A
Accrued interest - Interest that has been earned but not received.
Actuary - a mathematician in the insurance field. Responsible for calculating premiums, developing plans and defining underwriting risk.
Accumulation plan - An arrangement which enables an investor to purchase mutual fund shares regularly in large or small amounts.
Agent - a licensed individual who represents several insurance companies and sells their products.
Annual Report - A financial report sent yearly to a publicly held firm's shareholders. This report must be audited by independent auditors.
Annuitant - An individual who purchases an annuity and will receive payments from that annuity.
Annuity - A contract that guarantees a series of payments in exchange for a lump sum investment.
Ask price - A proposal to sell a specific quantity of securities at a named price.
Assets - What a firm or individual owns.
B
Back-end load - A sales charge levied when mutual fund units are redeemed.
Balance sheet - A financial statement showing the nature and amount of a company's assets, liabilities and shareholders' equity.
Balanced fund - A mutual fund which has an investment policy of "balancing" its portfolio generally by including bonds and shares in varying proportions influenced by the fund's investment outlook.
Bear market - A declining financial market.
Benefit - reimbursement for covered medical expenses as specified by the plan.
Beneficiary - The person(s) named in the policy to receive the life insurance proceeds upon the death of the insured.
Bond - A long-term debt instrument with the promise to pay a specified amount of interest and to return the principal amount on a specified maturity date.
Bond fund - A mutual fund whose portfolio consists primarily of bonds.
Book value - The value of net assets that belong to a company's shareholders, as stated on the balance sheet.
Brand-name drug - prescription drug which is marketed with a specific brand name by the company that manufactures it. May cost insured individuals a higher co-pay than generic drugs on some health plans. (see "generic.")
Broker (Investment)- An agent who handles the public's orders to buy and sell securities, commodities, or other property. A commission is generally charged for this service.
Broker (Insurance) - a licensed insurance professional who obtains multiple quotes and plan information in the interest of his client.
Bull market - An advancing financial market.
Buying on margin - Purchasing a security partly with borrowed money.
C
Capital - Generally, the money or property used in a business. The term is also used to apply to cash in reserve, savings, or other property of value.
Capital cost allowance - A taxation term, equivalent to depreciation, that makes allowance for the wearing away of a fixed asset.
Capital loss - The loss that results when a capital asset is sold for less than its purchase price.
Capital stock - All ownership shares of a company, both common and preferred.
Capitalization - The total amount of all securities, including long-term debt, common and preferred stock, issued by a company.
Carrier - insurance company.
Cash equivalent - Assets that can be quickly converted to cash. These include receivables, Treasury bills, short-term commercial paper and short-term municipal and corporate bonds and notes.
Cash (Surrender) Value - The amount that is available in cash for loans and that may be available for withdrawals. Accessing Cash Surrender Value may reduce the death benefit and may increase the risk of lapse.
Certificate - A document providing evidence of ownership of a security such as a stock or bond.
Certificate Booklet - the plan agreement. A printed description of the benefits and coverage provisions intended to explain the contractual arrangement between the carrier and the insured group or individual. May also be referred to as a policy booklet.
Claim - a formal request made by an insured person for the benefits provided by a policy.
Closed-end fund - A fund company that issues a fixed number of shares. Its shares are not redeemable, but are bought and sold on stock exchanges or the over-the-counter market.
Co-insurance - the percentage of covered expenses an insured individual shares with the carrier. (i.e., for an 80/20 plan, the health plan member's co-insurance is 20%.) If applicable, co-insurance applies after the insured pays the deductible and is only required up to the plan's stop loss amount. (see "stop loss.")
Compounding - The process by which income is earned on income that has previously been earned. The end value of the investment includes both the original amount invested and the reinvested income.
Consumer price index - A statistical device that measures the change in the cost of living for consumers. It is used to illustrate the extent that prices have risen or the amount of inflation that has taken place.
Contractual plan - An arrangement whereby an investor contracts to purchase a given amount of a security by a certain date and agrees to make partial payments at specified intervals.
Convertible - A security that can be exchanged for another. Bonds or preferred shares are often convertible into common shares of the same company.
Convertible Term Insurance - Term insurance which can be exchanged (converted), at the option of the policyowner and without evidence of insurability, for a permanent insurance policy.
Co-pay/co-payment - the amount an insured individual must pay toward the cost of a particular benefit. For example, a plan might require a $10 co-pay for each doctor's office visit.
