Definition of Conversion Right

Conversion Right

Term life insurance products are offered as non-convertible or convertible to a certain time in the future. The coversion right has a time limit, usually to the policy holder's age 60 or possibly even age 70. This right means that the policy holder has the right to convert their existing policy to another specific different plan of permanent insurance within the specified time period, without providing evidence of insurability. There is a slightly higher cost for a term policy with the conversion priviledge but it is a valuable feature should a policy holder's health change for the worst and continued insurance coverage becomes a necessity.
Most often this right is also granted to individuals covered under employee group benefit policies where individuals leaving the employee group have a limited amount of time, usually anywhere from 30 to 90 days, to convert to a specific permanent individual policy without evidence of insurability.

Conversion

The act of changing from one type of life insurance policy to another, without having to give evidence of insurability.

Right Reading Reverse Fee

right reading reverse plans show the design flipped 180 degrees with all of the text reading normally. When you choose this option, we ship each set of purchased blueprints in this format.

Registered Pension Plan

Commonly referred to as an RPP this is a tax sheltered employee group plan approved by Federal and Provincial governments allowing employees to have deductions made directly from their wages by their employer with a resulting reduction of income taxes at source. These plans are easy to implement but difficult to dissolve should the group have a change of heart. Employer contributions are usually a percentage of the employee's salary, typically from 3% to 5%, with a maximum of the lessor of 20% or $3,500 per annum. The employee has the same right of contribution. Vesting is generally set at 2 years, which means that the employee has right of ownership of both his/her and his/her employers contributions to the plan after 2 years. It also means that all contributions are locked in after 2 years and cannot be cashed in for use by the employee in a low income year. Should the employee change jobs, these funds can only be transferred to the RPP of a new employer or the funds can be transferred to an individual RRSP (or any number of RRSPs) but in either scenario, the funds are locked in and cannot be accessed until at least age 60. The only choices available to access locked in RPP funds after age 60 are the conversion to a Life Income Fund or a Unisex Annuity.
To further define an RPP, Registered Pension Plans take two forms; Defined Benefit or Defined Contribution (also known as money purchase plans). The Defined Benefit plan establishes the amount of money in advance that is to be paid out at retirement based usually on number of years of employee service and various formulae involving percentages of average employee earnings. The Defined Benefit plan is subject to constant government scrutiny to make certain that sufficient contributions are being made to provide for the predetermined pension payout. On the other hand, the Defined Contribution plan is considerably easier to manage. The employer simply determines the percentage to be contributed within the prescribed limits. Whatever amount has grown in the employee's reserve by retirement determines how much the pension payout will be by virtue of the amount of LIF or Annuity payout it will purchase.
The most simple group RRSP plan is a group billed RRSP. This means that each employee has his own RRSP plan and the employer deducts the contributions directly from the employee's wages and sends them directly to the RRSP plan administrator. Regular RRSP rules apply in that maximum contribution in the current year is the lessor of 18% or $13,500. Generally, to encourage this kind of plan, the employer also agrees to make a regular contribution to the employee's plans, knowing full well that any contributions made immediately belong to the employee. Should the employee change jobs, he/she can take their plan with them and continue making contributions or cash it in and pay tax in the year in which the money is taken into income.

Mirror Reverse

Mirror reversed plans show the design flipped 180 degrees just like looking at it reflected in a mirror. Keep in mind that all of the text will be flipped too. The fee allows you to have one or more sets shipped in mirror reverse format. We recommend having at least one regular set handy.

Origination fee

A fee paid to a lender for processing a loan application, usually computed as a percentage of face value of the loan.

Policy Fee

This is an administrative fee which is part of most life insurance policies. It ranges from about $40 to as much as $100 per year per policy. It is not a separate fee. It is incorporated in the regular monthly, quarterly, semi-annual or annual payment that you make for your policy. Knowing about this hidden fee is important because some insurance companies offer a policy fee discount on additional policies purchased under certain conditions. Sometimes they reduce the policy fee or waive it altogether on one or more additional policies purchased at the same time and billed to the same address. The rules are slightly different depending on the insurance company. There could be enormous savings if several people in the same family or business were intending to purchase coverage at the same time.

Policy Fee

Administrative charge included in a Policy Premium.

Recording fee

A charge from the city or county for recording the transfer of the property.

Accidental Death Benefit (ADB)

Coverage against accidental death usually payable in addition to base amount of coverage.

Accidental Dismemberment: (Credit Insurance)

Provides additional financial security should an insured person be dismembered or lose the use of a limb as the result of an accident.

