Glossary

Question 1

Accident and sickness insurance

Answer 1

A type of insurance that makes a payment if you have an illness, are injured or die from an accident. It includes disability income insurance and accidental death and dismemberment insurance.

Question 2

Accidental death and dismemberment insurance

Answer 2

A type of insurance that makes a payment if you die from an accident or lose full or partial use of a limb, hearing or eyesight. You can buy this type of insurance on its own or add it to a life insurance policy.

Question 3

Accidental death insurance

Answer 3

A type of insurance that makes a payment if you die from an accident. You can buy accidental death insurance on its own or add it to a life insurance policy.

If you add it to a life insurance policy and die from an accident, your insurance company pays both the life insurance amount and the accidental death insurance amount.

When the amount of the accidental death insurance is equal to the amount of the life insurance, the amount payable is double the original amount of the life insurance policy, and is known as “double indemnity”.

Question 4

Actuary

Answer 4

A person professionally trained in calculating the risks and costs of insurance.

Question 5

Adjustable policy

Answer 5

A type of insurance policy that allows the insurance company to make changes to the policy under certain conditions. Changes can include the amount of insurance, the premiums charged and the cash value.

Details of how the insurance company can make changes are listed in the policy.

Question 6

Administrative services only (ASO) plan

Answer 6

A type of group plan where the benefits are not insured. The plan sponsor (usually an employer) hires an outside firm (often a life and health insurance company) to administer their plan. The plan sponsor is responsible for providing the funds to pay claims.

Question 7

Advisor

Answer 7

A person who is licensed by a provincial or territorial regulator to sell life insurance, accident and sickness insurance, group insurance and segregated funds. Also called an agent or a broker.

Question 8

Annuitant

Answer 8

Typically, the person who receives payments from an annuity. It can also refer to the policyholder and to the person on whose life the payments are based.

Question 9

Annuity

Answer 9

A contract that pays you income at regular intervals, typically monthly, in exchange for an upfront payment. The income can start right away, or at some set date in the future. Annuities are often used to provide retirement income.

The different types of annuities include:

a life annuity, which makes payments for as long as you live. A joint life annuity could make payments for as long as either you or your spouse lives.
an annuity certain, which makes payments for a specified number of years or to a specified age, regardless of whether you are alive throughout that period,
some combination of both.

Question 10

Application

Answer 10

An application is a formal request for insurance coverage. It provides information about you and the type and amount of insurance you want. The information you give the insurance company helps them decide if you meet their requirements and qualify for the insurance. In some cases, you have to answer a series of health questions. You may also have to undergo basic medical tests as part of your application.

Question 11

Automatic premium loan

Answer 11

A feature in a permanent life insurance policy that allows the insurance company to pay for overdue premiums by taking a loan against the policy (as long as it has a cash value). Paying for overdue premiums in this way prevents your policy from being cancelled (or lapsing).

(See Non-forfeiture options.)

Question 12

Beneficiary

Answer 12

The person you name to receive the payment from your insurance policy. In the case of life insurance, if you don’t name a beneficiary, the payment goes to your estate.

Question 13

Benefit

Answer 13

The payment an insurance company makes when they approve an insurance claim.

Question 14

Cash surrender value

Answer 14

The amount your insurance company pays you when you cancel a permanent life insurance policy that has built up a cash value. The insurance company deducts any policy loans or overdue premiums from the cash surrender value before paying you.

Question 15

Cash Value

Answer 15

The cash amount that builds up in a permanent life insurance policy. You can take a loan against the cash value of your policy. If you cancel your policy, you get the cash value.

Whole life, variable life and universal life are types of life insurance that have cash value.

Question 16

Certificate of insurance

Answer 16

A document that sets out the key features of the insurance under a group insurance plan. It lists things like the type and amount of coverage, categories of dependents, deductibles and coinsurance, limits and exclusions, and instructions for making a claim.
A contract given to those who have insurance through a fraternal society.

