 |
Amortization Period |
The amortization period is the period of time—most
often 15, 20 or 25 years—required to pay off the debt when payments
are made on a regular basis.
|
Appraisal |
Appraisal is the assessment of a property’s market
value for the purpose of obtaining a mortgage loan. The market value may
differ from the purchase price of the home.
|
Asset Allocation |
Asset allocation refers to the manner in which
an individual’s total assets are invested among the various asset
classes.
|
Banker’s Acceptance
|
A banker’s acceptance is a type of short-term
negotiable instrument issued by a non-financial corporation. Its capital
and interest are guaranteed by the bank.
|
Bond (Fixed-Income Security) |
A bond is a certificate of indebtedness through
which the issuer promises to pay the holder a certain amount of interest
for a fixed period and to repay the capital at maturity.
Canada
Mortgage and Housing Corporation (CMHC)
The Canada Mortgage and Housing Corporation is a Crown corporation that
is responsible for administering the National Housing Act. It fosters
the improvement of the housing and living conditions of Canadians. In
particular, the CMHC creates and offers mortgage
insurance products.
|
Cash Surrender Value |
The cash surrender value is an amount payable in cash if
a policyholder decides to cancel their policy, in whole or in part, before
it expires or before they die.
|
Closed Term Loan |
A closed term loan is a mortgage loan that
has a payment amount and an interest rate that are fixed for the mortgage
term chosen—between one and five years. It
is repayable at maturity only, its conditions cannot be modified during
the agreed term and its interest rate is lower than on an open term loan.
|
Closing Costs |
Closing costs are the costs that add to the price of a
residence and include legal fees, transfer taxes and expenses. These costs
normally represent from 1.5% to 4% of the price of the residence.
|
Coinsurance |
Coinsurance is the proportion of the cost
of medical and dental care expenses that is payable by the insured, up
to the amount of the maximum contribution.
|
Convertible Mortgage |
A convertible mortgage is a mortgage that the borrower
can convert from a short term to a longer term according
to their financial needs.
|
Creditor |
A creditor is the holder of a debt, in other words the
person or entity to whom money is owed.
|
Daily Interest Fund |
A daily interest fund is a fund in which the
interest on the capital is calculated on a daily basis.
|
Deductible (Auto and Home Insurance) |
The deductible is the portion of the cost that is payable
by the insured in the event of a claim. It is set out contractually in
the contract terms and conditions and is expressed as a fixed amount ($200,
$250 or $500, for example).
|
Deductible (Group Insurance) |
The deductible is the portion of the cost of medical services and dental
care that an insured must pay. The maximum amount of the deductible payable
is set out in the contract.
|
Deed of Sale |
A deed of sale is a legal document that the
seller and the purchaser must sign before a notary or a lawyer in order
to transfer property. This document provides evidence of ownership.
|
Discharge |
A discharge is a document signed by the lender
and remitted to the borrower when the mortgage loan has been repaid in
full.
|
Diversification |
Diversification is a method that consists
of allocating the investment risks by investing in various asset classes.
Diversification may also be geographic or carried out on the basis of
the sector of activity, the management style or the manager.
|
Downpayment |
The downpayment is the portion of the price of a house
that the purchaser must pay before obtaining a mortgage loan. In general,
this amount varies between 0% and 25% of the purchase price.
|
Education Bonus |
The Company pays an education bonus corresponding to a
percentage of the amount the subscriber has saved for the child’s
education, up to a maximum of 15%. The amount is paid into the subscriber’s
Diploma registered education savings plan (RESP).
|
Electronic Immobilization |
An electronic immobilization system deactivates such vehicle
systems as the starter, the fuel supply, the starter circuit, and sometimes
the alarm devices. To start the engine of a vehicle equipped with an electronic
immobilization system, the driver requires a special key or a small electronic
device. Today, the systems are factory installed on numerous vehicles
as standard equipment or may be purchased from glass installers.
|
Eligibility Period |
The eligibility period is the continuous period,
as set out in the contract, that an employee must be actually at work
before becoming eligible for insurance.
|
Endorsement (Auto and Home Insurance) |
When the initial conditions of the contract are revised
(when the insured moves or purchases a new car, for example), the insurer
issues an endorsement to validate the new situation, rather than drafting
an entirely new contract.