Actuary

one who uses statistical information to evaluate the probability of future events and prices insurance products.

Agency

A grouping of sales producers according to region. Compare with Branch.

Agent

one who represents Canada life When providing services to clients

Agreement of Purchase and Sale

A legal agreement that offers a certain price for a home. The offer may be firm (no conditions attached), or conditional (certain conditions must be fulfilled before the deal can be closed).

Allowance

A sum of money set aside in the construction contract for items which have not been selected and specified in the construction contract. For example, selection of tile as a flooring may require an allowance for an underlayment material, or an electrical allowance which sets aside an amount of money to be spent on electrical fixtures.

Americans with Disabilities Act

The Americans with Disabilities act which gives civil Rights protection to individuals with disabilities similar to those provided to individuals on the basis of race, color, sex, national origin, age, and religion. It guarantees equal opportunity for individuals with disabilities in public accommodations, employment, transportation, State and local government services, and telecommunications.

Amortization (Credit Insurance)

Refers to the reduction of debt by regular payments of interest and principal in order to pay off a loan by maturity.

Amortization Period

The time over which all regular payments would pay off the mortgage. this is usually 25 years for a new mortgage, however can be greater, up to a maximum of 40 years.

Amperage

See Ampere

Annual Percentage Rate (APR)

Annual cost of credit over the life of a loan, including interest, service charges, points, loan fees, mortgage insurance, and other items.

Annuity Period

The time between each payment under an annuity.

Area Walls

Corrugated metal or concrete barrier walls installed around a basement window to hold back the earth.

Asset

all things of value owned by an individual or organization.

aterial used to cover the interior framed areas of walls and ceilings

Automatic Benefits Payment

Automatic payment of moneys derived from a benefit.

Ballast

A transformer that steps up the voltage in a florescent lamp.

Balloon

A loan that has a series of monthly payments with the remaining balance due in a large lump sum payment at the end.

Balloon Framed Wall

Framed walls (generally over 10' tall) that run the entire vertical length from the floor sill plate to the roof. this is done to eliminate the need for a gable end truss.

Beneficiary (Credit Insurance)

The person or party designated to receive proceeds entitled by a benefit. Payment of a benefit is triggered by an event. In the case of credit insurance, the beneficiary will always be the creditor.

Benefit

An instruction that pays a cash amount upon the occurrence of a specific event.

Benefit Value

The amount of cash payable on a benefit.

Borrower (Credit Insurance)

A consumer who borrows money from a lender.

Builder's Risk Insurance

insurance coverage on a construction project during construction, including extended coverage that may be added for the contract for the customer's protections.

Bull Nose Drywall

Rounded drywall corners.

Canada Mortgage and Housing Corporation (CMHC)

The National Housing act (NHA) authorized Canada Mortgage and Housing Corporation (CMHC) to operate a Mortgage insurance Fund which protects NHA Approved Lenders from losses resulting from borrower default.

Canada Pension Plan (CPP)

A plan that provides retirement and long term disability income benefits to residents of Canadian provinces (excluding Quebec).

Canadian Deposit Insurance Corporation

Better known as CDIC, this is an organization which insures qualifying deposits and GICs at savings institutions, mainly banks and trust companys, which belong to the CDIC for amounts up to $60,000 and for terms of up to five years. Many types of deposits are not insured, such as mortgage-backed deposits, annuities of duration of more than five years, and mutual funds.

Canadian Life and Health Insurance Association (CLHIA)

An association of Most of the life and health insurance companies in Canada that conducts research and compiles information about the life and health insurance industry in Canada.

Captive Agent

A licensed insurance agent who sells insurance for only one company.

Certificate of Search or Abstract of Title

A document setting out instruments registered against the title to the property, e.g. deed, mortgages, etc.

Child Insurance Rider (CIR)

insurance or insurability provided on current or future children of insured.

Closed Mortgage

A mortgage agreement that cannot be prepaid, renegotiated or refinanced before maturity, except according to its terms.

Closing Costs

Various expenses associated with purchasing a home. These costs can include, but are not limited to, legal/notary fees and disbursements, property land transfer taxes, as well as adjustments for prepaid property taxes or condominium common expenses, if any.

CMHC or GEMICO Insurance Premium

Mortgage insurance insures the lender against loss in case of default by the borrower. Mortgage insurance is provided to the lender by CMHC or GEMICO and the premium is paid by the borrower.