Corporation - A legal business entity created under federal or provincial statutes. Because the corporation is a separate entity from its owners, shareholders have no legal liability for its debts.
Credit for prior coverage - any pre-existing condition waiting period met under an employer's prior (qualifying) coverage will be credited to the current plan, if any interruption of coverage between the new and prior plans meets state guidelines.
Current asset - An asset that could be converted into cash within 12 months.
Current liability - A liability that has to be paid within 12 months.
Current yield - The annual rate of return that an investor purchasing a security at its market price would realize. This is the annual income from a security divided by the current price of the security. It is also known as the return on investment.
D
Debt - An obligation to repay a sum of principal, plus interest. In corporate terms, debt often refers to bonds or similar securities.
Deductible - the dollar amount an insured individual must pay for covered expenses during a calendar year before the plan begins paying co-insurance benefits.
Deferral - A form of tax sheltering that results from an investment that offers deductions during the investor's high-income years, and/or postpones capital gains or other income until after retirement or during another period when the income level is expected to change.
Deferred Profit Sharing Plan - A plan that allows an employer to set aside a portion of company profits from the benefit of employees. A corporation makes a contribution to the plan on behalf of an employee.
Defined benefit pension plan - A registered pension plan that guarantees a specific income at retirement, based on earnings and the number of years worked.
Defined contribution pension plan - a registered pension plan that does not promise an employee a specified benefit upon retirement. Benefits depend on the performance of investments made with contributions to the plan.
Denomination - The principal amount, or value at maturity, or a debt obligation. Also known as the par value or face value.
Dependents - usually the spouse and unmarried children (adopted, step or natural) of an employee.
Depreciation - Charges made against earnings to write off the cost of a fixed asset over its estimated useful life. Depreciation does not represent a cash outlay. It is a bookkeeping entry representing the decline in value of an asset that is wearing out.
Distributions - Payments to investors by a mutual fund from income or from profit realized from sales of securities.
Diversification - The investment in a number of different securities. This reduces the risks inherent in investing. Diversification may be among types of securities, companies, industries or geographic locations.
Dividend (Life Insurance) - A return of part of the premium on participating insurance that is based on the insurer's investment, mortality, and expense experience. Dividends are not guaranteed.
Dividend (Investments) - A per-share payment designated by a company's board of directors to be distributed among shareholders. For preferred shares, it is generally a fixed amount. For common shares, the dividend varies with the fortunes of the company and the amount of cash on hand. It may be omitted if business is poor or the directors withhold earnings to invest in plant and equipment.
Dividend fund - A mutual fund that invests in common shares of senior Canadian corporations with a history of regular dividend payments at above average rates, as well as preferred shares.
Dividend tax credit - An income tax credit available to investors who earn dividend income through investments in the shares of Canadian Corporations.
Dollar cost averaging - A principle of investing which entails the use of equal amounts for investment at regular intervals in the hope of reducing average share cost by acquiring more shares in periods of lower securities prices and fewer shares in periods of higher securities prices.
E
Earned income - For tax purposes, earned income is generally the money made by an individual from employment. It also includes some taxable benefits. Earned income is used as the basis for calculating RRSP maximum contribution limits.
Earnings statement - A financial statement showing the income and expenses of a business over a period of time. Also known as an income statement or profit and loss statement.
Effective date - the date requested by an employer for insurance coverage to begin.
Equity - The net worth of a company. This represents the ownership interest of the shareholders (common and preferred) of a company. For this reason, shares are often known as equities.
Equity fund - A mutual fund whose portfolio consists primarily of common stocks.
Exclusions - expenses which are not covered under an insurance plan. These are listed in the Certificate Booklet.
Explanation of Benefits (EOB) - a carrier's written response to a claim for benefits. Sometimes accompanied by a benefits check.
F
Face Amount - The amount stated on the face of the policy that will be paid in case of death. It does not include additional amounts payable under accidental death or other special provisions, or acquired through the application of policy dividends.
Face value - The principal amount, or value at maturity, of a debt obligation. Also known as the par value or denomination.
Fair market value - The price a willing buyer would pay a willing seller if neither was under any compulsion to buy or sell. The standard at which property is valued for a deemed disposition.
Fiduciary - An individual or institution occupying a position of trust. An executor, administrator or trustee. Hence, "fiduciary" duties.
Fiscal policy - The policy pursued by government to manage the economy through its spending and taxation powers.
Fixed assets - Assets of a long-term nature, such as land and buildings.
