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Definition of Illustration
An illustration is a computer-generated spreadsheet that takes into account a number of assumptions in order to show how a specific policy might perform for a specific individual.
A condition which can occur with snow and freezing conditions. When snow or ice melts on a roof over a heated or partially heated attic space, the melting water may refreeze over an unheated areas such as a roof overhang. This re-frozen water may create a "dam" and allow additional melt water to back up under shingles and cause leaks (illustration "A"). Solutions include: proper roof venting and insulation (illustration "B"), membrane roofing or roofing underlayment, and heat tapes. Once an ice dam occurs, remedies are difficult and or dangerous. Working on a frozen roof should be avoided, as should the use of any open flames. The use of hot water to melt the ice may help, it may also increase the amount of leakage.
The percentage of the borrower's gross income that will be used for monthly payments of principal, interest, taxes, heating costs and condominium fees.
Gross Debt Service (GDS) Ratio
The percentage of gross income required to cover monthly payments associated with housing costs. Most lenders recommend that the GDS ratio be no more than 32% of your gross (before tax) monthly income.
Total Debt Service (TDS) Ratio
The percentage of gross income needed to cover monthly payments for housing and all other debts and financing obligations. The total should generally not exceed 37% of gross monthly income.
Overhang of a pitched roof, usually consisting of a fascia board, a soffit and appropriate trim moldings.
Electrical Service Panel
Refers to the high-voltage electrical system's first point of entry into a home beyond the meter.
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 Annuity
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 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 agreement.
Cash Surrender Value
This is the amount available to the owner of a life insurance policy upon voluntary termination of the policy before it becomes payable by the death of the life insured. This does not apply to term insurance but only to those policies which have reduced paid up values and cash surrender values. A cash surrender in lieu of death benefit usually has tax implications.
Interest earned on an investment at periodic intervals and added to principal and previous interest earned. Each time new interest earned is calculated it is on a combined total of principal and previous interest earned. Essentially, interest is paid on top of interest.
Creditor Proof Protection
The creditor proof status of such things as life insurance, non-registered life insurance investments, life insurance RRSPs and life insurance RRIFs make these attractive products for high net worth individuals, professionals and business owners who may have creditor cOncerns. under most circumstances the creditor proof rules of the different provincial insurance acts take priority over the federal bankruptcy rules.
An annuity providing for income payments to commence at a specified future time.
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.
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.
This clause in regular life insurance policy provides for voiding the contract of insurance for up to two years from the date of issue of the coverage if the life insured has failed to disclose important information or if there has been a misrepresentation of a material fact which would have prevented the coverage from being issued in the first place. After the end of two years from issue, a misrepresentation of smoking habits or age can still void or change the policy.
In England in the 1700's it was popular to bet on the date of death of certain prominent public figures. anyone could buy life insurance on another's life, even without their consent. Unfortunately, some died before it was their time, dispatched prematurely in order that the life insurance proceeds could be collected. In 1774, English Parliament passed a law which restricted the right to be a beneficiary on a life insurance contract to those who would suffer an economic loss When the life insured died. The law also provided that a person has an unlimited insurable interest in his own life. It is still a legal stipulation that an insurance contract is not valid unless insurable interest exists at the time the policy is issued. Life Insurance companies will not, however, issue unlimited amounts of coverage to an individual. The amount of life insurance which will be approved has to approximate the loss caused by the death of the individual and must not result in a windfall for the beneficiary.
This is a telephone interview of the person applying for life insurance conducted by someone from the underwriting department of the insurance company. Some insurance companies only sporadically contact applicants and some contact every applicant. On average the interview lasts between 15 to 30 minutes. The questions asked relate to personal habits (like smoking and alcohol consumption) and finances, including income and net worth, confirmation of employment, duties and the nature of the applicant's business. In addition, there are questions about driving, sports, aviation and currently held insurance. All information obtained is strictly confidential and is submitted solely to the underwriter for review.
This is the person covered by the life insurance policy. upon This person's death, a tax free benefit will be paid to that person's estate or a named beneficiary.
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."
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.
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.
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.
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.
As non-smoking rates caused a major reduction in the cost of life insurance in the early 1980's, the emergence of preferred non-smoker rates in 1998 has caused another noteworthy reduction in rates. A growing number of insurance companies are offering better rates which go beyond simply looking at gender or smoking habits. Other health related factors such as physical build, lifestyle, avocation and personal and family health history indicating longer life expectancy can add up to significant cost savings to new life insurance applicants. Make certain to ask about these new preferred rates.