Question 17

Claim

Answer 17

A formal request to an insurance company for payment of a benefit.

Question 18

Claimant

Answer 18

The person who makes a claim.

Question 19

Coinsurance

Answer 19

An arrangement in a health or dental insurance plan where you and the insurance company share the cost of the items covered. You usually pay a set percentage (e.g., 20% paid by you and 80% paid by the plan).

Question 20

Contestability

Answer 20

Contestability is the legal right of the insurance company to question (or contest) your insurance coverage. If the company finds that you gave incomplete or incorrect information when applying for the insurance, they will look at what impact the missing information would have had on their decision to insure you. If their decision would have been different, they may cancel your coverage and deny any claims.

Most policies have a two-year contestability period. After that, the company cannot contest your coverage except in the case of fraud (a deliberate misstatement of fact). An example of fraud is a smoker who states in their application that they’re a non-smoker, to get a reduced premium.

Question 21

Contingent beneficiary

Answer 21

If you choose to name more than one person to receive a benefit, you can name some to be primary and others to be secondary (also called contingent). Primary beneficiaries are first in line to receive benefits. Secondary beneficiaries only receive a benefit if no primary beneficiaries are alive when the benefit is paid.

Question 22

Contract

Answer 22

An insurance contract is the legal agreement with your insurance company that sets out the terms of your coverage. The contract usually includes your application, the policy, and any changes made later to the policy.

Question 23

Conversion right

Answer 23

A right that a policyholder has to exchange their policy for another one, without giving proof of good health. A common example is term insurance that can be exchanged for a permanent insurance policy. Another example is a group insurance plan where an employee plan member who leaves the plan can convert their group insurance to an individual insurance policy.

Question 24

Coordination of benefits

Answer 24

Families with two working adults may be covered by more than one health or dental plan. If your primary plan doesn’t pay the full amount of an expense, you can submit a claim to the other plan for the balance. In this way, you can receive up to 100% of your expense.

Question 25

Creditor protection

Answer 25

If you have unpaid debts, the people you owe the money to (your creditors) may legally have access to your other assets, such as property, investments or valuables, to pay off the debt. This may happen through your bankruptcy or other legal proceedings.

The funds in your insurance policies may be protected from creditors in certain circumstances. For example, if you make certain beneficiary designations or if the policy is registered (such as a Registered Retirement Savings Plan). However, the protection may not apply if you put your money into an insurance policy to avoid paying your creditors.

Question 26

Creditor’s group insurance

Answer 26

A type of insurance that helps to pay down or pay off your loan or credit card or cover your payments in certain situations, such as if you die or become disabled. It can be offered through financial institutions, auto dealers, mortgage brokers, retailers, or credit card companies when you take on debt.

Question 27

Critical illness insurance

Answer 27

A type of insurance that pays you a lump sum if you are diagnosed with a serious illness such as cancer, heart disease requiring surgery, heart attack or stroke. The exact illnesses covered are listed in your policy. You can buy this type of insurance on its own or may be able to add it to a life insurance policy or group plan.

Question 28

Deductible

Answer 28

Deductibles are common in health insurance plans. The deductible is the amount of a covered expense that you pay before your insurance company makes any payments. The deductibles apply to you and to any dependents covered under the plan. Examples might be $50 per person per year or $5 for each drug prescription.

Question 29

Deferred annuity

Answer 29

A contract that pays you income at regular intervals, starting at a future date. The date can be in a specified number of years or at a specified age.

Question 30

Defined benefit pension plan

Answer 30

A workplace pension plan that pays you a set benefit amount when you retire. Benefits are based on a formula that takes into account things like your salary, how long you were a member of the plan and how much you and your employer contributed to the pension plan.

Question 31

Defined contribution pension plan

Answer 31

A workplace pension plan where the amount you contribute is fixed but the benefit amount you receive on retirement is not. Your benefits are based on the amount you and your employer have contributed, plus investment earnings.

