Life Insurance Glossary Terms

Investment Glossary Terms

A

Absolute assignment

Transfers all the rights of the owner of the policy to another party

Accidental death insurance

The benefit amount of a life insurance policy that is only paid out due to the insured's death as a result of an accident.

Accidental death and dismemberment insurance

Insurance that provides an amount, paid in the event of death or loss of one or more body parts, loss of eyesight, as a result of an accident.

Agent

An individual who serves as a sale/service representative of an insurance company. (Insurance Agent)

Annuity

specified income payments within a contract that takes place in a contingent period.

Application

A form that contains the applicant's information, the specified plan, amount requested, name of life insured and beneficiaries, and other relevant information.

Accrued interest
Interest that has been earned but not paid out.

Accumulation Plan (Systematic)
An arrangement which enables an investor to purchase investments such as mutual fund shares regularly in large or small amounts.

Annual Report
An audited financial report sent yearly to a publicly held firm's shareholders.

Ask price
An offer to sell a specific quantity of securities at a named price.

Assets
What a company or individual owns

B

Beneficiary

The person/people that are provided with the proceeds of the life policy when the insured dies.

Billing date

The specific day of the month where the billing deduction will take place through pre-authorized chequing/credit card in order to pay for the cost of insurance.

Broker

An individual that sells a wide variety of insurance products on behalf of several insurance companies, acting as a sales representative

Back-end load
A sales charge when mutual fund units are redeemed.

Balance sheet
A financial statement showing the nature and amount of a company's assets, liabilities and shareholders' equity.

Balanced fund
An investment or mutual fund which has an investment policy of "balancing" its portfolio generally by including bonds and shares in varying proportions influenced by the fund's investment outlook.

Bank Rate
The rate at which the Bank of Canada makes short-term loans to chartered banks and other financial institutions, and the benchmark for prime rates set by financial institutions.

Bankers' Acceptance
Short-term bank paper issued by banks, with the repayment of principal and payment of interest guaranteed by the issuer's bank.

Bear market
A declining cyclical or secular financial market.

Beta
A statistical term used to illustrate the relationship of the price of an individual security or mutual fund unit to similar securities or financial market indexes.

Bid price
An offer to buy a specific quantity of securities at a named price.

Blue chip
A term usually applied to high grade equity securities.

Board lot
A standard number of shares for trading transactions. The number of shares in a board lot varies with the price level of the security, although in most cases a board lot is 100 shares.

Board of directors
A committee elected by the shareholders of a company, empowered to act on their behalf in the management of company affairs. Directors are normally elected each year at the annual meeting.

Bond
A long-term debt instrument with the promise to pay a specified amount of interest and to return the principal amount on a specified maturity date.

Bond fund
A mutual fund whose portfolio consists primarily of bonds.

Book value
The value of net assets that belong to a company's shareholders, as stated on the balance sheet.

Broker
An agent who handles the public's orders to buy and sell securities, commodities, or other property. A commission is generally charged for this service.

Bull market
An advancing cyclical or secular financial market.

Buying on margin
Purchasing a security or fund partly with borrowed money.

C

Cash surrender value

The cash amount that is provided to the insurer in the event of voluntary termination of the policy before the death of the insured life.

Certificate of Insurance

A documentation that summarizes the specified benefits and principal provisions of the group contract in which the person is insured.

Claim

The demand by the insured/beneficiary for the benefit payments from the policy.

Claims examiner

The person who evaluates the claim and verifies if the claim is valid

Covered expenses

Health care expenses including specified hospital, medical and etc that are considered when calculating benefits due under the health insurance policy

Coinsurance

Provision where the insured and the insurer share the covered expenses specified in the policy in a ratio. (the insurer reimburse the insured for 75% of covered expenses, the insured pays the 25%)

Collateral assignment

Assigns the life policy to a financial institution as a security in which the loan is repaid upon the death of the borrower

Contributory plan

A group plan where the employee contributes toward the premium cost. The employee deducts the employee's contribution from their salary.

Convertible policy

A type of life policy that can be changed for another life policy under certain conditions

Contract

A document that contain a set of promises that the law will enforce,

Critical illness insurance

A form of insurance that provides a lump-sum cash payment in the event of a contracting certain dreaded diseases (top four conditions: heart attack, cancer, stroke, heart bypass surgery)

Callable
Preferred shares or bonds that give the issuing corporation an option to repurchase, or "call" those securities at a stated price. These are also known as redeemable securities.

