Financial Glossary


Callable Loan
A loan that may be terminated at any time by the lender or borrower; used to finance the purchase of securities.
Canada Education Savings Grant
A Canada Education Savings Grant (CESG) is a grant offered by the Government of Canada to encourage parents, family and friends to save for a child’s education after high school. A CESG is paid by Human Resources and Skills Development Canada directly into an RESP in which the child is a named beneficiary.
Canadian Capital Markets Association (CCMA)
An association made up of the main sectors of the Canadian financial community to address, among other things, the impacts of moving to a T+1 settlement date.
Canadian Deposit Insurance Corporation
Better known as CDIC, this is an organization which insures qualifying deposits and GICs at savings institutions, mainly banks and trust companies, which belong to the CDIC for amounts up to $100,000 and for terms of up to five years. Many types of deposits are not insured, such as mortgage-backed deposits, annuities of duration of more than five years, and mutual funds.
Canadian Depository for Securities Limited (CDS)
The national clearinghouse and depository for securities; provides a variety of automated services for financial institutions active in Canada and international capital markets.
Canadian Life and Health Insurance Compensation Corporation (aka. CompCorp)
See Assuris.
Canadian Payments Association (CPA)
An association created by an Act of Parliament in 1980 whose mandate was amended through the Canadian Payments Act in 2001 to establish and operate national systems for the clearing and settlement of payments and other arrangements for the making or exchange of payments; facilitate the interaction of the CPA’s systems with others involved in the exchange, clearing and settlement of payments; and facilitate the development of new payment methods and technologies.
Canadian Venture Exchange (CDNX)
A new exchange formed through the merger of the ASE and VSE under a restructuring agreement between Canada’s exchanges; in 2001, the Toronto Stock Exchange acquired CDNX.
Capital Gain
Profit realized on the sale of securities. An unrealized capital gain is an increase in the value of securities that have not been sold.
Captive Agent
A licensed insurance agent who sells insurance for only one company.
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 that have reduced paid up values and cash surrender values. A cash surrender in lieu of death benefit usually has tax implications.
Casualty Insurance
Lines of insurance, such as automobile, liability, aviation, bonding and theft.
See Canadian Venture Exchange.
Certificate of Insurance
A statement of coverage issued to an individual insured under a group insurance contract, outlining the insurance benefits and principal provisions applicable to the member.
Certified Financial Planner (CFP)
The internationally recognized designation awarded in Canada by Financial Planners Standards Council (FPSC). CFP professionals must meet the FPSCs standards in education, experience, examination and ethics. CFP professionals must also have 30 hours of continuing education every year and agree to abide by the CFP Code of Ethics to renew their right to use the designation annually.
See Canada Education Savings Grant.
Chartered Financial Consultant (ChFC)
One who has passed advanced courses in financial planning and wealth accumulation granted by the Canadian Association of Insurance and Financial Advisors (CAIFA).
Chartered Life Underwriter (CLU)
One who has passed exams given by the Canadian Association of Insurance and Financial Advisors and who has been determined to be a financial planner with advanced knowledge in life and health insurance and employee benefits.
Chartered Property and Casualty Underwriter (CPCU)
A designation conferred in recognition of the attainment of certain standards of education and proficiency in the art and science of property and casualty insurance underwriting.
Charitable Lead Trust
A trust established for the benefit of a charitable organization under which the trustor receives income from an asset for a set number of years or for the trustor’s lifetime. Upon the termination of the trust, the asset reverts to the charitable organization. The trustor receives a charitable contribution deduction in the year in which the trust is established and the assets placed in the trust are exempt from capital gains tax.
A request for payment of a loss that may come under the terms of an insurance contract.
Claims Adjustor
Person who settles claims; an agent, company adjustor, independent adjustor, adjustment bureau, or public adjustor.
Class Rating
Rate-making method in which similar insureds are placed in the same underwriting class and each is charged the same rate. Also called manual rating.
Client Held Account
The arrangement where assets in an account are held in the individual’s name rather than a nominee’s name.
Closed Mortgage
A mortgage agreement that does not provide for prepayment prior to maturity without some form of prepayment penalty.
Canada Mortgage and Housing Corporation. A high ratio mortgage insurer.
Cognitive Impairment
A diminished mental capacity, such as difficulty with short-term memory. People who are cognitively impaired typically have Alzheimer’s disease or other forms of dementia.
In medical insurance, the insured person and the insurer sometimes share the cost of services under a policy in a specified ratio, for example 80% by the insurer and 20% by the insured. By this means, the cost of coverage to the insured is reduced.
An asset (securities, funds or a holding cheque) held by a lender as a guarantee until a loan (pledge) is repaid.
