Full List of Abbreviations and Terms



AACI Accredited Appraiser Canadian Institute

ACAIQ Association des courtiers et agents immobiliers du Québec

ACB Adjusted Cost Base

ACB Adjusted Cost Basis

ADL Activities of Daily Living

AMP Accredited Mortgage Professional

CCRA Canada Customs and Revenue Agency

CIMBL Canadian Institute of Mortgage Brokers and Lenders

CLEAR Canadian Loss Experience Automobile Rating System

CMBs Canada Mortgage Bonds

CMHC Canada Mortgage and Housing Corporation

COLA Cost of Living Adjustment

CompCorp Canadian Life and Health Insurance Association Compensation Corporation

CPI Consumer Price Index

CPP Canada Pension Plan

CRA Canadian Residential Appraiser

CSV Cash Surrender Value

DMC Donatio mortis causa (лат.)

DPSP Deferred Profit Sharing Plan

EC Extended Coverage Endorsement

EFT Electronic Funds Transfer

EI Employment Insurance

FMV Fair Market Value

FPR Foreign Property Rule

GIS Guaranteed Income Supplement

IBC Insurance Bureau of Canada

LIF Life Income Fund

LIFE Life Income Plan

LIRA Locked-in Retired Account

LRIF Locked-in Retirement Income Fund

LTC Long-term Care Insurance

LTV Loan-to-Value Ration

MBS Mortgage-Backed Securities

METC Medical Expenses Tax Credit

MIB Medical Information Bureau

MRTC Marginal Rate of Tax Credit

NCPI Net Cost of Pure Insurance

NHA National Housing Act

OAS Old Age Security

OSFI Office of the Superintendent of Financial Institutions

P & C Property and Casualty

PA Pension Adjustment

PACICC Property and Casualty Insurance Compensation Corporation

PHSP Private Health Services Plan

PSPA Past Service Pension Adjustment

REAVS Real Estate Automated Valuation System

RRIF Registered Retirement Income Fund

RRSP Registered Retirement Savings Plan

RRSP Registered Retirement Savings Plan

TDS Total Debt Service Ratio

UCC Undepreciated Capital Cost

UL Office of the Superintendent of Financial Institutions

ULICA Uniform Life Insurance Companies Act

WC Workers’ Compensation

WCB Workers’ Compensation Board

WSIB Workplace Safety and Insurance Board

YBE Year’s Basic Exemption

YMPE Yearly Maximum Pensionable Earnings



Accelerated Weekly Payment: a mortgage repayment plan in which the borrower makes 52 payments per year instead of 48 which would be required if the payment plan called for four payments per month. The extra four payments each year have the effect of “accelerating” the repayment of the mortgage.

Acceleration Clause: a clause in a mortgage which provides that where default has occurred in making any mortgage payment, the outstanding mortgage amount becomes due.

Acceptance: the offeree’s consent to enter into a contract and to be bound by the terms of the offer.

Accidental Death: a provision in many insurance policies that doubles the payout if one dies from an accident instead of an illness. Also called Double Indemnity.

Account Value: of a universal life plan is the sum of the gross (before surrender charges) value of all of the investment accounts within the policy. This includes investment income and allows for the current month’s deductions and expenses.

Accredited Appraiser Canadian Institute (AACI): the highest level of designation bestowed by the Appraisal Institute of Canada. It allows the holder to conduct appraisals and consultations on various types of property.

Accredited Mortgage Professional (AMP): AMP is Canada’s only national designation for mortgage professionals. The AMP designation sets a single national proficiency standard for Canada’s mortgage professionals and is issued by the Canadian Institute of Mortgage Brokers and Lenders (CIMBL).

Accrued Interest: the interest charged for the period of time that has elapsed since the last interest date.

Accumulating Fund: see reserve value.

Accumulation Annuity: an annuity whereby a single premium, annual premiums or other varying premiums are accumulated for the purpose of providing a lump sum at some point in the future. The policy holder then has the option of rolling the lump sum into an annuity, or receiving the cash surrender value.

Activities of Daily Living (ADL): five necessary daily functions, which include eating, bathing, dressing, toilet use and transferring position (e.g., getting in and out of bed or a chair.)

Adjustable Rate Mortgage: see Variable Rate Mortgage.

Adjusted Cost Base (ACB): the price paid for a property, plus the expenses incurred to buy it. Expenses include commissions, legal fees, additions and taxes. The actual cost to the taxpayer adjusted for any of the numerous adjustments in subsections 53(1) and 53(2) of the Income Tax Act.

Adjusted Cost Basis (ACB): the adjusted cost basis of a life insurance policy include 13 factors (ITA 148(9)). Essentially, the ACB is the sum of the following factors: Premiums paid under the policy less dividends; Interest paid on a policy loan if it was not deductible in computing income; The amounts included in income from a none-exempt policy subject to the income accrual rules, less the net cost of pure insurance.

Adjusted Net Capital Loss: the amount of a net capital loss adjusted to reflect the capital gains inclusion rate.

Adjuster: the person responsible for investigating a claim to determine the facts relating to the occurrence and to the extent the claim is covered by insurance. The adjuster also attempts to reach an agreement with the people involved on the amount of the loss and extent of their responsibility.

Adjustment on Sale: a pro-rated division and distribution of prepaid or accrued taxes, prepaid insurance premiums, prepaid rents and other income and expenses. This adjustment usually occurs when a property is sold and is the manner of determining the amounts due to and from the parties.

Administration Fee: every life insurance policy contains annual administration fee, usually a flat fee of between $30 to $75 for each policy that may be charged separately or included in the premiums. An administration fee is a separate charge for having an interest in a seg fund. Some seg funds charge an administration fee of $10 per month. The amount varies widely.

Administrator: in an intestacy, an individual who has been appointed by the courts to administer the estate of the deceased, with duties similar to an executor or personal representative.

Affidavit: a statement or declaration in writing and sworn to or affirmed before some officer who is authorized to administer an oath or affirmation, such as a notary public, or commissioner of oaths.

Age of Majority: the age at which a person is able to sign contracts, etc. This is 18 years in Ontario, Alberta, Manitoba, Prince Edward Island and Saskatchewan. In British Columbia, New Brunswick, Newfoundland, Nova Scotia, the Yukon and the Northwest Territories, the of majority is 19 years.

Agency: an agency relationship is created when one person, called the principal, authorizes another person, called the agent, to act on behalf of and subject to the control of the principal.

Agent: an individual who acts on behalf of an insurance company and collects commission on policies sold. The agent is your client’s contact with the life insurance company and can assist your client in designing a life insurance package to meet his needs.

Agent (mortgage): one who is authorized to represent and act on behalf of another person or business, the principal in transactions involving a third party. Unlike an employee who merely works for the principal, an agent works in place of the principal.

Agreement of Purchase and Sale: a written agreement between vendor and purchaser in which the purchaser agrees to buy certain real property and the vendor agrees to sell upon terms and conditions as set out in that agreement.

All Perils Automobile Insurance: a combination of collision and comprehensive automobile insurance that has a common deductible.

Allowable Capital Loss: a capital loss adjusted to reflect the capital gains inclusion rate.

Allowance: another supplement to ensure that retired Canadians do not live in poverty. Under this provision, a pensioner’s spouse or common–law partner, widow or widower aged 60- to 64 who has resided in Canada for at least 10 years since reaching age 18 ( and taking into account reciprocal agreement with other countries), and who qualifies under the net income test, is eligible for a monthly allowance. Almost 93,000 people received an Allowance in 2000.

Amending Agreement: an agreement between the lender and borrower by the lender in which the terms of the registered mortgage are changed.

Amortization: this refers to the process of paying off a mortgage in regular payments composed of both interest and principal.

Amortization Period: the time over which the mortgage is to be completely repaid, assuming equal payments. This means that when looking, for example, at a mortgage with a 25-year amortization period, it would take 25 years to reduce the balance to zero, if all regular payments were made on time and the terms (payment, interest rate) remained the same.

Amortization Schedule: the monthly payment includes interest and principal, the portions of which change with each payment. Calculation of these two components of each payment and can be prepared with either a financial calculator or computer software.

Amortized Mortgage: a mortgage requiring regular payments which include both principal and interest sufficient to fully repay the loan by maturity.

Anniversary Date: the same date in each calendar year during the term of the mortgage. The first anniversary date occurs one year from the date interest is adjusted and the periodic repayments begin.

Annuitant: the recipient or beneficiary of an annuity. An annuity contract can have more than one annuitant.

Annuity: a series of income payments or receipts made yearly or at other regular intervals.

Annuity Contract: an agreement with a financial institution or life insurance company to provide the annuitant with an annuity. The owner of the annuity contract may or may not be the annuitant.

Appraisal: an independent, unbiased report that uses various analysis techniques and market research to determine the realistic value of a property.

Appraisal Report: an independent assessment of a property by a qualified individual. A statement giving an opinion of value of an adequately described property, as at a specific date and supported by pertinent data.

Appraiser: an appraiser determines the market value of a house based on its condition and the selling price of comparable houses recently sold in the area. The licensing requirement for real estate appraisers varies from province to province.

Arm’s Length: someone that is no way related to the employer.

Arrears: an overdue payment (in reference to a mortgage for the purposes of this text).

Assessment (assessed value): a value placed upon property (land and buildings) for taxation purposes.

Assets: goods of value, either tangible or not, that a borrower or business owns.

Assignee: one who takes the rights or title or another by assignment.

Assignment: the legal transfer by the policyowner of the benefits of the policy. Also called Collateral Assignment.

Assignment (mortgage): the act of transferring rights held by one party, the assignor, to another party, the assignee.

Assignment of CPP Retirement Pensions: an income splitting process whereby spouses or common-law partners choose to share their Canada Pension Plan retirement pensions with each other to minimize their tax burden.

Assignment of Lease: the absolute or conditional transfer of the rights of either party to a lease.

Assignment of Mortgage: the transfer of ownership of a mortgage from one party to another.

Assignment of Rentals: a contract in which the borrower grants the lender the right to collect future rents on a given occurrence, normally default. This assignment is normally taken as additional security on rental loans.

Assignor: one who transfers or assigns the rights or title to another.


Association des courtiers et agents immobiliers du Québec (ACAIQ): ACAIQ is responsible for administering the Real Estate Brokerage Act and regulations in Québec.

Assumable Mortgage: an existing mortgage that can be taken over (assumed) by the buyer of a property when that property is sold.

Assumption of Mortgage: the act of assuming liability for an existing mortgage on a property by the purchaser of that property. With builders’ loans, the assumption is usually evidenced by written agreement.

Attained Age: the age the life insured has reached at the start of the policy year. The attained age may be based upon the life insured’s nearest or last birthday depending upon the practice of the insurance company.

Attorney: the chosen representative specified in a power of attorney. Also called the proxy or the agent.

Automatic Premium Loan: an option that will automatically pay any premium in default at the end of the grace period. The amount is charged against the cash surrender value as a policy loan provided the premium is not in excess of the policy’s cash surrender value on the due date of the premium.


Balance Sheet: also known as the Statement of Financial Position or Statement of Assets and Liabilities. The Balance Sheet is a listing of the assets, liabilities (debts), and owners’ equity of a business enterprise at a specific point in time. The assets must equal the liabilities plus the owners’ equity.

Balloon Payment: any payment of principal over and above the regular payment.

Bank Act: the Canadian Bank Act regulates all Canadian banking activity conducted through a federally chartered institution. This includes banks, trust companies, loan companies, and insurance companies.

Bank Rate: the rate at which the Bank of Canada charges loans to the chartered banks. This is the rate on which lending institutions base their prime lending rate.

Base Income: equals net income, excluding OAS benefits, of the previous year.

Basic Activities of Daily Living: include perceiving, thinking and remembering, feeding and dressing oneself, speaking, hearing, eliminating and walking. An individual’s ability to perform these activities is markedly restricted only where, even with the use of appropriate devices, medication and therapy, the individual is blind, or unable to perform the activity.