Canada Savings Bond
A bond issued each year by the federal government. These bonds can be cashed in at any time for their full face value.

Capital
Generally, the money or property used in a business. The term is also used to apply to cash in reserve, savings, or other property of value.

Capital cost allowance
A taxation term, equivalent to depreciation, that makes allowance for the wearing away of a fixed asset.

Capital loss
The loss that results when a capital asset is sold for less than its purchase price.

Capital stock
All ownership shares of a company, both common and preferred.

Capitalization
The total amount of all securities, including long-term debt, common and preferred stock, issued by a company.

Cash equivalent
Assets that can be quickly converted to cash. These include receivables, Treasury bills, short-term commercial paper and short-term municipal and corporate bonds and notes.

Certificate
A document providing evidence of ownership of a security such as a stock or bond.

Closed-end fund
A fund company that issues a fixed number of shares. Its shares are not redeemable, but are bought and sold on stock exchanges or the over-the-counter market.

Commercial paper
A negotiable corporate promissory note with a term of a few days to a year. It is generally not secured by company assets.

Common stock
A security representing ownership of a corporation's assets. Voting rights are normally accorded to holders of common stock.

Compounding
The process by which income is earned on income that has previously been earned. The end value of the investment includes both the original amount invested and the reinvested income.

Consumer price index
A statistical device that measures the change in the cost of living for consumers. It is used to illustrate the extent that prices have risen or the amount of inflation that has taken place.

Contractual plan
An arrangement whereby an investor contracts to purchase a given amount of a security by a certain date and agrees to make partial payments at specified intervals.

Convertible
A security that can be exchanged for another. Bonds or preferred shares are often convertible into common shares of the same company.

Corporation
A legal business entity created under federal or provincial statutes. Because the corporation is a separate entity from its owners, shareholders have no legal liability for its debts.

Coupon rate
The annual interest rate of a bond.

Current asset
An asset that could be converted into cash within 12 months.

Current liability
A liability that has to be paid within 12 months.

Current yield
The annual rate of return that an investor purchasing a security at its market price would realize. This is the annual income from a security divided by the current price of the security. It is also known as the return on investment.

Custodian
A financial institution, usually a bank or trust company, that holds a mutual fund's securities and cash in safekeeping.

D

Death benefit

The amount of money that is provided to the beneficiary upon the insured's death.

Deductible

The amount that the individual must pay to the insurance company before they are able to collect the claim

Dependency period

The time period in which the surviving spouse has the necessary income to provide for his/her children until the age of 18

Disability income insurance

A form of insurance that pays a monthly benefit to the insured life who are injured/sick and are unable to work

Debt
An obligation to repay a sum of principal, plus interest. In corporate terms, debt often refers to bonds or similar securities.

Deferral
A form of tax sheltering that results from an investment that offers deductions during the investor's high-income years, and/or postpones capital gains or other income until after retirement or during another period when the income level is expected to change.

Deferred Profit Sharing Plan
A plan that allows an employer to set aside a portion of company profits from the benefit of employees. A corporation makes a contribution to the plan on behalf of an employee.

Defined benefit pension plan
A registered pension plan that guarantees a specific income at retirement, based on earnings and the number of years worked.

Defined contribution pension plan
a registered pension plan that does not promise an employee a specified benefit upon retirement. Benefits depend on the performance of investments made with contributions to the plan.

Denomination
The principal amount, or value at maturity, or a debt obligation. Also known as the par value or face value.

Depreciation
Charges made against earnings to write off the cost of a fixed asset over its estimated useful life. Depreciation does not represent a cash outlay. It is a bookkeeping entry representing the decline in value of an asset that is wearing out.

Discount
The amount by which a bond sells on the secondary market at less than its par value or face value.

Distributions
Payments to investors by a mutual fund from income or from profit realized from sales of securities.

Diversification
The investment in a number of different securities. This reduces the risks inherent in investing. Diversification may be among types of securities, companies, industries or geographic locations.

