Fortitude Financial Management
Fortitude Financial Management arrow Glossary
Glossary
Accelerated death benefit
An accelerated death benefit provides for the payment of a portion of your life insurance proceed if you become terminally ill. To be eligible to receive the benefit, you must be diagnosed as being terminally ill with a life expectancy of 12 months or less. The maximum benefit is usually 75 percent of the member's existing life insurance. An accelerated death benefit does not usually apply to term life insurance.
Accidental Death Cover
Accidental Death Cover is the optional benefit payable on the death of the insured as a result of an accident. The amount of the benefit is that shown in the Policy Schedule together with any increases as a result of automatic indexation of benefits.
Annual Premium
This is the annual premium specified in the Policy Schedule and includes the premiums for the benefits attached to the policy and the policy fee.
Annuity
A contract which provides an income for a specified period of time, such as a certain number of years or for life. An annuity is like a life insurance policy in reverse. The purchaser gives the life insurance company a lump sum of money and the life insurance company pays the purchaser a regular income, usually monthly.
Application
A signed statement of facts made by a person applying for life insurance and then used by the insurance company to decide whether or not to issue a policy. The application becomes part of the insurance contract when the policy is issued. 
Assignment
This is the legal transfer on one person's interest in an insurance policy to another person or entity, such as to a bank to qualify for a loan 
Automatic indexation of benefits
Unless otherwise specified, on each policy anniversary date we will index your benefits in line with the movement in the Consumer Price Index.
Beneficiary
The person(s) named in the policy to receive the life insurance proceeds upon the death of the insured.
Benefit period
The maximum amount of time that we will pay you benefits for each claim.
Buy/Sell Agreement
This is an agreement entered into by the owners of a business to define the conditions under which the interests of each shareholder will be bought and sold. The agreement sets the value of each shareholders interest and stipulates what happens when one of the owners wishes to dispose of his/her interest during his/her lifetime as well as disposal of interest upon death or disability. Life insurance, critical illness coverage and disability insurance are major considerations to help fund this type of agreement.
Cash surrender value
This is the amount available to the owner of a life insurance policy upon voluntary termination of the policy before it becomes payable by the death of the life insured. This does not apply to term insurance but only to those policies which have reduced paid up values and cash surrender values. A cash surrender in lieu of death benefit usually has tax implications.
Compound Interest
Interest earned on an investment at periodic intervals and added to principal and previous interest earned. Each time new interest earned is calculated it is on a combined total of principal and previous interest earned. Essentially, interest is paid on top of interest.
Convertible Term Insurance
Term insurance that can be exchanged (converted), at the option of the policyowner and without evidence of insurability, for a permanent insurance policy.
Critical Illness Cover
Critical illness cover will pay out on the diagnosis of a specified condition during the policy term. Many times this payout will be regardless of the level or speed of the illness recovery.
Date insured from
This is the date, shown on the Policy Schedule, from which the policy becomes effective.
Decreasing Term Insurance
Decreasing life cover decreases at a flat, fixed rate each year.
Deferred Annuity
An annuity providing for income payments to commence at a specified future time.
Disability Insurance
: Insurance that pays you an ongoing income if you become disabled and are unable to pursue employment or business activities. There are limits to how much you can receive based on your pre-disability earnings. Rates will vary based on occupational duties and length of time in a particular industry. This kind of coverage has a waiting period before you can begin collecting benefits, usually 30, 60 or 90 days. The benefit paying period also varies from 2 years to age 65. A short waiting period will cost more that a longer waiting period. As well, a long benefit paying period will cost more than a short benefit paying period.
Disablity/disabled
This is the word we use to describe your inability to work due to sickness or injury. Totally disabled is when you can't work at all, and partially disabled is when you can only work in a reduced capacity.
Diversification
Investing so that all your eggs are not in the same basket. By spreading your investments over different kinds of investments, you cushion your portfolio against sudden swings in any one area. Segregated equity funds have become a popular and secure way for average investors to get the benefits of greater diversification.
Dividend
A return of part of the premium on participating insurance that is based on the insurer's investment, mortality and expense experience. Dividends are not guaranteed.
Dollar Cost Averaging
A way of smoothing out your investment deposits by investing regularly. Instead of making one large deposit a year into your RRSP, you make smaller regular monthly deposits. If you are buying units in a mutual fund or segregated equity fund, you would end up buying more units in the month that values were low and less units in the month that values were higher. By spreading out your purchases, you don't have to worry about buying at the right time.
Endowment
Life insurance payable to the policyholder, if living on the maturity date stated in the policy, or to a beneficiary if the insured dies before that date. For example, some Term to age 100 policies offer the option of taking the face amount of the policy as a cash payout at age 100 if the policyholder is still alive and paying all required income taxes on the amount received or leaving the policy to pay out upon death whereupon the payout is tax free.
Face Amount
The amount stated on the face of the policy that will be paid in case of death. It does not include additional amounts payable under accidental death or other special provisions, or acquired through the application of policy dividends.
Family income benefit
With a family income benefit, instead of being paid in one lump sum, your beneficiaries will be paid with a tax free annual income until the end of the term specified in the policy.

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