Definition of Y

Y

A "Y" shaped plumbing fitting.

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.

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.

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.

Buy/Sell Agreement

This is an agreement entered into by the owners of a business to define the conditions under which the interests of each shareholder will be bought and sold. The agreement sets the value of each shareholders interest and stipulates what happens when one of the owners wishes to dispose of his/her interest during his/her lifetime as well as disposal of interest upon death or disability. Life insurance, critical illness coverage and disability insurance are major considerations to help fund this type of agreement.

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.

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.

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.

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.

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.

Mortality Tables

This is a statistical table used by life insurance companies showing the probability of death of male and females at all ages.

Morbidity Tables

These are statistical tables used by life insurance companies showing the probability of disease of male and females at all ages.

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.

Re-entry

This is a provision in some term insurance policies that allow the insured the right to renew the policy at a more favourable rate by providing updated evidence of insurability.

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.

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.

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.

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

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.

Daily Interest Accumulation

Account in which interest is accrued daily and credited to the account at the end of a specified time.

Disability

Inability to work due to injury or sickness.

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.

Equity investment

Through equity investment, investors gain part ownership of the corporation. The primary type of equity investment is corporate stock.

Evidence of Insurability

Evidence submitted to Canada Life that is used to determine whether an individual is eligible for the insurance coverage the individual has applied for.

Guaranteed Interest Annuity (GIA)

Interest bearing investment with fixed rate and term.

Indemnity

A type of contract in which the amount of the benefit to be paid is based on the actual amount of financial loss determined at the time of the loss - for example, hospital expense insurance.

Insurance Policy (Credit Insurance)

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

Irrevocable Beneficiary

Legal designation that cannot be contested. (See beneficiary)

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.

Maturity

The time when a policy or annuity reaches the end of its span.

Mortality Rate

The death rates for various age groups of the population.

Non-participating Policy

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

Participating Policy

A policy offers the potential of sharing in the success of an insurance company through the receipt of dividends.

Policy

A written document that serves as evidence of insurance coverage and contains pertinent information about the benefits, coverage and owner, as well as its associated directives and obligations.

Policy Anniversary

Yearly event linked to a policy. Usually the date issued.

Policy Date

Date on which the insurance company assumes responsibilities for the obligations outlined in a policy.

Policy Fee

Administrative charge included in a Policy Premium.

Policy Year

Period between two policy anniversaries.

Policyowner

The person who owns and holds all rights under the policy, including the power to name and change beneficiaries, make a policy loan, assign the policy to a financial institution as collateral for a loan, withdraw funds or surrender the policy.

Preferred Beneficiary

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

Variable Annuity

A form of annuity policy under which the amount of each benefit is not guaranteed or specified. The amounts fluctuate according to the earnings of a separate investment account.

Blended Payments

Payments consisting of both a principal and an interest component, paid on a regular basis (e.g. weekly, biweekly, monthly) during the term of the mortgage. The principal portion of payment increases, while the interest portion decreases over the term of the mortgage, but the total regular payment usually does not change.

Certificate of Location or Survey

A document specifying the exact location of the building on the property and describing the type and size of the building including additions, if any.

Equity

The interest of the owner in a property over and above all claims against the property. It is usually the difference between the market value of the property and any outstanding encumbrances.

Home Equity

The difference between the price for which a home could be sold (market value) and the total debts registered against it.

Maturity Date

Last day of the term of the mortgage agreement.

Payment Frequency

The choice of making regular mortgage payments every week, every other week, twice a month or monthly.

Prepayment Charge

A fee charged by the lender when the borrower prepays all or part of a closed mortgage more quickly than is set out in the mortgage agreement.

Prepayment Option

The ability to prepay all or a portion of the principal balance. Prepayment charges may be incurred on the exercise of prepayment options.

Security

In the case of mortgages, real estate offered as collateral for the loan.

Contingency

A condition that must be satisfied before a contract is binding. Inspection and obtaining financing are the two most common.

Courtyard home

A home with a courtyard as its main entrance.

Equity

The value of a homeowner's unencumbered interest in real estate. Equity is the difference between the home's fair market value and the unpaid balance of the mortgage and any outstanding liens. Equity increases as the mortgage is paid down or as the property appreciates.

Earnest money

A deposit made by potential home buyers during negotiations with the seller. The sum shows a seller that a buyer is serious about purchasing the property. The money usually is counted toward the down payment.