Question 32

Dental insurance

Answer 32

A type of insurance that provides coverage for dental expenses. It’s usually provided as part of a group plan, but you can also buy it on its own.

Question 33

Disability income insurance

Answer 33

A type of insurance that makes regular payments (usually monthly) to replace income if you become disabled and unable to work. It’s usually provided as part of a group plan, but you can also buy it on its own.

Question 34

Eligible expenses

Answer 34

Expenses that are covered under a health or dental plan. Depending on the coverage provided, you may have to pay a share of the expenses.

Question 35

Eligibility period

Answer 35

The length of time you must be a member of a group before qualifying for coverage under the group plan. For example, an organization whose health and dental plan has a 90-day eligibility period would require 90 days of qualified employment before coverage could begin.

Question 36

Elimination period

Answer 36

In disability insurance, you have to be continuously disabled for a certain amount of time before making a claim. This amount of time is the elimination period (sometimes referred to as a “waiting period”). You will not receive benefits for the elimination period.

Question 37

Endowment insurance

Answer 37

A type of life insurance that pays you a set amount if you live to the maturity date of your policy. If you die before that date, your insurance company pays the set amount to your beneficiary.

Question 38

Evidence of insurability

Answer 38

The information an insurance company uses to decide whether or not to insure you. It’s often called “proof of good health”. The information may include medical, lifestyle, smoking and other personal information.

Question 39

Exclusions

Answer 39

Things that are not covered by an insurance policy. They can include:

certain medical conditions you had before you applied for the insurance
high-risk activities such as sky-diving
You can sometimes buy extra insurance to pay for risks that would not otherwise be covered.

Question 40

Exempt policy

Answer 40

A life insurance policy where the savings growth does not exceed limits set under income tax law. In an exempt policy, the investment earnings on cash value are not subject to annual taxation.

Question 41

Extended health care insurance

Answer 41

A type of insurance that pays for hospital and medical expenses not covered by your provincial health plan. Expenses typically include prescription drugs and medicines, semi-private or private hospital rooms, ambulance services, and hospital and medical expenses you incur outside Canada. It can be part of a group plan or you can buy it on its own.

Question 42

Extended term insurance

Answer 42

An option in a permanent life insurance policy that allows you to extend the period you’re covered without having to pay additional premiums. It uses the cash value in your policy but your insurance coverage stays the same. How long the policy continues depends on how much cash value is available.

Question 43

Face amount

Answer 43

Also called the “sum insured”, the face amount is the amount stated on your policy that your insurance company guarantees to pay when the insured person dies. It does not include amounts payable under accidental death coverage or other special provisions.

Question 44

Financial needs analysis

Answer 44

When you buy insurance, an advisor may help you decide how much insurance you need by completing a financial needs analysis. This looks at your current financial and personal situation and goals to help decide how much insurance you need. It can include things like taking care of dependents and paying off loans.

Question 45

Flexible premium policy or annuity

Answer 45

A type of life insurance policy or annuity contract where you can vary the amount of your premium payments and when you make them. For example, you can pay premiums for six months and then stop paying them for the next six months. There may be minimums and maximums that apply to your payments.

Question 46

Fraternal society/Fraternal benefit society

Answer 46

A not-for-profit organization that operates for fraternal, benevolent or religious purposes, including providing insurance to its members and their families.

Question 47

Grace period

Answer 47

A period in which an insurance policy is effective even though the premium is past due.

Question 48

Group annuity

Answer 48

A workplace savings plan that provides a regular income, typically at retirement. Pension plans and group registered retirement savings plans often use group annuities. These may be variable insurance contracts.

Question 49

Group insurance

Answer 49

A type of insurance that provides coverage for a group of people (for example employees or members of an association) under one contract called a group plan or group policy.

Question 50

Group policyholder

Answer 50

An organization (for example an employer or association) that enters into a group insurance contract with an insurance company.

