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Glossary

 
Glossary A
 

Account Value
Under some insurance plans, part of the premium is invested. The account value is the total amount in each investment account.

Accidental death benefit
A benefit that is paid to the beneficiary if the policy holder dies from an accident.

Agent
A sales and service representative of an insurance company.
 

Glossary B
 

Beneficiary
A person or entity who receives the death benefit when the policy holder dies. By naming a beneficiary, the money is protected from creditors. A beneficiary under the age of 18 needs to be represented by a legal individual guardian or a public official who represents minors generally. In addition the policy owner can choose someone to act as a trustee for a minor.

Broker
An insurance broker is a sales representative who sells various types of insurance on behalf of several insurance companies.
 

Glossary C
 

Cash Value
Money that accumulates in an insurance policy, which, depending on the plan selected, can be borrowed, used as collateral for a loan, or withdrawn.

Cash surrender value
Cash amount available to the owner of a life insurance policy when the policy is cancelled before the death of the insured.

Contract of insurance
A legal document stating the insurance coverage and confirming its term and conditions.

Convertible policy
A life insurance policy that allows for conversion to another type of policy.

Coverage
The scope of protection provided by an insurance policy.
 

Glossary D
 

Death benefit
The amount of money to be paid to the beneficiary should the policy holder pass away.

Disability
When a person is unable to work as a result of an accident, injury or sickness.
 

Glossary E
 

Effective date
The date on which an insurance policy takes effect

Endorsement
A legal document which outlines any changes made to an existing insurance policy.

Estate taxes
Government taxes which are collected from a person’s estate (real and personal property) when he/she dies.

Exclusions
Refers to losses or events that are not covered by the insurance policy.

Expiry date
The date that the insurance coverage stops.

Evidence of insurability
A record of physical, health and/or other information affecting a person’s eligibility for insurance
 

Glossary F
 

Face Amount
Frequently used to refer to the amount of insurance purchased. Also called amount of insurance, coverage amount or sum insured.

Financial Needs Analysis
Process of reviewing your current financial objectives and situation to help provide a guideline on the amount of insurance you require.

Fund Value
Total Fund Value is the total amount of all investment accounts held in a universal life policy. It is also often referred to as Account Value.

Free Examination Period (Free Look Period)
This is the period of time that the policyholder has to review an insurance policy and cancel the coverage if so inclined. All the premiums paid are refunded.
 

Glossary G
 

Grace Period
This is the period of time (usually 30 days) following the premium due date, during which an overdue premium may be paid without penalty and the insurance policy and all riders remain in effect.

Guaranteed Premiums
Premiums that stay the same for the period specified in the policy.
 

Glossary I
 

Incontestable Clause
A clause in a life insurance policy that allows the life insurance company to void the policy for up to two years from when the policy was issued if the life insured did not disclose or misrepresented important information that would have prevented the policy from being issued. This time limit doesn’t apply in cases of fraud.

In Force
This term describes the status of a life insurance policy, meaning that the policy is in effect.

Insurance Advisor
An Insurance Advisor is a professional who provides insurance advice and services to individuals and businesses. Most advisors are independent in that they represent multiple insurance companies. There are however, some insurance advisors who work exclusively for a single company.

Insurance Policy
The legal document issued by the insurer to the policy owner that outlines the conditions and terms of the insurance. Also called the policy.

Insured
This is the person whose life is being insured by the life insurance policy. In case the insured dies, a tax-free benefit will be paid to that person's estate or a named beneficiary.

Insurer
The insurance company.

Issue Date
The date on which an insurance policy is issued.

Interest Index-Linked Account
This is an investment account available in some life insurance policies that provides variable returns. It accumulates interest that reflects the increase or decrease for a stock market index or mutual fund.

Investment Account
With a universal life insurance plan there are investment options available. These include fixed interest accounts with guaranteed returns and interest index-linked accounts with variable returns.

Investment Management Fees
These are the fees charged for the maintenance of investment accounts in a universal life insurance policy.
 

Glossary J
 

Joint First-to-Die
A life insurance policy that provides coverage for two people and is usually designed to pay estate taxes. The benefit is paid when the first person dies.

Joint Last-to-Die (also known as joint second-to-die policies)
A life insurance policy that covers two people and provides payment when both people have died. Commonly this policy is set up to pay estate taxes and thus protect the children in a case where there might be substantial capital gains taxes due upon the death of the last parent.
 

Glossary L
 

Lapse
Termination of an insurance policy because the premium was not paid within the grace period. It is possible to re instate the coverage however the insured will have to re-qualify and pay all unpaid premiums.

Last Conversion Date
The last date a policy can be converted into another type of policy.

Life Expectancy
The period of time a person is expected to live based on factors such as gender and current age of an individual.

Life Insurance
Protection that provides immediate tax-free cash payment upon death.

Lifetime Coverage
An insurance policy that is in effect for the whole life of the insured.

Living Benefit
An advance cash payment of part of the amount of insurance when the insured is still living for certain conditions as specified in the policy.
 

Glossary M
 

Maximum Premium/Deposit
This is the estimated amount that can be deposited into a Universal Life policy on a tax-deferred basis.

Maximum Tax Actuarial Reserve (MTAR)
This is the total amount (prescribed by law) that can remain within the Cash Value of the policy.