Commercial Paper
The interest-bearing or discounted short-term (less than one year) negotiable debt issued by a non-financial corporation.
Commission des valeurs mobilières du Québec (CVMQ)
Regulator of Québec securities markets.
The part of an insurance premium paid by the insurer to an agent or broker for his services in procuring and servicing the insurance.
Commitment Letter
This letter is the lenders commitment to provide mortgage financing within a specified time and according to the terms and conditions contained therein.
Common Stock (CM)
The securities that represent ownership in a corporation and carry voting privileges.
Completion Date
The date on which the purchase and sale of a property becomes final. Accordingly all documentation must be completed and payment of funds made by this date.
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.
Conditionally Renewable
Continuance provision of a health insurance policy under which the company cannot cancel the policy during its term but can refuse to renew under certain conditions stated in the contract.
Contingent Annuity Option
An option under which an employee may elect to receive, under certain conditions, a reduced amount of annuity with the same income, or a specified fraction, to be paid after his death to another person designated as his contingent annuitant, for that person’s lifetime. The contingent annuitant is usually the husband or the wife. (See Joint-and-Survivor Annuity)
Contingent Beneficiary
An individual who is entitled to receive the benefits of an insurance policy if the primary beneficiary dies before the life insured.
Contingent Owner
This is the person designated to become the new owner of a life insurance policy if the original owner dies before the life insured.
A binding agreement between two or more parties for the doing or not doing of certain things. A contract of insurance is embodied in a written document called the policy.
Conventional Mortgage
A mortgage loan that does not exceed 75% of the purchase price or appraised value whichever the lesser.
Conversion Privilege
The right given to an insured person to convert their current policy to an alternate form of insurance without evidence of medical insurability
Conversion Right
Term life insurance products are offered as non-convertible or convertible to a certain time in the future. The conversion right has a time limit, usually to the policy holder’s age 60 or possibly even age 70. This right means that the policyholder has the right to convert their existing policy to another specific different plan of permanent insurance within the specified time period, without providing evidence of insurability. There is a slightly higher cost for a term policy with the conversion privilege but it is a valuable feature should a policyholder’s health change for the worst and continued insurance coverage becomes a necessity. Most often this right is also granted to individuals covered under employee group benefit policies where individuals leaving the employee group have a limited amount of time, usually anywhere from 30 to 90 days, to convert to a specific permanent individual policy without evidence of insurability.
Convertible Bond
A bond that offers the holder the privilege of converting the bond into a specified number of shares of stock.
Transfer of title to the property at Land Titles Office from the vendors name to the purchasers name.
Coordination of Benefits (COB)
The mechanism used in group health insurance to designate the order in which the multiple carriers are to pay benefits and to prevent duplicate payments.
Corporate Debenture
The unsecured bonds issued by corporations that have no specific claim on assets or property.
Cost Basis
An amount attributed to an asset for income tax purposes; used to determine gain or loss on sale or transfer; used to determine the value of a gift
Cost-of-Living Rider
Benefit that can be added to a life insurance policy under which the policy owner can purchase one-year term insurance equal to the percentage change in the consumer price index with no evidence of insurability.
Coupon (CPN)
A future-date payment of interest on an underlying (physically stripped) bond held and traded separately from the underlying bond; the residual and other coupons form the same underlying bond.
The scope of protection provided under a contract of insurance; any of several risks covered by a policy.
A person covered by a pension plan is one who has fulfilled the eligibility requirements in the plan, for whom benefits have accrued, or are accruing, or who is receiving benefits under the plan.
See Canadian Payments Association.
See Chartered Property and Casualty Underwriter.
Creditor Proof Protection
The creditor proof status of such things as life insurance, non-registered life insurance investments, life insurance RRSPs and life insurance RRIFs make these attractive products for high net worth individuals, professionals and business owners who may have creditor concerns. Under most circumstances the creditor proof rules of the different provincial insurance acts take priority over the federal bankruptcy rules. The provincial insurance acts protect life insurance products that have a family class beneficiary. Family class beneficiaries include the spouse, parent, child or grandchild of the life insured, except in Québec, where creditor protection rules apply to spouse, ascendants and descendants of the insured. Investments sold by other financial institutions do not offer the same security should the holder go bankrupt. There are also circumstances under which the creditor proof protections do not hold for life insurance products. Federal bankruptcy law disallows the protection for any transfers made within one year of bankruptcy. In addition, should it be found that a person shifted money to an insurance company fund in bad faith for the specific purpose of avoiding creditors; these funds will not be creditor proof.
A person or company that holds and administers securities and financial instruments on behalf of others.