Basic Fire Insurance Policy: a policy that is used as the starting point from which homeowner’s, tenant’s and other personal lines policies are developed.

Basis Point: one one-hundredth of one percent. Used to describe the amount of change in yield in money debt instruments, including mortgages.

Beacon Score: the name given to the credit score published by Equifax. See also Empirica Score.

Beneficiary: the person who is entitled to receive the death benefit upon death of the life insured.

Beneficiary of a Life Insurance Policy: the person to whom the proceeds are payable when the insured dies. The beneficiary may b a named beneficiary, who is an individual identified on the insurance policy as a beneficiary or the beneficiary may be the estate of the life insured with the name of the ultimate beneficiary being specified in the life insured’s will or trust document.

Bequeath: to make a gift of personal property.

Bequest: a declaration made in a will specifying that some or all of the estate assets are to go a specific individual or organization.
Best-earnings Plan: a defined-benefit plan that relates the amount of pension benefit payable at retirement to the best-earnings of an employee’s career (usually over a three to five consecutive year period), as well as his number of years of credited service.

Blanket Mortgage: a single mortgage registered against two or more individual parcels of real property.

Blended Payments: regular equal mortgage payments combining, or blending, interest and principal components in one constant payment.

Blended Rate: the rate that results from the blending of an existing mortgage and a new mortgage with differing interest rates into one consolidated mortgage. The calculation to determine the final rate takes into account both the interest rates and the amount of principal for each of the component loans.

Bona Fide: in good faith, with valuable consideration and with absence of notice of any problems.

Borrowing By-laws: a document providing proof that a corporation has the power to borrow under its company charter.

Breach of Contract: failure, without legal reason, to perform any promise that forms the whole or part of the agreed terms contained in the contract.

Bridge Financing: a loan provided to borrowers to provide financing for purchase, pending closing of the sale of their existing property.

Bridge Loan: a bridge loan is a short-term, high interest loan intended to offset financial hardship until a long-term loan is secured.

Broker: one who acts as a intermediary between parties in a transaction. A broker, for a fee or other consideration, arranges a transaction (a sale) by a seller to the buyer.

Builder’s Loan: a loan designed for borrowers who need financing for construction projects. These differ from normal loans as the funds are received in stages (also known as draws) during the building process to protect the lender from construction abandonment.

Builder’s Risk Insurance: fire and extended coverage insurance for a building under construction. Coverage increases automatically as the construction progresses and terminates at completion.

Building Code: a set of minimum regulations respecting the safety of buildings with reference to public health, fire protections and structural sufficiency.

Building Scheme: a group of restrictive covenants attached to two or more lots. These covenants are set by a vendor or landlord. They detail restrictions for use and are agreed to by the purchasers or tenants as part of the purchase or lease.

Bundle of Rights: legal rights with respect to real estate ownership which include the right to use, sell, lease, enter, or to give away the property, plus the right to refuse to take any of these actions.

Burglary: you are a victim of burglary if someone used force on the structure of your home to gain entry or exit.

Buy Down: a lump sum payment as consideration for the reduction in the interest charged on a loan from that which would normally be charged.

Buy-sell Agreement: a legal contract between the partners of a partnership, among the shareholders of a corporation, or between the shareholders and the corporation, obligating the surviving party or parties to purchase the ownership interest of the deceased. The agreement can specify the purchase either at a fixed price or according to a formula developed at the time the agreement is entered.


Canada Mortgage and Housing Corporation (CMHC): a Crown Corporation which was initially created to administer the National Housing Act and is Canada’s only public sector mortgage insurer. CMHC is charged with administering government housing initiatives and works with community organizations, the private sector, non-profit agencies and all levels of government to help create innovative solutions to today’s housing challenges.

Canada Mortgage Bonds: Canada Mortgage Bonds (CMBs) are similar to Mortgage Backed Securities (MBS) IN THAT Canada Mortgage and Housing Corporation guarantees the timely payment of interest and principal. However, an MBS has a disadvantage to investors since borrowers of the underlying mortgages can make partial or full prepayments of their mortgage principal. While consumers (borrowers) like this flexibility, investors do not like this unpredictability. The Canada Mortgage Bond program eliminates this cash flow uncertainty to investors, as CMHC guarantees both semi-annual interest payments, and the repayment of principal on a specified maturity date.

Canada Pension Plan (CPP): a federal government program designed to provide monthly pensions to contributors in retirement, to disabled contributors and their children, and to the widows, widowers and orphaned children of deceased contributors.

Canadian Institute of Mortgage Brokers and Lenders (CIMBL): CIMBL is the only national organization representing Canada’s mortgage industry and administers the Accredited Mortgage Professional (AMP) designation.

Canadian Life and Health Insurance Association Compensation Corporation (CompCorp): administers the insurance industry’s consumer protection plan. It is a federally incorporated private company funded by the insurance industry. CompCorp insures, within limits, Canadian policyholders against loss of benefits should a member of CompCorp become insolvent and be forced to wind up its affairs. All federally licensed and most provincially incorporated life insurers in Canada are required to be members of CompCorp.

Canadian Residential Appraiser (CRA): this designation is awarded by the Appraisal Institute of Canada and grants those with the designation the right to valuate individual, undeveloped residential sites.

Cancellable: means the insurance company can cancel the policy.

Capital Cost Allowance: a deduction permitted under the Income Tax Act for the cost of a depreciable property that recognizes the decline in value due to depreciation and obsolescence. The annual deduction is calculated based upon the class of property, the rate for that class of property, and either the undepreciated capital cost or the adjusted cost base of the property.

Capital Gain: the excess of the deemed proceeds of disposition of a capital property over its adjusted cost base.

Capital Gains Deduction: a deduction you can claim for the deceased person against taxable capital gains realized from the disposition and deemed disposition of capital property.

Capital Loss: except for depreciable property, the excess of the adjusted cost base of a capital property over the deemed proceeds.

Capital Property: depreciable property, and any property, which, if sold, would result in a capital gain or a capital loss.

Capped Rate Variable Mortgage: a variable rate mortgage on which the lender has set a limit to interest rate increases or decreases.

Career-average Plan: a defined benefit plan that relates the amount of pension benefit payable at retirement to average earnings during an employee’s career, as well as his number of years of credited service.

Carry-forward: a process by which the balance of RRSP contribution room remaining after that year’s contributions may be carried forward to be used in a future calendar year.

Cash Back: a mortgage feature that provides the borrower with cash back, as a percentage of the mortgage principal. It is generally used to cover closing costs.

Cash Surrender Value (CSV): the amount returned to the policy owner when a whole life insurance policy is cancelled. The cash surrender value is equal to the value of the policy reserve less any surrender charge. Also called Cash Value.

Cash Surrender Value (CSV): the equity amount available to the annuitant of a commutable annuity if he decides to surrender the policy back to the provider – depending on the contract it may be the full equity value, or the equity value less a surrender charge.

Cash Value: see Cash Surrender Value (CSV).

Central Bank: a body established by a national government to regulate currency and monetary policy on a national/international level. In Canada, it is the Bank of Canada; in the United States, the Federal Reserve Board; in the U.K., the Bank of England.

Certificate of Occupancy (Permit): a certificate provided by the municipality that a property has been constructed under the authority of the issued building permit, has met the requirements of the building code, and is now suitable to be occupied.

Chain of Title: chain of title refers to who has owned the land in the past. It is uncovered through the lawyer’s search. See Extend of title.

Charge: the name given to a mortgage document when title is registered under the Land Titles System. Also known as Certificates of Charge.

Charitable Gift: a donation of money or other assets to a registered charity or other suitable recipients as specified by the Income Tax Act.

Chattel Mortgage: a mortgage given on chattels. This type of mortgage is usually given as collateral security to a mortgage on real estate. As an example, there may be a chattel mortgage on refrigerators and stoves in an apartment building.

Child Life Insurance: a rider that provides insurance on the life of a child.

Clawback: reduction of social security benefits based upon net income.

Closed Mortgage: a mortgage agreement that cannot be repaid, refinanced or renegotiated until maturity, unless otherwise stated in its terms.

Closed Date: the date on which a sale becomes final, funds are transferred from the purchaser to the vendor, and the new owner takes possession of a property.

Closing Process: the procedure of finalizing the sale, once the lender receives an accepted commitment.

Co-Applicant: one of two or more people applying together for a loan.

Cognitive impairment: the inability to this, perceives, reason or remember.

Co-Insurance: a sharing of risk between insurer and insured which depends on the relationship of the amount of the insurance carried versus the amount of insurance required at the time of the loss.

Collateral (5 Cs of Credit): guaranteed support for a loan, generally consisting of funds or real estate, that ensures added security to the lender. Collateral can also take the from of guarantees provided by third parties, i.e. guarantors.

Collateral Assignment: the legal transfer by a policy owner of the benefits of the policy to a creditor as security for a debt.

Collateral Heirs: the brothers, sisters, nieces, nephews (including grandnieces and grandnephews) of the deceased.

Collateral Mortgage: the mortgage registered to document collateral security.

Collateral Security: security given in addition to the direct security and subordinate to it.

Collision Insurance: covers the cost of repairs to the car when it is involved in a collision or tips over.

Commencement Date: the date that disability benefits begin according to the Policy Schedule.

Commercial Properties: properties that are utilized for commerce or trade (e.g. stores, office buildings).

Commitment: a letter/document issued by a lender reciting the basic terms of a loan which, when accepted by the borrower, forms a binding contract. The commitment may have conditions attached to it which must be met before the contract can be finalized.

Common-law Partner: a person who cohabits with taxpayer in a conjugal relationship and who has either so cohabited for at least one year, or who is the parent of the taxpayer’s child. This also provides for termination of the common-law relationship if the partners cease cohabitation for a period of at least 90 days because of a breakdown in their relationship.

Commutation Payment: a single lump-sum payment from annuity that is equal to the present value of the future annuity payments from the plan.

Commuted Value: is the present value of the future payments at a point in time of an annuity.

Commuting: converting an annuity to its equivalent lump sum value.

Comparable Properties: properties that contain similar characteristics to the subject property in an appraisal. Appraisals typically require three comparable properties. Comparables should have sold recently, be from the same or similar neighbourhood, be of the same style/age/condition, be of similar size and on similar lots. See Comparative Method of Appraisal.

Compound Interest: interest charged not only on the principal sum but also on interest amounts charged, but no paid, in preceding periods that accumulate as new principal.

Comprehensive Automobile Insurance: covers the cost of repairs to the car when is it damaged in circumstances other than by a collision, (e.g., fire, theft, vandalism, glass breakage, etc.). The car is insured for the actual cash value at the time of loss.

Concurrent Disability: if an injury or illness was caused by more than one occurrence, the policy will treat the disability as if it were caused by one injury or illness. An insurance company will not pay more than one disability benefit to an individual, for the same period of disability.

Condition: a clause or statement in the contract, which must be met to fulfill an obligation in the agreement.

Condition Precedent: clause in a contract that lays down factors and/or events that must occur for the agreement to be binding.

Conditional: means the insured’s right to renew is subject to certain criteria specified in the contract.

Conditionally Renewable: the insurer cannot decline to renew at the end of the policy’s term because of a decline in the individual’s health.

Condominium: ownership of property whereby the owners hold negotiable title to their own unit. At the same time they share with fellow owners the title and cost of operation of the balance of the property (common elements) making up the condominium.

Consumer Price Index (CPI): an index that measures the rate of inflation over a given period of time for selected goods and services available to the Canadian consumer. Items in the index include food, shelter, clothing, transportation and education costs.

Contract: a contract is a legally binding agreement between two or more capable people for consideration or value, to do or not do some lawful and genuinely intended act.

Contract of purchase and sale: a contract involving the sale of a property that outlines the complete duties of the promisor and the promissee in the real estate transaction.

Contribution: an amount of money the policy owner pays to the insurance company. Also called Deposit.

