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Glossary of Basic Insurance Terms

Beneficiary
The person designated to receive the insurance proceeds upon the death of the insured. The beneficiary designation can be made revocable or irrevocable (see below).

Benefit
The amount of money paid to the insured person or designated beneficiary when an insurance claim is approved.

Certificate or Memorandum of Insurance
A written document which confirms insurance coverage under a group policy.

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

Deductible
A set amount that the insured party pays toward a loss, before the insurance company pays the remainder of the claim.

Elimination Period
A specified amount of time, beginning with the onset of a disability, during which benefits are not payable.

Irrevocable Beneficiary
A beneficiary designation which requires that written consent be obtained from named beneficiaries before adding or removing beneficiaries and before making changes to the insurance coverage.

Medical Evidence of Insurability
Written information, a completed questionnaire of insurability and/or a medical examination required when applying for personal insurance before coverage can be approved.

Medical Underwriting
For life and disability insurance, this is the process of determining whether an applicant meets medical qualifications for coverage. Applicants may be evaluated on factors including age, gender, physical condition, personal health history and family health history, as part of the underwriting process.

Option
Specialized coverage that the applicant has the choice of adding to basic coverage for an additional premium.

Plan
An insurance arrangement described in a group insurance policy or a master agreement under which a group of participants receive a specified type of coverage.

Policy
A written document that serves as evidence of an insurance contract, including all details of the insurance coverage, policyholder, the insured, and the insurer.

Premium
The payment, or one of a series of payments, paid to the insurer to put an insurance policy in force and keep it in force.

Revocable Beneficiary
A beneficiary designation which allows for the addition or replacement of beneficiaries at any time without requiring the named beneficiaries’ consent.

Glossary of Investment Terms

Bond: An interest-bearing or discounted government or corporate security that obligates the issuer to pay the bondholder a rate of return, usually at specific intervals, and to repay the principal at maturity.

Canada Education Savings Grant (CESG): A grant issued by the federal government equal to 20 per cent of the first $2,500 in annual RESP contributions. Lower-income families with qualifying net income can receive additional grant amounts. Contact CDSPI Investment Services for details.

Cash: Currency, negotiable money orders and cheques and bank balances. Cash equivalents include highly liquid securities with a set market value.

Commission: A fee paid to a fund manager or broker for executing a trade of stocks, options, mutual funds or commodities, based on the number of shares being traded and the dollar amount of the trade.

Common share or common stock: Unit of ownership of a public corporation. In the event a company is liquidated, the claims of secured and unsecured creditors and owners of bonds and preferred stocks take precedence over those who own common stocks.

Dollar cost averaging: A method of investing regularly in investment funds to take advantage of volatility in stock prices. The aim is to purchase more fund units through installments than may be possible through lump sum payments.

Equity: Ownership by shareholders in a corporation (stock as opposed to bonds).

Guaranteed Fund: Offers a range of guaranteed investments similar to term deposits. Principal and interest guaranteed for terms from 1 to 5 years.

Index: A number indicating the current market value of a group of securities trading on a particular exchange.

Individual Pension Plan (IPP): A defined benefit pension plan, typically for just one employee. It provides senior executives and owners of incorporated businesses with the opportunity to achieve maximum tax relief combined with maximum retirement pension.

Individually Managed Account (IMA): An account in which an investment professional manages and monitors an investor's portfolio on his/her behalf. Also called a "wrap account".

Investment fund: An interchangeable term referring to mutual funds and segregated funds.

Loads: A commission charged when you either purchase or sell units in a given investment fund. If a fund is front-loaded, it means you'll pay a fee to acquire units in the fund when you enter the fund. If a fund is back-loaded, it means you may pay when you sell the units, but this generally depends on how long you've held them. With no-load funds, however, there are no entry or exit fees.

Management Expense Ratio (MER): A percentage of the assets that an investment fund manager charges to manage the fund annually.

Mortgage-backed securities: Similar to bonds, the units are backed by a share in a pool of mortgages, and pay interest.

Mutual fund: A fund operated by an investment management company that raises money from fund holders and invests in stocks, bonds or other investments. These funds offer investors the advantage of diversification and professional management. There are a wide variety of mutual funds available offering different types of investments, levels of risk and management styles.

Registered Education Savings Plan (RESP): An investment plan, registered with the government, which allows the accumulation on a tax-deferred basis of contributions for education. Contributions are not tax-deductible.

Registered Retirement Income Fund (RRIF): A government-registered plan that allows your investments to grow tax-sheltered while you are in retirement. Your money remains tax-sheltered until it is withdrawn as retirement income and becomes taxable. Minimum annual withdrawals must be made. By rolling your RRSP into a RRIF, you can keep the same investments as you had in your RRSP.

Registered Retirement Savings Plan (RRSP): An investment plan which you register with the government so you can make tax-deductible contributions to accumulate (tax-deferred) retirement savings.

Security: Financial instrument that signifies ownership in a corporation (stock), a creditor relationship with a corporation or government (a bond), or rights to ownership (such as an option).

Segregated fund: An investment fund similar to a mutual fund but offered through a life insurance company. Segregated funds offer additional security features compared to mutual funds.

Share or stock: Ownership in a corporation represented by shares that are a claim on the corporation's earnings and assets.

Tax-Free Savings Account (TFSA): A government-registered plan introduced in 2009 that allows contributions of $5,000 per year (plus indexation, if applicable). The income generated in the TFSA is tax-free when withdrawn. Contributions to a TFSA and the interest on money borrowed to invest in a TFSA are not tax-deductible.

Volatility: The measure of the rise or fall in a security's price over time.