Glossary of Terms / Investing terms / Estate Planning Terms / Insurance Terms / Life Insurance Terms / Critical Illness Terms / Disability Insurance Terms / Niagara Region / Ontario / Canada

Glossary of Terms

Investing, Estate, and Insurance

Planning in Ontario

Here is a glossary of key terms for investing, estate, and insurance planning,

specifically tailored for Ontario, Canada:

Investing Terms

Asset Allocation: The strategy of dividing your investment portfolio among different asset categories, such as stocks, bonds, and cash, to balance risk and return.1
Bonds: A type of debt instrument where you lend money to a government or corporation, and in return, they pay you interest over a specified period and return your principal at maturity.
Capital Gains/Losses: The profit or loss you make when you sell an investment (like a stock or property) for more or less than its original purchase price. In Canada, 50% of capital gains are taxable.
Compounding: The process where the earnings from an investment are reinvested, generating their own earnings. This "interest on interest" effect allows your money to grow exponentially over time.
Diversification: The strategy of spreading your investments across various asset types, industries, and geographies to reduce risk. The idea is that if one investment performs poorly, others might perform well, balancing out the overall return.2
Dividend: A portion of a company's profits paid regularly (usually quarterly) to its shareholders.
ETF (Exchange-Traded Fund): A type of investment fund that holds a collection of stocks, bonds, or other assets, and trades on stock exchanges like individual stocks. They typically have lower fees than mutual funds.
GIC (Guaranteed Investment Certificate): A conservative investment that guarantees your principal and provides a fixed rate of return over a specified term (e.g., 1 to 5 years).
LIF (Life Income Fund): A type of Registered Retirement Income Fund (RRIF) that holds "locked-in" pension money. It has both minimum and maximum annual withdrawal limits.
LIRA (Locked-in Retirement Account): A registered investment account that holds "locked-in" pension funds transferred from a former employer's pension plan when you leave employment. Funds cannot be withdrawn until retirement.
Mutual Fund: A professionally managed investment fund that pools money from many investors to purchase a diversified portfolio of stocks, bonds, or other securities.
Non-Registered Accounts: Investment accounts that are not registered with the government (unlike RRSPs or TFSAs) and thus do not offer tax-deferred growth or tax-free withdrawals. Investment income earned in these accounts is typically taxed annually.
Registered Accounts: Investment accounts recognized by the Canadian government (e.g., RRSP, TFSA) that offer specific tax advantages, such as tax-deferred growth or tax-free withdrawals.
RRIF (Registered Retirement Income Fund): A retirement income fund that you must convert your RRSP to by age 71. It allows you to draw regular income from your savings, with minimum annual withdrawal amounts.
Risk Tolerance: An investor's willingness and ability to take on financial risk. It influences the type of investments suitable for their portfolio.
RRSP (Registered Retirement Savings Plan): A retirement savings plan that allows you to contribute money on a tax-deductible basis, with investments growing tax-deferred until withdrawal in retirement.
Stocks: Represent ownership shares in a company. When you buy stock, you become a part-owner and can potentially benefit from the company's growth and profits.
TFSA (Tax-Free Savings Account): A registered savings account that allows your investments to grow tax-free, and all withdrawals (including gains) are also tax-free. Contributions are made with after-tax dollars.

Estate Planning Terms (Ontario Specific)

