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Definition of Insurance Company
A firm licensed to sell insurance to the public.
A regular periodic payment made by an insurance company to a policyholder for a specified period
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.
A signed statement of facts made by a person applying for life insurance and then used by the insurance company to decide whether or not to issue a policy. The application becomes part of the insurance contract when the policy is issued.
Assuris is a not for profit organization that protects Canadian policyholders in the event that their life insurance company should become insolvent. Their role is to protect policyholders by minimizing loss of benefits and ensuring a quick transfer of their policies to a solvent company where their benefits will continue to be honoured. Assuris is funded by the life insurance industry and endorsed by government. If you are a Canadian citizen or resident, and you purchased a product from a member life insurance company in Canada, you are protected by Assuris.
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.
An amount the insurance company will pay if the policyholder ends a whole life
An annual statement filed by a life insurance company in each state where it does
Purchase of the financial guarantee of a large insurance company to raise funds.
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.
A flat amount that an insured must pay before the insurance company makes any benefit payments under a health insurance policy.
As the term dividend relates to a corporation's earnings, a dividend is an amount paid per share from a corporation's after tax profits. Depending on the type of share, it may or may not have the right to earn any dividends and corporations may reduce or even suspend dividend payments if they are not doing well. Some dividends are paid in the form of additional shares of the corporation. Dividends paid by Canadian corporations qualify for the dividend tax credit and are taxed at lower rates than other income.
Annuity contracts in which the insurance company or issuing financial institution pays a
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.
Individual Retirement Annuity
An IRA comprised of an annuity that is managed
This is a telephone interview of the person applying for life insurance conducted by someone from the underwriting department of the insurance company. Some insurance companies only sporadically contact applicants and some contact every applicant. On average the interview lasts between 15 to 30 minutes. The questions asked relate to personal habits (like smoking and alcohol consumption) and finances, including income and net worth, confirmation of employment, duties and the nature of the applicant's business. In addition, there are questions about driving, sports, aviation and currently held insurance. All information obtained is strictly confidential and is submitted solely to the underwriter for review.
Insurance Policy (Credit Insurance)
A policy under which the insurance company promises to pay a benefit of the person who is insured.
The party in an insurance contract that promises to pay a benefit if a specified loss occurs. Usually an insurance company.
This refers to the practice of some life insurance companies to offer policies which are lower in price because they have assumed a high probability that the policies will be cashed in by their owners for one reason or another before the death benefit becomes available. It is a bold and risky offer by the insurance company because sometimes the purchasers of these policies simply don't lapse them.
Medical Information Bureau
This organization was established in 1902. The Medical Information Bureau (M.I.B.) is a non-profit association of life insurance companies. Its purpose is to detect and deter fraud by providing warnings called, alerts, to member companies. For example, if an insurance applicant advised one insurance company of a heart attack and then applied to another insurance company omitting this history, codes, reported by the first insurance company, indicating a heart attack would alert the second insurance company to the undisclosed history. It is a rarity, however, that the alert is the only notice of a specific medical impairement as most applicants completely disclose their history.
Commonly sold in the form of reducing term life insurance by lending institutions, this is life insurance with a death benefit reducing to zero over a specific period of time, usually 20 to 25 years. In most instances, the cost of coverage remains level, while the death benefit continues to decline. Re-stated, the cost of this kind of insurance is actually increasing since less death benefit is paid as the outstanding mortgage balance decreases while the cost remains the same. Lending institutions are the most popular sources for this kind of coverage because it is usually sold during the purchase of a new mortgage. The untrained institution mortgage sales person often gives the impression that this is the only place mortgage insurance can be purchased but it is more efficiently purchased at a lower cost and with more flexibility, directly from traditional life insurance companies. No matter where it is purchased, the reducing term insurance death benefit reduces over a set period of years. Most consumers are up-sizing their residences, not down-sizing, so it is likely that more coverage is required as years pass, rather than less coverage.
This is the maximum value of a policy that an insurance company will issue without the applicant taking a medical examination, although medical questions are invariably asked during the application process. When a non-medical issue is made through group insurance, in most cases, medical data is not requested at all.
In October 1996 it was announced in the international news that scientists had finally located the link between cigarette smoking and lung cancer. In the early 1980's, some Canadian Life insurance Companies had already started recognizing that non-smokers had a better life expectancy than smokers so commenced offering premium discounts for life insurance to new applicants who have been non-smokers for at least 12 months before applying for coverage. Today, most life insurance companies offer these discounts.
A policy offers the potential of sharing in the success of an insurance company through the receipt of dividends.
Date on which the insurance company assumes responsibilities for the obligations outlined in a policy.
This is an administrative fee which is part of most life insurance policies. It ranges from about $40 to as much as $100 per year per policy. It is not a separate fee. It is incorporated in the regular monthly, quarterly, semi-annual or annual payment that you make for your policy. Knowing about this hidden fee is important because some insurance companies offer a policy fee discount on additional policies purchased under certain conditions. Sometimes they reduce the policy fee or waive it altogether on one or more additional policies purchased at the same time and billed to the same address. The rules are slightly different depending on the insurance company. There could be enormous savings if several people in the same family or business were intending to purchase coverage at the same time.
This is the restoration of a lapsed life insurance policy. The life insurance company will require evidence of continuing good health and the payment of all past due premiums plus interest.
An insurance company that accepts the risk transferred from another insurance company in a reinsurance transaction.