Dividend
A per-share payment designated by a company's board of directors to be distributed among shareholders. For preferred shares, it is generally a fixed amount. For common shares, the dividend varies with the fortunes of the company and the amount of cash on hand. It may be omitted if business is poor or the directors withhold earnings to invest in plant and equipment.

Dividend fund
A mutual fund that invests in common shares of senior Canadian corporations with a history of regular dividend payments at above average rates, as well as preferred shares.

Dividend tax credit
An income tax credit available to investors who earn dividend income through investments in the shares of Canadian Corporations.

Dollar cost averaging
A principle of investing which entails the use of equal amounts for investment at regular intervals in the hope of reducing average share cost by acquiring more shares in periods of lower securities prices and fewer shares in periods of higher securities prices.

E

Effective date

The date in which the life insurance contact begins to take effect.

Emergency fund

In case of an emergency, financial planners advise clients to have income equivalent of three months

Employment insurance (EI)

Insurance that provides the benefits for those unemployed, under maternity/paternal leave, sick, or under compassionate care.

Estate planning

The process of distribution of one's estate according to the wishes of the estate owner.

Exclusion rider

A rider that excludes some coverage

Expiry date

The day the term insurance coverage ends for the time period

Extended term insurance

A type of paid-up life insurance in order to continue the protection of the full coverage amount for an extended, but limited time period

Earned income
For tax purposes, earned income is generally the money made by an individual from employment. It also includes some taxable benefits. Earned income is used as the basis for calculating RRSP maximum contribution limits.

Earnings statement
A financial statement showing the income and expenses of a business over a period of time. Also known as an income statement or profit and loss statement.

Equity
The net worth of a company. This represents the ownership interest of the shareholders (common and preferred) of a company. For this reason, shares are often known as equities.

Equity fund
A mutual fund whose portfolio consists primarily of common stocks.

F

Face amount

The amount of the insurance payable that will be paid on the death of the insured life, within the policy. Also referred to as: amount of insurance, coverage amount or sum insured.

Face page

A schedule or a page that contains details about the insurance policy.

Final expenses

The costs incurred upon the death of the life insured. (funeral costs, taxes, legal/professional fees etc.)

Financial needs analysis

A procedure to review one's current financial objectives and situation in order to create a guideline of the needed amount of insurance

Flexible premium policy or annuity

The policyholder/contract holder may have a varied amount or timing of the premium payments under a life insurance policy.

Fund value

Total fund value shows the total amount of investment accounts under the universal life (UL) policy.

Face value
The principal amount, or value at maturity, of a debt obligation. Also known as the par value or denomination.

Fair market value
The price a willing buyer would pay a willing seller if neither was under any compulsion to buy or sell. The standard at which property is valued for a deemed disposition.

Fiduciary
An individual or institution occupying a position of trust. An executor, administrator or trustee. Hence, "fiduciary" duties.

Fiscal policy
The policy pursued by government to manage the economy through its spending and taxation powers.

Fixed assets
Assets of a long-term nature, such as land and buildings.

Fixed dollar withdrawal plan
A plan that provides the mutual fund investor with fixed-dollar payments at specified intervals, usually monthly or quarterly.

Fixed liability
Any corporate liability that will not mature within the following fiscal period. For example, long-term mortgages or outstanding bonds.

Fixed income investments
Investments that generate a fixed amount of income that does not vary over the life of the investment.

Fixed-period withdrawal plan
A plan through which the mutual fund investor's holdings are fully depleted through regular withdrawals over a set period of time. A specific amount of capital, together with accrued income, is systematically exhausted.

Front-end load
A sales charge levied on the purchase of mutual fund units.

Fundamental analysis
A method of evaluating the future prospects of a company by analyzing its financial statements. It may also involve interviewing the management of the company.

G

Grace period

The period that the overdue premium of the life insurance policy may be paid without any penalty. This period is usually 30 or 31 days.

Group insurance

Insurance that is provided for several people under one contract, controlled by a group policy owner.

Guaranteed insurability benefit

The policy owner is guaranteed the right to increase the amount of their life insurance at certain times

Guaranteed issue insurance

the guarantee of insurance coverage for individuals despite of health or medical history.

Growth stocks
Shares of companies whose earnings are expected to increase at an above-average rate. Growth stocks are often typified by their low yields and relatively high price/earnings rations. Their prices reflect investors' belief in their future earnings in growth.