Question 51

Guaranteed death benefit

Answer 51

The minimum amount an insurance company pays to the beneficiary when the insured person dies.

Question 52

Guaranteed insurability benefit

Answer 52

An option in a life insurance policy. It gives you the right to buy additional insurance coverage at set future ages without having to give proof of good health.

It’s also called “guaranteed insurability option”.

Question 53

Guaranteed maturity benefit

Answer 53

The amount that your insurance company guarantees to pay you on the policy maturity date. This benefit is most common with segregated fund contracts.

Question 54

Guaranteed Minimum Withdrawal Benefit (GMWB)

Answer 54

An option within a segregated fund contract that guarantees to pay you a stated income as long as you live, or for a specified period, even if the cash surrender value of the contract drops. If the cash surrender value grows, then the income paid to you can increase.

Question 55

Guaranteed renewable policies

Answer 55

A feature of an individual insurance policy where the insurance company guarantees to renew the insurance at the end of a certain period, regardless of any changes in your health. Premiums may increase at renewal times.

Question 56

Health care spending account

Answer 56

An arrangement in a group plan where the plan member gets a number of credits in an account. The member can use the credits to pay for health and dental expenses not covered elsewhere in their plan.

Question 57

Health insurance

Answer 57

A type of insurance that covers medical expenses (such as drugs, dental expenses, vision expenses) or loss of income if you’re sick or injured. Types of health insurance include accident and sickness insurance, disability income insurance, and accidental death and dismemberment insurance.

Question 58

Hospital expense insurance

Answer 58

A feature of extended health care insurance that covers hospital expenses not covered by your provincial health plan during your stay in hospital. It can include the cost of private or semi-private hospital rooms and other prescribed hospital services.

Question 59

Hospital indemnity

Answer 59

A health insurance benefit that pays a flat amount for each day a covered person is in hospital. The number of days covered is set and the daily amount paid does not vary, regardless of the medical expenses the covered person incurs. Also called “hospital cash plans”.

Question 60

Illustration

Answer 60

A document you may get from your advisor when you are thinking about buying insurance. It explains how the policy would work. It shows the costs and values of the policy under different conditions. It should also clearly show what’s guaranteed and what’s not. A policy illustration is for your information only and isn’t part of a legal contract.

Question 61

Immediate annuity

Answer 61

An annuity product you buy with a single lump-sum payment and that starts paying a guaranteed amount almost immediately.

Question 62

Impaired annuity

Answer 62

Someone who has a serious medical condition may qualify for an impaired life annuity. This means the amount they receive may be higher than a healthy person making the same purchase. The greater the severity of their condition, the shorter their life expectancy will be, so the annuity can pay a higher income.

Question 63

Impaired risk

Answer 63

In life and health insurance, a person who has physical or health problems, or who has a risky occupation or hobby, is known as an impaired risk. A person who presents an impaired risk may not qualify for coverage. If they do qualify they may pay higher premiums for their coverage. For example someone with a history of strokes would be an impaired risk.

Question 64

Individual insurance

Answer 64

Insurance you buy as an individual from an advisor or insurance company. This differs from group insurance, which you may have through your employer.

Question 65

Individual variable insurance contract

Answer 65

A contract, usually an annuity, where your premiums are invested in segregated funds managed by the life insurance company. The value of the plan will vary over time based on the value of those investments.

These contracts guarantee to pay at least 75% of what you’ve paid into the plan on death or maturity, even if the investments are worth less.

Question 66

Information folder

Answer 66

The document your advisor gives you before you buy a segregated fund contract. It provides details about the contract and your investment options.

Question 67

Insurer

Answer 67

An insurance company that issues policies and promises to pay benefits.

Question 68

Integration of benefits

Answer 68

The process where an insurance company takes into account disability income you receive from other benefit plans, such as the Canada and Quebec Pension Plans, when determining your benefit amount.

For example, your insurance benefit will be “off-set”, or reduced, by the amount of CPP benefits that you receive while disabled.