Fixed dollar withdrawal plan - A plan that provides the mutual fund investor with fixed-dollar payments at specified intervals, usually monthly or quarterly.
Fixed liability - Any corporate liability that will not mature within the following fiscal period. For example, long-term mortgages or outstanding bonds.
Fixed income investments - Investments that generate a fixed amount of income that does not vary over the life of the investment.
Fixed-period withdrawal plan - A plan through which the mutual fund investor's holdings are fully depleted through regular withdrawals over a set period of time. A specific amount of capital, together with accrued income, is systematically exhausted.
Front-end load - A sales charge levied on the purchase of mutual fund units.
Fundamental analysis - A method of evaluating the future prospects of a company by analyzing its financial statements. It may also involve interviewing the management of the company.
G
Generic drug - the chemical equivalent to a "brand name drug." These drugs cost less, and the savings is passed onto health plan members in the form of a lower co-pay.
Group insurance - an insurance contract made with an employer or other entity that covers individuals in the group.
Guaranteed investment certificates - A deposit instrument paying a predetermined rate of interest for a specified term, available from banks, trust companies and other financial institutions.
H
Home Buyer’s Plan (HBP) - The Home Buyers' Plan (HBP) allows you to withdraw up to $20,000 from RRSPs to buy or build a qualifying home for yourself (as a first-time home buyer) or for someone who is related to you and is disabled. You may still be considered a first-time home buyer if you own a rental property or if you have not recently owned a home.
Only the individual who is entitled to receive payments from the RRSP (the annuitant) can withdraw funds from an RRSP. You can make withdrawals from more than one RRSP as long as you are the annuitant (plan owner) of each RRSP.
I
ID card/identification card - card given to insured individuals which advises medical providers that a patient is covered by a particular health insurance plan.
Income funds - Mutual funds that invest primarily in fixed-income securities such as bonds, mortgages and preferred shares. Their primary objective is to produce income for investors, while preserving capital.
Index fund - A mutual fund that matches its portfolio to that of a specific financial market index, with the objective of duplicating the general performance of the market in which it invests.
Inflation - A condition of increasing prices. In Canada, inflation is generally measured by the Consumer Price Index.
Insurability - Acceptability to the company of an applicant for insurance.
Insured or Insured Life - The person on whose life the policy is issued.
Interest - Payments made by a borrower to a lender for the use of the lender's money. A corporation pays interest on bonds to its bondholders.
International fund - mutual fund that invests in securities of a number of countries.
Investment adviser - Investment counsel to a mutual fund. Also may be the manager of a mutual fund.
Investment company - A corporation or trust whose primary purpose is to invest the funds of its shareholders.
Investment dealer - A securities firm.
Investment fund - A term generally interchangeable with "mutual fund."
Issued shares - The number of securities of a company outstanding. This may be equal to or less than the number of shares a company is authorized to issue.
L
Letter of intent - An agreement whereby an investor agrees to make a series of purchases of mutual fund units.
Level Premium (Life Insurance) - life insurance for which the premium remains the same from year to year. The premium is normally more than the actual cost of protection during the earlier years of the policy and less than the actual cost in the later years. The building of a reserve is a natural result of level premiums. The payments in the early years, together with the interest that is to be earned, serves to balance out the underpayment of the later years.
Leverage - The financial advantage of an investment that controls property of greater value than the cash invested. Leverage is usually achieved through the use of borrowed money.
Liabilities - All debts or amounts owing by a company in the form of accounts payable, loans, mortgages and long-term debts.
Life annuity - An annuity under which payments are guaranteed for the life of the annuitant.
Life expectancy adjusted withdrawal plan - A plan through which a mutual fund investor's holdings are fully depleted while providing maximum periodic income over the investor's lifetime.
Lifelong Learning Plan (LLP) - The Lifelong Learning Plan (LLP) allows you to withdraw amounts from RRSPs to finance training or education for you or your spouse or common-law partner. You cannot use the RRSP funds to finance a child's education, such as your child or the child of your spouse or common-law partner.
Lifetime maximum benefit - the maximum amount a health plan will pay in benefits to an insured individual.
Limitations - a restriction on the amount of benefits paid out for a particular covered expense.
Liquidity - Refers to the ease with which an investment may be converted to cash at a reasonable price.
Load - Commissions charged to holders of mutual fund units. (See "sales charge".)
Loan (Policy Loan) - A loan made by a life insurance company from its general funds to a policyowner on the security of the cash value of a policy.