The insured can also obtain additional protection to meet
their specific needs. The insurer will then issue one or more endorsements
and add them to the basic contract. Although the insured is not required
to have any endorsements, all of them are useful. Auto insurance endorsements
are recognized by the “QEF” code, followed by an identification
number.
|
Evidence of Insurability |
Evidence of insurability is provided by documents
used by the insurer to evaluate insurance applications according to the
insured’s medical history, lifestyle, age, sex, weight, height,
etc. The risks submitted are then categorized for acceptance or refusal,
and the premium corresponding to the insured’s risk can be determined.
|
Foreign Content |
The foreign content corresponds to the portion
of savings invested in countries other than Canada.
The foreign investment portion of a registered
retirement savings plan (RRSP), may not exceed 30%.
GE
Mortgage Insurance Canada
GE Mortgage Insurance Canada, together with its affiliates, is the largest
private insurer of mortgage loans in the world. In Canada, GE is the only
private provider of this type of insurance.
|
Gross Debt Service (GDS) Ratio |
The gross debt service ratio is the portion
of the borrower’s gross income that is required to make the monthly
payment of principal, interest, taxes, heating
costs and, if applicable, half of the condominium fees.
|
Group Investment Funds |
Insurance companies offer a “segregated
fund” category, which is comparable to the mutual fund. Like mutual
funds, segregated funds offer a wide variety of investment objectives
and categories—bond funds, equity funds, diversified funds, international
funds, specialty funds, etc.
|
Guaranteed Insurability Benefit |
The guaranteed insurability benefit is the
life insurance contract rider that entitles the policyholder to purchase
specific amounts of additional insurance of the same type as the original
policy, on specific dates, without providing other evidence of insurability.
|
Guaranteed Interest Fund (Guaranteed Investment) |
A guaranteed interest fund is an investment
issued by most insurance companies for a given period. The capital invested
is guaranteed at maturity, and the interest rate, which is fixed in advance,
is also guaranteed for the period concerned. A guaranteed interest fund
may be redeemable or non-redeemable before maturity.
|
Guaranteed Investment Certificate |
A guaranteed investment certificate is a security
issued by most financial institutions attesting that an amount has been
invested at a fixed rate of interest for a given period.
|
Guaranteed Sum Insured, Insurance Amount
and Premium |
The sum insured and the insurance amount are
guaranteed when the death benefit remains the same for the term of the
insurance contract. A guaranteed premium is a premium that will not be
revised during the term of coverage.
|
Immediate Annuity |
An immediate annuity is an annuity that begins to be paid
as soon as it is purchased. It provides periodic income generated by the
capital invested. There are two categories of immediate annuities: the
term certain annuity and the life
annuity.
 |
Term
Certain Annuity |
|
The annuity certain provides
income until the end of the chosen term (for example, 10 years).
|
|
Life Annuity
|
| |
The life annuity is guaranteed, and
its payment terminates when the annuitant dies.
|
|
Investment Income |
Investment income refers to the yield on an
investment. There are various types of investment income—interest
income, dividend income and capital gains. The taxation rate differs according
to the type of investment income.
|
Investment Vehicle |
An investment vehicle is an option in which the contract
holder can invest to build up savings.
|
Lending Value |
The lending value corresponds to the lesser
of the following amounts: the purchase price or the market value of the
home.
|
Level |
A level payment is a payment that stays the
same for a fixed period. A premium or the cost of insurance is said to
be level when it remains the same for the duration of the coverage.
|
Life Expectancy |
Life expectancy corresponds to the number
of years a person is statistically presumed to be able to live. Life expectancy
calculations are based on mortality tables.