Home warranty

Like any other warranty, this guarantees the property against failure of mechanical systems, such as plumbing, electrical, heating and installed appliances.

Single-family home

A detached house.

Tray ceiling

A flat ceiling with a raised center portion.

Bay Window

A window that projects outward in a curve.

Bull Nose Drywall

Rounded drywall corners.

Cavity

The empty space between studs or joists to place insulation batts.

Clerestory

An outside wall of a room or building that rises above an adjoining roof and contains windows.

Daisy Chain

A wiring scheme in which device A is wired to device B, device B is wired to device C, etc. The last device is normally wired to a switch or circuit breaker.

Electricity

Provides power for lighting, appliances, and heating & cooling in a home. A meter records usage for billing by your local utility.

Entry Box

See Electrical Service Entry

High Voltage System

See Electricity.

Insulation Density

Denser insulation products have more fibers per square inch and, therefore, give you greater insulating power through higher R-values.

Low-Voltage System

Provides security, entertainment, communications, environmental control, networking, and other functions generally powered by a signal cable, phone line or data cable. Is not typically metered.

Poly-Wrap

Polyethylene wrap that encloses Owens Corning MIRAFLEX® insulation, making it comfortable to touch, less likely to itch and irritate, and easier to handle and install. The poly wrap has tiny perforations that allow the insulation to breathe and resist the collection of moisture within the wrap.

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.

Quarry Tile

A man-made or machine-made clay tile used to finish a floor or wall. Generally 6" X 6" X 1/4" thick.

Radiant Barrier System

A Radiant Barrier System (RBS) is a building section that includes a radiant barrier facing an air space.

Reflective Insulation System

Reflective Insulation System is formed by a combination of low emittance surfaces and air spaces that provide reflective cavities, which have low levels of radiant energy transmission.

Roof Valley

The "V" created where two sloping roofs meet.

Tray Ceiling

A decorative ceiling treatment used to add volume and/or height to a room. 2 Common types are: 1) Angled area toward the center leading to a flat ceiling surface, and 2) Stepped square edged leading toward the center of the ceiling.

Turnkey

A term used when the subcontractor provides all materials (and labor) for a job.

Yard of Concrete

One cubic yard of concrete is 3' x 3' x 3' in volume, or 27 cubic feet. One cubic yard of concrete will pour 80 square feet of 3 ½" sidewalk or basement/garage floor.

Yoke

The location where a home's water meter is sometimes installed between two copper pipes, and located in the water meter pit in the yard.

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.

Annuitant

This is the person during whose life an annuity is payable.

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.

Assignment

This is the legal transfer on one person's interest in an insurance policy to another person or entity, such as to a bank to qualify for a loan

Assuris

Assuris is a not for profit organization that protects Canadian policyholders in the event that their life insurance company should become insolvent. Their role is to protect policyholders by minimizing loss of benefits and ensuring a quick transfer of their policies to a solvent company where their benefits will continue to be honoured. Assuris is funded by the life insurance industry and endorsed by government. If you are a Canadian citizen or resident, and you purchased a product from a member life insurance company in Canada, you are protected by Assuris.
All life insurance companies authorized to sell in Canada are required, by the federal, provincial and territorial regulators, to become members of Assuris. Members cannot terminate their membership as long as they are licensed to write business in Canada or have any in force business in Canada.
If your life insurance company fails, your policies will be transferred to a solvent company. Assuris guarantees that you will retain at least 85% of the insurance benefits you were promised. Insurance benefits include Death, Health Expense, Monthly Income and Cash Value. Your deposit type products will also be transferred to a solvent company. For these products, Assuris guarantees that you will retain 100% of your Accumulated Value up to $100,000. Deposit type products include accumulation annuities, universal life overflow accounts, premium deposit accounts and dividend deposit accounts. The key to Assuris protection is that it is applied to all benefits of a similar type. If you have more than one policy with the failed company, you will need to add together all similar benefits before applying the Assuris protection. The Assuris website can be found at www.assuris.ca.

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.

Backdating

A procedure for making the effective date of a policy earlier than the application date. Backdating is often used to make the age of the consumer at policy issue lower than it actually was in order to get a lower premium.

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.

Compound Interest

Interest earned on an investment at periodic intervals and added to principal and previous interest earned. Each time new interest earned is calculated it is on a combined total of principal and previous interest earned. Essentially, interest is paid on top of interest.

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.

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