Long-term debt - Debt that becomes due after more than one year.
Long-term disability (LTD) - insurance which pays employees a percentage of monthly earnings in the event of disability.
M
Management company - The entity within a mutual fund complex responsible for the investment of the fund's portfolio and/or the administration of the fund. It is compensated on a percentage of the fund's total assets.
Management expense ratio - A measure of the total costs of operating a fund as a percentage of average total assets.
Management fee - The sum paid to the investment company's adviser or manager for supervising its portfolio and administering its operations.
Margin - An investor's equity in the securities in his or her account. The margin purchaser puts up a portion of the value of the securities, borrowing the remainder from the investment dealer.
Marginal tax rate - The rate of tax on the last dollar of taxable income.
Market index - A vehicle used to denote trends in securities markets. The most popular in Canada is the Toronto Stock Exchange 300 Composite Index (TSE 300).
Market price - In the case of a security, market price is usually considered the last reported price at which the stock or bond is sold.
Maturity - The date at which a loan or bond or debenture comes due and must be redeemed or paid off.
Money market - A sector of the capital market where short term obligations such as Treasury bills, commercial paper and bankers' acceptances are bought and sold.
Money market fund - A type of mutual fund that invests primarily in treasury bills and other low-risk, short-term investments.
Money purchase pension plan - Another term for defined contribution pension plan.
Mortgage fund - A mutual fund that invests in mortgages. Portfolios of mortgage funds usually consist of first mortgages on Canadian residential property, although some funds alsoinvest in commercial mortgages.
Mortgage-backed securities - Certificates that represent ownership in a pool of mortgages. The holders of these securities receive regular payments of principal and interest.
Mutual fund - An investment entity that pools shareholder or unitholder funds and invests in various securities. The units or shares are redeemable by the fund on demand by the investor. The value of the underlying assets of the fund influences the current price of units.
N
Net asset value - The value of all the holdings of a mutual fund, less the fund's liabilities.
Net asset value per share - Net asset value of a mutual fund divided by the number of shares or units outstanding. This represents the base value of a share of unit of a fund and is commonly abbreviated to NAVPS.
No-load fund - A mutual fund that does not charge a fee for buying or selling its shares.
O
Open-end fund - An open-end mutual fund continuously issues and redeems units, so the number of units outstanding varies from day to day. Most mutual funds are open-ended.
Out-of-pocket maximum - the total of an insured individual's co-insurance payments and co-payments.
P
Paid-up Insurance - Insurance that will remain in force with no need to pay additional premiums.
Participating Policy - A life insurance policy that is eligible for the payment of dividends by the insurer (see also "Dividend".)
Pension adjustment - An amount that reduces the allowable contribution limit to an RRSP based on the benefits earned from the employee's pension plan or deferred profit sharing plan.
Pension plan - A formal arrangement through which the employer, and in most cases the employee, contribute to a fund to provide the employee with a lifetime income after retirement.
Permanent life insurance - Life insurance coverage for which the policyholder pays an annual premium, generally for the life of the insured. This type of policy features a savings component, known as the cash surrender value.
Plan administration - overseeing the details and routine activities of installing and running a health plan, such as answering questions, enrolling new individuals for coverage, billing and collecting premiums, etc.
Policyowner - The person who owns a life insurance policy. This is usually the insured person, but it may also be a relative of the insured, a partnership or a corporation.
Portfolio - All the securities which an investment company or an individual investor owns.
Pre-certification - an insurance company requirement that an insured obtain pre-approval before being admitted to a hospital or receiving certain kinds of treatment.
Pre-existing condition - an illness, injury or condition for which the insured individual received medical advice, treatment, services or supplies; had diagnostic tests done or recommended; had medicines prescribed or recommended; or had symptoms of typically within 12 months (time periods may vary depending on state laws) prior to the effective date of insurance coverage.
Preferred share - An ownership security, senior to the common stock of a corporation, with preferred claim on assets in case of liquidation and a specified annual dividend.
Premium -The amount by which a bond's selling price exceeds its face value. Also, the amounts paid to keep an insurance policy in force.
Premiums (Group Insurance) - payments to an insurance company providing coverage.
Present value - The current worth of an amount to be received in the future. In the case of an annuity, present value is the current worth of a series of equal payments to be made in the future.
Principal - The person for whom a broker executes an order, or a dealer buying or selling for his or her own account. Also, an individual's capital or the face amount of a bond.