Contribution Room: the amount that an individual may contribute to an RRSP and deduct from his current income, after accounting for current income and any pension adjustments and carry-forward amounts.

Contributory Earnings: all employment earnings above a basic exemption level up to a yearly maximum, upon which Canada Pension Plan premiums are payable.

Contributory Period: the period, which commences on the later of January 1, 1966 or a person’s 18th birthday, and which extents to age 60, or to age 70 if the individual continues to work and does not apply for a retirement pension.

Conventional Mortgage: a loan based on the credit of the borrower and on the collateral for the mortgage. A conventional mortgage does not exceed 75% of the market value of the property. This means that the borrower must have 25% or more available for the down payment.

Convertible: a term life policy that may be converted to a whole life form of insurance without evidence of insurability. The amount of the death benefit and the life insured must remain the same for a conversion. The premium is based on the attained age of the assured as at the time of conversion.

Convertible Rate: mortgages with a convertible rate feature allow borrowers to fix the rate of their variable rate mortgage at any time with no penalty.

Co-Ownership: the idea that a property (present or future) can be held at the same time by several persons. The most common types of co-ownership are joint tenancy and tenancy-in-common.

Corporation: a separate legal entity which exists apart from a person but has the rights and liabilities of an individual.

Cost of Insurance: in a universal life policy for the current month, is the net amount at risk multiplied by the cost of insurance factors specified in the policy for the attained age and class of life insured.

Cost of Living Adjustment (COLA): a provision in some contracts that indexes the benefit payable to the Consumer Price Index.

Counter Offer: a new offer made in response to an offer received. This has the effect of rejecting the original offer and placing the counter offer on the table for consideration.

Coverage: the amount of the benefit paid upon death of the life insured. Also called Death Benefit.

CPP Pension Credits: the taxpayer’s pensionable earnings, and the contributions the taxpayer pays on them over the years.

CPP Supplement: for employees who retire before age 65 a CPP supplement is added to the employer pension until age 65 to provide a 2% benefit.

Credit Report: a detailed description of the applicant’s credit records. This includes information provided by lenders concerning credit card payments and loans repayment history.

Credit Score: a single number that represents the information found in a borrower’s credit history. Equifax’s credit score is known as the Beacon Score, while TransUnion’s score is called the Empirica Score.

Credit Splitting: the division of the CPP pension credits which the couple built up during the time they lived together can be divided equally between them when a relationship ends.

Credit Unions: credit unions are lending institutions owned by their members. Membership is often based on a common bond of association such as employment or ethnic background.

Creditor: one to whom a debt is owned.

Critical Illness Insurance: a health care plan designed to provide a lump sum cash payment to help and insured person cope with a severe critical illness or condition.

Cross-insurance: each partner or shareholder purchases sufficient insurance on each of his co-owner’s lives to cover the cost of purchasing the ownership interest of that partner of shareholder as covered by a buy-sell agreement.

Cross-purchase Agreement: a buy-sell agreement executed among the partners in a partnership, or among the shareholders in a corporation, obligating the surviving partners or shareholders to purchase the interest of the deceased partner or shareholder.

Crown Gifts: donations to Her Majesty in right of Canada or a province, including Crown agencies controlled by a provincial ministry.

Cultural Gifts: gifts that meet the criteria set by the Canadian Cultural Property Export Review Board, as described in the Cultural Property Export and Import Act, and that are donated to designated institutions.

Current Contribution Limit: the limit beyond which contributions to any form of retirement savings are no longer tax deducted; defined as 18% of earned income in the previous year, to a maximum set by the Income Tax Act. Also referred to as the RRSP dollar limit.


Damages: a financial solution determined by a court to compensate one party for injury by another party. Damages are intended to restore the parties to the stat that would have existed if the contract had been performed.

Date of Maturity: the date on which the insurer must pay out the face amount of the policy. The date of maturity may be the death of the life insured or a specified age such as age 100 in a term 100 policies.

Death Benefit (Pension): a lump sum benefit of a maximum of $2,500 payable under the Canada Pension Plan to the spouse or common-law partner or estate of a deceased contributor.

Death Benefit (Insurance): the amount of the benefit payable upon death of the life insured. Upon death of the life insured, the policy pays a death benefit, which is a fixed amount specified in the policy. The initial death benefit may be augmented by accumulated dividend options or other options or riders associated with the policy. The cash surrender value is not a benefit in addition to the death benefit, but rather it represents the prefunding of the death benefit. The death benefit is greater than the CSV to the extent the life insured ends before the life expectancy used in establishing the policy reserve. The CSV will never exceed the death benefit. Also called Coverage.

Decreasing Term: a form of term insurance in which the death benefit declines over all or part of the period of coverage, but the premiums remain the same. This reduction is often included to keep the premium low.

Deductible: the amount of a claim that you must pay yourself. The amount of the deductible affects the cost of the premiums; the lower the deductible, the higher the premium and vice versa.

Deed: a legal document in writing, duly executed and delivered, that conveys title or an interest in real property.

Deemed Allowable Capital Loss: the deemed capital loss adjusted to reflect the capital gains inclusion rate.

Deemed Capital Gain: any excess of the deemed proceeds, which are the FMV immediately before death over the ACB of the property.

Deemed Capital Loss: any excess of the ACB over the deemed proceeds.

Deemed Disposition: a person is considered to have disposed of a property, even though a sale did not take place.

Deemed Proceeds of Disposition: a person is deemed to have received the fair market vale (FMV) of each capital property owned immediately before death, even though the person did not receive this amount.

Deemed Taxable Capital Gain: the deemed capital gain adjusted to reflect the capital gains inclusion rate.

Default: failure to fulfill contractual obligations.

Deferred Annuity: a term or life annuity contract in which the payments do not commence until a specific date that may be based upon the annuitant’s age. The premium for the deferred annuity can be paid in a lump sum or as periodic payments.

Deferred Profit Sharing Plan (DPSP): a form of trust fund, registered with Revenue Canada in accordance with the Income Tax Act, to which an employer makes contributions on behalf of its employees.

Defined-benefit Pension Plan: any plan that defines the amount of the pension benefit payable at retirement, usually by way of a formula that relates the value of the pension benefits to earning levels and years of service.

Defined-contribution Pension Plan: a plan in which the contribution required from the employer and the employee is known up-front, but for which the ultimate benefits are not known. The value of the pension will depend on what can be purchased by the total accumulation of contributions plus interest – hence the alternate term of money-purchase plan.

Dependent Child: a child who is under the age of 18,or who is between the ages of 18 and 25 and who is full-time attendance at an approved educational institution.

Dependent of the Principal Life Insured: a spouse or child of the policyholder.

Depreciable Property: capital property, used to earn income, on which you can claim capital cost allowance.

Depreciation: the loss of value of an asset over time.

Designated Beneficiary: see named beneficiary.

Designated Benefit: a lump-sum amount that a spouse or common-law partner, child or grandchild is entitled to receive from a RRIF as a result of the death of the annuitant.

Designated Person: for the purposes of the attribution rules under the Income Tax Act, includes the spouse or common-law partner of the transferor and any person under the age of 18 who does not deal at arm’s length with the transferor or who is the niece or nephew of the transferor.

Disability: a physical or mental impairment caused by an accident of illness that partially or totally limits one’s ability to perform an occupation fro which one is suited by education, training or experience.

Disability Benefits: while the insured is disabled, the insurance company will provide a monthly income.

Disability Income: a benefit in the form of a monthly income provided to the insured by the insurer that compensates the insured for loss of earnings during their time of disability.

Disability Tax Credit: a federal tax credit that can be claimed for a taxpayer who is mentally or physically impaired and makes no claim for expenses for a full-time attendant or care in a nursing home. A taxpayer may also claim the unused portion of the disability tax credit of certain dependants.

Discharge Document: once the receipt (acknowledging the completion of payment) has been processed and registered to the title, it becomes the discharge document.

Discharge of Mortgage/Charge: a legal document executed by the lender, and given to the borrower when a mortgage loan has been repaid in full, releasing him or her from all obligations and covenants contained in the mortgage.

Disclosure Statement: a written statement disclosing information about a specific loan and potential conflicts of interest required under various consumer protection acts.

Dividends: on a life insurance policy is a refund of part of the premium, calculated as the excess of the actual return on the policy reserve over the guaranteed rate. It is not a share of the insurer’s profits.

Dollar Adjustments: these are estimates of the dollar amount allocated to each factor being compared to the subject property in an appraisal. For example a dollar adjustment would reflect how much extra a buyer would pay for a home with a finished basement compared to one with an unfinished basement. See percentage adjustment.

Donatio Mortis Causa: a gift made in contemplation of death and conditional upon it, such that the transfer is not made until after death.

Double Indemnity: see Accidental Death.

Double Up Option: a clause that may be included as part of an open mortgage contract, giving the borrower the opportunity to double the scheduled principal and interest payments.

Draft Mortgage Document: the foundation of the document is to specify all terms and conditions of the agreement. A lawyer must ensure its contents accurately list loan amounts, interest rates, proper legal descriptions, repayment contract and other factors that affect the loan agreement. The draft mortgage document is a last check on the mortgage required by some lenders.

Draws: the stages in which the borrower receives a partial loan disbursement in a builder’s loan.


Earned Income: the basis for calculating the current RRSP contribution limit; generally includes net income from employment, business and rentals.

Ecological Gift: a gift of land that has been certified by the Minister of the Environment to be ecologically sensitive, such that the conservation and protection of that land is important to the preservation of Canada’s environmental heritage.

Effective Gross Income (Income Property): the annual income from a property, if fully leased, less an annual allowance for vacancies and bad debts.

Effective Interest Rate (for Mortgages): the actual rate that the borrower must pay on a loan after the effects of compounding are considered. It is also known as the true rate. It differs from the nominal interest rate.

Electronic Funds Transfer (EFT): the automatic transfer of funds from one account to another. Mortgage repayments can be made electronically directly to the lender.

Eligible Amount: the portion of a designated benefit that may be transferred to the beneficiary’s RRIF.

Elimination Period: the duration of time that an individual must be disabled before being eligible for benefits under a disability insurance policy. Also called waiting period.

Emergency Travel Health Insurance: an insurance contract that provides coverage for the expense insured by a medical emergency while the insured person is outside of the Canadian province of residence.

Empirica Score: the name given to the credit score published by TransUnion. See also Beacon Score.

Employer Group Disability plan: a disability insurance plan providing converge to all employees, or a specific group of employees. The employees pay the premiums as a payroll deduction, or the employer pays the premium and includes it as a taxable employment benefit.

Employment Insurance Benefits: in cases of illness, accident or quarantine, and employee who has paid their Employment Insurance premium is entitled to receive up to 55% of their average weekly pay. Employment Insurance is a second pay or to CPP/QPP, Workers’ Compensation and group plans, so the benefit is reduced dollar for dollar when other resources are available to the insured. Self-employed individuals do not qualify for Employment Insurance compensation.

English Form Will: valid in all provinces, and is the most common form of will found under the common law in English provinces and in some areas of Quebec. This is the format used when a lawyer draws up a will.

Equity of Redemption: the right of a borrower to repay a loan that was in default and retain possession of the property.

Estate Freeze: a strategy designed to minimize income taxes due at death as the result of the deemed disposition of capital property, by freezing that disposition at an earlier point in time so that any future gains accrue to the intended beneficiaries.

Excess Amounts: any withdrawals from a RRIF in excess of the minimum amount.

Executor: someone named in a will to act as the legal representative to handle a deceased person’s estate.

Existing Mortgage: a mortgage loan that is already in-place when the property is being sold. The buyer may have the option of taking over assuming the mortgage or taking out a new one, depending on whether or not the mortgage is assumable.

Expandability: this is a feature available in some mortgages. It allows the borrower to increase or expand the principal on a first mortgage at the lender’s agreed upon interest rate.

Extension Agreement: an agreement extending a loan past the original maturity date.