Question 69

Irrevocable beneficiary

Answer 69

A type of beneficiary designation where you need written permission from the beneficiary before changing the beneficiary or making certain other changes to your coverage under the policy.

Question 70

Key person insurance

Answer 70

A type of insurance on the life of a key employee in a business. It’s designed to provide cash to hire and train a replacement and replace lost revenues and profits, if the key employee dies.

Question 71

Lapsed policy

Answer 71

An insurance policy that has ended because you stopped paying premiums and there was not enough money in the policy (cash value) to keep the payments up to date.

Question 72

Level premium life insurance

Answer 72

A type of life insurance where the premium you pay stays the same through the life of the policy.

Question 73

Licence

Answer 73

The official certification a provincial or territorial regulator gives an individual to show the individual is authorized to sell insurance.

Question 74

Life Income Fund (LIF)

Answer 74

A type of retirement plan. If you leave a pension plan you may chose to transfer the value of your pension to a LIF.

At retirement, income payments from a LIF are subject to upper and lower limits each year, based on the amount in the account and the pension laws that apply to the LIF

Question 75

Life income option

Answer 75

An option available to beneficiaries to receive their life insurance payout. With this option the insurance company pays the beneficiary regular, equal payments for as long as they live.

Question 76

Life insurance

Answer 76

A type of insurance that pays out when the insured person dies.

Question 77

Life insured

Answer 77

The person whose life is insured.

Question 78

Locked-in

Answer 78

A government restriction applied to a registered retirement savings plan or registered retirement income fund if amounts are transferred to that plan from a pension plan. It generally prevents withdrawals from the plan until you are 55 or older, and then limits any withdrawals so that the plan can be expected to provide a predictable income until age 90.

Question 79

Locked-in Retirement Income Fund (LRIF)

Answer 79

A type of retirement plan similar to a Life Income Fund (LIF). Not all provinces permit pension amounts to be transferred to both a LIF and an LRIF.

Question 80

Locked-in Registered Retirement Savings Plan (Locked-in RRSP)

Answer 80

A type of registered retirement savings plan containing funds transferred from a pension plan. You are generally unable to withdraw any amounts before age 55.

Question 81

Long-term care insurance

Answer 81

A type of insurance that provides financial support for people who become unable to care for themselves because of a chronic illness or disability.

Question 82

Long-term disability insurance

Answer 82

A type of group insurance that replaces part of your income if you become disabled and are unable to work. Long-term disability often starts after short-term disability ends and usually provides coverage for two or more years.

Question 83

Management Expenses Ratio (MER)

Answer 83

The MER is the portion of the segregated fund or mutual fund used for covering management and administrative expenses. For a segregated fund, the MER includes the basic guarantee cost. The MER is shown as a percentage of your fund.

Question 84

Material facts

Answer 84

Information or a fact you’re aware of that could affect an insurance company’s decision about whether to insure you and at what cost. For example, if you’re being checked for a medical condition when you’re applying for insurance, you must tell the insurance company. If you don’t, the company could cancel your policy and refuse to pay any claims.

Question 85

Maturity date

Answer 85

The date on which the insurance company pays a maturity benefit and the policy ends. For an endowment policy, annuity contract or segregated fund contract, the maturity date is a predetermined age or date.

Question 86

Medical Information Bureau (MIB)

Answer 86

A non-profit association of Canadian life and health insurance companies established to provide for the confidential sharing of information among its members. Member insurance companies use MIB’s services to help assess an individual’s risk and eligibility during the underwriting of life, health, disability income, critical illness, and long-term care insurance policies. Reports from MIB may alert insurance companies to applicants who have provided incomplete or false information, and help them fight insurance fraud.

Question 87

Member

Answer 87

A person who is covered under a group plan.

Question 88

Misrepresentation

Answer 88

A false or misleading statement an applicant makes when applying for insurance. An insurance company can cancel the policy if they find you gave them false or misleading information in your application.

