Definition of Deferred nominal life annuity

Deferred nominal life annuity

A monthly fixed-dollar payment beginning at retirement age. It is nominal
because the payment is fixed in dollar amount at any particular time, up to and including retirement.

ADF (annuity discount factor)

the present value of a finite stream of cash flows for every beginning $1 of cash flow.

Annuity

A regular periodic payment made by an insurance company to a policyholder for a specified period
of time.

Annuity due

An annuity with n payments, wherein the first payment is made at time t = 0 and the last
payment is made at time t = n - 1.

Annuity factor

Present value of $1 paid for each of t periods.

Annuity in arrears

An annuity with a first payment on full period hence, rather than immediately.

Average life

Also referred to as the weighted-average life (WAL). The average number of years that each
dollar of unpaid principal due on the mortgage remains outstanding. Average life is computed as the weighted average time to the receipt of all future cash flows, using as the weights the dollar amounts of the principal
paydowns.

Contingent deferred sales charge (CDSC)

The formal name for the load of a back-end load fund.

Deferred call

A provision that prohibits the company from calling the bond before a certain date. During this
period the bond is said to be call protected.

Deferred equity

A common term for convertible bonds because of their equity component and the
expectation that the bond will ultimately be converted into shares of common stock.

Deferred futures

The most distant months of a futures contract. A bond that sells at a discount and does not
pay interest for an initial period, typically from three to seven years. Compare step-up bond and payment-inkind
bond.

Deferred taxes

A non-cash expense that provides a source of free cash flow. Amount allocated during the
period to cover tax liabilities that have not yet been paid.

Deferred-annuities

Tax-advantaged life insurance product. deferred annuities offer deferral of taxes with the
option of withdrawing one's funds in the form of life annuity.

Equivalent annual annuity

The equivalent amount per year for some number of years that has a present
value equal to a given amount.

Nominal

In name only. Differences in compounding cause the nominal rate to differ from the effective
interest rate. Inflation causes the purchasing power of money to differ from one time to another.

Nominal annual rate

An effective rate per period multiplied by the number of periods in a year.

Nominal cash flow

A cash flow expressed in nominal terms if the actual dollars to be received or paid out are given.

Nominal exchange rate

The actual foreign exchange quotation in contrast to the real exchange rate that has
been adjusted for changes in purchasing power.

Nominal interest rate

The interest rate unadjusted for inflation.

Nominal price

Price quotations on futures for a period in which no actual trading took place.

Normal annuity form

The manner in which retirement benefits are paid out.

RAMs (Reverse-annuity mortgages)

Mortgages in which the bank makes a loan for an amount equal to a
percentage of the appraisal value of the home. The loan is then paid to the homeowner in the form of an
annuity.

Single-premium deferred annuity

An insurance policy bought by the sponsor of a pension plan for a single
premium. In return, the insurance company agrees to make lifelong payments to the employee (the
policyholder) when that employee retires.

Tax-deferred retirement plans

Employer-sponsored and other plans that allow contributions and earnings to
be made and accumulate tax-free until they are paid out as benefits.

Term life insurance

A contract that provides a death benefit but no cash build-up or investment component.
The premium remains constant only for a specified term of years, and the policy is usually renewable at the
end of each term.

Universal life

A whole life insurance product whose investment component pays a competitive interest rate
rather than the below-market crediting rate.

Variable life insurance policy

A whole life insurance policy that provides a death benefit dependent on the
insured's portfolio market value at the time of death. Typically the company invests premiums in common
stocks, and hence variable life policies are referred to as equity-linked policies.

Weighted average life

See:Average life.

Whole life insurance

A contract with both insurance and investment components: (1) It pays off a stated
amount upon the death of the insured, and (2) it accumulates a cash value that the policyholder can redeem or
borrow against.

Lifecycle costing

An approach to costing that estimates and accumulates the costs of a product/service over
its entire lifecycle, i.e. from inception to abandonment.

Annuity

A series of payments or deposits of equal size spaced evenly over
a specified period of time

Annuity Due

annuity where the payments are to be made at the beginning of
each period

Nominal Interest Rate

The rate of interest quoted, or stated, to be paid on a security

Ordinary Annuity

An annuity where the payments are made at the end of each
period

annuity due

a series of equal cash flows being received or paid at the beginning of a period

deferred compensation

pay related to current performance
that will be received at a later time, typically after retirement

life cycle costing

the accumulation of costs for activities that
occur over the entire life cycle of a product from inception
to abandonment by the manufacturer and consumer

ordinary annuity

a series of equal cash flows being received
or paid at the end of a period

product life cycle

a model depicting the stages through
which a product class (not necessarily each product) passes

tax-deferred income

current compensation that is taxed at a future date

Annuity

A series of payments over a period of time. The payments are usually
in equal amounts and usually at regular intervals such as quarterly,
semi-annually, or annually.

