyer. Therefore, One should conclude that this kind of Insurance offers Protection only to the bank or trust company and absolutely no Protection to the home buyer.

Owner

this is the person who owns the Insurance policy. It is usually the same person as the insured but it could be someOne else who has the permission of the insured to be the owner, like a spouse, a common-law-spouse, an offspring, a parent, a corporation with insurable interest or a business partner with insurable interest. In order for someOne else to be an owner of your policy, they have to have a legitimate insurable interest in you.

Policy Fee

this is an administrative fee which is part of most LIFe Insurance policies. It ranges from about $40 to as much as $100 per year per policy. It is not a separate fee. It is incorporated in the regular monthly, quarterly, semi-annual or annual payment that you make for your policy. Knowing about this hidden fee is important Because some Insurance companies offer a policy fee discount on additional policies purchased under certain conditions. sometimes they reduce the policy fee or waive it altogether on One or more additional policies purchased at the same time and billed to the same address. The rules are slightly different depending on the Insurance company. There could be enormous savings if several people in the same family or business were intending to purchase coverage at the same time.

Policyholder

this is the person who owns a LIFe Insurance policy. this is usually the insured person, but it may also be a relative of the insured, a partnership or a corporation. There are instances in marriage breakup (or relationship breakup with dependent children) where appropriate LIFe Insurance on the support provider, owned and paid for by the ex-spouse receiving the support is an acceptable method of ensuring future security.

Probate

Letters Probate represent judicial certification of the validity of a will and judicial confirmation ofthe authority of the personal representative who is to administer the will. Essentially, Probate fees are a tax on a person's estate and except for the provinces of Quebec and Alberta, There is no limit to this tax.

Registered Pension Plan

Commonly referred to as an RPP this is a tax sheltered employee group plan approved by Federal and Provincial governments allowing employees to have deductions made directly from their wages by their employer with a resulting reduction of income taxes at source. These plans are easy to implement but difficult to dissolve should the group have a change of heart. Employer contributions are usually a percentage of the employee's salary, typically from 3% to 5%, with a maximum of the lessor of 20% or $3,500 per annum. The employee has the same right of contribution. Vesting is generally set at 2 years, which means that the employee has right of ownership of both his/her and his/her employers contributions to the plan after 2 years. It also means that all contributions are locked in after 2 years and cannot be cashed in for use by the employee in a low income year. should the employee change jobs, these funds can only be transferred to the RPP of a new employer or the funds can be transferred to an individual RRSP (or any number of RRSPs) but in either scenario, the funds are locked in and cannot be accessed until at least age 60. The only choices available to access locked in RPP funds after age 60 are the conversion to a LIFe income Fund or a Unisex annuity.
To further define an RPP, registered Pension Plans take two forms; Defined benefit or Defined Contribution (also known as mOney purchase plans). The Defined benefit plan establishes the amount of mOney in advance that is to be paid out at retirement based usually on number of years of employee service and various formulae involving percentages of average employee earnings. The Defined benefit plan is subject to constant government scrutiny to make certain that sufficient contributions are being made to provide for the predetermined pension payout. On the other hand, the Defined Contribution plan is considerably easier to manage. The employer simply determines the percentage to be contributed within the prescribed limits. Whatever amount has grown in the employee's reserve by retirement determines how much the pension payout will be by virtue of the amount of LIF or annuity payout it will purchase.
The most simple group RRSP plan is a group billed RRSP. this means that each employee has his own RRSP plan and the employer deducts the contributions directly from the employee's wages and sends them directly to the RRSP plan administrator. Regular RRSP rules apply in that maximum contribution in the current year is the lessor of 18% or $13,500. generally, to encourage this kind of plan, the employer also agrees to make a regular contribution to the employee's plans, knowing full well that any contributions made immediately belong to the employee. should the employee change jobs, he/she can take their plan with them and continue making contributions or cash it in and pay tax in the year in which the mOney is taken into income.

Registered Retirement Savings Plan (Canada)

Commonly referred to as an RRSP, this is a tax sheltered and tax deferred savings plan recognized by the Federal and Provincial tax authorities, whereby deposits are fully tax deductable in the year of deposit and fully taxable in the year of receipt. The ability to defer taxes on RRSP earnings allows One to save much faster than is ordinarily possible. The new rules which apply to RRSP's are that the holder of such a plan must convert it into income by the end of the year in which the holder turns age 69. The choices for conversion are to simply cash it in an pay full tax in the year of receipt, convert it to a RRIF and take a varying stream of income, paying tax on the amount received annually until the income is exhausted, or converting it into an annuity with guaranteed payments for a chosen number of years, again paying tax each year on mOneys received.
If you are currently 69 years of age, you may still contribute to your own RRSP until December 31st of this year and realize a tax deduction on this year's income. you must also, however, make provisions before December 31st of the year for converting your RRSP into either a RRIF or an annuity, otherwise, the full balance of your RRSP becomes taxable on January 1 of the following year. If you are older than age 69, still have earned income, and have a younger spouse, you may continue to contribute to a spousal RRSP until that spouse reaches 69 years of age. Contributions would be based on your own contribution level and are deducted from your taxable income.

