Financial Glossary

D

Dealer
An investment broker acting as a principal or agent in a securities transaction.
Death Benefit
A payment made to a designated beneficiary upon the death of the employee annuitant.
Debenture
Unsecured debt backed only by the integrity of the borrower, not by collateral, and documented by an agreement called an indenture.
Debt Issue
The funds borrowed through the issuance of bonds and debentures by corporations and governments usually for the financing of long-term projects.
Declarations
Statements in an insurance contract that provide information about the property or life to be insured and used for underwriting and rating purposes and identification of the property or life to be insured.
Decreasing Term Life Insurance
A form of life insurance policy in which the policy's death benefit decreases over the term of the plan.
Deductible
An amount that a policyholder agrees to pay, per claim or per accident, toward the total amount of an insured loss.
Deemed Disposition
Under certain circumstances, taxation rules assume that a transfer of property has occurred, even though there has not been an actual purchase or sale. This could happen upon death or transfer of ownership.
Default
Non-payment of the instalments due under the terms of the mortgage(s).
Deferred Annuity
An annuity providing for the income payments to begin at some specified future date.
Defined Benefit Pension Plan
A plan where benefits are predetermined by a formula and employer contributions depend on the cost of the benefit minus the employee's contributions, if any.
Defined Benefit Plan
A pension plan stating either (1) the benefits to be received by employees after retirement or (2) the method of determining such benefits. The employer's contributions under such a plan are actuarially determined.
Defined Contribution Pension Plan
A plan where contributions by employees and the employer are fixed and the benefits depend on the contributions and their earnings.
Defined Contribution Plan
A plan under which the contribution rate is fixed and benefits to be received by employees after retirement depend to some extent upon the contributions and their earnings.
Demutualization
the process of changing the legal structure of an insurance company from a mutual form of ownership to a stock form of ownership.
Dental Insurance
Individual or group plan that helps pay costs of normal dental care as well as damage to teeth from an accident.
Dependents' Insurance Rider
An optional life insurance policy rider that provides term insurance coverage on the life of each of the policy owner's children.
Depreciation
A decrease in the value of property over a period of time due to wear and tear or obsolescence. Depreciation is used to determine the actual cash value of property at time of loss. (See Actual Cash Value)
Derivative
Security based on other underlying securities, for example, options or futures.
Direct Deposit
The electronic transfer of a payment from a company or organization into accounts of employees, retirees, taxpayers, vendors or shareholders.
Direct Payment
The electronic transfer of an authorized payment from a consumer's chequing or savings into the account of a biller, financing or investment company or non-profit organization.
Disability Benefit
A feature added to some life insurance policies providing for waiver of premium, and sometimes payment of monthly income, if the policyholder becomes totally and permanently disabled.
Disability Income Insurance
A form of health insurance that provides periodic payments to replace income when an insured person is unable to work as a result of illness, injury, or disease.
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.
Disability
A physical or mental condition that makes an insured person incapable of performing one or more duties of his or her occupation.
Discharge
The removal of all mortgages and financial encumbrances on a property.
Dismemberment Insurance
A form of health insurance that provides payment in case of loss by bodily injury of one or more body members (such as hands or feet) or the sight of one or both eyes.
Disposable Personal Income
The personal income less personal tax and non-tax payments. It is the income available to people for spending and saving.
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 Addition
An amount of paid-up insurance purchased with a policy dividend and added to the face amount of the policy.
Dividend
As the term dividend relates to a corporation's earnings, a dividend is an amount paid per share from a corporation's after tax profits. Depending on the type of share, it may or may not have the right to earn any dividends and corporations may reduce or even suspend dividend payments if they are not doing well. Some dividends are paid in the form of additional shares of the corporation. Dividends paid by Canadian corporations qualify for the dividend tax credit and are taxed at lower rates than other income. As the term dividend relates to a life insurance policy, it means that if that policy is "participating", the policy owner is entitled to participate in an equitable distribution of the surplus earnings of the insurance company that issued the policy. Surpluses arise primarily from three sources:
  1. The difference between anticipated and actual operating expenses
  2. The difference between anticipated and actual claims experience
  3. Interest earned on investments over and above the rate required to maintain policy reserves. Having regard to the source of the surplus, the "dividend" so paid can be considered, in part at least, as a refund of part of the premium paid by the policy owner
Life insurance policy owners of participating policies usually have four and sometimes five dividend options from which to choose:
  1. Take the dividend in cash
  2. Apply the dividend to reduce current premiums
  3. Leave the dividends on deposit with the insurance company to accumulate at interest like a savings plan
  4. Use the dividends to purchase paid-up whole life insurance to mature at the same time as the original policy
  5. Use the dividends to purchase one year term insurance equal to the guaranteed cash value at the end of the policy year, with any portion of the dividend not required for this purpose being applied under one of the other dividend options. NOTE: It is suggested here that if you have a participating whole life policy and at the time of purchase received a "dividend projection" of incredible future savings, ask for a current projection. Life insurance company's surpluses are not what they used to be.
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.
Donor
The person making a gift.
Double Indemnity
See Accidental death benefit.