|
Life Income Fund (LIF) |
The locked-in life income fund (LIF) is to
the locked-in retirement account (LIRA) what the registered
retirement income fund (RRIF) is to the registered
retirement savings plan (RRSP). The only difference between these
two types of contracts is the maximum withdrawal limit imposed on locked-in
plans. Like the RRIF, the locked-in LIF requires a minimum withdrawal,
but it also imposes a maximum withdrawal per year. Certain provincial
regulations require that when the annuitant reaches the age of 80, the
minimum for the year be paid out of the LIF and the remaining funds used
to purchase a life annuity.
|
Lifetime Income |
Lifetime income is income the annuitant receives throughout
their life until they die.
|
Loan-to-Value Ratio |
The loan-to-value ratio is the relationship
of the loan to the value of the property, expressed as a percentage. For
example the loan-to-value ratio of a $90,000 loan for a house costing
$100,000 is 90%.
|
Locked-in Retirement Account (LIRA) |
A locked-in retirement account (LIRA) is a special registered
retirement savings plan (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.
At maturity, a LIRA or a locked-in RRSP may
be:
|
Lump-Sum Payment |
A lump-sum payment is a fixed benefit equal
to the coverage amount determined upon issuance of a critical illness
insurance contract. This benefit is tax-free and is paid when a critical
illness is diagnosed.
|
Lump-Sum Withdrawal |
A lump-sum withdrawal is a withdrawal that
is made without any pre-established frequency.
|
Management Fees |
Management fees correspond to the amounts
paid to the manager of a stock brokerage firm
to administer a portfolio.
|
Manager |
A manager is a finance professional to whom
amounts of money are entrusted for management.
|
Maximum Contribution |
The maximum contribution is the total amount
payable by an insured. After this amount has been paid, the remaining
cost of pharmaceutical services and medications is fully paid by the insurer.
The maximum contribution is set out in the contract.
|
Mortgage |
A mortgage guarantees the loan granted for
the purchase of a home. It personally obliges the borrower to repay the
loan and binds the property as a guarantee.
|
Mortgage Insurance |
Mortgage insurance enables an individual who does not have
the minimum downpayment required to purchase a home
(25% of the purchase price or the market value of the property) to obtain
a mortgage loan of up to 100% of the purchase price of the property.
|
Mortgage Payment |
A mortgage payment is a periodic payment that
includes repayment of the principal and the payment
of interest on the loan.
|
Mutual Fund |
A mutual fund is composed of amounts pooled by investors
to make a collective investment that is managed by a third party, who
must, on demand, redeem the units at their net asset value. The value
of the securities forming the fund influences the current price of the
fund units.
|
Non-Registered Savings |
Contrary to the registered
retirement savings plan (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. The investment options are
very similar to those offered for RRSPs and have no foreign-content limit.
|
Offer to Purchase |
An offer to purchase is a written agreement establishing
the terms and conditions of purchase to which the purchaser has agreed.
Once accepted by the seller, the offer becomes legally binding.
|
Open Term Loan |
An open term loan is a mortgage loan with
a fixed interest rate and a term that is limited
to six months or one year. It is repayable at any time, in whole or in
part, its conditions are renegotiable and its interest rate is higher
than on a closed term loan. This type of loan is suitable for persons
who are considering selling their property in the short term or who are
expecting a significant decrease in interest rates.
|
Option |
An option is the right or obligation to purchase
or sell a given number of a company’s shares at a price and within
a period that are determined in advance.
|
Paid-up Insurance
|
Paid-up insurance is the amount of the sum
insured that remains in force in the event that the policyholder definitively
stops paying premiums. The contract specifies the various paid-up insurance
values in accordance with certain specific anniversaries.
|
Pension Adjustment (PA) |
A pension adjustment (PA) exists if contributions
to a registered pension plan (RPP) have been made on
behalf of a contributor. When a contributor is a member of a RPP, the
PA corresponds to the contributions made to the pension plan by the employee
and the employer. The PA reduces the amount that a contributor may pay
into his registered retirement savings plan (RRSP).