Co-insurance

In medical insurance, the insured person and the insurer sometimes share the cost of services under a policy in a specified ratio, for example 80% by the insurer and 20% by the insured. By this means, the cost of coverage to the insured is reduced.

Coffered Ceiling

A ceiling with recessed square panels, bordered with trim for ornamental purposes.

Commercial Business Loan (Credit Insurance)

An agreement between a creditor and a borrower, where the creditor has loaned an amount to the borrower for business purposes.

Conventional Mortgage

A mortgage that does not exceed 80% of the purchase price of the home. Mortgages that exceed this limit must be insured against default, and are referred to as high-ratio mortgages (see below).

Cost of Insurance

The cost of insuring a particular individual under the policy. It is based on the amount of coverage, as well as the underwriting class, age, sex and tobacco consumption of that individual.

Creditor (Credit Insurance)

A lender or lending institution that offers financing and loans to a borrower, for the purpose of acquiring a commodity.

Critical Illness Insurance

Coverage that provides a lump-sum payment should you be diagnosed with a critical illness and survive a pre-determined period of time. There are no restrictions on how you use your benefit.

Critical Illness Insurance (Credit Insurance)

Coverage that provides a lump-sum payment should you become seriously ill with a specified illness. The payment is made to your creditors to pay off your debt owing.

Dead Peasants Insurance

also known as "Dead Janitors insurance", this is the practice, where allowed, in several U.S. states, of numerous well known large American Corporations taking out corporate owned life insurance policies on millions of their regular employees, often without the knowledge or consent of those employees. Corporations profiting from the deaths of their employees [and sometimes ex-employees] have attracted adverse publicity because ultimate death benefits are seldom, even partially passed down to surviving families.

Death Benefit

amount paid on death of an insured.

Debt (Credit Insurance)

Money, goods or services that someone is obligated to pay someone else in accordance with an expressed or implied agreement. Debt may or may not be secured.

Deed (Certificate of Ownership)

The document signed by the seller transferring ownership of the home to the purchaser. this document is then registered against the title to the property as evidence of the purchaser's ownership of the property.

Disability Insurance

insurance that pays you an ongoing income if you become disabled and are unable to pursue employment or business activities. There are limits to how much you can receive based on your pre-disability earnings. Rates will vary based on occupational duties and length of time in a particular industry. this kind of coverage has a waiting period before you can begin collecting benefits, usually 30, 60 or 90 days. The benefit paying period also varies from 2 years to age 65. A short waiting period will cost more that a longer waiting period. As well, a long benefit paying period will cost more than a short benefit paying period.

Disability Insurance (Credit Insurance)

group insurance designed to cover monthly obligations due to a borrower being unable to work due to sickness or injury.

Dividend Policy

this policy governs Canada life's actions regarding distribution of dividends to policyholders. It's goal is to achieve a dividend distribution that is equitable and timely, and which gives full recognition of the need to ensure the ongoing solidity of the company. It also specifies that distribution to individual policyholders must be equitable between dividend classes and policyholder generations, and among policyholders within any class.

Dollar Cost Averaging

A way of smoothing out your investment deposits by investing regularly. Instead of making one large deposit a year into your RRSP, you make smaller regular monthly deposits. If you are buying units in a mutual fund or segregated equity fund, you would end up buying more units in the month that values were low and less units in the month that values were higher. By spreading out your purchases, you don't have to worry about buying at the Right time.

Drive Under

A style of home where the garage is located in a basement.

Earnest money

A deposit made by potential home buyers during negotiations with the seller. The sum shows a seller that a buyer is serious about purchasing the property. The money usually is counted toward the down payment.

Equity-based insurance

life insurance or annuity product in which the cash value and benefit level fluctuate according to the performance of an equity portfolio.

Errors and Omissions Insurance

insurance coverage purchased by the agent/broker which provides protection against loss incurred by a client because of some negligent act, error, oversight, or omission by the agent/broker.

Estate Planning

An insurance program designed to provide funds for insured's dependents upon death of the insured, and to also conserve, as much as possible, the personal assets that the insured wants to bequeath to heirs.

Evidence of Insurability

evidence submitted to Canada life that is used to determine whether an individual is eligible for the insurance coverage the individual has applied for.

Fiat Money

Fiat Money is paper currency made legal tender by law or fiat. It is not backed by gold or silver and is not necessarily redeemable in coin. this practice has had widespread use for about the last 70 years. If governments produce too much of it, There is a loss of confidence. even so, governments print it routinely When they need it. The value of fiat money is dependent upon the performance of the economy of the country which issued it. Canada's currency falls into this category.

