Glossary

Terminology

Index

A – B – C – D

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 an insurance company 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.

Annual Premium

Yearly amount payable by a client for a policy or component.

Annuity

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

Annuity Period

The time between each payment under an annuity.

Applicant

The party applying for an insurance policy.

Asset

All things of value owned by an individual or organization.

Automatic Benefits Payment

Automatic payment of moneys derived from a benefit.

Automatic Waiver of Premium

A benefit that automatically forfeits premium payments.

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.

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.

Bond

Fixed interest security issued by a corporation or government, having a specific maturity date.

Book Returns

Book yield is the investment income earned in a year on a portfolio of assets purchased over a number of years and at different interest rates, divided by the book value of those assets.

Borrower (Credit Insurance)

A consumer who borrows money from a lender.

Canada Pension Plan (CPP)

A plan that provides retirement and long term disability income benefits to residents of Canadian provinces (excluding Quebec).

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.

Claim

Request for payment of benefits under the terms of an insurance policy.

Claimant

Person or party making request for payment of benefits under the terms of an insurance policy.

CLHIA

Canadian Life and Health Insurance Association.

COLA

Cost of living adjustment.

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.

Contingencies

Events that are possible, but may or may not happen. Premium rates and acceptance of certain risk are based on contingencies.

Contribution Principle

This is the principle, which specifies the factors that must be taken into account when calculating dividends. Depending on the insurance companies, the key factors are: interest earnings, mortality, and operating expense.

Conversion

The act of changing from one type of life insurance policy to another, without having to give evidence of insurability.

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 become seriously ill with a specified illness. 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.

Daily Interest Accumulation

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

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.

Deductible

A flat amount that an insured must pay before the insurance company makes any benefit payments under a health insurance policy.

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

Unlike dividends which are paid to company shareholders, participating insurance policy dividends are not based on the company’s overall profits. Rather, they are determined by grouping policies by type and country of issue and looking at how each class contributes to the company’s earnings and surplus.

Dividend Policy

This policy governs an insurance company’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.

Duration

The time it takes for a policy or annuity to reach maturity.

Index

E – F – G – H – I – J – K – L – M – N – O – P

Equity-based insurance

Life insurance or annuity products 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.

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.

Evidence of Insurability

Evidence submitted to an insurance company that is used to determine whether an individual is eligible for the insurance coverage in which the individual has applied for.

Exclusion

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

Guaranteed Interest Annuity (GIA)

Removing liability or responsibility regarding a tangible event.

Guaranteed Interest Certificate (GIC)

Removing liability or responsibility regarding a tangible event.

Guaranteed Renewal

A promise that a life insurance policy will be renewed without penalty or medical examination after the term has expired. The renewal rate can also be guaranteed.

Illustration

An illustration is a computer-generated spreadsheet that takes into account a number of assumptions in order to show how a specific policy might perform for a specific individual.

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.

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.

Insurer

The party in an insurance contract that promises to pay a benefit if a specified loss occurs. It is usually an insurance company.

Interest Option

One of several investment accounts in which your premiums may be invested within your life insurance policy.

Interest Rate

Rate charged or paid for the use of money, normally expressed as a percentage

Irrevocable Beneficiary

Legal designation that cannot be contested. (See beneficiary)

Issue

When an item is approved and released for sale, or when a policy or sales contract is accepted.

Issue Age

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

Issue Date

Date on which a policy is approved.

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.

Lapse

Termination when a policy has no cash value after all attempts at conservation have failed.

Lapses

Policies which are sold but do not remain in force because the policyholder fails to pay premiums.

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 lesser 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.

Level Premium

A premium that remains unchanged throughout the life of a policy

Life Insurance

Insurance that provides protection against an economic loss caused by death of the person insured.

Life Insured

The person whose life is protected by an individual policy.

Life Underwriter

Insurance Agent.

Lives

Number of insured’s.

Maturity

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

Money Market Fund

A low risk mutual fund that achieves greater liquidity by investing primarily in short-term securities.

Mortality Rate

The death rates for various age groups of the population.