Face Value: the amount that insure will pay to beneficiaries should the insured die during the period of coverage named in the policy.

Face Value (mortgage): the face value of the loan is the amount of money the borrower promises to repay (at the contract rate of interest).

Fair Market Value (FMV): the highest dollar value that you can get for your property in an open and unrestricted market, where the parties of the transaction deal at arm’s length with each other and are nor forced to buy or sell.

Fee Simple: the highest estate or absolute right in real property. In common practice, fee simple is thought of as absolute ownership.

Final-earnings Plan: a defined-benefit plan that relates the amount of pension benefit payable at retirement to the average final-earnings of an employee’s career (usually over the last three to five years), as well as his number of years of credited service.

Final Return: see Terminal Period Return.

Financial Dependant: in the context of determining a designated benefit, a child or grandchild who is considered to have been financially dependent on a deceased RRIF annuitant, if that child or grandchild’s income in the year preceding the death of the annuitant was less than or equal to the basic personal amount as it related to personal tax credits.

First Mortgage: a mortgage registered before all others on title.

Fiscal Year: a business’ operating year. Some companies do not use the calendar year for their bookkeeping but run over a 12 month cycle, beginning and ending at another point in the year.

Fixed Annuity: a term of life, indexed or non-indexed annuity with the amounts of the payments based upon a specified interest rate at the time of purchase.

Fixed Rate Mortgage: in a fixed rate mortgage the interest is determined and is set for the term of the mortgage. Fixed rate mortgages are most desirable when current interest rates are low.

Flat-benefit Plans: a defined-benefit plan where retiring members receive a flat rate benefit, regardless of their earnings.

Floater Policy: an insurance policy, or a rider on an insurance policy that provides insurance coverage for loss or damage to specific property. A floater policy covers specific property, specific risks or specific conditions such as location of the property.

Foreign Property: generally consists of shares, units and debts issued by non-resident entitles.

Foreign Property Rule (FPR): in respect of deferred income plans generally limits the amount of foreign property that such a plan can hold. This limit applies to each RRSP of an individual.

Foreign Property Rule Limit: the limit is 20% from 1994 to 1999, 20% from 1994 to 1999, 25% for 2000, and 30% after 2000.

Four Unities: the four elements that must exist before a joint tenancy is created: unity of possession, unity of interest, unity of time and unity of title.

Fraud: a form of false representation made with knowledge of its falsity and the intention of inducing a person to act upon it. Usually, a misrepresentation must be flagrant and severe to be termed a fraud. An insurance contract becomes incontestable after a two-year period, except in the case of fraud.

Full Review: the most comprehensive type of appraisal, it includes a review of both the internal and external features of the property as well as an assessment of neighbourhood factors.

Fully Amortized Mortgages: a mortgage that requires the constant regular payments, including both principal and interest components, for the life of the mortgage.

Fully Open Mortgage: an open mortgage that allows principal payments to be made in any amount, at any time, in addition to regular mortgage payments, without penalty.


General Insurance: a broad term for all types of insurance, other than life and health.

Good Title: a proof ownership that is free of any legal holds or claims.

Government Disability Plans: the disability provisions of the Canada Pension Plan, Quebec Pension Plan, Employment Insurance and Workers’ Compensation.

Grace Period: a period of 31 days is allowed for payment in full of any premium due. If the insured dies during the grace period, the unpaid premium is deducted from the death benefit.

Grantor: an individual executing a power of attorney. Also called principal.

Gross Income (Single Family): the total annual personal income before deductions used in the calculation of an applicant’s debt service ratios.

Group Insurance: a type of insurance plan in which premiums are set for a large group as a whole, as opposed to individual premiums set on personal characteristics. All mortgage creditor insurance plans are group insurance plans.

Group Insurance Contracts: where the employer or association is the owner, the employee or member is the life insured and the beneficiary is designated by the employee or member.

Group Life Insurance: a form of life insurance covering a group of persons having some common association, such as employees of the same company, members of the same profession or alumnae of a university.

Group RRSP: a variation on basic RRSPs typically sponsored by an employer, union or professional association and managed by a trust or insurance company on behalf of the group.

Guaranteed Annuity: a pension that is payable for life, with a provision that payments are guaranteed to continue for a minimum number of years (such as five years), even if death occurs before the end of the guaranteed period.

Guaranteed Income Supplement (GIS): provides additional benefits to low-income pensioners who meet a basic income test and reduced by $1 for every $2 of income excluding OAS benefits.In additions to their OAS benefits, approximately 1.5 million low-income pensioners who meet a basic income test also qualify for the federal guaranteed income supplement, or GIS. This income test can result in a reduction of social security benefits based upon net income. This reduction is generally referred to as a clawback. The clawback of GIS and Allowance is based upon the pensioner’s base income, which is net income, excluding OAS benefits, of the previous year. The net income amount, at which the social security benefits are entirely clawed back is referred to as the income level cutoff.

Guaranteed Insurability: this is a provision that allows the insured to buy additional insurance at certain specified future dates without proof of insurability.

Guaranteed Investment Certificates (GIC): investments purchased through banks and trust companies for one to five years maturity and with a fixed interest rate. Also called certificates of deposit (CD’s).

Guaranteed-Issue: a form of whole life policy bought through the mail with no medical screening. Marketing is generally aimed at people in the 50 to 70 years age range who are concerned about passing the medical screening exam. The face value of Guarantee-Issue policies then to be very low which may be suitable for those who only want life insurance to cover their funeral expenses.

Guaranteed Premium Return Annuity: a life annuity that includes a guarantee that at least the full amount of the initial investment or premium will be paid out before payments cease as a result of death.

Guaranteed Renewable: the renewability is guaranteed for or to a specific age, as ling as the insured is employed. The insured has the right to renew the policy and continue the coverage at the end of the term. This right of renewal ends at a specific age, which might be age 65 or 70. However, the insurance continues only if the individual is still working, so age 65 or 70 is usually not a problem. The insurer cannot cancel or decline to renew the policy. Also called guaranteed continuable.

Guarantor: one who promises to pay a debt or perform an obligation contracted by another in the event the original borrow fails to pay or to perform as contracted.

Guardian: someone who assumes the responsibility for a minor child until that child reaches the age of majority.


Health Care Directive: see power of attorney for personal care.

High Ratio Mortgage: a mortgage is considered high ratio when the loan-to-value is 75% or more. This occurs when the borrower’s down payment is 25% or less of the property value.

Holograph Will: wholly in the handwriting of the person making the will.

Home Equity Financing: a type of mortgage refinancing in which the mortgage amount is increased to take advantage of the increased equity in a home.


Immediate Annuity: usually, an annuity that yields its first payment one month after the annuity is purchased, although by strict definition it could take place within one year of purchase.

Income Attribution Rules: a set of rules that prevent income splitting in certain specific circumstances.

Income-level Cutoff: the net income amount at which the social security benefit is entirely clawed back.

Income Splitting: a term used to describe strategies to save taxes by shifting income from the hands of a family member in a higher tax bracket, to the hands of a second family member in a lower tax bracket so that the same income is taxed at a lower rate.

Income Statement: summarizes the findings of calculations between a company’s revenues and expenses. The income statement can be reported annually, quarterly or monthly.

Incontestability Clause: under this clause, the insurer gives up the right to dispute a claim after the policy has been in effect for a specified period of time. On most insurance policies, the period to time is two years.

Incontestable: after a life insurance policy has been in force for two years, the insurance company cannot declare it void because of misrepresentation or concealment by the insured. The insurance company can declare it void in the case of fraud.

Incorporated Companies: a form of business ownership in which the business is set up as a separate legal entity under the laws of the jurisdiction it operates in (provincial and/or federal). When an incorporated company is a party to a contract it is important to determine if the company exists, and if it has the capacity to become a party to the contract.

Indemnity: the amount to be collected by the insured to cover all or part of a loss. The insurance contract may specify a maximum amount payable for such a loss or a percentage of the amount of loss, which may be less than the actual amount of loss. The principle of indemnity is to provide protection from loss while preventing profit from it. In this sense, indemnity should not be confused with benefits.

Indexed Annuity: an annuity that includes a provision for increased payments over time, as a hedge against inflation.

Individual Contract: a contract issued to an individual directly by an insurance contract.

Individual Pension Plan (IPP): an employer-sponsored, defined-benefit registered pension plan specifically established for the benefit of significant connected individuals or other highly-paid employees. Also called executive pension plan.

Individual Policies: those available directly from an insurance company.

Industrial Property: property that contains units that designed for manufacturing, production and warehousing.

Inflation: a general increase in the price level of goods and services.

Injury: means an accidental bodily injury occurring while this policy is in force.

In-patient: a patient who is admitted to a hospital for a stay of at least one night.

Insolvency: the inability to meet one’s financial obligations as they come due in the ordinary course of business.

Insurability: being able to meet an insurance company’s underwriting standards for risk including being able to meet the medical and other criteria for insurance coverage.

Insurable: able to meet the conditions of health established by the insurance company, which usually involves a medical examination.

Insurance: the undertaking by one person to indemnify another person against loss or liability for loss in respect of a certain risk or peril to which the object of the insurance may be exposed, or to pay a sum of money or other thing of value upon the happening of a certain event and includes life insurance.

Insurance Contract: an agreement between the insurer and the insured that the insured agrees to pay specified premiums and the insurer agreed to pay a certain sum (all or part of the insurance money) at a certain time in the future or upon a specific occurrence.

Insured: the person who makes a contract with an insurer. This clause is interpreted to mean that it is the person who makes the contract with the insurer who is the insured (i.e., the owner). If the owner takes out a policy on life of a third party, it is the owner who is the insured, not the person whose life is insured. Therefore, it is the owner who can exercise all the rights of an insured person under the Act regardless of whose life is insured. Also called Policyowner or Policyholder.

Insurer: the company or organization that undertakes or agrees or offers to undertake a contract.

Inter Vivos Gift: a gift made during the lifetime of the donor.

Inter Vivos Trust: a trust established by an individual while she is still alive.

Interest: an amount, expressed as a percentage, which a borrower agrees to pay on borrowed money, at a certain frequency as per an agreement with the lender.

Interest Accruing Loan: in this type of loan no payments on interest or the principal are paid until the end of the term. Only when the mortgage contract has expired are the payments due.

Interest Adjustment: the process of calculating compound interest payable on the amount borrowed between the day the loan is disbursed and the day the amortization period starts.

Interest Adjustment Date: the date from which interest is calculated at the rate and compounded at the frequency set out in the mortgage contract. It is normally the first day of the month following the closing of the mortgage transaction.

Interest Only Loan: a loan in which the borrower only pays regularly scheduled payments on the interest to the lender and the principal remains the same during the life of the loan. The principal is repaid in full at the end of the loan’s term.

Interest Plus Specified Principal Loan: also known as a straight-line principal reduction loan. In this type of loan an equal amount of principal is repaid at every interest compounding period in addition to the interest that must be paid for that period.

Interest Rate: interest rate is the percentage charged on outstanding loan balances.

Interim Life Insurance Coverage: begins when the insurance company has received a signed application and first premium payment. The interim status expires and coverage takes effect, when the application has been approved according to the insurer’s underwriting rules and a copy of the contract has been received by the insured.

Intestacy: an estate of a deceased who died without a will.

Intestate: dying without a will, also a person dying without a will.

Investment Bonus: Many UL contracts offer their long-term policyowners an investment bonus of up to 1.00 to 1.50% per annum after 10 or 20 years to encourage them to keep their contracts in force. These bonuses can significantly enhance the growth performance of a policy. The policyowner must be careful to read the fine print because some of these bonuses are conditional upon the amount of premium paid to date.

Investment Property: property which is rented out to individuals who do not own the property, and pay rent to the owner of that property. The opposite of an owner occupied property.

Irrevocable Beneficiary: if the policyowner has signed a declaration making the beneficiary irrevocable, the designation cannot be changed without the beneficiary’s consent.