Fire Insurance

Before a mortgage can be advanced, the purchaser must have arranged fire insurance. A certificate or binder from the insurance company may be required on closing.

First To Die Coverage

this means that There are two or more life insured on the same policy but the death benefit is paid out on the first death only. If two or more persons at the same address are purchasing life insurance at the same time, it is wise to compare the cost of this kind of coverage with individual policies having a multiple policy discount.

Fixed-Rate Mortgage

A mortgage for which the rate of interest is fixed for a specific period of time (the term).

Gable End Wall

The triangular end of an exterior wall above the eaves formed under a gable roof.

Grace Period

A specific period of time after a premium payment is due during which the policy owner may make a payment, and during which, the protection of the policy continues. The grace period usually ends in 30 days.

Group Life Insurance

this is a very common form of life insurance which is found in employee benefit plans and bank mortgage insurance. In employee benefit plans the form of this insurance is usually one year renewable term insurance. The cost of this coverage is based on the average age of everyone in the group. Therefore a group of young people would have inexpensive rates and an older group would have more expensive rates.
Some people rely on this kind of insurance as their primary coverage forgetting that group life insurance is a condition of employment with their employer. The coverage is not portable and cannot be taken with you if you change jobs. If you have a change in health, you may not qualify for new coverage at your new place of employment.
Bank mortgage insurance is also usually group insurance and you can tell this by virtue of the fact that you only receive a certificate of insurance, and not a complete policy. The only form in which bank mortgage insurance is sold is reducing term insurance, matching the declining mortgage balance. The only beneficiary that can be chosen for this kind of insurance is the bank. In both cases, employee benefit plan group insurance and bank mortgage insurance, the coverage is not guaranteed. this means that coverage can be cancelled by the insurance company underwriting that particular plan, if they are experiencing excessive claims.

High Ratio Mortgage

If you don't have 20% of the lesser of the purchase price or appraised value of the property, your mortgage must be insured against payment default by a Mortgage Insurer, such as CMHC.

High Voltage System

See Electricity.

Individual Insurance

insurance that is offered to individuals rather than groups.

Inset Staple

Stapling to the inside portion of the stud or rafter.

Insurance Act

In Canada, a general statute that contains Most of the insurance law of a common law province, and regulates the conduct of insurers and insurance agents within the province.

Insurance Policy (Credit Insurance)

A policy under which the insurance company promises to pay a benefit of the person who is insured.

Insured Mortgage

An insured mortgage protects only the mortgage lender in case you do not make your mortgage payments. this coverage is provided by CMHC [Canada Mortgage and Housing Corporation] and is required if a person has a high-ratio mortgage. [A mortgage is high-ratio if the amount borrowed is more than 75% of the purchase price or appraised value, whichever is less.]

Insured Retirement Plan

this is a recently coined phrase describing the concept of using Universal life insurance to tax shelter earnings which can be used to generate tax-free income in retirement. The concept has been described by some as "the Most effective tax-neutralization strategy that exists in Canada today."
In addition to life insurance, a Universal life policy includes a tax-sheltered cash value fund that cannot exceed the policy's face value. Deposits made into the policy are partially used to fund the life insurance and partially grow tax sheltered inside the policy. It should be pointed out that in order for this to work, you must make deposits into this kind of policy well in excess of the cost of the underlying insurance. Investment of the cash value inside the policy are commonly mutual fund type investments. Upon retirement, the policy owner can draw on the accumulated capital in his/her policy by using the policy as collateral for a series of demand loans at the bank. The loans are structured so the sum of money borrowed plus interest never exceeds 75% of the accumulated investment account. The loans are only repaid with the tax free death benefit at the death of the policy holder. Any remaining funds are paid out tax free to named beneficiaries.
Recognizing the value to policy holders of this use of Universal life insurance, insurance companies are reworking features of their products to allow the policy holder to ask to have the relationship of insurance to investment growth tracked so that investment growth inside the policy may be maximized. The only potential downside of this strategy is the possibility of the government changing the tax rules to prohibit using a life insurance product in this manner.

Interest Option

one of several investment accounts in which your premiums may be invested within your life insurance policy.

Interest Rate Differential Amount (IRD)

An IRD amount is a compensation charge that may apply if you pay off your mortgage principal prior to the maturity date or pay the mortgage principal down beyond the prepayment privilege amount. The IRD amount is calculated on the amount being prepaid using an interest rate equal to the difference between your existing mortgage interest rate and the interest rate that we can now charge When re-lending the funds for the remaining term of the mortgage. For more information, click on compensation amounts.

