Definition of Irrevocable Beneficiary

Irrevocable Beneficiary

Legal designation that cannot be contested. (See beneficiary)

Beneficiary

This is the person who benefits from the terms of a trust, a will, an RRSP, a RRIF, a LIF, an annuity or a life insurance policy. In relation to RRSP's, RRIF's, LIF's, Annuities and of course life insurance, if the beneficiary is a spouse, parent, offspring or grand-child, they are considered to be a preferred beneficiary. If the insured has named a preferred beneficiary, the death benefit is invariably protected from creditors. There have been some court challenges of this right of protection but so far they have been unsuccessful. See "Creditor Protection" below. A beneficiary under the age of 18 must be represented by an individual guardian over the age of 18 or a public official who represents minors generally. A policy owner may, in the designation of a beneficiary, appoint someone to act as trustee for a minor. Death benefits are not subject to income taxes. If you make your beneficiary your estate, the death benefit will be included in your assets for probate. Probate filing fees are currently $14 per thousand of estate value in British Columbia and $15 per thousand of estate value in Ontario.
Another way to avoid probate fees or creditor claims against life insurance proceeds is for the insured person to designate and register with his/her insurance company's head office an irrevocable beneficiary. By making such a designation, the insured gives up the right to make any changes to his/her policy without the consent of the irrevocable beneficiary. Because of the seriousness of the implications, an irrevocable designation should only be made for good reason and where the insured fully understands the consequences.
NoteA successful challenge of the rules relating to beneficiaries was concluded in an Ontario court in 1996. The Insurance Act says its provisions relating to beneficiaries are made "notwithstanding the Succession Law Reform Act." There are two relevent provisions of the Succession Law Reform Act. One section of the act gives a judge the power to make any order concerning an estate if the deceased person has failed to provide for a dependant. Another section says money from a life insurance policy can be considered part of the estate if an order is made to support a dependant. In the case in question, the deceased had attempted to deceive his lawful dependents by making his common-law-spouse the beneficiary of an insurance policy which by court order was supposed to name his ex-spouse and children as beneficiaries.

Preferred Beneficiary

Used in older contracts to confer the same rights as an irrevocable beneficiary. Applied to family members.

Beneficiary

The person designated to receive proceeds entitled by a benefit. Payment of a benefit is triggered by an event.

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.

Contingent Beneficiary

This is the person designated to receive the death benefit of a life insurance policy if the primary beneficiary dies before the life insured. This is a consideration when husband and wife make each other the beneficiary of their coverage. Should they both die in the same car accident or plane crash, the death benefits would go to each others estate and creditor claims could be made against them. Particularly if minor children could be survivors, then a trustee contingent beneficiary should be named.

Preferred Rates

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.

Polyethylene Vapor Barrier

Plastic film used to prevent moisture from passing through unfaced insulation. Both 4- and 6-mil polyethylene are preferred because they are less likely to be damaged during construction.

Risk class

A group of insureds who present similar risk to the insurance company. Risk classes include - standard, preferred, nonsmoker, substandard, uninsurable.

Segregated Fund

Sometimes called seg funds, segregated funds are the life insurance industry equivalent to a mutual fund with some differences.The term "Mutual Fund" is often used generically, to cover a wide variety of funds where the investment capital from a large number of investors is "pooled" together and invested into specific stocks, bonds, mortgages, etc.
Since Segregated Funds are actually deferred annuity contracts issued by life insurance companies, they offer probate and creditor protection if a preferred beneficiary such as a spouse is named. Mutual Funds don't have this protection.
Unlike mutual funds, segregated funds offer guarantees at maturity (usually 10 years from date of issue) or death on the limit of potential losses - at times up to 100% of original deposits are guaranteed which makes them an attractive alternative for the cautious and/or long term investor. On the other hand, with regular mutual funds, it is possible to have little or nothing left at death or plan maturity.

Accidental Death and Dismemberment

Coverage that provides a lump-sum payment to you or your survivors if an accident results in the loss of a limb, paralysis or your Death.

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.

Account Value

The sum of all the interest options in your policy, including interest.

Accrued Income

income that has been earned but not yet received. For instance, if you have a non-registered Guaranteed Investment Certificate (GIC), Mutual Fund or Segregated Equity Fund, growth accrues annually or semi-annually and is taxable annually even though the gain is only paid at maturity of your investment.

Accumulated Value

An amount of mOney invested plus the interest earned on that mOney.

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).

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

Ampere

A unit of electrical current or volume--see "Voltage." Most homes have an electrical service 'entrance' package of 125 or 200 amps. some older homes have 60 or 100 amp 'entrances'.