Registered Retirement Income Fund (Canada)

Commonly referred to as a RRIF, this is One of the options available to RRSP holders to convert their tax sheltered savings into taxable income.

Spousal Registered Retirement Savings Plan

this is an RRSP owned by the spouse of the person contributing to it. The contributor can direct up to 100% of eligible RRSP deposits into a spousal RRSP each and every year. Contributing to a spouses RRSP reduces the amount One can contribute to One's own RRSP, however, if the spouse is a lower income earner, it is an excellent way in which to split income for lower taxation in retirement years.

Split Dollar Life Insurance

The split dollar concept is usually associated with cash value LIFe Insurance where There is a Death benefit and an accumulation of cash value. The basic premise is the sharing of the costs and benefits of a LIFe Insurance policy by two or more parties. Usually One party owns and pays for the Insurance Protection and the other owns and pays for the cash accumulation. There is no single way to structure a split dollar arrangement. The possible structures are limited only by the imagination of the parties involved.

Temporary Life Insurance

Temporary Insurance coverage is available at time of application for a LIFe Insurance policy if certain conditions are met. Normally, temporary coverage relates to free coverage while the Insurance company which is underwriting the risk, goes through the process of deciding whether or not they will grant a contrAct of coverage. The quaLIFications for temporary coverage vary from Insurance company to Insurance company but generally applicants will quaLIFy if they are between the ages of 18 and 65, have no knowledge or suspicions of ill health, have not been absent from work for more than 7 days within the prior 6 months Because of sickness or injury and total coverage Applied for from all sources does not exceed $500,000. Normally a cheque covering a minimum of One months premium is required to complete the conditions for this kind of coverage. The Insurance company applies this deposit towards the cost of a policy at its issue date, which may be several weeks in the future.

Term Life Insurance

A plan of Insurance which covers the insured for only a certain period of time and not necessarily for his or her entire LIFe. The policy pays a Death benefit only if the insured dies during the term.

Underwriter

this could be the person (broker or agent) who helps you choose the proper type of LIFe Insurance or disability Insurance and the Insurance company for your particular needs. this could also be the person at the Insurance company's head office who reviews your application for coverage to determine whether or not the Insurance company will issue a policy to you.

Will

this is a Legal document detailing how you want your assets to be distributed upon your Death. you may also stipulate how you wish to be buried or who you would like to take care of any surviving dependent family members. In my opinion, it is very important to be quite specific about your wishes for the distribution of special assets such as the antique grandfather clock, the classic silver tea set or the antique piano. If you think that your beneficiaries may dispute how your things are to be distributed, consider stipulating that an auction be held in which all beneficiaries may bid on the item which they value and all mOneys collected are then shared in the same manner in which you distributed your other liquid assets. your might want to remember that a will is automatically revoked upon marriage unless the will specifically states that the will is made in contemplation of marriage.

Yearly Renewable Term Insurance

sometimes, simply called YRT, this is a form of term LIFe Insurance that may be renewed annually without evidence of insurability to a stated age.

Accidental Death and Dismemberment

Coverage that provides a lump-sum payment to you or your survivors if an accident results in the loss of a limb, paralysis or your Death.

Accidental Death Benefit (ADB)

Coverage against accidental Death usually payable in addition to base amount of coverage.

Accidental Dismemberment: (Credit Insurance)

provides additional financial security should an insured person be dismembered or lose the use of a limb as the result of an accident.

Account Value

The sum of all the interest options in your policy, including interest.

Accumulated Value

An amount of mOney invested plus the interest earned on that mOney.

Actuary

One who uses statistical information to evaluate the probability of future events and prices Insurance products.

Agency

A grouping of sales producers according to region. Compare with Branch.

Agent

One who represents Canada LIFe when providing services to clients

Amortization (Credit Insurance)

Refers to the reduction of debt by regular payments of interest and principal in order to pay off a loan by maturity.

Annuity

periodic payments made to an individual under the terms of the policy.

Annuity Period

The time between each payment under an annuity.

Automatic Benefits Payment

Automatic payment of mOneys derived from a benefit.

Beneficiary (Credit Insurance)

The person or party designated to receive proceeds entitled by a benefit. Payment of a benefit is triggered by an event. In the case of credit Insurance, the beneficiary will always be the creditor.

Benefit

An instruction that pays a cash amount upon the occurrence of a specific event.