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.

Multiple Lives

Two or more death benefits based on one definition with different insured’s.

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.

Paid-Up Additions

A type of insurance policy or annuity in which the owner receives dividends, typically increases the death.

Participating Policy

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

Pension Fund

Assets used to pay the pensions of retirees. An investment institution established to manage the assets used to pay the pensions of retirees.

Personal Line of credit (Credit Insurance)

A bank’s commitment to make loans to a borrower up to a specified maximum during a specific period, usually one year.

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.

Pre-Authorized Cheque (PAC)

Withdrawals generated by a company (with client’s permission) against a client’s bank account on a predetermined schedule for a predetermined amount.

Pre-existing medical condition (Credit Insurance)

A medical condition that existed before you became insured. Most policies exclude benefits if the condition is related to the event that triggers a claim if occurs within a certain period (6-12 months) after you became insured.

Preferred Beneficiary

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

Premium

Annual amount payable, by a client, for a selected product or service.

Premium (Credit Insurance)

Annual or monthly amounts payable, by a client, for a selected insurance coverage to insure debt obligations to their creditors are protected.

Premium Mode

Payment schedule of policy premiums, usually selected by the policy owner (monthly, quarterly, annually).

Premium Offset

After premiums have been paid for a number of years, further annual premiums may be paid by the current dividends and the surrender of some of the paid-up additions, which have built up in the policy. In effect, the policy can begin to pay for itself. Whether a policy becomes eligible for premium offset, the date on which it becomes eligible and whether it remains eligible once premium offset begins, will all depend on how the dividend scale changes over the years. Since dividends are not guaranteed, premium offset cannot be guaranteed either.

Mortgage Life insurance (Credit Insurance)

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

Index

Q- R – S – T – U – V – W – X – Y – Z

Quebec Pension Plan

A plan that primarily provides retirement and long-term disability income benefits for residents of Quebec.

Refinancing (Credit Insurance)

Extending the maturity date or increasing the amount of existing debt or both. Also, revising a payment schedule, usually to reduce the monthly payments and often to modify interest charges.

Reinsurance

Process in which the risk of potential loss is shared between two or more insurers.

Reinsurer

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

Rider

An attachment to an insurance policy that becomes part of the insurance contract and expands the benefits payable.

Risk

Calculated chance of loss.

Risk class

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

RRSP

Registered Retirement Savings Plan – A plan enabling Canadian citizens to establish tax-sheltered accounts to accumulate money towards retirement.

Segregated Fund

A pool of assets held by the insurer, to back a specific liability to a policyholder. Segregated Funds fluctuate in value depending on the market value of a specific group of assets the company must maintain separately.

Strike Insurance (Credit Insurance)

Coverage that can pay down your debt should you become unemployed due to a legal strike in your place of work. The payment is made to your creditors to reduce your debt owing.

Surrender

Give up certain rights under a policy, or give up the policy itself.

Surrender Charge

Expense charges applied when the owner of a policy surrenders a policy for its cash value.

Term

The time period during which a policy is in force, or the time it takes for a policy to reach maturity.

Terminal Illness Insurance (Credit Insurance)

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

Terminate

Cease all legal obligations under a contract.

Term Life

A product that provides life coverage for a specified duration typically not beyond the age of 75.

Underwriter

Person that uses various types of evidence to evaluate the insurability of a client.

Underwriting

Evaluating and classifying potential risk of a client.

Unearned Premium

Premiums paid for coverage not yet provided.

Universal Life

An unbundled Life product with a separate investment component. It typically does not participate in companies profits.

Valuation

Estimation of worth.

Valuation Date

Date on which valuation occurs.

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.

Waiting Period (Credit Insurance)

A specific time that must pass following the onset of a covered disability before any benefits will be paid under a creditor disability policy. (Also known as an elimination period).

Waiver

Removing liability or responsibility regarding a tangible event.

Waiver of Premium

A benefit that allows an insurance company to pay premiums on behalf of the insured.

Whole Life

Component that provides life coverage during the insured’s life.

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