Beneficiary:
The person named in the policy to receive the insurance proceeds upon the death of the insured.

Cash Surrender Value (CSV):
The cash value paid to the policy owner if he or she cancels the policy or withdraws some funds from the policy (partial surrender). For example, the cash surrender value for a universal life policy is the total account value less current applicable surrender charges, any market value adjustments, withdrawal fees and outstanding loans. If the policy is surrendered or partially surrendered for its cash value, there may be tax implications.

Convertible Term Insurance:
A type of term insurance that allows the policy owner to change the term insurance policy to a permanent life policy without providing evidence of insurability. The premium amount for the new permanent policy is usually based on the age of the insured at the time of the conversion.

Cost of Insurance (COI):
COI is the insurance charge within a universal life policy (usually deducted monthly). These charges are typically based on guaranteed rates per $1,000 of insurance and vary by age, sex, smoking status, medical rating and the amount of insurance.

Death Benefit:
The amount of money paid or due to be paid when a person insured under a life
Insurance policy dies.

Decreasing Term Insurance:
A type of term life insurance in which the amount of coverage decreases during the term of coverage.

Dividends:
See policy owner dividends

Evidence of Insurability:
Medical, financial and lifestyle information that is needed as part of the underwriting process to assess the applicant’s risk in approving the life insurance application. The policy owner, the insured person or both may be asked to provide this information depending on the coverage’s selected.

Increasing Death Benefit:
A death benefit option within a universal life policy where the total (investment) account value is added to the basic coverage to determine the basic death benefit.
Insured person: The person on whom the premium and coverage is based. The application for coverage is filled out based on this person. This person may or may not be the policy owner.

Investment Options:
Universal life policies typically offer a range of investment account options based on short-term, long-term and index-linked investments. Index-linked investment options are determined in relation to the changes in the values of the underlying index and may be either positive or negative depending on actual performance. Generally, you can change from one investment option to another when you want, but you may be subject to a cost for transferring the funds.

Lapse:
The termination of an insurance policy because premiums were not paid when they came due and there were insufficient funds available within the policy to keep the policy in force. Therefore, the policy coverage
is suspended and could be permanently terminated if unpaid premiums are not paid within an allotted time.

Level Death Benefit:
A universal life insurance death benefit option in which the death benefit of the policy remains level. The insurance amount decreases as the total account value in the policy increases. The account value in the policy is used to reduce the cost of insurance.

Non-participating (non-par):
A type of life insurance policy or annuity in which the policy owner does not receive policy owner dividends. Also called a non-par policy.

Participating Life Insurance:
A type of permanent life insurance that is eligible for dividends which are dependent on a variety of factors, including investment returns, mortality and expense experience.

Permanent Insurance:
Type of life insurance product intended to provide protection for the lifetime of the insured and may be participating or non-participating. Most permanent products have a cash surrender value at some point.

Policy Owner:
The person who owns the policy. Unless the policy is assigned or has an irrevocable beneficiary, this person has the ability to request changes to the policy.

Policy Owner Dividends:
If the actual investment returns, mortality and expense experience in the par account are collectively more favourable than the assumptions supporting the guaranteed values, earnings are generated in the par account that become part of the par account surplus (retained earnings). Each year, the company distributes a portion of the earnings to policy owner as approved by the Board of Directors.

Policy Illustration:
A presentation which is used to help explain how an insurance product works and should clearly show what is guaranteed and what is not guaranteed.

Policy Loan:
A loan from an insurance company to a policy owner that is secured by the cash surrender value of a life insurance policy. You pay an interest charge for the use of this money. The net cost of the loan is the difference between what your policy is earning compared to the loan interest charged. Taking a policy loan may
create taxable income and repaying a loan may create a tax credit.

Premium Amount:
The payment you pay in exchange for insurance coverage.

Premium Loan:
This is often the standard default option to prevent a policy from lapsing in a permanent, participating policy that has a cash surrender value. It is initiated when a premium payment is missed and there is a cash surrender value to cover the amount of the premium. It is intended to keep a policy in force as long as the policy cash surrender value is adequate to cover the cost of the loan.

Premium Schedule:
This is the amount of premium that you elect to pay within the parameters specified in the contract. Some policies provide considerable flexibility in selecting a premium schedule. For others, the premium schedule is specified in the contract – guaranteed premium levels are generally specified in the contract.

Renewable:
Most term policies are renewable or can be continued without providing evidence of insurability until the expiry date of the policy. There are non-renewable and nonconvertible term policies sold in the marketplace, so these features should be verified.

Risk Tolerance:
Your ability or willingness to endure declines in the value of your policy investments or increases in premiums. A financial security advisor should assess your risk tolerance prior to recommending a life insurance product.

Term Insurance:
Life insurance that provides coverage for a specified period of time. The premium will generally increase at each renewal. There is generally no cash surrender value associated with term insurance.

Total Account Value:
The total of all the investment accounts within a universal life policy before considering surrender charges, market value adjustments and withdrawal fees.

Universal Life:
A type of permanent insurance protection that has two components: insurance, also called the insurance amount, and an investment component which provides the cash or total account value. It offers greater choice and flexibility than traditional permanent insurance in terms of paying premiums and changing the amount of the basic death benefit. However, it also requires more decision making on the part of the policy owner and there are more fluctuation in the returns on the investment component. Universal life also offers choices in type of death benefit and cost of insurance.

Whole Life Insurance:
See permanent insurance.

Withdrawals:
Withdrawals may be made from the cash surrender values of the policy, but are subject to tax under the rules set out by the Canada Customs and Revenue Agency. Cash withdrawals will generally reduce the total death benefit. A cash withdrawal is different from a policy loan in that no interest is charged on the amount withdrawn and the growth of the cash surrender value is hindered by the amount withdrawn.

Yearly Renewable Term (YRT):
Insurance Term life insurance that gives the policy owner the right to continue the coverage at the end of each year. This renewal right continues for a specified number of years or until the insured reaches the age specified in the contract. Also called annually renewable term (ART) insurance. The premium will generally increase every year.

Long-term Care (LTC):
Long-term care insurance is relatively new to the Canadian marketplace. It is designed to provide financial assistance for the insured for health and personal care while they are residing in long-term residential care facility. Coverage can even be extended to provide care in your own home and provide assistance with the activities of daily living.

Critical Illness Protection:
Critical illness insurance provides a lump-sum benefit to an insured person on the diagnosis of a covered medical condition. The benefit can be used to pay for on- going care, home modification to accommodate the condition, access to foreign medical treatment that may not be available at home, or for any other purpose the insured deems to be appropriate. Many Critical Illness plans offer riders such as return of premium, therefore if you never claim you will receive your premium dollars back.