Question 89

Misstatement of age

Answer 89

This happens when an insurance company is given the wrong age for the person insured. In some situations the insurance company can cancel the coverage when the wrong age is given. However, in many cases they adjust the coverage or premiums to take the correct age into account.

Question 90

Mutual insurance company

Answer 90

An insurance company owned by its policyholders (called participating policyholders). A mutual insurance company has no shareholders. Management is directed by an elected board.

Question 91

Non-cancellable and guaranteed renewable policy

Answer 91

A type of insurance policy where the insurance company guarantees not to cancel the policy, increase the premiums or make changes to the policy until the insured person reaches a set age (usually 65). Typically, this involves disability insurance.

Also known as a”non-cancellable policy”.

Question 92

Non-contributory pension plan

Answer 92

A pension plan where the employee makes no contributions. The employer funds the entire cost of the plan.

Question 93

Non-forfeiture options

Answer 93

A feature of some permanent life insurance policies that provides the policyholder with choices if he or she stops paying premiums on a policy. Usually, the policyholder may choose one of the following:

cash (cash value or cash surrender value);
reduced paid-up amount of insurance;
automatic premium loan to continue the full sum insured; or
extended term insurance for the full sum insured over a specified period (not made available by all insurers).

Question 94

Non-participating Insurance

Answer 94

A policy that does not participate in the insurance company’s distribution of earnings or dividends.

Question 95

Off-set

Answer 95

See Integration of benefits.

Question 96

Paid-up insurance

Answer 96

Life insurance on which all the required premiums have been paid and coverage continues.

Question 97

Partial disability benefit

Answer 97

A disability benefit that pays a monthly amount that is less than a total disability benefit. In this situation, the insured person cannot work fulltime or is prevented from performing one or more important daily duties of his or her occupation, but is not considered totally disabled under the policy.

Question 98

Participating insurance

Answer 98

A type of insurance policy that pays the policyholder a share of the insurance company’s earnings, or dividends.

Question 99

Pension plan

Answer 99

A workplace savings plan that provides a monthly income to you after retirement. Depending on the specific plan, you and your employer may contribute to the plan.

Question 100

Permanent life insurance

Answer 100

A type of life insurance that provides coverage for the lifetime of the person insured, provided the required premiums are paid. Permanent life insurance usually has a cash value. Whole life, Term to 100 and Universal Life are examples of this type of insurance.

Question 101

Plan member

Answer 101

The person insured under a group insurance or group benefit policy (for example, an employee, union member or association member). The member’s spouse and dependents are not considered members.

Question 102

Plan sponsor

Answer 102

The owner of a group insurance or group benefit policy. It can be any organization that provides group benefits to its members, for example an employer, union or association.

Question 103

Policy (Contract)

Answer 103

The legal agreement between you and your insurance company that sets out the terms of your insurance coverage.

Question 104

Policy loan

Answer 104

A loan made by a life insurance company to a policyholder based on the policy’s cash value. A policy loan reduces the cash value and the insurance company usually charges interest.

Question 105

Policy reserves

Answer 105

The pool of funds that an insurance company keeps specifically to meet its policy obligations. The law requires insurance companies to keep sufficient reserves to pay all future claims.

Question 106

Policyholder

Answer 106

The person who owns an insurance policy.

Question 107

Policyholder dividend

Answer 107

If you have a participating insurance policy, a policyholder dividend is a payment your insurance company makes to you when the company performs well. Dividends are not guaranteed – they depend on things like the total amount of claims the company pays, how the company’s investments perform and their level of expenses.

You can receive dividends in different ways:

cash;
leave them in the policy to accumulate;
use them to pay part of the premiums (thus reducing your insurance cost); or
use them to buy additional insurance.

Question 108

Pooled Registered Pension Plan (PRPP)

Answer 108

A defined contribution pension plan designed for smaller workplaces and the self-employed. Your contributions, and any from your employer, are credited to your account. The funds in your account are pooled with other funds in the plan to achieve lower investment management and administrative costs. The plans are run by organizations that are licensed to administer the plan.