This is your payment for the cost of insurance. You may pay annually, semi-annually, quarterly or monthly. The least expensive method is annually. Using any of the other payment modes will cost you more money. For example, paying monthly will cost about 17% more. If you pay annually and terminate your coverage part way through the year, you may not receive a refund for the remaining months to the annual renewal date.
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.
This is the person who owns a life insurance policy. This is usually the insured person, but it may also be a relative of the insured, a partnership or a corporation. There are instances in marriage breakup (or relationship breakup with dependent children) where appropriate life insurance on the support provider, owned and paid for by the ex-spouse receiving the support is an acceptable method of ensuring future security.
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.
Registered Retirement Savings Plan (Canada)
Commonly referred to as an RRSP, This is a tax sheltered and tax deferred savings plan recognized by the Federal and Provincial tax authorities, whereby deposits are fully tax deductable in the year of deposit and fully taxable in the year of receipt. The ability to defer taxes on RRSP earnings allows one to save much faster than is ordinarily possible. The new rules which apply to RRSP's are that the holder of such a plan must convert it into income by the end of the year in which the holder turns age 69. The choices for conversion are to simply cash it in an pay full tax in the year of receipt, convert it to a RRIF and take a varying stream of income, paying tax on the amount received annually until the income is exhausted, or converting it into an annuity with guaranteed payments for a chosen number of years, again paying tax each year on moneys received.
Registered Retirement Income Fund (Canada)
Commonly referred to as a RRIF, This is one of the options available to RRSP holders to convert their tax sheltered savings into taxable income.
This is a provision in some term insurance policies that allow the insured the right to renew the policy at a more favourable rate by providing updated evidence of insurability.
This is the restoration of a lapsed life insurance policy. The life insurance company will require evidence of continuing good health and the payment of all past due premiums plus interest.
This subject of replacement of existing policies is covered because sometimes existing life insurance policies are unnecessarily replaced with new coverage resulting in a loss of valuable benefits. If someone suggests replacing your existing coverage, insist on having a comparison disclosure statement completed.
Spousal Registered Retirement Savings Plan
This is an RRSP owned by the spouse of the person contributing to it. 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.
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.
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.
Generally, a suicide clause in a regular life insurance policy provides for voiding the contract of insurance if the life insured commits suicide within two years of the date of issue of the coverage.
This could be the person (broker or agent) who helps you choose the proper type of life insurance or disability insurance and the insurance company for your particular needs. This could also be the person at the insurance company's head office who reviews your application for coverage to determine whether or not the insurance company will issue a policy to you.
This term relates to participating whole life insurance and the use of the dividend to reduce or completely eliminate the need for future premiums. In the 1980's life insurance company's profits from investment were exceedingly high compared to historical experience. It became common for a salesperson to show new prospective clients how quickly his or her insurance company's dividends would cover the future cost of future premiums. In some cases more emphasis was put on the value of future dividends than on the fact that future dividends were not guaranteed and could only be projected based on current earnings. Many life insurance buyers have since learned that the dividends they expected in the 80's no longer exist in the 90's and they are continuing to dig into their pockets to pay insurance premiums.
Waiver of Premium
This is an option available to the applicant for life insurance which sets certain conditions under which an insurance policy will be kept in full force by the insurance company without the payment of premiums. Very specifically, a life insured would have to become totally disabled through injury or illness for a period of six months before the benefit kicks in. When it does, the insurance company retroactively pays premiums from the beginning of the disability until the time the insured is able to perform some form of regular activity. 'Totally disabled' is highlited here, because that is what is required to receive This benefit.
Yearly Renewable Term Insurance
Sometimes, simply called YRT, This is a form of term life insurance that may be renewed annually without evidence of insurability to a stated age.
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.
The sum of all the interest options in your policy, including interest.
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.
Yearly amount payable by a client for a policy or component.
Automatic Waiver of Premium
A benefit that automatically forfeits premium payments.
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.
Book yield is the investment income earned in a year on a portfolio of assets purchased over a number of years and at different interest rates, divided by the book value of those assets.
Borrower (Credit Insurance)
A consumer who borrows money from a lender.
Cash Surrender Value
Benefit that entitles a policy owner to an amount of money upon cancellation of a policy.
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.
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 (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.