Guaranteed investment certificates
A deposit instrument paying a predetermined rate of interest for a specified term, available from banks, trust companies and other financial institutions.

H

Health insurance

Insurance that provides benefit payments due to sickness or injury to the insured life. Examples include: accident insurance, and medical expense insurance

Health questionnaire

A form requesting the insurer to provide medical information in order to be assessed by the insurer.

Hospital expense insurance

Insurance that covers certain expenses that include the hospital room and board, prescribed hospital service, which are not covered by government hospital plans

I

In force

The status of the insurance policy in which the premium payments are up to date and the life insured is protected

Incontestable clause

A clause within the insurance policy that permits the policy to be void for up to two years starting from the date the policy was issued if the life insured failed to disclose important information or had misrepresentation of material information that would have caused the policy from being issued

Insurance Agent

See Agent.

Insured

The individual who owns the insurance policy, also known as the life insured.

Insurer

The insurance company providing the insurance

Irrevocable beneficiary

A person that is listed as a beneficiary, but cannot be changed to another beneficiary without the permission of the irrevocable beneficiary.

Income funds
Mutual funds that invest primarily in fixed-income securities such as bonds, mortgages and preferred shares. Their primary objective is to produce income for investors, while preserving capital.

Index fund
A mutual fund that matches its portfolio to that of a specific financial market index, with the objective of duplicating the general performance of the market in which it invests.

Inflation
A condition of increasing prices. In Canada, inflation is generally measured by the Consumer Price Index.

Interest
Payments made by a borrower to a lender for the use of the lender's money. A corporation pays interest on bonds to its bondholders.

International fund
A mutual fund that invests in securities of a number of countries.

Intrinsic value
The amount by which the price of a warrant or call option exceeds the price at which the warrant or option may be exercised.

Investment adviser
Investment counsel to a mutual fund. Also may be the manager of a mutual fund.

Investment company
A corporation or trust whose primary purpose is to invest the funds of its shareholders.

Investment counsel
A firm or individual which furnishes investment advice for a fee.

Investment dealer
A securities firm.

Investment fund
A term generally interchangeable with "mutual fund."

Investment Funds Institute of Canada (IFIC)
The mutual fund industry trade association set up to serve its members, co-operate with regulatory bodies, and protect the interests of the investing public that use mutual funds as a medium for their investments.

Issued shares
The number of securities of a company outstanding. This may be equal to or less than the number of shares a company is authorized to issue.

L

Lapse policy

A policy that has been terminated due to the non-payment of the premium during the grace period. A possibility to re-instate the insurance coverage with the same premium & benefits is possible, however the life insured must qualify for this coverage again and pay for unpaid premiums.

Level Death Benefit

The total payable amount at the insured life's death remains the same for the life of the insurance policy

Limited life policy

A specific type of health insurance policy that covered only accidents or sickness

Long term care insurance

Insurance that provides benefits and financial protection for people who are not able to care for themselves due to cognitive impairment, disability, and chronic illness. Benefits under this policy include such things as medical equipment, adult day care, home health care, and hospice care.

Letter of intent
An agreement whereby an investor agrees to make a series of purchases of mutual fund units.

Leverage
The financial advantage of an investment that controls property of greater value than the cash invested. Leverage is usually achieved through the use of borrowed money.

Liabilities
All debts or amounts owing by a company in the form of accounts payable, loans, mortgages and long-term debts.

Life annuity
An annuity under which payments are guaranteed for the life of the annuitant.

Life expectancy adjusted withdrawal plan
A plan through which a mutual fund investor's holdings are fully depleted while providing maximum periodic income over the investor's lifetime.

Liquidity
Refers to the ease with which an investment may be converted to cash at a reasonable price.

Load
Commissions charged to holders of mutual fund units. (See sales charge.)

Long-term asset
A mutual fund that charges a commission to purchase its shares.

Long-term debt
Debt that becomes due after more than one year.

M

Master Contract

The form that a policy is issued to the owner of the group policy.

Maximum premium/deposit

The largest amount that can be deposited into a Universal Life policy under a tax-deferred basis.

Major medical expense insurance

Form of health insurance in which the benefits for the protection of hospital/medical expenses that are not supported by government programs are provided by this one policy.