Advance Directive: While not a legally recognized term in Ontario, this generally refers to a person's wishes regarding their future medical care, often expressed through a Power of Attorney for Personal Care.
Beneficiary: An individual or entity designated to receive assets or benefits from a will, trust, or insurance policy upon the owner's death.
Certificate of Appointment of Estate Trustee with a Will (formerly Letters Probate): The official court document issued by the Ontario Superior Court of Justice that confirms the validity of a will and grants the named executor (Estate Trustee) the legal authority to administer the deceased's estate.
Certificate of Appointment of Estate Trustee without a Will (formerly Letters of Administration): The official court document issued by the Ontario Superior Court of Justice that appoints an individual (the Estate Trustee) to administer the estate of someone who died without a valid will.
Clearance Certificate (CRA): A certificate issued by the Canada Revenue Agency (CRA) confirming that all tax obligations (income tax, GST/HST) of a deceased person and their estate have been satisfied. Executors typically obtain this before distributing all assets to avoid personal liability.
Digital Assets: Online accounts, digital files, cryptocurrencies, social media profiles, and other electronic records that have financial or personal value. Estate plans should include instructions for managing these.
Executor / Estate Trustee: The person named in a will (or appointed by the court if there is no will) who is legally responsible for administering the deceased's estate, including collecting assets, paying debts, filing taxes, and distributing assets to beneficiaries. In Ontario, the official term is Estate Trustee.
Final Tax Return (Terminal Return): The last income tax return filed for a deceased person, covering the period from January 1st to the date of death.
Henson Trust: A specific type of discretionary trust (named after a legal case) often used in Ontario to hold assets for a beneficiary with a disability, allowing them to receive funds without jeopardizing their eligibility for provincial disability benefits.
Intestacy / Intestate: The legal state of dying without a valid will. In Ontario, specific rules under the Succession Law Reform Act dictate how the deceased's assets will be distributed.
Joint Tenancy with Right of Survivorship: A form of property ownership (often real estate or bank accounts) where two or more individuals own the property equally. Upon the death of one owner, their share automatically passes to the surviving owner(s) outside of the will and probate.
Probate: The legal process in Ontario where the Superior Court of Justice confirms the validity of a will and grants the Estate Trustee the legal authority to administer the deceased's estate.
Probate Fees / Estate Administration Tax: A tax levied by the Ontario government on the value of assets that pass through a will (i.e., those that require probate). It is approximately 0.5% on the first $50,000 and 1.5% on the amount over $50,000.
Power of Attorney for Personal Care: A legal document in Ontario where you appoint someone (your "attorney") to make decisions about your personal care (e.g., housing, nutrition, hygiene, safety, medical treatment) if you become mentally incapable of doing so.
Power of Attorney for Property (Financial POA): A legal document in Ontario where you appoint someone (your "attorney") to manage your financial affairs (e.g., bank accounts, investments, paying bills, selling property) if you become mentally incapable or if you simply want them to act on your behalf.
Residue of the Estate: The remaining assets of an estate after all specific gifts, debts, taxes, and expenses have been paid. This is usually the largest portion of the estate.
Spousal Trust: A trust set up in a will for the benefit of a surviving spouse. Assets held in a qualifying spousal trust can pass to the surviving spouse tax-deferred until the spouse's death, potentially delaying capital gains tax.
Tenancy in Common: A form of property ownership where two or more individuals own distinct, separable shares of the property. Upon the death of one owner, their share does not automatically pass to the co-owner(s) but instead becomes part of their estate, to be distributed according to their will or intestacy rules.
Testator: The person who makes a will.
Trust: A legal arrangement where property is held by one party (the trustee) for the benefit of another party (the beneficiary). Trusts can be set up during a person's lifetime or through a will.
Will (Last Will and Testament): A legal document that specifies how a person wishes their assets to be distributed and who they want to manage their estate after their death.

Insurance Terms

Here is a glossary of terms for various insurance products, focusing on life, critical illness, disability, long-term care, and individual & group health plans in Ontario, Canada:

General Insurance Terms

Actuarial: The statistical and mathematical methods used by insurance companies to assess risks, calculate premiums, and determine reserves.
Application: A form completed by a prospective insured providing information to the insurer, which is then used to decide whether to accept the risk and at what premium.
Beneficiary: The person(s) or entity designated to receive the benefits from an insurance policy upon a specific event (e.g., the death of the insured).
Broker: An independent insurance professional who represents multiple insurance companies and helps clients find the best policy for their needs.
Claim: A formal request by a policyholder to an insurance company for payment or services under the terms of the policy.
Coverage: The specific types of services, care, or events that an insurance policy protects against.
Deductible: The amount of money the insured must pay out-of-pocket for covered services before the insurance company begins to pay.
Exclusions: Specific conditions, events, or perils that are explicitly not covered by an insurance policy.
Insurability: The conditions under which an insurance company will accept an application for insurance, typically based on health, lifestyle, and occupation.
Insured: The person or entity whose risk of financial loss from an insured peril is protected by the policy.
Insurer: The insurance company that provides the coverage and guarantees payment in the event of a covered loss.
Lapse: The termination of an insurance policy due to non-payment of premiums.
Premium: The regular payment (e.g., monthly, annually) made by the policyholder to the insurance company to keep the policy in force.
Rider/Endorsement: An additional provision or amendment added to an insurance policy that either modifies, expands, or restricts its benefits or terms.
Underwriting: The process by which an insurance company assesses the risk of insuring an applicant to determine whether to provide coverage and at what premium rate.
Waiting Period / Elimination Period: The period of time that must pass after an insured event occurs (e.g., a diagnosis of illness, onset of disability) before benefits begin to be paid.

Life Insurance Terms

Cash Surrender Value: The amount of money available to the policyholder upon the voluntary termination of a permanent life insurance policy before it becomes payable by death or maturity.
Death Benefit: The lump-sum, tax-free payment made to the designated beneficiary(ies) upon the death of the insured person.
Permanent Life Insurance: Life insurance that provides coverage for the entire lifetime of the insured, as long as premiums are paid. It often includes a cash value component. Examples include Whole Life and Universal Life.
Term Life Insurance: Life insurance that provides coverage for a specific period (e.g., 10, 20, 30 years). If the insured dies within the term, the death benefit is paid.1 If the term expires, the coverage typically ends or becomes renewable at a higher rate.
Term: The specific period for which a term life insurance policy provides coverage.
Whole Life Insurance: A type of permanent life insurance with guaranteed premiums, a guaranteed death benefit, and a guaranteed cash value that grows over time.
Universal Life Insurance: A type of permanent life insurance offering more flexibility in premium payments and investment choices within the policy's cash value component.