Daily Interest Accumulation
account in which interest is accrued daily and credited to the account at the end of a specified time.
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.
Disability Insurance (Credit Insurance)
Group Insurance designed to cover monthly obligations due to a borrower being unable to work due to sickness or injury.
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.
Guaranteed Interest Annuity (GIA)
Interest bearing investment with fixed rate and term.
Guaranteed Interest Certificate (GIC)
Interest bearing investment with fixed rate and term.
A promise that a life insurance policy will be renewed without penalty or medical examination after the term has expired. The renewal rate can also be guaranteed.
Insurance that is offered to individuals rather than groups.
Insurance Policy (Credit Insurance)
A policy under which the insurance company promises to pay a benefit of the person who is insured.
Person whose life is protected under a specific policy.
The party in an insurance contract that promises to pay a benefit if a specified loss occurs. Usually an insurance company.
One of several investment accounts in which your premiums may be invested within your life insurance policy.
Rate charged or paid for the use of money, normally expressed as a percentage
Legal designation that cannot be contested. (See beneficiary)
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.
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.
A premium that remains unchanged throughout the life of a policy
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.
The person who's life is protected by an individual policy.
Mortgage Life insurance (Credit Insurance)
Decreasing term life insurance that provides a death benefit amount corresponding to the decreasing amount owed on a mortgage.
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.
A type of insurance policy or annuity in which the owner does not receive dividends.
A type of insurance policy or annuity in which the owner receives dividends, typically increases the death.
A policy offers the potential of sharing in the success of an insurance company through the receipt of dividends.
Personal Line of credit (Credit Insurance)
A bank's commitment to make loans to a borrower up to a specified maximum during a specific period, usually one year.
A written document that serves as evidence of insurance coverage and contains pertinent information about the benefits, coverage and owner, as well as its associated directives and obligations.
Yearly event linked to a policy. Usually the date issued.
Date on which the insurance company assumes responsibilities for the obligations outlined in a policy.
Administrative charge included in a policy Premium.
Period between two policy anniversaries.
The person who owns and holds all rights under the policy, including the power to name and change beneficiaries, make a policy loan, assign the policy to a financial institution as collateral for a loan, withdraw funds or surrender the policy.
Pre-Authorized Cheque (PAC)
Withdrawals generated by a company (with client's permission) against a client's bank account on a predetermined schedule for a predetermined amount.
Pre-existing medical condition (Credit Insurance)
A medical condition that existed before you became insured. Most policies exclude benefits if the condition is related to the event that triggers a claim if occurs within a certain period (6-12 months) after you became insured.
used in older contracts to confer the same rights as an irrevocable beneficiary. Applied to family members.
Annual amount payable, by a client, for selected product or service.
Premium (Credit Insurance)
Annual or monthly amounts payable, by a client, for a selected insurance coverage to insure debt obligations to their creditors are protected.
Payment schedule of policy premiums, usually selected by the policy owner (monthly, quarterly, annually).
After premiums have been paid for a number of years, further annual premiums may be paid by the current dividends and the surrender of some of the paid-up additions which have built up in the policy. In effect, the policy can begin to pay for itself. Whether a policy becomes eligible for premium offset, the date on which it becomes eligible and whether it remains eligible Once premium offset begins, will all depend on how the dividend scale changes over the years. Since dividends are not guaranteed, premium offset cannot be guaranteed either.
Refinancing (Credit Insurance)
Extending the maturity date or increasing the amount of existing debt or both. also, revising a payment schedule, usually to reduce the monthly payments and often to modify interest charges.
Process in which the risk of potential loss is shared between two or more insurers.
An insurance company that accepts the risk transferred from another insurance company in a reinsurance transaction.
A pool of assets held by the insurer, to back a specific liability to a policyholder. Segregated Funds flucuate in value depending on the market value of a specific group of assets the company must maintain separately.
Strike Insurance (Credit Insurance)
Coverage that can pay down your debt should you become unemployed due to a legal strike in your place of work. The payment is made to your creditors to reduce your debt owing.
Give up certain rights under a policy, or give up the policy itself.
Expense charges applied When the owner of a policy surrenders a policy for its cash value.
Terminal Illness Insurance (Credit Insurance)
Coverage that provides a lump-sum payment should you become terminally ill. The payment is made to your creditors to pay off your debt owing.
Person that uses various types of evidence to evaluate the insurability of a client.
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