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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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Scholarship Trusts:

Available from independent associations, scholarship trusts operate much like an insurance fund. The income from all contributions is pooled in one large fund and is paid out to eligible children as they progress through post-secondary education. With this type of plan, a child may get more or less than their proportionate share of the pool.

Scholarship trusts often have restrictions. If the child does not attend a qualified post-secondary institution within certain time limits, the interest income is normally kept in the pool for the benefit of other plan holders. There may also be restrictions on changing beneficiaries.

Self-insurer:

A person, corporation or organization, which assumes all or part of a risk itself rather than use an insurer, government departments often self-insure.

Settlor/Donor:

The person who makes the decision to place, transfer or "settle" property by way of gift (usually either a gold coin or silver wafer) to the trustee or trustees who will manage and administer that property for the benefit of the beneficiaries in accordance with the governing trust document.

Single-Life Annuity:

This is an insurance-based contract that provides future payments at regular intervals in exchange for current premiums. Generally used as a supplement to retirement income and pays over the life of one individual, usually the retiree, with no rights of payment to any survivor.

Spousal Registered Retirement Savings Plan:

This is an RRSP owned by the spouse (plan holder) of the person contributing to it. Contributions to a spousal RRSP are given, not loaned. The contributor can direct up to 100% of eligible RRSP deposits into a spousal RRSP each and every year. Contributing to a spouses RRSP reduces the amount one can contribute to one's own RRSP, however, if the spouse is a lower income earner, it is an excellent way in which to split income for lower taxation in retirement years.

Once the money is in the plan, it is under the spouse's (plan holder's) control. Amounts withdrawn from a spousal RRSP will be taxed back to the contributor if the withdrawal is made within 3 years of the contribution date.

Spousal Trust:

A spousal trust is one in which the testator provides that all of the income from the trust is paid to the spouse and that no one other than the spouse is entitled to the capital from the trust during the spouse's lifetime. After the spouse's death, the assets are to be distributed to the beneficiaries. There is no deemed disposition of capital assets transferred to a spousal trust, and the deemed disposition will apply upon the death of the beneficiary spouse.

Split Dollar Life Insurance:

The split dollar concept is usually associated with cash value life insurance where there is a death benefit and an accumulation of cash value. The basic premise is the sharing of the costs and benefits of a life insurance policy by two or more parties. Usually one party owns and pays for the insurance protection and the other owns and pays for the cash accumulation. There is no single way to structure a split dollar arrangement. The possible structures are limited only by the imagination of the parties involved.

Segregated Fund:

Sometimes called seg funds, segregated funds are the life insurance industry equivalent to a mutual fund with some differences. The term "Mutual Fund" is often used generically, to cover a wide variety of funds where the investment capital from a large number of investors is "pooled" together and invested into specific stocks, bonds, mortgages, etc.

Since Segregated Funds are actually deferred annuity contracts issued by life insurance companies, they offer probate and creditor protection if a preferred beneficiary such as a spouse is named. Mutual Funds don't have this protection.

Unlike mutual funds, segregated funds offer guarantees at maturity (usually 10 years from date of issue) or death on the limit of potential losses - at times up to 100% of original deposits are guaranteed which makes them an attractive alternative for the cautious and/or long term investor. On the other hand, with regular mutual funds, it is possible to have little or nothing left at death or plan maturity.

Single Premium Policy:

A whole life policy or universal life policy for people who want to buy a policy for a one-time lump sum, and then be covered for the rest of their lives without paying any additional premiums.

Standard Risk:

The Person, who, according to a company's underwriting standards, is entitled to insurance protection without extra rating or special restrictions.

Substandard Risk:

Person who is considered an under-average or impaired insurance risk because of physical condition, family or personal history of disease, occupation, residence in unhealthy climate or dangerous habits

Structured Settlement:

Simply stated, a structured settlement is a voluntary agreement between a plaintiff and a defendant under which the injured victim (plaintiff) receives damages in the form of a stream of periodic payments purchased for the plaintiff by the defendant.

Historically, damages paid out during settlement of personal physical injury cases were distributed in the form of a lump-sum cash payment to the plaintiff. This windfall was intended to provide for a lifetime of medical and income needs. The claimant or his/her family was then forced into the position of becoming the manager of a large sum of money.

In an effort to create a more financially stable arrangement for the claimant, the Structured Settlement was developed. A Structured Settlement is an alternative to a lump sum cash payment in the resolution of personal physical injury, wrongful death, or workers’ compensation cases. The settlement usually consists of two components: an up-front cash payment to provide for immediate needs and a series of future periodic payments which are funded by the defendant’s purchase of one or more annuity policies. Those payors make payments directly to the claimant. In the unfortunate event of the claimant’s death, a guaranteed portion of the settlement may be directed to a beneficiary or his/her estate.

A Structured Settlement is a guaranteed source of funds paid to the claimant or his/her family on a tax-free basis.

Subrogation:

A plan’s right to protect itself against paying when another party is responsible for a claim. The plan may pay benefits, but has the right to demand restitution or recovery of payments if the subscriber receives payment or is eligible for payment from a third party or from any judgement or settlement. Subrogation literally means the substitution of one person for another. This concept is similar to no-fault auto insurance restriction clauses or Worker’s Compensation. The theory is that the plan should not pay if another party is responsible, but the subscriber should receive benefits until the third party pays.

Suicide Clause:

A provision specifying that in the event the insured commits suicide within two years from the date the policy was issued, the insurance company's liability is limited to payment of a single sum equal to the premium(s) paid less any dividends paid and any indebtedness to the Company.

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