Mortgage life insurance

A type of life insurance that pays the outstanding mortgage balance to the lending institution holding that mortgage

Medical Information Bureau (MIB)

A non-profit organization of life insurance companies that detect/deter fraud by alerting member companies with warnings.

Medical report

The report on the applicant's health for insurance purposes that is to be completed physician and is based on physical examination and questioning of the life insured.

Management company
The entity within a mutual fund complex responsible for the investment of the fund's portfolio and/or the administration of the fund. It is compensated on a percentage of the fund's total assets.

Management expense ratio
A measure of the total costs of operating a fund as a percentage of average total assets.

Management fee
The sum paid to the investment company's adviser or manager for supervising its portfolio and administering its operations.

Margin
An investor's equity in the securities in his or her account. The margin purchaser puts up a portion of the value of the securities, borrowing the remainder from the investment dealer.

Marginal tax rate
The rate of tax on the last dollar of taxable income.

Market index
A vehicle used to denote trends in securities markets. The most popular in Canada is the Toronto Stock Exchange 300 Composite Index (TSE 300).

Market price
In the case of a security, market price is usually considered the last reported price at which the stock or bond is sold.

Maturity
The date at which a loan or bond or debenture comes due and must be redeemed or paid off.

Money market
A sector of the capital market where short term obligations such as Treasury bills, commercial paper and bankers' acceptances are bought and sold.

Money market fund
A type of mutual fund that invests primarily in treasury bills and other low-risk, short-term investments.

Money purchase pension plan
Another term for defined contribution pension plan.

Mortgage fund
A mutual fund that invests in mortgages. Portfolios of mortgage funds usually consist of first mortgages on Canadian residential property, although some funds alsoinvest in commercial mortgages.

Mortgage-backed securities
Certificates that represent ownership in a pool of mortgages. The holders of these securities receive regular payments of principal and interest.

Mutual fund
An investment entity that pools shareholder or unitholder funds and invests in various securities. The units or shares are redeemable by the fund on demand by the investor. The value of the underlying assets of the fund influences the current price of units.

N

Net death benefit

The face amount including extra benefits, less outstanding amounts of the insurance policy, additional interests, and unpaid premiums

Non-contributory plan

A group plan where the employee does not contribute the premium cost and the employer pays the total premium

Non-forfeiture options

The choices that are available in a life insurance policy to the owner of the policy that if he/she discontinues the premium payments on a policy that has already accumulated a cash value, the voices are usually to take the cash value in cash, apply the value to a “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 premiums or premiums due, referred to as “automatic premium loan”

Net asset value
The value of all the holdings of a mutual fund, less the fund's liabilities.

Net asset value per share
Net asset value of a mutual fund divided by the number of shares or units outstanding. This represents the base value of a share of unit of a fund and is commonly abbreviated to NAVPS.

No-load fund
A mutual fund that does not charge a fee for buying or selling its shares.

O

Overinsurance

When the insurance policy provides too much income/benefit that the policy owner/life insured no longer has the incentive to return to work.

Odd lot
Any number of securities that represents less than a board lot.

Open-end fund
An open-end mutual fund continuously issues and redeems units, so the number of units outstanding varies from day to day. Most mutual funds are open-ended.

Option
The right or obligation to buy or sell a specific quantity of a security at a specific price within a stipulated period of time.

Over-the-counter market
A securities market that exists for securities not listed on stock exchanges. Bonds, money market securities and many stocks are traded on the over-the-counter market.

P

Paid up insurance

Life insurance policy where all the required premium payments have been paid

Permanent life insurance

A type of life insurance that will take place until the insured's death. These include Term-to-100, whole life, and universal life.

Policy

The document that is held by the insured that provides information about the terms and conditions of the insurance. Also referred to as contract.

Policy loan

A loan that is made by the insurer, life insurance company, on the security of the cash value of the policy provided to the policyholder

Policy reserves

Estimated funds that are needed, with future premiums and investment income, to pay future benefits and expenses under insurance and annuity contracts, with an allowance provided for adverse experience in future assumptions

Preferred rates

A cheaper cost of insurance for people that is able to demonstrate a better risk to the insurance company.

