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Glossary

A B C D E F G H I J K L M N O P Q R S T U V W X Y Z

Amortization Period
The amortization period is the period of time most often 15, 20 or 25 years required to extinguish 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. The appraisal lets the purchaser know how much he should pay for the property. Normally, the lender may use the appraisal ordered by the purchaser for the requirements of the mortgage loan.

Asset Allocation
Asset allocation refers to the manner in which an individual's total assets are invested among the various asset classes.

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.

Cash Surrender Value
The cash surrender value is an amount payable in cash if the policyholder decides to cancel his policy, in whole or in part, before it expires or before he dies.

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.

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 his financial needs.

Creditor
A creditor is the holder of a debt, in other words the person 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 (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.

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 5% and 25% of the purchase price.

Education Bonus
Industrial Alliance pays an education bonus corresponding to a percentage of the amount you have saved for your child's education, up to a maximum of 15%. The amount is paid into the subscriber's Diploma registered education savings plan (RESP).

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.

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)no longer exists.

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 annuity certain and the life annuity.

Annuity Certain
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 you can invest amounts 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 you receive throughout your life until you die.

Locked-in Retirement Account (LIRA)
A locked-in retirement account (LIRA) is a special registered retirement savings plan (RRSP) into which you can transfer the amounts that are in your supplemental pension plan (SPP). The amounts held in this type of contract are "locked in" and cannot be withdrawn until you retire. They can be used only for retirement income. At maturity, a LIRA or a locked-in RRSP may be: converted into a life income fund (LIF) or a locked-in registered retirement income fund (RRIF); or used to purchase a life annuity (paid until death).

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 95% 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 person, 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.

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 gives to a company to withdraw a predetermined amount from his bank account on a date and according to a frequency that are determined in advance.

Premium
A premium is an amount that the insured pays to the insurer in exchange for the insurer's promise to pay amounts to the insured 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.

Redemption Fees
Redemption fees are charged when units of a mutual fund or a segregated fund are sold to a third person.

Refinancing
The purpose of refinancing is to settle a mortgage loan when the borrower negotiates a new mortgage loan, or even a new loan from a new lender.

Registered Education Savings Plan (RESP)
A Registered Education Savings Plan (RESP) is a special savings account that can help you, your family, or your friends save early for your child's education after high school. The Government of Canada allows savings for education to grow tax free until your child named in the RESP enrolls in education after high school. The child named in an RESP is known as a beneficiary. A parent, grandparent, other relative, or friend, can open an RESP for a child. The person who opens an RESP is called a subscriber.

Registered Pension Plan (RPP)
A registered pension plan is a trust registered with the Canada Customs and Revenue Agency 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% x number of years of service x five-year average salary

Registered Retirement Income Fund (RRIF)
The registered retirement income fund (RRIF) enables the annuitant to gradually withdraw his 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 71. 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 $20,000 (2008). Contributions may be paid into an RRSP until December 31 of the year in which the contributor turns 71. However, if the contributor is over 71 years of age and declares earned income, he may contribute to his spouse's RRSP if his spouse is 71 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.

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.

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.

Total Debt Service (TDS) Ratio
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 him up to a date on which he 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.

*Mutual Funds Disclaimer - Commissions, trailing commissions management fees and expenses all may be associated with mutual fund investments. PLease read the prospectus before investing. Mutual funds are not guaranteed by the Canada Deposit Insurance Corporation or by any other government deposit insurer. There can be no assurance that the fund will be able to maintain its net asset value per security at a constant amount or that the full amount of your investment in the fund will be returned to you. Fund values change frequently and past performance may not be repeated.“
Mutual funds are sold exclusively by mutual fund representatives who are registered with Investia Financial Services Inc. (Investia). Investia does not provide or distribute any advice or product other than those that are directly related to the sale of mutual funds. Any representative who provides or offers other advice or services must hold the necessary licenses and deal with the entities (other than Investia) that are duly registered with the competent authorities.


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