Prospectus - The document by which a corporation or other legal entity offers a new issue of securities to the public.
Provider - any person or entity providing health care services, including hospitals, physicians, home health agencies and nursing homes.
R
Ratio withdrawal plan - A type of mutual fund withdrawal plan that provides investors with an income based on a percentage of the value of units held.
Referral - within many managed care plans, transfer to specialty physician or specialty care by a primary care physician.
Registered Education Savings Plan (RESP) - A plan that enables a contributor, on a tax deferral basis, to accumulate assets on behalf of a beneficiary to pay for a post secondary education.
Registered Retirement Income Fund (RRIF) - A maturity option available for RRSP assets to provide a stream of income at retirement.
Registered Retirement Savings Plan (RRSP) - A retirement savings plan to hold amounts deducted from taxable income, within certain limits, in a tax deferred state. There are various investment options and a tax deferral on investment income and gains. Available to individuals to and including 69 years of age, but must be collapsed by the end of the year in which the holder turns 69 years of age.
Renewable Term Insurance - Term insurance which can be renewed at the end of the term, at the option of the policyowner and without evidence of insurability, for a limited number of successive terms. The rates generally increase at each renewal as the age of the insured increases.
Retained earnings - The accumulated profits of a company. These may or may not be reinvested in the business.
Rider - a modification to a Certificate of Insurance regarding clauses and provisions of a policy. A rider usually adds or excludes coverage.
Risk - The possibility of loss; the uncertainty of future returns.
S
Sales charge - In the case of mutual funds, these are commissions charged to holder of fund units, usually based on the purchase or redemption price. Sales charges are also known as "loads."
Securities Act - Provincial legislation regulating the underwriting, distribution and sale of securities.
Shares - A document signifying part ownership in a company. The terms "share" and "stock" are often used interchangeably.
Shareholders' equity - The amount of a corporation's assets belonging to its shareholders (both common and preferred) after allowance for any prior claim.
Simplified prospectus - An abbreviated and simplified prospectus distributed by mutual funds to purchasers and potential purchasers of units or shares (see prospectus).
Specialty fund - A mutual fund that concentrates its investments on a specific industrial or economic sector or a defined geographical area.
Stop-loss - the dollar amount of claims filed for eligible expenses at which the insurance begins to pay at 100% per insured individual. Stop-loss is reached when an insured individual has paid the deductible and reached the out-of-pocket maximum amount of co-insurance.
Systematic withdrawal plan - Plans offered by mutual fund companies that allow unitholders to receive payment from their investment at regular intervals.
T
Tax credit - An income tax credit that directly reduces theamount of income tax paid by offsetting other income tax liabilities.
Tax deduction - A reduction of total income before the amount of income tax payable is calculated.
Technical analysis - A method of evaluating future security prices and market directions based on statistical analysis of variables such as trading volume, price changes, etc., to identify patterns.
Term insurance - Temporary life insurance that covers the policyholder for a specific time. It does not build up cash value and where the premium normally increases as the insured gets older.
Term to 90 annuity - An annuity that pays a fixed amount each year until it is exhausted in the year that the annuitant turns 90.
Third Party Administrator (TPA) - An organization responsible for marketing and administering small group and individual health plans. This includes collecting premiums, paying claims, providing administrative services and promoting products.
Trust - An instrument placing ownership of property in the name of one person, called a trustee, to be held by the trustee for the use and benefit of some other person.
U
Underwriter - entity that assumes responsibility for the risk, issues insurance policies and receives premiums.
Universal life insurance - A life insurance term policy that is renewed each year and which has both an insurance component and an investment component. The investment component invests excess premiums and generates returns to the policyholder.
V
Variable life annuity - An annuity providing a fluctuating level of payments, depending on the performance of its underlying investments.
Vesting - In pension terms, the right of an employee to all or part of the employer's contributions, whether in the form of cash or as a deferred pension.
Voluntary accumulation plan - A plan offered by mutual fund companies whereby an investor agrees to invest a predetermined amount on a regular basis.
W
Waiver of coverage - a section on the enrollment form which states that an employee was offered insurance coverage but opted to waive this coverage.
Whole Life Insurance - A basic type of permanent life insurance which can provide lifetime protection at a level premium. Premiums must generally be paid for as long as the policy is in force.
Worker's Compensation Insurance - insurance coverage for work-related illness and injury. All states require employers to carry this insurance.
Y
Yield - Annual rate of return received on investments, usually expressed as a percentage of the market price of the security.