Premium

The periodic payment that the owner of the policy must make in order to continue being protected by the insurance policy

Par value
The principal amount, or value at maturity, of a debt obligation. It is also known as the denomination or face value. Preferred shares may also have par value, which indicates the value of assets each share would be entitled to if a company were liquidated.

Pension adjustment
An amount that reduces the allowable contribution limit to an RRSP based on the benefits earned from the employee's pension plan or deferred profit sharing plan.

Pension plan
A formal arrangement through which the employer, and in most cases the employee, contribute to a fund to provide the employee with a lifetime income after retirement.

Portfolio
All the securities which an investment company or an individual investor owns.

Preferred share
An ownership security, senior to the common stock of a corporation, with preferred claim on assets in case of liquidation and a specified annual dividend.

Premium
The amount by which a bond's selling price exceeds its face value. Also, the amounts paid to keep an insurance policy in force.

Present value
The current worth of an amount to be received in the future. In the case of an annuity, present value is the current worth of a series of equal payments to be made in the future.

Price earnings ratio
The market price of a common share divided by its earnings per share for 12 months.

Primary distribution
A new security issue, or one that is made available to investors for the first time.

Principal
The person for whom a broker executes an order, or a dealer buying or selling for his or her own account. Also, an individual's capital or the face amount of a bond.

Prospectus
The document by which a corporation or other legal entity offers a new issue of securities to the public.

R

Rated premiums

Premiums that are higher-priced

Reduced paid-up insurance

A form of insurance that is available as a non-forfeiture option, and provides the insurance payable for a reduced amount, at the same time and in the same manner as the original policy

Reinsurance

Process where one insurer insures the excess risk of another insurer (multiple insurers)

Reinstatement clause

A clause in the policy that assists the policy owner when the insurance contract lapses because of a non-payment of a premium

Replacement

When the life insurance policy or part of the policy is replaced by another

Riders

An extra coverage or benefit, attached to the main policy that is added at a cost to project against other losses

Ratio withdrawal plan
A type of mutual fund withdrawal plan that provides investors with an income based on a percentage of the value of units held.

Real estate fund
A mutual fund that invests primarily in residential and/or commercial real estate to produce income and capital gains for its unitholders.

Real estate investment trust
A closed-end investment company that specializes in real estate or mortgage investments.

Redeemable
Preferred shares or bonds that giver the issuing corporation an option to repurchase securities at a stated price. These are also known as callable securities.

Registered Education Savings Plan (RESP)
A plan that enables a contributor, on a tax deferral basis, to accumulate assets on behalf of a beneficiary to pay for a post secondary education.

Registered Retirement Income Fund (RRIF)
A maturity option available for RRSP assets to provide a stream of income at retirement.

Registered Retirement Savings Plan (RRSP)
A retirement savings plan to hold amounts deducted from taxable income, within certain limits, in a tax deferred state. There are various investment options and a tax deferral on investment income and gains. Available to individuals to and including 71 years of age, but must be collapsed by the end of the year in which the holder turns 71 years of age.

Retained earnings
The accumulated profits of a company. These may or may not be reinvested in the business.

Retractable
Bonds or preferred shares that allow the holder to require the issuer to redeem the security before the maturity date.

Rights
Options granted to shareholders to purchase additional shares directly from the company concerned. Rights are issued to shareholders in proportion to the securities they may hold in a company.

Risk
The possibility of loss; the uncertainty of future returns.

S

Segregated funds

A type of investment available through insurers that is managed separately from other similar pools or funds and the general funds of the life insurance company. Segregated funds provide a guarantee to the investor that either 75% or 100% of deposits will be returned on the death of the policy owner or on maturity of the contract.

Settlement option

A method in which the beneficiary/beneficiaries can receive the death benefit, for instance, at a lump-sum, interest option, instalment option, or life annuity option

Suicide clause

A death benefit that will not be provided to the beneficiary of the policy if the life insured dies because of suicide within two years of the policy's issued date

Sum insured

Refer to Face Amount.

Surrender charges

The amount of money that is deducted when the policy owner cancels the policy for the cash value (cash surrender value), from certain life insurance policies

Surrendered policy

The termination of a policy due to the non-payment of premiums in which there is either a cash value or other non-forfeiture value

Sales charge
In the case of mutual funds, these are commissions charged to holder of fund units, usually based on the purchase or redemption price. Sales charges are also known as "loads."