Joint and Last Survivor Annuity: a pension that is payable to two annuitants, and that includes a provision that payments will continue for the life of the survivor after the first annuitant dies.

Joint Life: an insurance policy that covers two or more lives and provides for the payment of the proceeds at the death of the first insured. At this time, the policy automatically terminates and provides no further coverage for the survivors.

Joint Life Annuity: an annuity in which it is payable to 2 people, but payments cease upon the death of either of the annuitants.

Joint Tenancy: a form of property ownership whereby each tenant will have an equal share in the ownership, control and enjoyment of the asset, and right of survivorship in the event of the death of the other joint tenant.

Joint Venture: an arrangement under which two or more people or businesses go into a single venture as partners.

Joint Will: a will that has been prepared for both a husband and wife, rather than the more common practice of having a will prepared for each spouse.


Land Titles System: this is a system of land registration under which the registrar, or master of titles, passes on the validity of the mortgage instruments, determines its legal effect, and the Government guarantees title.

Last-to-die Policy: covers two or more lives and pays the death benefit upon the last death of the lives insured.

Late Charge: an additional charge a borrower is required to pay as penalty for failure to pay a regular instalment when due.

Lawyer’s Report (or Opinion) on Title: the Lawyer’s Report outlines the mortgage details, including the results of the title search, tax details, fire insurance and any other related insurance coverage details, verification that title insurance has been obtained (if applicable), and any other relevant facts (i.e. easements, restrictions, liens).

Lease: a contract between landlord (lessor) and tenants (lessee) for the occupation or use of the landlord’s interest in a property by the tenant for a specified period of time and for a specified consideration (rent).

Legal Description: the written geographical description of a property (metes and bounds) as described in the land register.

Legal Liability: the responsibility for one’s conduct, which the courts recognize and will enforce between persons.

Legal Representative: a person who has the authority to act on behalf of the deceased in matters including the filing of the deceased’s final return and other income tax returns.

Lending Value: the property value for mortgage purposes. Usually, the lesser of appraised value or sale price.

Level Death Benefit: an option that provides for a fixed amount of coverage throughout the lifetime of the policy equal to the initial face amount.

Level Death Benefit Plus Account Value: the total amount of death benefit with level death benefit plus account value is always equal to the initial face amount plus the gross value of the account value.

Level Death Benefit Plus Cumulative Deposits: the amount of death benefit with level death benefit plus cumulative deposits increases by the amount of each deposit to the policy.

Level Term Rates: fixed annual or monthly amounts, such that their present value at the date of issue of the policy equals the present value of the annual expected death benefits and operating margins less investment income of the policy. This is how term 100 premiums are calculated.

Liabilities: a business’ or a borrower’s debts and legal obligations.

Liability Insurance: provides protection for the insured against loss arising out of his legal liability resulting from injuries to other persons or damage to their property.

Lien: a claim on real or personal property for the payment of some undischarged debt or duty.

Life Annuity: an annuity where payments are guaranteed for the duration of the lifetime of the annuitant(s), regardless of how long (or short) a period that the annuitant survives.

Life Annuity with a Guaranteed Term: a life annuity that includes a clause that guarantees that payments will continue for a specific period, even if the annuitant dies before the guaranteed period expires.

Life Expectancy: the average duration of life remaining for a person of a given age and sex. Also called remaining years expected to live.

Life Income Fund (LIF): essentially a RRIF that receives funds from a locked-in retirement account that provides for a life income by restricting both the minimum and maximum withdrawals from the plan. Furthermore, property held within a LIF must be used to purchase a life annuity by age 80. Also called as locked-in PRIF.

Life Insurance: and undertaking by an insurer to pay insurance money, (a) on death; or (b) on the happening of an event or contingency dependent on human life; or (c) at a fixed or determinable future time; or (d) for a term dependent on human life, and, without restricting the generality of the foregoing, includes, (e) accidental death insurance but not accident insurance; (f) an undertaking entered into by an insurer to provide an annuity or what would be an annuity except that the periodic payments may be unequal in amount and such an undertaking shall be deemed always to have been life insurance. All common law provinces, except Saskatchewan, include annuities within the definition of life insurance.

Life Insured: the person upon whose death the benefit of the life insurance policy becomes payable.

Lifetime Facility Care Rider: coverage for extended, intermediate and personal care receive while confine in a long-term care facility, such as a nursing home or home for the aged. There is no lifetime maximum applicable to this rider.

Limited-Restricted Appraisal: a type of appraisal that provides only an exterior inspection for transactions that are somewhat riskier than standard, e.g., in a new or unknown market, or in mixed use neighbourhoods but not high risk. Also known as a drive-by appraisal.

Liquidator: a person responsible for liquidating all estates established after December 31, 1993. For estates with a will, the liquidator’s role is similar to that of an executor.

Listing Agreement: the listing agreement is a contract between a seller and a real estate agent or broker. It sets out the conditions of the listing. A listing agreement generally includes, but is not limited to, the following: the length of the listing period, the desired sales price and the amount of the commission.

Living Will: see Power of attorney for personal care.

Loan: you can borrow from the cash value of your insurance policy or use it as collateral for a loan. The amount of the loan is limited to a pre-established percentage of the cash surrender value of your policy. When the policy matures, the death benefit paid to your beneficiaries is reduced by the amount of any outstanding loans and accrued interest. See Policy Loan.

Loan Qualification: also known as qualifying the borrower. Loan qualification is the process of analyzing the buyer’s eligibility for financing.

Loan-to-Value Ration (LTV): the amount of the mortgage loan compared to the value of the property. This ratio is calculated by the lender prior to providing the loan. The results of this calculation help to determine whether or not the applicant will qualify for a loan and whether the application, if approved, will be for a conventional loan or a high ratio loan.

Locked-in: the beneficiary, who is to receive the property, has a right to absolute ownership of it.

Locked-in: refers to pension contributions that can no longer be taken out of the pension fund, but that instead must be used to provide a lifetime retirement income. While provincial pension legislation specifies that the funds must be used to provide a retirement income, the Income Tax Act specifies that the pension must begin no later than the end of year in which the annuitant attains 69 years of age (ITR 8502e).

Locked-in Registered Funds: funds in a Locked-in retirement account (LIRA), Life income funds (LIF), or Locked-in retirement income fund (LRIF).

Locked-in Retirement Account (LIRA): essentially an RRSP that is established with vested pension benefits that has a trust agreement attached to it, which restricts the use of funds to the provision of a retirement income. Also called a locked-in RRSP.

Locked-in Retirement Income Fund (LRIF): a variation of a PRIF or LIF, available only in certain provinces that receives funds from a locked-in retirement account and provides for a life income by restricting both the minimum and maximum plan withdrawals. Unlike a LIF, there is no requirement to convert the amount in a locked-in retirement income fund to an annuity at any age. Also called a locked-in RRIF.

Locked-in RRIF: see “Locked-in retirement account”.

Locked-in RRSP: see Locked-in retirement Account.

Long-term Сare Insurance (LTC): an insurance contract that provides coverage for the expense of providing long-term care to the insured person.

Loss: that portion of the property insured, which is entirely destroyed or missing. As opposed to damage, which refers to the portion of the property that remains, but is unusable, after the occurrence.

Lump Sum Payment Option: a clause that may be included in an open mortgage allowing the borrower to prepay a portion of the principal if desired and in accordance with the specific terms of the contract.


Management Fee: a charge paid to the life insurance company for managing the fund. The fee is typically of the order of 2-2.5% depending on the nature of the financial assets.

Marginal Tax Rate: the rate of tax that would be paid on an additional dollar of taxable income. The Canadian tax system uses progressive tax rates, whereby the marginal tax rate increases as taxable income increases.

Marital Home: see matrimonial home.

Marriage Contract: a contract used to determine the rights and obligations of both spouses during a legal marriage, as well as upon any possible future separation, annulment, divorce or death.

Matrimonial Home: varies from province to province (including matrimonial home, marital home and family home), but generally it includes any dwelling place normally inhabited by a family.

Mature RRSP: an RRSP matures when it begins to provide retirement income. All plans must mature by the end of the year in which the annuitant turns age 69.

Maturity: the end of the mortgage’s term.

Maturity Date: the final day of the term of the mortgage, on which the balance of the mortgage owing becomes due.

Maximum Loan Amount: the maximum dollar that a lender is wiling to fund. It is expressed as a percentage of the value of the property to be purchased when using the loan to value ratio.

Medical Expense Tax Credit (METC): provides tax recognition for above-average medical expenses incurred by individuals.

Medical Information Bureau (MIB): one of the medical records agencies. It is a US-based non-profit organization with an office in Canada. The MIB consists of 750 member insurance companies in North America, including most major Canadian insurers.

Minimum Amount: the amount that must be withdrawn from a RRIF each year, in accordance with the Income Tax Act beginning the year after the RRIF is established. (ITA 146.3(1).)

Minor: a person under the age of 18 years (19 years in certain provinces). A person aged 16 years or older may purchase a life insurance contract with the same rights under the insurance contract as someone who had reached the age of majority. A person that is not legally capable of giving a discharge to the insurer, which means the insurer, will not be able to pay the proceeds to the child.

Mirror Will: a will where each testator is the beneficiary of the other testator’s residuary estate.

Misrepresentation: a statement of false facts, generally occurring during negotiations prior to contract creation. Misrepresentation typically induces the other party to enter the agreement.

Misstatement of Age: when an applicant gives an incorrect age at the time of applying for life insurance.

Money-purchase Limit: the maximum annual contribution permitted to a defined-contribution pension plan. The limit is $15,500 in 2004, increased thereafter.

Money-purchase Plan: a common name for defined-contribution pension plan.

Mortgage: a legal method by which a borrower can pledge property to a lender as security for a debt. In Quebec, this is referred to as a hypothec.

Mortgage Agent: an individual authorized to deal in mortgages on behalf of a mortgage broker.

Mortgage Averaging: a method of determining a weighted mortgage rate. Mortgage averaging is used when calculating an “average” rate for a first and second mortgage, each of which has a different mortgage rate.

Mortgage-Backed Securities (MBS): an MBS represents an undivided interest in a pool of insured residential first mortgages. As mortgages, these financial instruments are secured by the value of the underlying real estate. NHA MBS carry the CMHC Timely Payment Guarantee and represent an obligation of the Government of Canada.

Mortgage Broker: an individual authorized to deal in mortgage and lend money using real estate as a security.

Mortgage Brokers Act: a piece of legislation that regulates the activities of mortgage brokers across Canada. In Ontario, for example, The Mortgage Brokers Act regulates the activities of mortgage brokers in that province.

Mortgage Consultant: see mortgage agent.

Mortgage Creditor Insurance: this type of insurance protects the borrower, by relieving the borrower of the need to make mortgage payments should unforeseen circumstances make it impossible for them to do so (e.g. serious illness or death).

Mortgage Default Insurance: a type of insurance which protects the mortgage lender in case the borrower defaults on the mortgage payments.

Mortgage Fraud: any material misstatement, misrepresentation or omission relied upon by a lender or insurer to underwrite, approve, fund or insure a mortgage loan.

Mortgage Insurance: a term insurance policy so your debt is paid off in the event you die.

Mortgage Refinancing: the replacement of current mortgage financing with new financing, usually to take advantage of different interest rate or financial conditions or the existing equity in the property.

Mortgage Representative: employees of a financial institution who originate mortgages. Unlike originators operating outside of lending institutions and are regulated provincially, institutional originators, if working for federally incorporated lenders, are governed under the Office of the Superintendent of Financial Institutions (OSFI).

Mortgage Servicing: the process of managing the administrative duties resulting from the mortgage contract.

Mortgage Specialist: see mortgage agent.

Mortgage Term: the length of time the interest rate is guaranteed for a mortgage. Mortgage terms normally range from 6 months to 5 years or more, after which time the borrower can either repay the balance of the principal owing or re-negotiate the mortgage at current rates.

Mortgaged Out: the situation existing when the total mortgage debt equals or exceeds the market value or cost of the property.