Question 109

Pre-determination of benefits

Answer 109

A claim procedure required by many group plans. For large expenses, such as major dental work, your plan may require you to obtain and submit an estimate of the costs so your insurer can determine what portion of the costs your plan will cover (called a pre-determination of benefits) before you receive treatment. You can then budget for the expense knowing how much your plan will pay and how much you’ll have to pay. You may be able to cover some of your costs under your spouse’s or partner’s plan.

Question 110

Pre-existing condition

Answer 110

A medical condition for which you’ve had symptoms, consulted a medical professional or received treatment before you apply for insurance or before your coverage takes effect.

Some types of insurance have pre-existing condition clauses which may limit or exclude benefits if you make a claim related to that condition.

Question 111

Premium

Answer 111

The amount you pay to buy insurance. The premium is usually paid monthly, quarterly or annually. The amount of your premium may change over time.

Question 112

Premium offset

Answer 112

A payment arrangement where the insurance company uses policy dividends or cash value to pay for premiums.

Question 113

Rated policy

Answer 113

An insurance policy where the insured person does not meet the company’s standard insurance requirements (for example, because of a risky occupation). The policy has higher risks and therefore higher premiums

Question 114

Reduced paid-up insurance

Answer 114

A form of paid-up life insurance available as a non-forfeiture option. The policy continues, but for a reduced amount.

Question 115

Registered Education Savings Plan (RESP)

Answer 115

A type of savings plan for your own, your child’s or your grandchild’s college or university education. No tax-deduction is provided for contributions. Payouts from the plan to the student are not taxed.

Question 116

Registered Pension Plan (RPP)

Answer 116

A workplace savings plan that provides a monthly income to you after retirement. Depending on the specific plan, you and your employer may contribute to the plan.

Pension plans are subject to regulation by the Canada Revenue Agency, and such plans are called “Registered Pension Plans”.

Question 117

Registered Retirement Income Fund (RRIF)

Answer 117

A type of plan that provides a predictable - but not guaranteed - retirement income, starting at a set age (currently 72). Most people transfer their registered retirement savings plan savings into RRIFs or annuities

Question 118

Registered Retirement Savings Plan (RRSP

Answer 118

A type of retirement savings plan. The amount you can contribute to an RRSP is based on your income and is set by the federal government. The amount you contribute reduces the income tax you pay at the time, but you generally pay tax on any money you withdraw from the account.

Question 119

Reinstating a policy

Answer 119

You may apply to restart your insurance coverage if it ended because you did not pay your premiums. This process is called reinstating your policy. To do so you must apply within two years of the date the required premiums were not paid. You must also provide evidence of insurability and pay any outstanding costs, plus interest

Question 120

Reinsurance

Answer 120

An agreement between insurance companies to share insurance risk. One company transfers some of its insurance risk to another company, known as the reinsurer. Reinsurance is one way your insurance company manages the risks it takes on.

Question 121

Renewable term insurance

Answer 121

A type of term life insurance that can be renewed at the end of the term, either automatically or at the policyholder’s option, without evidence of insurability. The amount you pay for the insurance (the premium) is usually fixed and guaranteed not to change for the length of the term. When the insurance renews, the premium increases, based on your age.

Question 122

Replacement

Answer 122

The act of replacing an existing insurance policy with another policy. Since this means that the first policy is cancelled, the insurance company usually requires a written statement showing you understand the seriousness of making this change

Question 123

Rescission right

Answer 123

The policyholder’s right to cancel a policy within a set period of time and get a refund of any premiums paid. This “free look” period allows you to review the policy and ensure it meets your needs.

Question 124

Revocable beneficiary

Answer 124

A type of beneficiary designation. You can change a revocable beneficiary at any time.

