A Glossary of Life Insurance And Financial Terms
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This glossary is arranged in alphabetical order.
Click on a letter or scroll to search.
Accidental Death Insurance:
A type of Life Insurance providing payment only if the insured's death results from an accident.
A contract which provides an income for a specified period of time,
such as a certain number of years or for 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.
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
This is the person during whose life an annuity is payable.
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.
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
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.
A procedure for making the effective date of a policy earlier than the application date. Backdating is often used to make the age of the consumer at policy issue lower than it actually was in order to get a lower premium.
Back To Back:
This term refers to the simultaneous issue of a life annuity with a non-guaranteed period and a guaranteed life insurance policy [usually whole life or term to 100]. The face value of the life insurance would be the same amount that was used to purchase the annuity. This combination of life annuity providing the highest payout of all types of annuities, along with a guaranteed life insurance policy allowed an uninsurable person to convert his/her RRSP into the best choice of annuity and guarantee that upon his/her death, the full value of the annuity would be paid tax free through the life insurance policy to his family members. However, in the early 1990's, the Federal tax authorities put a stop to the issuing of standard life rates to rated or uninsurable applicants. Insuring a life annuity in this manner is still an excellent way to provide guaranteed tax free funds to family members but the application for the annuity and the application for the life insurance are separate transactions and today, most likely conducted through two different insurance companies so that there is no suspicion of preferential treatment given to the life insurance application.
This is the person who benefits from the terms of a trust, a will,
an RRSP, a RRIF, a LIF, an annuity or a life insurance policy. In relation
to RRSP's, RRIF's, LIF's, Annuities, Segregated Funds and of course life insurance, if the
beneficiary is a spouse, parent, adopting parents, offspring, adopted child, children of adopted children or grand-child, they are considered
to be a preferred beneficiary. If a policy was issued in Canada prior to July 1, 1962, then the signature of the preferred beneficiary named in that policy is required to release any rights to that preferred beneficiary. If the insured has named a preferred beneficiary,
the death benefit is invariably protected from creditors. There have been
some court challenges of this right of protection but so far they have
been unsuccessful. See "Creditor Protection" below. A beneficiary
under the age of 18 must be represented by an individual guardian over
the age of 18 or a public official who represents minors generally. A policy
owner may, in the designation of a beneficiary, appoint someone to act
as trustee for a minor. Death benefits are not subject to income taxes.
If you make your beneficiary your estate, the death benefit will be included
in your assets for probate. Probate filing fees are currently $14 per thousand of estate value in British Columbia and $15 per thousand of estate value in Ontario.
Another way to avoid probate fees or creditor claims against life
insurance proceeds is for the insured person to designate and register
with his/her insurance company's head office an irrevocable beneficiary.
By making such a designation, the insured gives up the right to make any
changes to his/her policy without the consent of the irrevocable beneficiary.
Because of the seriousness of the implications, an irrevocable designation
should only be made for good reason and where the insured fully understands
Note: A successful challenge of the rules relating to beneficiaries
was concluded in an Ontario court in 1996. The Insurance Act says its
provisions relating to beneficiaries are made "notwithstanding the
Succession Law Reform Act." There are two relevent provisions of the
Succession Law Reform Act. One section of the act gives a judge the power
to make any order concerning an estate if the deceased person has failed to
provide for a dependant. Another section says money from a life insurance
policy can be considered part of the estate if an order is made to support
a dependant. In the case in question, the deceased had attempted to deceive
his lawful dependents by making his common-law-spouse the beneficiary of an
insurance policy which by court order was supposed to name his ex-spouse
and children as beneficiaries.
This is an agreement entered into by the owners of a business to
define the conditions under which the interests of each shareholder will
be bought and sold. The agreement sets the value of each shareholders interest
and stipulates what happens when one of the owners wishes to dispose of
his/her interest during his/her lifetime as well as disposal of interest
upon death or disability. Life insurance, critical illness coverage and
disability insurance are major considerations to help fund this type of
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