Mortgagee: the lender or creditor.

Mortgagor: the borrower or debtor.

Mutual Will: a mirror will, where the testators have an agreement that prevents either testator from changing his will without the consent of the other.


Named Beneficiary: the person specified by the property owner to be given ownership of the property upon the original property owner’s death. Also called designated beneficiary.

National Housing Act (NHA): a federal act, administered by CMHC, which seeks to assist the private market in producing affordable housing to meet the needs of most Canadians.

Net Capital Loss: any excess of the total of deemed and actual allowable capital losses over the total of deemed and actual taxable capital gains. Technically this is a net allowable capital loss, but it is called simply, a net capital loss.

Net Cost of Pure Insurance: the probability of death in the year times the death benefit of the policy.

New RRSP Contribution Room: the new room arising in the current year, calculated as the current contribution limit plus pension adjustment reversals from the current year, less any pension adjustment from the previous year or a past service pension adjustment incurred in the current year.

No Cost Switching of Payment Option: this option allows the borrower to change the payment schedule (to either monthly/semi-monthly/bi-weekly/weekly) in an open mortgage at no charge.

No-Doc: refers to ‘no document necessary’ when confirming past income earnings.

Nominal Interest Rate: also known as the stated rate. This is the interest rate used to calculate interest payments. It differs from the effective interest rate.

Non-arm’s Length Person: a relative of the taxpayer including the taxpayer’s parents, grandparents, brothers, sisters, brother-in-law, sisters-in-low, children, adopted children, grandchildren and minor nieces and nephews.

Non-arm’s Length Transactions: includes transactions between two or more people who are related, or between unrelated people who do not have separate economic interests.

Non-cancellable: means that the insurance company cannot cancel coverage for the specified term of the policy.

Non-estate Asset: an asset that does not fall within the control of the estate cannot be controlled through a will and is not subject to probate.

Non-qualifying RRIF: any RRIF that was established in 1993 or later, or one that was established prior to 1992 that has subsequently received a transfer of property from anything other than a qualifying RRIF. (ITR 7308 (2).

Non-traditional Disability Insurance: provides protection to classes of occupations that would otherwise be uninsurable or insurable at an inflated cost. It is designed to covet a wide range of occupations, including those in high-risk categories.

Normal Annuity: an annuity that is analogous to a loan from the policyholder to the policy provider, where the allocation of the payments for income tax purposes between interest and principal are calculated according to an amortization schedule, such that the early payments consist of a higher proportion of interest than later payments, as opposed to a prescribed annuity.

Normal Pension: defined within the pension contract, in terms of the form that the standard pension benefits will take and what benefits, if any, a member’s beneficiary or estate will receive if the member dies after retirement.

Normal Retirement Age (NRA): the age specified in a pension plan, at which time the member has the right to retire and receive a full, unreduced pension.

Notarial Will: valid only in Quebec. A notary must read the will to the testator in the presence of two notaries, or one notary and two witnesses. The testator then signs the will, along with the witnesses.

Notes to Financial Statements: the part of a financial statement that includes an auditor’s or accountant’s opinion on the statements and other relevant notes pertaining to the company’s operations and the specific methods of accounting used.

Notice of Assessment: a form received by every taxpayer who has filed a tax return for the previous year that summarizes CCRA’s processing of that return.


Offer to Purchase: a written contract outlining the terms under which the buyer agrees to purchase the property. There may be conditions attached to the offer, for example, the offer may be conditional on the buyer arranging mortgage financing or selling a current home.

Offeree: the individual or group who receives an offer to enter into a contract.

Offeror: the individual or group who presents something to another for acceptance or rejection.

Old Age Security (OAS) Program: one of three public pension benefits, which provide seniors with a basic income guarantee.
Canada’s Old Age Security is a government program that provides all individuals who meet certain residency requirements with universal access to a basic level of retirement income, regardless of their past employment or income. The Old Age Security system provides a basic guaranteed level of retirement income to all qualifying Canadians. The program includes three public pension benefits – Old Age Security (OAS), Guaranteed Income Supplement (GIS) and the Allowance. The flat rate of OAS pension is payable commencing at age 65, and it is increased quarterly to match increases the Consumer Price Index. A person must file an application with the income Security Programs division of Human Resources Development Canada in order to receive an OAS pension. If the application is made after a person reaches age 65, the application may be approved retroactively to age 65, up to a period of no greater than one year. Provided that the recipient has lived in Canada for at least 20 years after reaching the age of 18, OAS payments will continue even if that individual leaves Canada. However, if a person receiving OAS benefit does not meet this 20 year residency requirement and he subsequently leaves Canada for six consecutive months, exclusive of the month he left Canada, then payment for any period after six months may be suspended. Payment will resume in the month that he returns to Canada.

OAS Clawback: a special tax introduced in 1989 requiring the payment of OAS benefits by high-income earners. The clawback is 15% of income that exceeds the 2004 threshold of $59,790. The OAS clawback threshold is indexed annually for a change in the CPI.

OAS Clawback Rate: the rate, currently 15%, at which net income in excess of the OAS clawback threshold is subject to repayment.

OAS Clawback Threshold: the amount below which the OAS need not be repaid ($59,790 in 2004).

Open Mortgage: an open mortgage allows a borrower to repay any amount of the principal at any time without notice or penalty. Mortgages may be partially open, having clauses that allow partial pre-payment at specified times, or in specified ways. For example:

  • Double Up Option – The opportunity to double the schedules principal and interest payments.
  • Lump Sum Payment Options – The choice to prepay a portion of the principal.
  • No Cost Switching of Payment Option – This option allows the borrower to change the payment schedule (monthly/semi-monthly/bi-weekly/weekly).
  • Skip Payment Option – This alternative grants the borrower the ability to skip a monthly payment without the mortgage going into default.

Orphan Benefits: a flat rate monthly pension payable under the Canadian Pension Plan to the dependant child of a deceased contributor.

Outpatient: a patient who is treated at a hospital but not admitted.

Own Occupation: the occupation or occupations in which an insured is regularly engaged at the time of becoming disabled.

Owner Occupied: the owner of the land also resides in that property. The opposite of an investment property.


Paid-up Policy: an insurance policy, which has not yet matured, but requires no further payment of premiums.

Partial Disability: based upon time and means that due to injuries or sickness, the insured is unable to perform either the important duties of one’s occupation at least one-half of the time usually required; or one or more important duties of your occupation The insured must also be under the care of a physician.

Partial Discharge: a release from the mortgage of a definite portion of the mortgaged lands. A partial discharge may be given after the borrower has prepaid a specific portion of the mortgage debt.

Partially Amortized Mortgage: a mortgage that protects both borrowers and lenders from the risk of unexpected interest rate fluctuations. The loan matures on a short term basis, at which time the full amount of the outstanding amount must be either repaid or refinanced at current interest rates.

Partnership: a business co-owned by two or more people. This form of ownership is less common than a sole proprietorship or a corporation. Like a sole proprietorship, a partnership does not exist as a separate legal entity. Each partner is taxed on his or her share of any profits.

Past Service Pension Adjustment (PSPA): represents the value of a past service event, including retroactive benefit upgrades and the purchase of additional pension credits.

Pays-as-you-go: the financial approach for the CPP which assumes the total contributions to the CPP can grow fast enough to cover growing expenditures without needing large increases in contribution rates.

Pension Adjustment (PA): a calculated number that represents the value of benefits that have accrued during the year under a registered pension plan or deferred profit sharing; used to reduce a member’s RRSP contribution room.

Pension Adjustment Reversal (PAR): increases the individual’s RRSP deduction limit by the amount by which the PAs and PSPAs exceed the termination benefit, restoring the RRSP room that would otherwise be lost permanently (ITR 8304.1).

Pensionable Earnings: earnings in excess of a yearly basic exemption.

Pensionable Employment: employment that generates income subject to Canada Pension Plan contributions; any employment in Canada that is not specifically exempt under the Canadian Pension Plan.

Pensionable Employment Earnings: earnings from pensionable employment.

Per Capita: for each person divided equally among all.

Per Stirpes: for each person from whom a family or family branch descends.

Peril: the actual cause of loss (e.g., fire, accident or illness).

Permanent Life Insurance: a policy that provides coverage for the life of the insured. There are three forms of permanent insurance: whole life, term-100 and universal life. Each of these policies requires the payment of premiums in excess of the mortality cost and the accumulation of a fund to pay the high mortality cost in the life insured’s latter years.

Personal Care Decisions: decisions related to those aspects of daily life that are necessary for maintaining your health and well-being.

Personal Liability: legal liability for unintentional bodily injury or property damage arising out of personal actions anywhere in the world.

Personal Representative: see Executor.

Policyholder: see Insured.

Policy Illustration: a computer-generated printout that shows the anticipated outcome of the prospective life insurance plan based on certain assumptions. Also called Illustration.

Policy Reserve: the fund set aside to cover the death benefit payable under the policy. The policy reserve equals the present value of the future death payment less the present value of future premiums under the policy. The policy reserve is a pooling of the excess premiums paid by all policyholders. Also called the The Accumulating Fund.

Policy Values: include the CSV while the insured is still alive, and the death benefit upon his death.

Policy Year: the twelve-month period following the date of issue or anniversary thereof.

Portability: the ability to transfer pension credits to another pension plan or to a locked-in RRSP when employee changes job.

Portable Mortgage: a mortgage with an option that allows a buyer to transfer a current mortgage to a new property (typically subject to credit approval and a property appraisal).

Power of Attorney: a written legal document in which and individual (the principal or grantor) appoints another person (the attorney or agent) to manage her affairs under specified circumstances.

Power of Attorney for Personal Care: a power of attorney dealing with the grantor’s personal care and health care. Also called a living will or health care directive.

Power of Attorney for Property: a power of attorney dealing with the grantor’s financial affairs.

Power of Sale: A clause generally inserted in mortgages giving the lender the right and power, on default by the borrower, to sell the mortgaged property by public auction, private contract or tender.

Pre-Authorized Cheques: direct withdrawals of payments due from a borrower’s bank account in accordance with authority granted by the borrower.

Pre-existing Condition Limitation: no benefit is payable for a pre-existing condition unless the period of care begins at least six months after the policy’s effective date.

Premium: the single or periodical payment under a contract for insurance, and include dues, assessments, administration fees paid for the administration or servicing of such contract, and other considerations.

Premium (mortgage): the amount, often stated as a percentage, paid in addition to the face value of a mortgage when a mortgage is being purchased.

Premium Holiday: a feature that allows you to skip a premium, or series of premiums, provided there is sufficient cash surrender value in your policy. You should be able to resume premium payments without penalty or cost.

Premium Tax: a tax on life insurance premiums levied by the provinces as a hidden tax.

Prepayment Clause: a clause inserted in a mortgage that gives the borrower the privilege of paying all or part of the mortgage debt in advance of the maturity date.

Prepayment Penalty: the sum of money (usually equal to an amount of interest) a lender may require from a borrower to repay all or part of any outstanding principal in advance.

Prescribed Annuity: receives special consideration under the Income Tax Act because it is assumed that the interested portion of the annuity payments are spread evenly over the life of the annuity contract, thereby easing the tax burden on a taxpayer during the early years. This proscribed treatment is only available for annuities purchased with non-registered funds, because the entire amount of a registered annuity is subject to tax. The prescribed annuity offers a tax deferral and a more level source of after-tax income.

Presumptive Clause: a clause that is in many disability insurance contracts and presumes total disability if, through sickness or accident, their is a complete and irrevocable loss of speech, hearing, sight or the loss of use of two limbs.

Prime Rate: the interest rate at which financial institutions lend to their best customers.

Principal: the amount upon which interest is paid.

Principal of Indemnification: insurance can restore the victim of a loss to her original financial condition, but the insured cannot profit from the loss.

Principal Risk: a risk to the lender associated with interest only loans. This risk is a result of market fluctuations. If the market value of a property falls, it might be less than the principal amount of the loan due at the end of the mortgage term. The lender might no be able the entire principal.