Issue Age

age of an insured as at the policy issue date, using "age nearest" next birthday formula.

Job Loss Insurance (Credit Insurance)

Coverage that can pay down your debt should you become involuntarily unemployed. The payment is made to your creditors to reduce your debt owing.

Joint Policy Life

one insurance policy that covers two lives, and generally provides for payment at the time of the first insured's death. It could also be structured to pay on second death basis for estate planning purposes.

Knee Wall

A wall-like structure that supports roof rafters.

Last To Die Coverage

this means that There are two or more life insured on the same policy but the death benefit is paid out on the last person to die. The cost of this type of coverage is much less than a first to die policy and it is generally used to protect estate value for children where There might be substantial capital gains taxes due upon the death of the last parent. this kind of policy is also valuable When one of two people covered has health problems which would prohibit obtaining individual coverage.

Lease (Credit Insurance)

Contract granting use of real estate, equipment or other fixed assets for a specified period of time in exchange for payment. The owner or a leased property is the lessor and the user the lessee.

Lender (Credit Insurance)

individual or firm that extends money to a borrower with the expectation of being repaid, usually with interest. Lenders create debt in the form of loans. Lenders include financial institutions, leasing companies government lending agencies and automobile dealers.

Level Premium Life Insurance

this is a type of insurance for which the cost is distributed evenly over the premium payment period. The premium remains the same from year to year and is more than actual cost of protection in the earlier years of the policy and less than the actual cost of protection in the later years. The excess paid in the early years builds up a reserve to cover the higher cost in the later years.

Leverage

The use of financing to buy a large investment, such as a house, with a small amount of money.

Life Expectancy

The average number of years of life remaining for a group of people of a given age and gender according to a particular mortality table.

Life Income Fund

Commonly known as a LIF, this is one of the options available to locked in Registered Pension plan (RPP) holders for income payout as opposed to Registered Retirement Savings plan (RRSP) holders choice of payout through Registered Retirement Income Funds (RRIF). A LIF must be converted to a unisex annuity by the time the holder reaches age 80.

Life Insurance

insurance that provides protection against an economic loss caused by death of the person insured.

Life Insurance (Credit Insurance)

group term life insurance that pays or reduces the balance due on a loan if the borrower dies before the loan is repaid.

Life Insured

The person who's life is protected by an individual policy.

Life Underwriter

insurance agent.

Living Benefit

Some insurance companies include this benefit option at no cost to their policy holders. The insurer considers on a case to case basis, the need for insurance funds before death. If the insured can demonstrate a shortened life of less than two years and with some insurers one year, the insurer will consider releasing up to 50% or a maximum of $100,000 of the life insurance coverage held by the insured. Not all insurers offer this benefit for free. The need has resulted in specific stand alone living benefit/critical illness policies coming into existence. Look under "different types of life insurance" for further information. you might have heard of "Viatical settlements", the practice of seriously ill people selling the Rights to their life insurance policies to third parties. this practice is common in the United States but has not caught on in Canada.

Living Square Footage

See Square Footage, Living

Load-Bearing Wall

Includes all exterior walls and any interior wall that is aligned above a support beam or girder. Normally, any wall that has a double horizontal top plate.

Low-Voltage System

Provides security, entertainment, communications, environmental control, networking, and other functions generally powered by a signal cable, phone line or data cable. Is not typically metered.

Medical Information Bureau

this organization was established in 1902. The Medical Information Bureau (M.I.B.) is a non-profit association of life insurance companies. Its purpose is to detect and deter fraud by providing warnings called, alerts, to member companies. For example, if an insurance applicant advised one insurance company of a heart attack and then applied to another insurance company omitting this history, codes, reported by the first insurance company, indicating a heart attack would alert the second insurance company to the undisclosed history. It is a rarity, however, that the alert is the only notice of a specific medical impairement as Most applicants completely disclose their history.

Money Laundering

this is the process by which "dirty money" generated by criminal activities is converted through legitimate businesses into assets that cannot be easily traced back to their illegal origins.

Mortgage broker

An independent individual (or company) who brings together borrowers and lenders together. Unlike a mortgage banker, a mortgage broker does not fund the loan. Instead, the broker originates and processes the loan, and places it with a funding source, such as a bank or thrift. Brokers typically require a fee or a commission for their services.

Mortgage (Credit Insurance)

An agreement between a creditor and a borrower, where the creditor has loaned an amount to the borrower for purposes of purchasing a loan secured by a home.

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