Economic life

The period over which a company expects to be able to use an asset.

Useful life

The estimated life span of a fixed asset, during which it can be expected to
contribute to company operations.

annuity

Equally spaced level stream of cash flows.

annuity due

Level stream of cash flows starting immediately.

annuity factor

Present value of an annuity of $1 per period.

nominal interest rate

Rate at which money invested grows.

Exchange Rate, Nominal

The price of one currency in terms of another, in this book defined as number of units of foreign currency per dollar.

Interest Rate, Nominal

Payment for the use of borrowed funds, measured as a percentage per year of these funds.

Nominal

Measured in money terms, in current rather than real dollars. Contrast with real.

Individual Retirement Annuity

An IRA comprised of an annuity that is managed
through and paid out by a life insurance company.

Deferred Income Tax Expense

That portion of the total income tax provision that is the result
of current-period originations and reversals of temporary differences.

Deferred Tax Asset

Future tax benefit that results from (1) the origination of a temporary difference
that causes pretax book income to be less than taxable income or (2) a loss, credit, or other
carryforward. Future tax benefits are realized on the reversal of deductible temporary differences
or the offsetting of a loss carryforward against taxable income or a tax-credit carryforward against
the current tax provision.

Deferred Tax Liability

Future tax obligation that results from the origination of a temporary
difference that causes pretax book income to exceed taxable income.

EBDDT - Earnings before depreciation and deferred taxes

This measure is used principally by
firms in the real estate industry, with the exception of real estate investment trusts, which typically
do not pay taxes.

Shelf life

The time period during which inventory can be retained in stock and beyond
which it becomes unusable.

Shelf life control

Deliberate usage of the oldest items first, in order to avoid exceeding
a component or product’s shelf life.

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.

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.

Deferred Annuity

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

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.

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.

Life Expectancy

The average number of years of life remaining for a group of people of a given age and gender according to a particular mortality table.

Life Income Fund

Commonly known as a LIF, this is one of the options available to locked in Registered Pension Plan (RPP) holders for income payout as opposed to Registered Retirement Savings Plan (RRSP) holders choice of payout through Registered Retirement Income Funds (RRIF). A LIF must be converted to a unisex annuity by the time the holder reaches age 80.

Split Dollar Life Insurance

The split dollar concept is usually associated with cash value life insurance where there is a death benefit and an accumulation of cash value. The basic premise is the sharing of the costs and benefits of a life insurance policy by two or more parties. Usually one party owns and pays for the insurance protection and the other owns and pays for the cash accumulation. There is no single way to structure a split dollar arrangement. The possible structures are limited only by the imagination of the parties involved.

Temporary Life Insurance

Temporary insurance coverage is available at time of application for a life insurance policy if certain conditions are met. Normally, temporary coverage relates to free coverage while the insurance company which is underwriting the risk, goes through the process of deciding whether or not they will grant a contract of coverage. The qualifications for temporary coverage vary from insurance company to insurance company but generally applicants will qualify if they are between the ages of 18 and 65, have no knowledge or suspicions of ill health, have not been absent from work for more than 7 days within the prior 6 months because of sickness or injury and total coverage applied for from all sources does not exceed $500,000. Normally a cheque covering a minimum of one months premium is required to complete the conditions for this kind of coverage. The insurance company applies this deposit towards the cost of a policy at its issue date, which may be several weeks in the future.

Term Life Insurance

A plan of insurance which covers the insured for only a certain period of time and not necessarily for his or her entire life. The policy pays a death benefit only if the insured dies during the term.

Nominal Interest Rate

The contracted, or stated, interest rate, undeflated for price level changes.

Annuity

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

Annuity Period

The time between each payment under an annuity.

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.

Guaranteed Interest Annuity (GIA)

Interest bearing investment with fixed rate and term.

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.

Life Insurance

Insurance that provides protection against an economic loss caused by death of the person insured.

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.

Life Insured

The person who's life is protected by an individual policy.

Life Underwriter

Insurance Agent.

Mortgage Life insurance (Credit Insurance)

Decreasing term life insurance that provides a death benefit amount corresponding to the decreasing amount owed on a mortgage.

Term Life

A product that provides life coverage for a specified duration typically not beyond the age of 75.

Universal Life

An unbundled life product with a separate investment component. It typically does not participate in companies profits.

Variable Annuity

A form of annuity policy under which the amount of each benefit is not guaranteed or specified. The amounts fluctuate according to the earnings of a separate investment account.

Whole Life

Component that provides life coverage during the insured's life.

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