Prior Monthly Income: the monthly income earned by the insured prior to a disability occurring.

Private Health Services Plan (PHSP): an extended health benefit plan that can be purchased by and individual (as opposed to a group health benefit plan).

Private Mortgages: mortgages provided by private corporations and individuals.

Probate: the process whereby a provincial court certifies the validity of a will, if there is one, and confirms the authority of the personal representative, or administrator in the case of intestacy, to administer the estate.

Profit-sharing Pension Plan: a form of defined-contribution pension plan, where the contributions made by the employer reflect the profits from the year.

Promisee: the person who can enforce the promise in a contract is called the promisee.

Promisor: the person who makes the promise in a contract is called the promisor.

Property and Casualty (P & C) Insurance: provides protection against loss or damage to personal property, as well as against personal liability.

Property Income: for the purpose of the income attribution rules, includes interest, dividends, rents and income earned as a specified member of a partnership.

Property Insurance: insurance that provides financial protection against loss or damage to the insured’s property caused by such perils as fire, windstorm, hail, explosion, aircraft, motor vehicles, vandalism, malicious mischief, riot, civil commotion and smoke.

Pure Deferred Annuity: an annuity where the only benefits available are annuity payments commencing at the end of the deferred period, which is fixed and inflexible.


Qualifying Factor: the combination of age and years that must be achieved by an employee to qualify for an unreduced early retirement.

Qualifying RRIF: (any RRIF that was established in 1992 or earlier, and that has had no funds or property transferred or contributed to it at any time after the end of 1992, other that funds from another qualifying RRIF, or a RRIF that was established after 1992 that only received funds or property from a qualifying RRIF. (ITA 7308 (2).

Quantum Meruit: latin meaning “as much as he deserved”. Quantum meruit determines the actual value of the services provided when either no contract exists or when doubt is cast as to the amount due for the work performed, but under situations when payment could be expected.

Quick Pay: an option that allows you to pay off the premiums quickly. With this option, your premium payments are divided over a small number of payments, say 10.


Rated Policy: a life insurance policy for a life insured who presents a higher than standard risk due to an occupation, hobby or health condition, and for which a higher than standard premium is charged.

Real Estate Automated Valuation System (REAVS): a system that provides an estimation of the value of residential property based on sales data and the nature of the property in relation to its neighbourhood.

Real Property: often called “property”, “real estate”, or “land”. Real property is defined as the interests, benefits, and rights inherent in the ownership of physical real estate. It does not include personal property. In civil law, real property is referred to as immovable property.

Reassessment: the process of creating a new base for property taxation by updating assessments to reflect more current values.

Receipt: a document acknowledging the completion of the repayment agreement under the terms of the contract and the release of the lender’s interest in the property.

Receiver (Mortgages): an appointee of a court, requested by a lender when the borrower is in default, to receive and account for the rents and profits from mortgaged premises.

Recurrent Disability: after a period of disability ends, if the insured becomes disabled again from the same or related causes, the insurer will consider the disability a continuation of the prior period. This is one for the purpose of determining the commencement period and maximum benefit period for the insured.

Redemption: the duty of a lender, on being paid the principal, interest and costs due by the borrower, to hand to the borrower the title deeds together with an executed reconveyance of the mortgage property.

Refund of Premiums: an amount received form an unmatured RRSP as a result of the death of the annuitant.

Registered Annuity: an annuity purchased with registered funds.

Registered Funds: funds that are held in registered plans and that have not yet been taxed as income. Also called tax-deferred savings.

Registered Pension Plan (RPP): an employer-sponsored pension plan registered under the Income Tax Act and regulated by provincial of federal legislation. There two types: defined benefit plans and defined contributions plans.

Registered Retirement Income Fund (RRIF): essentially a trust fund that is registered with Revenue Canada, for the purpose of providing the annuitant with a retirement income.

Registered Retirement Savings Plan (RRSP): a trust set up in accordance with the Income Tax Act, to hold certain investment assets intended for retirement income.

Reinstatement: if the policy lapses because the premium is not paid when due or within the grace period it will be reinstated if the insurance company accepts payment of the premium without requiring a reinstatement application.

Release of Covenant: an agreement by a lender to terminate the personal obligation of a borrower,

  1. usually upon sale of a property to a new purchaser who is acceptable to the lender, and who has signed as assumption agreement or other appropriate legal documents,
  2. releasing a guarantor whose covenant is no longer required.

Renewable: gives the policyowner the option of renewing the policy for some predetermined period of time, usually at a higher rate of premium. A term life policy that can be renewed at the end of the term for another term usually of the same length without further proof of insurability. Regardless of the physical condition of the life insured, the premium cannot be increased due to any adverse physical condition. The insured must pay the premium rate for his attained age at the time of the renewal. Some policies specify the premiums that will be charged upon each renewal. Other permit the insurer to adjust the premiums based upon the mortality experience of lives insured under the policy. The policy may give the right to several successive renewals up to a specified age.

Renewal Agreement: an agreement through which the lender may agree to extend the mortgage loan, possibly on revised terms as to principal repayments and interest rate.

Rent: periodic payments made by the lessee or tenant to the lessor or landlord in exchange for the use of their property.

Replacement Cost: insurance that pays the full value of damaged or destroyed property without taking depreciation into consideration.

Replacement Cost (Real Estate): the cost of replacing a subject property with one having exactly the same utility.

Replacement Value: the value of an item of the same kind, quality and condition. It may be more or less than the original purchase price of the property.

Rescission: the act of rescinding; the cancellation of a contract and the return of the parties to the state in which they would have been if the contract had not been made.

Reserve: see Policy Reserve.

Residual Disability: based upon loss of earnings and means that due to injuries or sickness, the insured has a loss of monthly income of at least 20%. The insured must also be under the care and attendance of a physician.

Respite care: financial assistance that is payable to a person who is unable to care for himself, in order to relieve a relative or friend who is a part-time caregiver.

Retiring Allowance Rollover: a process whereby all or portions of a retiring allowance may be transferred into an RRSP and deducted from income. The rollover is subject to a limit of $2,000 for each year of service prior to 1996 in which the individual earned no vested pension or DPSP benefits.

Reverse Mortgage: this type of mortgage allows older consumers to convert their home equity into monthly cash payment(s), generally for living expenses. A homeowner’s equity is gradually drawn down by a series of monthly payments from the lender to the homeowner – the borrower. At the end of the loan period, or upon the death of the borrower, the loan balance is due, which is usually settled by the heirs who sell the property to meet the outstanding obligation.

Reversion: a right to future possession retained by an owner at the time of the transfer of his or her interest in real property.

Revocable Beneficiary: the policyowner has the right to name the beneficiary of the proceeds of the policy and can change the beneficiary at any time.

Rider: an addition to a standard policy that adds or deletes some coverage or conditions.

Risk Tolerance: the degree of risk that a client is prepared to take in investing funds to meet a specific objective.

Robbery: you have been robbed if someone used violence or the threat of violence to take your property from you.


Sales Date Report: a quick, no-inspection based appraisal that estimates a value for good quality real estate in low risk neighbourhoods. It provides important information but lacks in-depth details that other appraisals provide. The value estimate is based on MLS sales and listing data.

Salvage: the value of the portion of the property not damaged when the rest of the property has been damage by an insured peril. This value is used to reduce the amount of any claims.

Schedule I, II and III Banks: schedule I Banks, as defined by the Bank Act, have shares that are widely held. Schedule II banks are more closely held. Schedule III banks are foreign bank branches of foreign institutions.

Second Mortgage: a mortgage placed on real property which is already encumbered with one mortgage. Determination of first, second, third mortgage, etc. is determined by priority of registration (time and date).

Secondary Financing: financing real estate with a loan, or loans, subordinate to a first mortgage.

Secondary Mortgage Market: a market where existing mortgages are bought and sold.

Segregated Funds: a portfolio of financial assets that are held in trust by an insurance company for the beneficiaries. The term, “segregated”, refers to the fact that, unlike the accumulating funds for some insurance policies, these funds are kept separate or segregated from the assets of the insurance company. The segregated fund is taxed as an inter vivos trust and elects under Section 104(6) of the Income Tax Act to have all of its taxable income flow through to the beneficiaries of unitholders. Segregated funds are primarily designed to provide a more flexible alternative for investing the accumulating fund of a life insurance policy. A segregated fund cannot be part of the exempt accumulating fund for a life insurance policy. Rather it is a trust. The investment income is taxable to the policyholders whether or not any amounts have been paid to the policyholder by the trust. The income retains its nature as it flows through to the policyholders and is taxable as capital gains, capital losses, dividends eligible for the dividend tax credit and other forms. A segregated fund, unlike a mutual fund, flows a capital loss through to the fund owner. The disposal of all or part of the interest in a segregated fund can give rise to a capital gain or loss. Also called seg fund.

Self-directed RRSP: an RRSP, set up by the taxpayer, and established to hold a wide-range of investments eligible for an RRSP, essentially a brokerage account for registered funds.

Separation Agreement: an agreement dealing with the rights and obligations of both parties during their separation.

Separation as to Bed and Board: separated and no longer living together.

Settlement Options: the part of an insurance policy that specifies that the death benefit is paid in cast upon satisfactory proof of the death of the life insured. The beneficiary usually may elect to receive the death benefit in a lump sum or as an annuity paid by the insurer unless the policy owner specifically set out the form of payment in the contract.

Simple Interest: the cost of borrowing money, calculated by applying the interest rate to the original principal amount only. In contrast to compound interest, interest is not charged on interest.

Single Life Annuity: a life annuity that terminates payments upon the later of the death of a single beneficiary and the end of any guaranteed term.

Skip Payment Option: this is an example of a mortgage clause that may be added to an open mortgage. If this clause is part of the mortgage agreement, the borrower has the ability to skip a monthly payment without the mortgage going into default.

Sole Proprietorship: a business owned by a single person and not registered as a corporation. The sole proprietorship has unlimited liability.

Sole Ownership: of an asset, means that an individual has ownership and control to the property, both during life and upon death through the designation of a beneficiary or the provisions of a will.

Spousal Rollover: where the ownership of a policy is transferred to the policyowner’s spouse or common-law partner trust or to a former spouse or common-law partner in settlement of rights arising out of their relationship; or at death of the policyholder to the owner’s spouse or common-law partner or a spousal or common-law partner trust, then the proceeds of disposition are deemed to equal to the ACB of the policyholder immediately before the transfer or death and the cost to the transferee is deemed to be this same amount (ITA 148(8.1) and 148(8.2). Consequently, any unrealized capital gains or capital losses become capital gains or capital losses of the spouse, common-laws partner or trust on a subsequent disposition.

Spousal RRIF: any RRIF that received payments or transfers of funds or property, either directly or indirectly, from a spousal RRSP.

Spousal RRSP: any RRSP established for the benefit of a taxpayer’s spouse or common-law partner and where the contributions are made and deducted by the taxpayer.

Spousal Trust: a trust set up under the deceased’s will, or a court order, for the surviving spouse.

Springing Power of Attorney: a power of attorney that does not come into effect until a triggering event has occurred, most often specified as the incapacity of the grantor. Also called contingent power of attorney.

Standby Fee: a sum of money given by the borrower to the lender to hold a mortgage commitment for a certain period of time. The fee is normally non-refundable.

Standing Mortgage: a mortgage that provides for equal, regular lump-sum payments of principal, usually quarterly, plus accrued interest.

Step Mortgage: a mortgage product that attaches a mortgage loan to a line of credit in one package.

Step-rated: a modified form of level premium, where the initial premium level is low and increases at specified times until it reaches a stated maximum.

Stepped Contributions: where a lower contribution rate applies to earnings up to the Yearly Maximum Pensionable Earnings (YMPE), while a higher rate applies to earnings above the YMPE, while a higher rate applies to earnings above YMPE. Stepped contributions are designed to provide some financial relief for those earnings that are already subject to CPP/QPP contributions.