Securities Act
Provincial legislation regulating the underwriting, distribution and sale of securities.

Shares
A document signifying part ownership in a company. The terms "share" and "stock" are often used interchangeably.

Shareholders' equity
The amount of a corporation's assets belonging to its shareholders (both common and preferred) after allowance for any prior claim.

Short selling
The sale of a security made by an investor who does not own the security. The short sale is made in expectation of a decline in the price of a security, which would allow the investor to then purchase the shares at a lower price in order to deliver the securities earlier sold short.

Simplified prospectus
An abbreviated and simplified prospectus distributed by mutual funds to purchasers and potential purchasers of units or shares (see prospectus).

Specialty fund
A mutual fund that concentrates its investments on a specific industrial or economic sector or a defined geographical area.

Spread
The difference between the rates at which money is deposited in a financial institution and the higher rates at which the money is lent out. Also, the difference between the bid and ask price for a security.

Stock options
Rights to purchase a corporation's stock at a specified price.

Strip bonds
The capital portion of a bond from which the coupons have been stripped. The holder of the strip bond is entitled to its par value at maturity, but not the annual interest payments.

Systematic withdrawal plan
Plans offered by mutual fund companies that allow unitholders to receive payment from their investment at regular intervals.

T

Temporary Insurance Agreement (TIA)

An agreement between the insurance company and the insured life, sometimes called “binding premium receipt” or “conditional insurance agreement”

Term life insurance

A form of life insurance for a specific set time period that is provided to the beneficiary if he/she dies within that period of time

Term to 100

A type of permanent life insurance in which the cash value and paid-up benefits are decreased, restricted, or eliminated when the policy is terminated prior to the life insured's death

Travel insurance

Insurance that provides the coverage for unexpected costs that could take place while on travel. Examples include medical costs, emergency hospital costs, lost baggage costs, and accidental death insurance.

Tax credit
An income tax credit that directly reduces theamount of income tax paid by offsetting other income tax liabilities.

Tax deduction
A reduction of total income before the amount of income tax payable is calculated.

Technical analysis
A method of evaluating future security prices and market directions based on statistical analysis of variables such as trading volume, price changes, etc., to identify patterns.

Trade
A securities transaction.

Treasury bill (T-bill)
Short-term government debt. Treasury bills bear no interest, but are sold at a discount. The difference between the discount price and par value is the return to be received by the investor.

Trust
An instrument placing ownership of property in the name of one person, called a trustee, to be held by the trustee for the use and benefit of some other person.

U

Underwriting

The process whereby the insurer assesses the potential risk of the life insured, when the application is made for insurance.

Underwriter:

The individuals at an insurance company who assess the risk of the life insured.

Universal life insurance

A type of insurance that is a combination of insurance and investment and offers flexibility unlike other insurances (flexible insurance coverage, flexible premiums, and tax-deferred investment account)

Unenforceable contract

A valid contract that cannot be carried out if one party refuses to comply with the terms (an insurance contract requires: need for legal capacity, meeting of the minds, and no evidence of fraud, forgery or theft)

Underwriter
An investment firm that purchases a security directly from its issuer for resale to other investment firms or the public or sells for such issuer to the public.

Unit trust
An unincorporated fund whose organizational structure permits the conduit treatment of income realized by the fund.

V

Voluntary accumulation plan
A plan offered by mutual fund companies whereby an investor agrees to invest a predetermined amount on a regular basis.

W

Wavier of premium

A benefit added to certain life insurance policies, if the insured life is fully and permanently disabled, that will provide the wavier of premium and sometimes the monthly payment of income.

Whole life insurance

Permanent life insurance payable on the death of the insured life at any moment in the future, where premium payments are fixed under contract.

Will

Usually a written legal document that specifies the person's disposition of property/assets/estate

Withdrawals

The amount of cash that the owner of the policy may take from a Universal Life Policy that may/may not be subject to income tax

Warrant
Certificates allowing the holder the opportunity to buy shares in a company at a stated price over a specified period. Warrants are usually issued in conjunction with a new issue of bonds, preferred shares or common shares.

Wrap account
An account offered by investment dealers whereby investors are charged an annual management fee based on the value of invested assets.