This amount is indicated on the T4 slip.
|
Periodic Withdrawal |
A periodic withdrawal is a withdrawal that
is made from an account on a regular basis, according to a set frequency
(monthly, quarterly, semi-annually, annually).
|
Preferred Underwriting |
This underwriting approach aims to take into
account specific factors that influence an individual's state of health,
including:
|
height and weight; |
|
blood pressure;
|
|
cholesterol level;
|
|
medical history;
|
|
family antecedents;
|
|
lifestyle.
|
Underwriting previously relied on three main
factors: age, sex and tobacco use.
|
Pre-authorized Withdrawal |
Pre-authorized withdrawal is the authorization an investor,
premium payer or mortgage payer gives to a company to withdraw a predetermined
amount from their bank account on a date and according to a frequency
that are determined in advance.
|
Premium |
A premium is an amount that the insured or owner pays to
the insurer in exchange for the insurer’s promise to pay amounts
to the owner in the event of specific losses.
|
Principal |
The principal is the amount of money actually
borrowed.
|
Principal Guaranteed with an Alternative
(PGA) Investment |
As with conventional guaranteed investments,
the principal invested in a principal guaranteed with an alternative (PGA)
investment is guaranteed at the maturity of the term. However, no interest
rate is determined in advance or guaranteed for the term. The amounts
are invested in a hedge fund. The return is therefore variable and is
known only at maturity.
|
Probate |
Probate is a legal process that validates
a document’s authenticity.
|
Property Survey |
The property survey sets out a property’s boundaries
and dimensions as well as the location of the buildings erected on the
property. It also indicates the servitudes (easements)
and encroachments.
|
Redemption Fees |
Redemption fees are charged when units of a mutual
fund or a segregated fund are sold before
the end of the redemption period.
|
Refinancing |
The purpose of refinancing a mortgage loan is to obtain
additional funds or revised terms of repayment.
|
Registered Education Savings Plan (RESP) |
A registered education savings plan (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. The contributions to an RESP
may qualify for the Canada Education Savings Grant (CESG). The CESG corresponds
to 20% of eligible annual contributions paid into the plan. The maximum
CESG amount is $400 per year, per beneficiary. Grants may be deferred
in certain situations,
|
Maximum annual contributions providing
entitlement to the CESG: |
$2,000 |
|
Maximum annual contributions per beneficiary: |
$4,000 |
|
Maximum lifetime contributions per
beneficiary: |
$42,000 |
Contributions paid into an RESP are not deductible
from the subscriber’s income.
|
Individual RESP
|
|
In an individual RESP, there can
be only one beneficiary. Any individual may become the initial subscriber,
even if they are not related to the designated beneficiary. |
|
Family RESP
|
| |
In a family plan, there can be one
or more beneficiaries. However, each beneficiary must be related
by blood or adoption to each subscriber under the plan. |
|
Registered Pension Plan (RPP) |
A registered pension plan is a trust
registered with the Canada Customs and Revenue Agency (CCRA) and established
by an employer to provide retirement income for its employees. The employer
and the employee may both contribute to the plan, and these contributions
are deductible from their taxable income. The most popular types of registered
pension plans are the defined contribution plan
and the defined benefit plan.
|
Defined
Contribution Plan
|
|
In the defined contribution
plan, the amount of the contributions paid into the pension fund
is fixed in advance.
The amount of the retirement benefit
depends on the total amounts accumulated in an account on behalf
of the employee. The amount corresponds to the total of the following
amounts:
- the employee’s contributions;
- the employer’s contributions;
- the interest and the return credited on the contributions. |
|
Defined Benefit Plan
|
| |
The defined benefit plan guarantees
a benefit of a pre-determined amount generally corresponding to
a percentage of the salary multiplied by the credited years of service
under the plan.
Actuaries establish the cost of the
benefits and determine the contributions that must be made to the
plan.
Example of a frequently used calculation
method:
2% × number of years of service
× five-year average salary |
|
Registered Retirement Income Fund (RRIF) |
The registered retirement income fund (RRIF) enables the
annuitant to gradually withdraw their registered funds and to pay taxes
only on the portion withdrawn each year. The minimum withdrawal is calculated
according to a percentage of the plan’s value as of January 1 each
year and according to the annuitant’s age. The calculation may be
made by using the age of the younger spouse in order to minimize the withdrawals.