Question 125

Rider

Answer 125

A change or addition to an insurance policy that either expands or limits the coverage and benefits.

Question 126

Risk

Answer 126

The likelihood that an insured event will happen while the policy is in place. For example, in life and health insurance, risk is typically the likelihood that the person insured will die, be injured or get sick.

Question 127

Segregated fund

Answer 127

A pool of investments held by the life insurance company and managed separately (i.e. segregated) from its other investments. If you buy a variable insurance contract, sometimes called a segregated fund policy, the value of your policy varies according to the market value of the assets in the segregated funds.

Question 128

Settlement options

Answer 128

The choices a beneficiary or policyholder may have for receiving payment of life insurance benefits, other than an immediate cash payment. For example, the beneficiary may choose to receive the benefit in the form of an annuity

Question 129

Short-term disability insurance

Answer 129

A type of insurance that replaces income for a short period of time when a person becomes disabled and is unable to work. If the disability continues, the person may be eligible for long-term disability benefits, if they have that coverage.

Question 130

Standard or statutory provisions

Answer 130

The provisions in an insurance policy setting out certain rights and obligations that you and the insurance company have. These are required by provincial insurance laws.

Question 131

Standard risk

Answer 131

A person who qualifies to buy insurance at the company’s regular premium rates.

Question 132

Stock insurance company

Answer 132

An insurance company that is listed on a stock exchange. The company’s shares (or stocks) are owned by the shareholders.

Question 133

Substandard risk

Answer 133

See Impaired risk.

Question 134

Suicide clause

Answer 134

A provision in a life insurance policy stating that benefits will not be paid if the person insured commits suicide or dies as a result of self-inflicted injuries.

Question 135

Sum insured

Answer 135

Sum insured

Question 136

Supplementary health insurance

Answer 136

See Extended health care insurance.

Question 137

Surrendered policy

Answer 137

A policy you’ve asked your insurance company to cancel. If your policy has a cash value, you receive this amount when you cancel your policy.

Question 138

Tax-Free Savings Account (TFSA)

Answer 138

A registered account you use to save money for any purpose. You do not get a tax deduction when you contribute to the plan. Investment earnings in the account are tax free and you don’t pay taxes when you withdraw money.

Question 139

Term life insurance

Answer 139

A type of life insurance that provides coverage for a set period of time. The period (or term) of the coverage can be either a fixed number of years or to a set age (e.g., age 65).

Question 140

Term to 100

Answer 140

A type of permanent life insurance that provides coverage for your lifetime, as long as you pay the required premiums. The premium amount stays the same and you stop paying premiums after age 100. Typically, the policy has little or no cash value.

Question 141

Travel insurance

Answer 141

Insurance designed to pay for certain unexpected costs that may arise when you are travelling outside your home province or Canada. These costs may include emergency hospital and medical costs, trip cancellation and lost baggage. Some travel insurance coverage includes an accidental death benefit.

Question 142

Underwriting

Answer 142

The process an insurance company goes through to decide whether or not to insure someone.

Question 143

Uninsured plan

Answer 143

See Administrative services only (ASO) plan.

Question 144

Universal life

Answer 144

A type of permanent life insurance with flexible premium payments. It consists of two parts: life insurance and an investment account. You pay money into the investment account. The insurer takes premiums and other expenses from the account and pays any investment income into the account. You can increase or decrease your premiums and your death benefit within certain limitations. Earnings on the investment account may or may not be guaranteed depending on the type of investment chosen.

Question 145

Variable insurance contract

Answer 145

A life insurance or annuity contract where benefits are not fixed but vary with the market value of a specified group of assets in which the premiums have been invested.

Question 146

Waiver of premium

Answer 146

A feature of some insurance policies that allows you to stop paying the premiums if you become disabled.

Question 147

Whole life insurance

Answer 147

A type of permanent life insurance that provides coverage for your lifetime. It has fixed premiums, builds up a cash value, and has features that help keep your coverage in place if you can’t pay the premiums.