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Glossary

This glossary is arranged in alphabetical order. Click on a letter in left column or scroll down to search.

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Accidental Death Benefit Rider:

A life insurance policy rider providing for payment of an additional cash benefit related to the face amount of the base policy when death occurs by accidental means.

Accident and health (Sickness) Insurance:

This is a form of insurance compensating an individual for loss as a result of accident or illness.

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.

Adjusted Cost Base:

It is the calculation used to determine the cost of an investment. Revenue Canada requires investors to use the adjusted cost base (ACB) when calculating capital gains or losses for tax purposes. The "cost base" of an investment is the initial purchase price plus any related costs, such as commissions or fees. The cost base may never change if there are no additions or disposals ("redemptions" in the case of funds). However, when changes are made, the cost base must be "adjusted" to reflect the new cost base of the investment for tax purposes.

Adjusted Gross Income: (AGI)

Is an interim calculation of income tax liability. It is computed by subtracting certain allowable adjustments from gross income.

Administrator:

A person appointed by the court to settle an estate when there is no will.

Annually Renewable Term:

A form of renewable term insurance that provides coverage for one year and allows the policy owner to renew his or her coverage each year, without evidence of insurability. Also called yearly renewable term.

After-Tax Return:

The returns from an investment after the effects of taxes have been taken into account.

Agent:

1) A person who is employed to act on behalf of another.
2) An insurance agent is one who contracts with one or more insurance companies to sell their insurance policies to the public and is paid a commission on or receives compensation for such business. See also Broker.

Agent of Record:

The agent writing the initial policy application and who is entitled to any and all commissions on the issued insurance contract, or the agent assigned by the agency or home office to service a particular policy owner. Also, an agent given written authorization by a present policy owner to seek out and negotiate insurance contracts with companies other than his or her own. Similar to a broker, the agent of record represents the interests of the client in dealings with other insurance companies' agents. The agent of record usually receives a percentage of the commission earned on the new policy.

Aggressive Growth Fund:

A mutual fund whose primary investment objective is substantial capital gains, through long-term capital growth, by investing primarily in stocks of fast growing smaller companies or narrow market segments, such as "the technology sector" or "the Internet sector." Sometimes called a capital appreciation fund.

Alter Ego Trust:

An alter ego trust is defined in the Income Tax Act as a trust created after 1999 by an individual who is at least 65 years old, for the individual's exclusive benefit. Until the individual's death, no other person may receive or otherwise obtain the use of trust income or capital. On the death of the contributor, the remaining trust property can be distributed or held for the benefit of family members.

Alternative Minimum Tax:

Is a method of calculating income tax that disallows certain deductions, credits, and exclusions. This was intended to ensure that individuals, trusts, and estates that benefit from tax preferences do not escape all federal income tax liability. People must calculate their taxes both ways and pay the greater of the two.

Amount of Insurance:

The limit of payment for which an insurer is liable under a policy.

Annuity:

Is a contract, which provides an income for a specified period of time, such as a specified number of years, or for the remainder of your 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.

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 that applies for and purchases an accumulation or payout annuity contract. For a payout of an annuity product, it is the person whose lifetime is used as the measuring period to determine how long benefits are payable and also is the person receiving the payments.

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:

The transfer of the ownership rights of a Life Insurance policy from one person to another.

Asset:

Is defined as anything of monetary value that is owned by a person. Assets include real property, personal property, and enforceable claims against others (including bank accounts, stocks, mutual funds, and so on).

Asset Allocation:

This is the process of positioning or repositioning assets within a portfolio to maximize return for a given level of risk. This process is usually done using the historical performance of the asset classes within sophisticated mathematical models.

Asset Class:

A category of investments that have similar characteristics, for example similar in potential risk and return. Basic asset classes include stocks, bonds, short-term securities or cash equivalents and annuities.

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

Attained Age:

Your current age. Your attained age is one of the factors life insurance companies use to determine your premiums. The older you are, the greater chance you'll die while you are covered - so the higher your premium.

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.

Audit:

Is the examination of the accounting and financial documents of a firm by an objective professional. The audit is done to determine the records' accuracy, consistency, and conformity to legal and accounting principles.

Automatic Premium Loan:

A section in a life insurance policy that provides that if premium is not paid by the policyholder within the allotted time after the due date, the amount of the premium will be loaned to him automatically. It is limited to the cash value of the policy and ceases when the cash value of the policy is insufficient to cover the loan, plus interest on the loan.

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