Glossary of Terms
Amortization Period
The period of time, (most often 15, 20 or 25 years) that is required to pay off the debt, making regular payments.
Asset Allocation
Refers to the manner in which a person's total assets are invested in the various asset classes.
Bonds
A certificate of indebtedness. The issuer promises to pay the holder a certain amount of interest for a fixed period and to repay the capital at maturity.
CMHC
The Canada Mortgage and Housing Corporation is a Crown corporation. They are responsible for administering the National Housing Act. It fosters the improvement of the housing and living conditions for Canadians.
Cash Surrender Value
This is the amount payable in cash if a policyholder cancels their policy, in whole or in part, before it expires or before they die.
Diversification
A method to allocate the investment risks by investing in various asset classes.
Evidence of Insurability
The documents help to evaluate insurance applications for medical history, lifestyle, age, sex, weight, height, etc. The risks received are then categorized for acceptance or refusal. The premium corresponding to the insured's risk can be determined.
Group Investment Funds
This is a segregated fund category, which is comparable to the mutual fund. Segregated funds offer a wide variety of investment objectives and categories such as bond funds, equity funds, diversified funds, international funds, specialty funds, and more.
GIC (Guaranteed Investment Certificate)
A GIC is a security issued by most financial institutions. It shows that an amount has been invested at a fixed rate of interest for a given period.
Investment Income
Investment income refers to the yield on an investment; such as interest income, dividend income and capital gains. Taxation rate differs according to the type of investment income.
Life Expectancy
Life expectancy calculations are based on mortality tables corresponding to the number of years a person is statistically presumed to be able to live.
LIRA (Locked-in Retirement Account)
A LIRA is a special RRSP into which the contract holder can transfer the amounts that are in their supplemental pension plan (SPP). The amounts held in this type of contract are "locked in" and cannot be withdrawn until they retire. They can be used only for retirement income.
Mortgage Insurance
For the individual who does not have the minimum down payment required at the time of purchase to purchase a home. (25% of the purchase price or the market value of the property) The mortgage load can be up to 100% of the purchase price of the property.
Mutual Fund
Composed of amounts pooled by investors to make a collective investment that is managed by a third party. This third party must, on demand, redeem the units at their net asset value.
Non-Registered Savings
Unlike the RRSP, Non-registered savings do not provide the tax deferral on the amounts invested. Interest income, dividend income and capital gains earned during a year must be included in the income tax return for the taxation year concerned.
Premium
The premium is an amount that the insured pays to the insurer. The insurer' promises to pay amounts to the insured in the event of specific losses.
Registered Education Savings Plan (RESP)
RESP is a means of accumulating savings to provide for an individual's post-secondary education. The plan offers a tax deferral on investment income earned on the amounts contributed.
Registered Retirement Income Fund (RRIF)
RRIF enables the annuitant to gradually withdraw their registered funds and to pay taxes only on the portion withdrawn each year.
RRSP must be converted to a RRIF or an annuity must be purchased by December 31 of the year in which the contributor turns 69. This conversion has no tax repercussions. The balance or a portion of the RRIF may be converted to an annuity at any time.
Registered Retirement Savings Plan (RRSP)
The amounts that accumulate in an RRSP are tax sheltered and are generally used to provide retirement income. The contributions paid into an RRSP are tax deductible, and the maximum contribution amount for the current year is established on the basis of the income earned in the previous year. Contributions may be paid into an RRSP until December 31 of the year in which the contributor turns 69.
Segregated Fund
Like mutual funds, segregated funds offer a wide variety of investment objectives and categories such as bond funds, equity funds, diversified funds, international funds, specialty funds, etc.
Segregated funds are the only funds to offer a guarantee on the amounts invested. This guarantee is 75% or 100% at the maturity date and 100% upon the subscriber's death.