Benefit Value

The amount of cash payable on a benefit.

Borrower (Credit Insurance)

A consumer who borrows mOney from a lender.

Canadian Life and Health Insurance Association (CLHIA)

An association of most of the LIFe and health Insurance companies in Canada that conducts research and compiles information about the LIFe and health Insurance industry in Canada.

Cash Surrender Value

benefit that entitles a policy owner to an amount of mOney upon cancellation of a policy.

Child Insurance Rider (CIR)

Insurance or insurability provided on current or future children of insured.

Commercial Business Loan (Credit Insurance)

An agreement between a creditor and a borrower, where the creditor has loaned an amount to the borrower for business purposes.

Cost of Insurance

The cost of insuring a particular individual under the policy. It is based on the amount of coverage, as well as the underwriting class, age, sex and tobacco consumption of that individual.

Creditor (Credit Insurance)

A lender or lending institution that offers financing and loans to a borrower, for the purpose of acquiring a commodity.

Critical Illness Insurance

Coverage that provides a lump-sum payment should you be diagnosed with a critical illness and survive a pre-determined period of time. There are no restrictions on how you use your benefit.

Critical Illness Insurance (Credit Insurance)

Coverage that provides a lump-sum payment should you become seriously ill with a specified illness. The payment is made to your creditors to pay off your debt owing.

Death Benefit

Amount paid on Death of an insured.

Debt (Credit Insurance)

MOney, goods or services that someOne is obligated to pay someOne else in accordance with an expressed or implied agreement. Debt may or may not be secured.

Disability Insurance (Credit Insurance)

Group Insurance designed to cover monthly obligations due to a borrower being unable to work due to sickness or injury.

Dividend Policy

this policy governs Canada LIFe's Actions regarding distribution of dividends to policyholders. It's goal is to achieve a dividend distribution that is equitable and timely, and which gives full recognition of the need to ensure the ongoing solidity of the company. It also specifies that distribution to individual policyholders must be equitable between dividend classes and policyholder generations, and among policyholders within any class.

Equity-based insurance

LIFe Insurance or annuity product in which the cash value and benefit level fluctuate according to the performance of an equity portfolio.

Estate Planning

An Insurance program designed to provide funds for insured's dependents upon Death of the insured, and to also conserve, as much as possible, the personal assets that the insured wants to bequeath to heirs.

Exclusion

A specific condition or circumstance listed in the policy that are not covered by the policy

Guaranteed Interest Annuity (GIA)

Interest bearing investment with fixed rate and term.

Indexation

The adjustment of benefits to compensate for the effects of inflation.

Individual Insurance

Insurance that is offered to individuals rather than groups.

Insurance Act

In Canada, a general statute that contains most of the Insurance law of a common law province, and regulates the conduct of insurers and Insurance agents within the province.

Insurance Policy (Credit Insurance)

A policy under which the Insurance company promises to pay a benefit of the person who is insured.

Insured

person whose LIFe is protected under a specific policy.

Issue Age

age of an insured as at the policy issue date, using "age nearest" next birthday formula.

Job Loss Insurance (Credit Insurance)

Coverage that can pay down your debt should you become involuntarily unemployed. The payment is made to your creditors to reduce your debt owing.

Joint Policy Life

One Insurance policy that covers two lives, and generally provides for payment at the time of the first insured's Death. It could also be structured to pay on second Death basis for estate planning purposes.

Lease (Credit Insurance)

ContrAct granting use of real estate, equipment or other fixed assets for a specified period of time in exchange for payment. The owner or a leased property is the lessor and the user the lessee.

Lender (Credit Insurance)

individual or firm that extends mOney to a borrower with the expectation of being repaid, usually with interest. Lenders create debt in the form of loans. Lenders include financial institutions, leasing companies government lending agencies and automobile dealers.

Life Insurance

Insurance that provides Protection against an economic loss caUsed by Death of the person insured.

Life Insurance (Credit Insurance)

Group Term LIFe Insurance that pays or reduces the balance due on a loan if the borrower dies before the loan is repaid.

Life Insured

The person who's LIFe is protected by an individual policy.

Life Underwriter

Insurance agent.

Mortgage Life insurance (Credit Insurance)

Decreasing term LIFe Insurance that provides a Death benefit amount corresponding to the decreasing amount owed on a mortgage.

Mortgage (Credit Insurance)

An agreement between a creditor and a borrower, where the creditor has loaned an amount to the borrower for purposes of purchasing a loan secured by a home.

Non-participating Policy

A type of Insurance policy or annuity in which the owner does not receive dividends.

Operating Expenses

The amount of mOney the company must spend on overhead, distribution, taxes, underwriting the risk and servicing the policy. It is a fActor in calculating premium rates.

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