There is no fixed maximum amount for the withdrawals.
A registered retirement savings
plan (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 registered retirement savings plan (RRSP)
is administered by the federal government. 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.
The maximum amount that may be contributed
to an RRSP is 18% of the income earned in the previous year, less the
previous year’s pension adjustment (PA), subject
to a maximum of $14,500.
Contributions may be paid into an RRSP until December 31
of the year in which the contributor turns 69. However, if the contributor
is over 69 years of age and declares earned income, they may contribute
to their spouse’s RRSP if the spouse is 69 years of age or under.
|
Rider (Life and Health Insurance) |
A rider is an addition to the policy that
forms an integral part of the insurance contract and has the same legal
value as any other component of the contract.
|
Section A – Third-Party Liability |
Section A of the automobile insurance policy covers the
insured against monetary consequences of third-party
liability that may be incurred as a result of owning, using or driving
an automobile.
|
Section B – Loss of or Damage to
Insured Vehicle |
Section B of the automobile insurance policy
covers the insured against loss or damage occasioned directly and accidentally
to the insured vehicle and its equipment and accessories. Various levels
of protection are available, as follows:
|
B1: All
risks: This is the fullest coverage. It combines and enhances the
coverage granted under sections B2, B3 and B4. |
|
B2: Collision or
upset: This protection covers the vehicle against collision with
another object (another vehicle, a tree, etc.) or upset.
|
|
B3: Comprehensive:
This protection covers the insured vehicle against risks other than
collision or upset (theft, vandalism, etc.).
|
|
B4: Specified perils.
This protection covers the property or the vehicle against perils
specified in the contract, such as hail, lightning, etc.
|
|
Segregated Fund |
Insurance companies offer a “segregated
fund” category, which is comparable to the mutual
fund category. Like mutual funds, segregated funds offer a wide variety
of investment objectives and categories—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.
|
Servitude |
A servitude (easement) is a right of access to the land
of another person or party for a very specific purpose such as parking
or public services.
|
Share
|
A share is a portion of ownership in a company
that, in certain cases, confers voting rights. An individual may hold
shares directly or through mutual funds and segregated
funds.
|
Stock Market Index |
A stock market index is an indicator that
measures stock market trends. The most representative index of the Canadian
market is the S&P/TSX.
|
Strip Bond |
A strip bond is a bond that has had its coupons
removed. The holder of this bond is entitled to the bond’s par value
at maturity, but not to the annual interest payments.
|
Term |
The term is the period during which the borrower
pays a certain interest rate on his mortgage loan. The borrower may not
be able to repay the principal in full during
that period, since the amortization period
is generally longer than the term.
|
Third-Party Liability |
Third-party liability refers to an individual’s obligation
to repair all or part of the damage that individual caused to a third
party.
In home insurance, the contract covers the personal liability
of the insured and his spouse and children, as well as the animals for
which they are responsible, for injury or damage caused to third persons.
In auto insurance, third-party liability insurance is mandatory.
All drivers must be insured against damage or injury that they could cause
to a third party. (See Section A – Third-Party
Liability.)
The total debt service ratio is the percentage
of the borrower’s gross annual income required to make the monthly
payments associated with housing, as well as to satisfy all other debts,
such as payments on a car loan.
|
Treasury Bill |
A treasury bill is a short-term debt security
issued by the government at a value that is lower than its par value.
The difference represents the interest.
|
Trust |
A trust is a contractual institution through which a person
(called a “trustee”) is given the responsibility to administer
the property entrusted to them up to a date on which they must restore
such property to the beneficial owner.
|
Volatility (Risk Measurement) |
Volatility is the fluctuation in the value
of a security, a fund or an index. The more volatile the investment, the
more quickly and the more significantly its value fluctuates.
|
Waiting Period |
The waiting period is the continuous period
during which a plan member must be absent from work as a result of a disability
before being entitled to receive disability income benefits.
|