Medical Report
This is a report that is completed by a physician to certify the health condition of the insurance applicant. To complete the report the physician performs a physical exam and administrates a health questionnaire.
 

Glossary N
 

Non-Forfeiture Options
These are options that are available to a policy owner who stopped paying premiums into a policy that has accumulated a cash value. The options are usually to take the cash value in cash, to use the value for purchasing "reduced paid-up insurance" or "extended term insurance," or to use the cash value as security for a loan against the policy to pay the premium or premiums due ("automatic premium loan").

Non-Smoker Rates
These are preferred rates for non-smokers, thus acknowledging that non-smokers have a better life expectancy than smokers. This discount applies for new applicants who have been non-smokers for at least 12 months before applying for coverage.

Named Insured
The person whose life is insured.

Non-Cancellable
Some policies cannot be cancelled by the insurance provider unless premiums are not paid or fraud has been committed.
 

Glossary O
 

Occupational Classification
Insurance providers may take into consideration the occupation of the insurance applicant. Occupations are classified by type and certain occupations may represent additional risks.

Owner
The person who owns the life insurance policy, also called policy owner. Usually the same person as the insured but it could be someone else who has the authorization from the insured to be the owner, like a spouse, a common-law-spouse, an offspring, a parent, a corporation or a business partner with insurable interest.
 

Glossary P
 

Paid-Up Insurance
A life insurance policy where the coverage is in force, but all required premiums have been paid.

Participating Insurance
An insurance policy that has the potential for earn dividends for the policyholder.

Permanent life Insurance
A life insurance policy designed to provide lifetime insurance coverage.

Policy
A legal document stating the insurance coverage and its terms and conditions.

Policy Anniversary
12-month period from the Issue Date of a policy.

Policy Loan
Some insurance policies are able to accumulate cash value. The policy holder can borrow money against the cash value of the policy.

Preferred Rates
Some insurance companies offer better rates to individuals who demonstrate minimal risk to the company. In most cases gender, smoking status, family health history, occupation and other health related factors are taken into consideration.

Policyholder or Policy Owner
A person who owns the insurance policy. Usually the same person as the insured but it could be someone else who has the authorization from the insured to be the owner, like a spouse, a common-law-spouse, an offspring, a parent, a corporation or a business partner with insurable interest.

Pre-Existing Health Condition
An injury, a sickness or a condition that existed before the start of the insurance policy.

Premium
The amount that a person pays for the insurance.

Premium Tax
This is the provincial premium tax that is collected for a policy as a percentage of each premium or deposit made to an Investment Account. The amount collected varies by province but currently ranges from 2% to 4%.
 

Glossary R
 

Rate Class
A rate class is the classification assigned to you during the underwriting process which determines how much your premium will be. Your rate class is based on a variety of factors covering your overall health and lifestyle profile. Typically, individuals who are in good health and who are non-smokers or do not participate in any hazardous activities will be able to obtain less expensive coverage than individuals who are in poor health or who are smokers.

Rated Policy
A policy issued to a person classified as having a greater-than-average risk to the insurance company, for example a person in poor health or a dangerous occupation. The policy may be issued with special exclusions and/or a cost of insurance that is higher than a regular policy.

Reinstatement
Restoration of a life insurance policy that was terminated. The insured will have to re-qualify by supplying evidence of continuing good health and make payment of all past due premiums plus interest.

Reinsurance
The sharing of insurance policies among multiple Insurers to reduce the risk for each one.

Replacement
Replacement is the process of purchasing a new individual life insurance policy to take the place of an existing individual life policy or part of the coverage of that policy. Consumers need to complete a Life Insurance. Disclosure Form, to ensure you’re fully aware and understand the pros and cons of both policies.

Riders
Additional types of insurance protection that can sometimes be added for a cost to a policy to protect against a variety of other losses.

Renewal
A statement in the policy indicating that the policy may be continued beyond its original term.
 

Glossary S
 

Side Account
This type of account is used to hold money that exceeds the maximum amount that can be deposited in the tax-exempt investment accounts of a Universal Life policy.

Single Life
Insurance policy that covers the life of one person.

Suicide Clause
A clause in the life insurance policy which states that the death benefit will not be paid if the insured commits suicide within a specified period of time (usually two years) after the policy is issued.

Surrender Charges
An amount of money deducted from some life insurance policies when the owner of a policy discontinues the policy for its cash value.
 

Glossary T
 

Term Insurance
Provides life insurance for a specified period of time referred to as term.

Total Investment Value
The sum of returns from individual investment accounts, including positive and negative adjustments.
 

Glossary U
 

Underwriter/Underwriting
The process of reviewing an application for life insurance before accepting and issuing an insurance policy or rejecting the application. The purpose of this assessment is to determine the potential degree of risk that a person represents to the life insurance company.

Universal Life Insurance
A permanent life insurance plan that combines the benefits of flexible insurance coverage with a wide range of investment options for tax-sheltered growth of the cash value.

Uninsurable
A risk class designation for a policy applicant whose health state makes them unsuitable for life insurance purposes.
 

Glossary W
 

Withdrawals
An amount of cash that a policy owner is able to take from a Universal Life policy that may or may not be subject to income tax.

Waiting Period
The period of time between: a submitted insurance application and the acceptance or rejection of that insurance application, or the beginning of a disability and the payment of disability benefits.