Straight-life Annuity: a pension that is payable as an annuity for the life time of the member, with no further benefit after the member dies.

Subprime Transactions: classification of lending based on the payment risk that the lender faces. Subprime deals (also known as B and C deals) face a higher risk that the amount of money lent will not be repaid, compared to prime deals (Also known as A deals).

Subscription Policy (Insurance): a single insurance policy that states that two or more insurance companies are sharing the risk.

Substantially Ceased Working: describes as individual under age 65 who has earnings that are less than the certain current maximum CPP pension payable at age 65.

Substitute Gifts: bequests to alternate beneficiaries in the event of the demise of the original beneficiary.

Successor Annuitant: if the taxpayer is the annuitant of a RRIF, he can elect to have payments from the RRIF continue to his spouse or common-law partner after his death. He can make this election either in the RRIF contract, or in his will. If he makes this election, then his spouse or common-law partner will become the successor annuitant of the RRIF after his death, and she will have to report the resulting payments as income in the year in which they are received.

Suicide Clause: a clause that states that if the life insured commits suicide, whether while sane or insane, within two years of the effective date of coverage, the insurer will return any premiums paid, but will not pay the death benefit.

Surrender Charge: a charge levied on the redemption of units of a seg fund as a percentage of the amount redeemed. Must UL policies have surrender charges in the event that the policy is surrendered, in whole or in part. The surrender charges are back-end charges, like deferred service charges for mutual funds, and are only applicable if the contract is surrendered before a period of years as specified in the contract. The surrender charge is deducted from the cash surrender value before the insurer releases the funds to the contract owner.

Survey: a survey sets out the legal description of a mortgaged property, allowing confirmation that any building sits within the described boundaries of the land. Land boundaries, areas and improvements are determined and plotted on the survey. Surveys are also used for identifying easements.

Surveyor’s Certificate: a formal statement signed, certified, and dated by a surveyor giving the pertinent facts about a particular property and any easements or encroachments affecting it. Such certificates are not longer available in Ontario.

Survivor’s Pension: a pension payable under the Canadian Pension Plan to the surviving spouse or common-law partner of a deceased contributor.

Survivorship Annuity: an annuity that is payable during the lifetime of one individual, but only after the death of another designated individual.


Take-out Loan: a first mortgage loan that is committed and expected to be made upon completion of a property with the loan proceeds to be used to repay an interim or construction loan.

Tax Assistance for Retirement Savings: a system to defer taxation on both the original amounts saved and the investment earnings on them.

Tax Planning: arranging one’s affairs in order to minimize the amount of income tax payable.

Taxable Capital Gain: the capital gain adjusted to reflect the capital gains inclusion rate.

Tenancy in Common: a form of ownership whereby each tenant has an undivided interest in the whole property. This means that each partner has the right to use and enjoy the full property, but only owns a portion of it.

Tenants in Common: an ownership of property by two or more people, each of whom has an interest in the property. Tenants in common may have different shares in the property. Unlike the case in joint tenancy, a tenancy in common does not end because one party chooses to sell his or her interest. Instead, the purchaser simply becomes the new tenant in common.

Term: the period of time that the insurance policy is in force. The term can range from one year to an entire lifetime.

Term (mortgage): in a mortgage, term is the actual length of time for which the money is loaned. The term is usually shorter than the amortization period. At the end of the term the outstanding debt must either be refinanced at current market rates or paid off in full.

Term 100: a form of permanent insurance that matures when the insured reaches age 100 or dies, whichever comes first. Unlike whole life insurance, term 100 does not usually build up any cash surrender value, has no loan value, is not participating and does not pay dividends. As a result, the premiums for term 100 are lower than premiums for whole life. There are a few term 100 policies available, which have a cash surrender value. However, these are the exceptions, rather than the rule. The amount of CSV is less than a comparable whole life policy.

Term Annuity: a contract for the annuitant to receive regular and periodic payments for a specified period of time or term.

Term Certain Annuity: a term annuity that includes a guarantee that the payments will be made for the full term, even if the annuitant dies before the term expires.

Term Life Insurance: an insurance policy that provides protection against financial loss resulting from death during a specified period of time. The policy only pays if the insured dies within the given period named in the policy. The period is usually 1 year, 10 years or 20 years, or until a specific age such as age 65. At the end of the period, the protection ceases unless it is renewed.

Term Mortgage: a non-amortizing mortgage under which the principal is paid in its entirety at the maturity date. A term mortgage is sometimes called a straight loan.

Terminal Loss: for depreciable property, the excess of the undepreciated capital cost over the deemed proceeds.

Terminal Period: the period from January 1 of the year of death up to the date of death.

Terminal Period Return: the income tax return for the terminal period. Also called Final Return.

Testacy: an estate left by a deceased who had a will. Also called a testate estate.

Testamentary Trust: a trust that is established through a will and that is only crated upon the testator’s death.

Testate Estate: see Testacy.

Testatrix/Testator: a woman/man who writes a will.

Theft: you are a victim of theft if someone steals your property without necessarily using force or violence.

Third Mortgage: a mortgage placed on real property which is already encumbered with a first and second mortgage. Determination of first, second, and third or subsequent mortgage is by priority of registration (time and date).

Third-party Contract: a contract where the insured (owner) insures the life of a third person. The three parties are thus the insured, the life insured and the insurer.

Third-party Liability Insurance: protects you against claims made by other people for their injuries and damage to their property caused by someone operating the car with the insured’s consent.

Title: the legal evidence that shows the rightful owner of land.

Title Fraud: a range of fraudulent activity regarding the ownership of property. One form of title fraud involves taking out a mortgage against a home that the fraudster does not own. The fraudster assumes the homeowner’s name and credit history, but absconds with the loan proceeds.

Title Insurance Policy: a contract by which the insurer, usually a title insurance company, agrees to pay the insured a specific amount for any loss caused by insured defects to title of a property, for which the insured has an interest as purchaser, lender or otherwise.

Title Search: an examination of public records to determine the state of title.

Total Debt Service Ratio (TDS): one of the ratios used to determine whether or not a borrower is able to carry the debt load for a mortgage. The ratio is calculated as the percentage of annual income required to cover housing costs (GDS) plus any other loans that an individual has, such as those resulting in credit card and car payments. There is a maximum amount associated with this ratio to ensure that borrowers can afford to carry the debt.

Total Disability: being unable to work at any occupation for wage or profit, and for which the insured is qualified by reason of education, training or experience.

Total RRSP Contribution Room: can be determined by calculating an individual’s current contribution limit, adding any carry- forward contribution room from previous years and any other special contribution limits, and subtracting any pension adjustments from the previous year or past service pension adjustments incurred in the current year.

Transfer of Charge: assignment of a mortgage.

Traveling expenses: if medical treatment is not available locally, you may be able to claim the cost of traveling to get the treatment somewhere else, provided you had to travel more than 40 kilometres. If you had to travel more than 80 kilometres, you can claim reasonable costs for meals and accommodation.

Trust Company: a commercial bank or other corporation that manages, holds, or invests assets for the benefit of others.

Trustee: the one who holds title to the property in the trust for the benefit of the beneficiaries, who is required to carry out specific duties and has the authority to dispose of the property.

Two-party Contract: a contract where the insured insures her own life with the insurance provider. The two parties are thus the insured and the insurer.


Undepreciated Capital Cost (UCC): the amount of the cost of a depreciable property for which a deduction for capital cost allowance has not yet been claimed, calculated as cost less accumulated capital cost allowance.

Underwriting: the process of examining an application for insurance, deciding whether to accept the application and determining the appropriate premiums after considering the risks associated with the applicant.

Uniform Life Insurance Act: a uniformity of law, not a statute, that governs the life insurance activities of the nine common law provinces (i.e., all provinces except Quebec).

Uninsurable: an individual can be uninsurable if her situation is such that due to any factor including a medical condition, occupation or employment situation, she is unable to meet the conditions for acceptance of her application fro disability insurance.

Unities: in common law, unities are the four conditions required to create and maintain joint tenancy. They are time, title, interest and possession.

  • Title – All joint tenants must obtain their interest from the same document.
  • Time – All joint tenants must receive their interest at the same time.
  • Possession – Each interest is an undivided interest in the whole of the property.
  • Interest – All joint tenants must have the same interest (extent, nature, duration) in the land.

Unity of Possession: one of the four unities required to form a joint tenancy. Each co-owner must have an equal interest in the property. If one of the co-owners subsequently sells a portion of his interest in the property, the unity of interest will be violated and the joint tenancy (presuming one existed) will revert to a tenancy in common.

Unity of Time: one of the four unities required to form a joint tenancy. All co-owners must receive their interests at the same time.

Unity of Title: one of the four unities required to form a joint tenancy. All co-owners must acquire their interest from the same instrument (e.g., by will or by a transfer of deed).

Universal Life: a form of life insurance under which the amount of death benefit and lives insured are variable, the accumulating fund and other accounts can be invested in a variety of financial assets, and the contributions to the policy to cover the premiums are flexible.

Unmatured RRSP: an RRSP that has not started to pay a retirement income.

Unregistered Annuity: an annuity purchased with unregistered funds.

Unregistered Funds: funds that are in the hands of the beneficiary. Also called non-tax-deferred savings or tax-paid capital. (i.e., funds that have already been subject to income tax).


Valuation Date: the date used for establishing the assessed value for all properties in a jurisdiction; formerly called a “base year”.

Variable Annuity: a contract under which the annuitant receives a periodic payment for a term or for life and the amount of the payment fluctuates in accordance with the earnings of an invested amount.

Variable Rate Mortgage: this type of mortgage, also referred to as adjustable rate mortgage, is the opposite of a fixed rate mortgage. The interest rate on this loan may change during the term of the mortgage reflecting changes in the current market rates.

Vendor Take-Back Mortgage (or Seller Take-Back Mortgage): a mortgage in which the vendor uses his or her own equity to provide some or all of the mortgage financing in order to sell the property.

Vesting: refers to the point in time when the employer’s contributions become the property of the employee, such that the employee has the right to receive the benefit for those contributions, even following termination of employment prior to retirement.

Vested Benefits: benefits that have vested with the employee, such that they legally belong to the employee and must be used to provide him with a retirement income.


Waiting Period: see Еlimination period.

Waiver of Premiums Clause: a clause that states that in the event the insured becomes totally disabled, payment of premiums are waived. The waiver of premiums option can add 10% to 15% to the policy’s premium.

Waiver of Premium Provision: a term of the policy under which the insurer relinquishes the right to the receipt of payment of the premium in the event the insured becomes totally or partially disabled.

Whole Life Insurance: a form of permanent life insurance, which provides protection for the whole of the insured’s life, not just for a specific term. Whole life insurance has fixed annual or monthly premium that is payable for the entire lifetime of the insured. Premiums can be paid on a continuous payment basis over the insured’s life or on any limited basis, such as a single payment or annually for 10 years. (Also referred to as straight life and ordinary life insurance.)

Widow: for OAS, a widow includes widower, and means a person whose spouse or common-law partner has died, and who has not thereafter become the spouse or common-law partner of another person.

Will: a legal declaration of a person’s wishes regarding the disposition of her assets after death.

Workers’ Compensation: insurance offered by the provincial governments that provides coverage to employees for injuries sustained while performing the duties of their normal occupation.

Workers’ Compensation Offset: a reduction in benefits under an individual or group disability insurance plan due to the insured’s eligibility to receive Workers’ Compensation benefits


Yearly Maximum Pensionable Earnings (YMPE): the upper ceiling on pensionable earnings, beyond which no additional Canada Pension Plan premiums are required. This amount is indexed annually to changes in the CPI.

Yearly Term Rates: premiums based upon the probability of death in the year for the attained age of the life insured, which premiums increase each year.

Year’s Basic Exemption (YBE): a minimum level of earnings set at $3,500, below which no Canada Pension Plan premiums are required.