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

A contrAct which provides an income for a specified period of time, such as a certain number of years or for LIFe. An annuity is like a LIFe Insurance policy in reverse. The purchaser gives the LIFe Insurance company a lump sum of mOney and the LIFe Insurance company pays the purchaser a regular income, usually monthly.

Annuity

periodic payments made to an individual under the terms of the policy.

Annuity Period

The time between each payment under an annuity.

Appraisal Value

An estimate of the market value of the property.

Assessed value

The dollar value of an asset assigned by a public tax assessor for the purposes of taxation.

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

Attribution Rules

Legislation under which interest, dividends, or capital gains earned on assets you transfer to your spouse will be treated as your own for tax purposes. Interest or dividends relating to property transferred to children under 18 also will be attributed back to you. The exception to this rule is that capital gains relating to property transferred to children under 18 will not be attributed back to you.

Automatic Benefits Payment

Automatic payment of mOneys derived from a benefit.

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.

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.

Built-Up Roof

A roofing composed of three to five layers of asphalt felt laminated with coal tar, pitch, or asphalt. The top is finished with crushed slag or gravel. generally Used on flat or low-pitched roofs.

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.

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.

Cash Surrender Value

benefit that entitles a policy owner to an amount of mOney upon cancellation of a policy.

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.

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.

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.

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.

Contingent Beneficiary

this is the person designated to receive the Death benefit of a LIFe Insurance policy if the primary beneficiary dies before the LIFe insured. this is a consideration when husband and wife make each other the beneficiary of their coverage. should they both die in the same car accident or plane crash, the Death benefits would go to each others estate and creditor claims could be made against them. particularly if minor children could be survivors, then a trustee contingent beneficiary should be named.

Contingent Owner

this is the person designated to become the new owner of a LIFe Insurance policy if the original owner dies before the LIFe insured.

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).

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.

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.

Courtyard home

A home with a courtyard as its main entrance.

Creditor (Credit Insurance)

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

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.
The provincial Insurance Acts protect LIFe Insurance products which have a family class beneficiary. family class beneficiaries include the spouse, parent, child or grandchild of the LIFe insured, except in Quebec, where creditor Protection rules apply to spouse, ascendants and descendants of the insured. Investments sold by other financial institutions do not offer the same security should the holder go bankrupt. There are also circumstances under which the creditor proof Protections do not hold for LIFe Insurance products. Federal bankruptcy law disallows the Protection for any transfers made within One year of bankruptcy. In addition, should it be found that a person shifted mOney to an Insurance company fund in bad faith for the specific purpose of avoiding creditors, these funds will not be creditor proof.

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.

Deferred Annuity

An annuity providing for income payments to commence at a specified future time.

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.

Drive Under

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

Ductwork

A system of large tubes, pipes or channels (ducts) designed to deliver air to and from a furnace or other air-handling unit.

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.

Exclusion

A specific condition or circumstance listed in the policy that are not covered by the policy

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).

GFI -See Ground Fault Current Interrupter

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.

Gross Household Income

Gross household income is the total salary, wages, commissions and other assured income, before deductions, by all household members who are co-applicants for the mortgage.

Ground Fault Current Interrupter

An electrical device Used to prevent injury from contAct with faulty electrical appliances and faulty wiring
electrical shocks. GFIs should not be confUsed with AFIs, the later are designed to prevent electrical fires. GFIs are required in new home bathrooms, kitchen, garage, out of doors and in other locations where One might be in contAct with a grounded surface or body of water and an electrical appliance. Most GFI's are located in the receptacle itself or a curcuit breaker and can be identified by the presence of a 'test' and a 'reset' button.

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.

Guaranteed Interest Annuity (GIA)

Interest bearing investment with fixed rate and term.

Header

A crossbeam above a window or door.

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.

Income Splitting

this is a tax planning strategy of arranging for income to be transferred to family members who are in lower tax brackets than the One earning the income, thus reducing taxes. Even though attribution rules limit income splitting, There are still a number of legitimate ways to do so, such as through the use of spousal RRSPs.

Indexation

The adjustment of benefits to compensate for the effects of inflation.

Individual Insurance

Insurance that is offered to individuals rather than groups.

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

person whose LIFe is protected under a specific policy.

Insured

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.

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.

Intestate

this means dying without a will, in which case the provincial laws of the province in which the Death occurred apply to the manner in which assets will be distributed. In other words, if you don't write your own will, the government will do it for you after your Death and it may not be as you would have wished.

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.

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.

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