A group of insureds who present similar risk to the insurance company. Risk classes include - standard, preferred, nonsmoker, substandard, uninsurable.
Single-premium deferred annuity
An insurance policy bought by the sponsor of a pension plan for a single
The surplus of an insurance company determined by the accounting treatment of both
Conditional payments may be made by an insurance company to a disability insurance claimant who has a loss of income claim against a third party who caused or contributed to their disability, however, the insurance company has a right to seek reimbursement of any payments they made to the claimant either from the third party or from any judgement or settlement received by the claimant from the third party.
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.
This could be the person (broker or agent) who helps you choose the proper type of life insurance or disability insurance and the insurance company for your particular needs. This could also be the person at the insurance company's head office who reviews your application for coverage to determine whether or not the insurance company will issue a policy to you.
For an insurance company, the difference between the premiums earned and the costs
This term relates to participating whole life insurance and the use of the dividend to reduce or completely eliminate the need for future premiums. In the 1980's life insurance company's profits from investment were exceedingly high compared to historical experience. It became common for a salesperson to show new prospective clients how quickly his or her insurance company's dividends would cover the future cost of future premiums. In some cases more emphasis was put on the value of future dividends than on the fact that future dividends were not guaranteed and could only be projected based on current earnings. Many life insurance buyers have since learned that the dividends they expected in the 80's no longer exist in the 90's and they are continuing to dig into their pockets to pay insurance premiums.
Waiver of Premium
This is an option available to the applicant for life insurance which sets certain conditions under which an insurance policy will be kept in full force by the insurance company without the payment of premiums. Very specifically, a life insured would have to become totally disabled through injury or illness for a period of six months before the benefit kicks in. When it does, the insurance company retroactively pays premiums from the beginning of the disability until the time the insured is able to perform some form of regular activity. 'Totally disabled' is highlited here, because that is what is required to receive this benefit.
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.
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.
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.
Large and creditworthy company.
Borrower (Credit Insurance)
A consumer who borrows money from a lender.
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.
Child Insurance Rider (CIR)
insurance or insurability provided on current or future children of insured.
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.
Refers to the fact that the merger of two firms decreases the probability of default on
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.
Assets acquired to create money. May include plant, machinery and equipment, shares of another company etc.
company cost of capital
Expected rate of return demanded by investors in a company, determined by the average risk of the company’s assets and operations.
Related: Unsystematic risk
See asset-specific risk
Cost company arrangement
Arrangement whereby the shareholders of a project receive output free of
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.
Creditor (Credit Insurance)
A lender or lending institution that offers financing and loans to a borrower, for the purpose of acquiring a commodity.
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.
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.
Depository Trust Company (DTC)
DTC is a user-owned securities depository which accepts deposits of
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.
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.
Export Credit Insurance
The granting of insurance to cover the commercial and political risks of selling in foreign markets.
Federal Deposit Insurance Corporation (FDIC)
A federal institution that insures bank deposits.
Federal Insurance Contributions Act of 1935 (FICA)
A federal Act authorizing the government to collect Social Security and Medicare payroll taxes.
company engaged in making loans to individuals or businesses. Unlike a bank, it does not receive deposits from the public.
Guaranteed insurance contract
A contract promising a stated nominal interest rate over some specific time
Health Insurance Portability and Accountability Act of 1996 (HIPAA)
A federal Act expanding upon many of the insurance reforms created by
A corporation that owns enough voting stock in another firm to control management and
insurance that is offered to individuals rather than groups.
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.
The law of averages. The average outcome for many independent trials of an experiment
Loan made by one unit of a corporation to another unit of the same corporation.
Transaction carried out between two units of the same corporation.
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.
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.
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.
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.
limited liability company
an organizational form that is a hybrid of the corporate and partnership organizational
Mortgage (Credit Insurance)
An agreement between a creditor and a borrower, where the creditor has loaned an amount to the borrower for purposes of purchasing a loan secured by a home.
Mortgage Life insurance (Credit Insurance)
Decreasing term life insurance that provides a death benefit amount corresponding to the decreasing amount owed on a mortgage.
A company that retains control over one or more other companies.
Personal Line of credit (Credit Insurance)
A bank's commitment to make loans to a borrower up to a specified maximum during a specific period, usually one year.
A strategy using a leveraged portfolio in the underlying stock to create a synthetic put
Pre-existing medical condition (Credit Insurance)
A medical condition that existed before you became insured. Most policies exclude benefits if the condition is related to the event that triggers a claim if occurs within a certain period (6-12 months) after you became insured.
Premium (Credit Insurance)
Annual or monthly amounts payable, by a client, for a selected insurance coverage to insure debt obligations to their creditors are protected.
Refinancing (Credit Insurance)
Extending the maturity date or increasing the amount of existing debt or both. Also, revising a payment schedule, usually to reduce the monthly payments and often to modify interest charges.
Process in which the risk of potential loss is shared between two or more insurers.
an individual or firm engaged in a high or moderate degree of conversion that results in service output
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.
Strike Insurance (Credit Insurance)
Coverage that can pay down your debt should you become unemployed due to a legal strike in your place of work. The payment is made to your creditors to reduce your debt owing.
A company that is controlled by another company through ownership
Provides a death benefit only, no build-up of cash value.
Term life insurance
A contract that provides a death benefit but no cash build-up or investment component.
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.
Terminal Illness Insurance (Credit Insurance)
Coverage that provides a lump-sum payment should you become terminally ill. The payment is made to your creditors to pay off your debt owing.
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