Critical Illness Insurance Terms

Covered Condition: A specific critical illness or medical condition (e.g., cancer, heart attack, stroke) that is explicitly defined and covered by the policy. The diagnosis must meet the policy's exact definition for a claim to be paid.
Lump-Sum Benefit: A single, tax-free payment made to the policyholder upon diagnosis of a covered critical illness (after satisfying any survival period). The funds can be used for any purpose.
Return of Premium: A common rider or feature that allows the policyholder to receive all or a portion of their premiums back if they do not make a claim by a certain age or upon death.
Survival Period: The specified number of days (e.g., 30 days) that the insured must survive after the diagnosis of a covered critical illness before the benefit is payable.

Disability Insurance Terms

Benefit Period: The maximum length of time that disability benefits will be paid (e.g., 2 years, 5 years, to age 65).
Definition of Disability: The most crucial part of a disability policy, defining when the insured is considered disabled and eligible for benefits. Common definitions include:
- Own Occupation: Unable to perform the substantial duties of your specific occupation at the time of disability. (Generally more favourable to the insured).
- Regular Occupation: Unable to perform the substantial duties of your regular occupation and not engaged in any other occupation.
- Any Occupation: Unable to perform the duties of any occupation for which you are reasonably suited by education, training, or experience. (Generally less favourable).
Elimination Period (Waiting Period): The period of time at the beginning of a disability during which no benefits are paid (e.g., 30, 60, 90, 120 days). A longer elimination period usually results in lower premiums.
Monthly Benefit: The amount of tax-free income replacement received by the insured each month during a period of qualified disability.
Partial Disability Benefit: A benefit paid if the insured can perform some, but not all, of their occupational duties, resulting in a loss of earnings but not total disability.
Waiver of Premium: A rider that waives future premium payments if the insured becomes totally disabled and meets the policy's definition of disability.

Long-Term Care Insurance Terms

Activities of Daily Living (ADLs): Fundamental daily tasks that individuals must be unable to perform independently to qualify for benefits. Typically include bathing, dressing, eating, continence, toileting, and transferring (moving in/out of a bed or chair).
Cognitive Impairment: A decline in mental abilities (e.g., memory, reasoning, judgment) that prevents an individual from functioning independently and requires supervision.
Daily/Monthly Benefit Amount: The specific amount of money the policy pays out per day or month to cover long-term care expenses.
Elimination Period: The waiting period that must pass after care begins before benefits become payable (e.g., 0, 30, 90 days).
Home Care: Services provided in the individual's home, such as personal care, homemaking, and nursing care.
Long-Term Care Facility: A residential facility that provides ongoing care and supervision for individuals who can no longer live independently (e.g., nursing homes, assisted living facilities).
Pool of Money: Some policies provide a total dollar amount available for care, rather than a fixed daily/monthly benefit for a set period.
Reimbursement Plan: The policy pays back (reimburses) actual expenses incurred for covered long-term care services, up to the daily/monthly benefit limit.
Indemnity Plan (Income-Style Plan): The policy pays the full daily/monthly benefit amount directly to the insured once they qualify, regardless of the actual cost of care.

Individual & Group Health Plans (Extended Health Care)

Annual Maximum: The maximum dollar amount an insurance plan will pay for a specific benefit (e.g., dental, prescription drugs) within a calendar year.
Co-insurance: The percentage of a covered expense that the insured is responsible for paying after the deductible has been met (e.g., 20% co-insurance means the plan pays 80%, you pay 20%).
Co-payment (Co-pay): A fixed dollar amount that the insured pays for a covered service at the time it is received (e.g., $10 per prescription).
Coordination of Benefits (COB): Rules that determine the order in which two or more group or individual health plans (e.g., if both spouses have coverage) pay benefits for the same claim, to prevent overpayment.
Dental Care: Coverage for various dental services, often categorized into basic (cleanings, fillings), major (crowns, bridges), and orthodontics.
Drug Formulary: A list of prescription drugs covered by an insurance plan. It often categorizes drugs (e.g., generic, brand-name, specialty) and may have different coverage levels or dispensing fees.
EHC (Extended Health Care): Benefits that cover medical expenses beyond what is provided by the provincial government health plan (e.g., prescription drugs, paramedical services, vision care, hospital room upgrades).
Eligibility: The criteria an individual must meet to be covered by a group or individual health plan (e.g., employment status, residency, age).
Group Health Plan (Group Benefits): A health insurance plan purchased by an employer or organization to cover its employees or members. It typically offers broader coverage at a lower cost per person than individual plans.
Health Spending Account (HSA): An employer-funded account that provides employees with a set amount of money annually to spend on eligible health-related expenses not covered by the provincial plan or other benefits. Unused funds may roll over or be forfeited.
Individual Health Plan: A health insurance policy purchased directly by an individual (or family) from an insurance company, often when they don't have access to group coverage or want to supplement it.
OHIP (Ontario Health Insurance Plan): Ontario's provincial government-funded health insurance plan, covering medically necessary hospital and physician services. Private health plans supplement OHIP.
Paramedical Services: Services provided by regulated health professionals outside of a hospital, such as chiropractors, physiotherapists, massage therapists, naturopaths, and psychologists.
Prescription Drugs: Coverage for medications prescribed by a doctor that are not covered by the provincial drug plan.
Vision Care: Coverage for eye exams, prescription eyeglasses, contact lenses, and sometimes laser eye surgery.