The financial planning process provides a financial route from your current situation to your retirement including significant milestones along the way. It brings together your savings, your retirement budget, your obligations, your dreams, your working life net cash flow for savings, your appetite for risk and an expected return on investment that factors in tax minimization strategies.
A type of financial-protection policy that provides cash to a named beneficiary upon the insured’s death, which an insurance company will offer to an applicant regardless of health. Guaranteed issue life insurance tends to be a last resort for individuals who can’t qualify for life insurance because of their current or past health problems and who don’t have the option to purchase life insurance as a benefit through their employer.
A policy with a set duration limit on the coverage period. Once the policy is expired, it is up to the policy owner to decide whether to renew the term life insurance policy or to let the coverage end. This type of insurance policy contrasts with permanent life insurance, in which duration extends until the policy owner reaches 100 years of age (i.e. death).
Whole life insurance refers to a policy that provides lifetime protection by paying a lump sum death benefit. Whole life policies differ from term insurance in that they have a savings component with earning accruing referred to as cash value. With this type of insurance a policy holder may take loans against the cash value which usually have a minimum guaranteed rate of interest. As with most life policies, whole life may be participating or non-participating.
Cash values are considered liquid enough to be used for investment collateral. If the insured dies, the death benefit is reduced by any outstanding loans. Premiums payable may be a single payment or fixed periodic (monthly) payment that is payable for the life of the owner or in most cases until the insured reaches age 100.
A type of flexible permanent life insurance offering the low-cost protection of term life insurance as well as a savings element (like whole life insurance) which is invested to provide a cash value buildup. The death benefit, savings element and premiums can be reviewed and altered as a policyholder's circumstances change. In addition, unlike whole life insurance, universal life insurance allows the policyholder to use the interest from his or her accumulated savings to help pay premiums.
An insurance policy that protects a mortgage lender or title holder in the event that the borrower defaults on payments, dies, or is otherwise unable to meet the contractual obligations of the mortgage. Mortgage insurance can refer to private mortgage insurance (PMI), mortgage life insurance, or mortgage title insurance. What these have in common is an obligation to make the lender or property holder whole in the event of specific cases of loss.
A type of insurance that protects the insured, in the event of specified major health events, during a defined period of time. Catastrophic illness insurance coverage is usually a lump sum, and
can be full or partial depending on the condition and the policy. Some conditions covered could include (but not limited to); long-term hospitalization, heart attack, stroke or cancer.
Also known as "critical illness insurance". Catastrophic illness insurance can be used to supplement a beneficiary's existing health and disability coverage. Restrictions are unique to the provider, but typically claims will be rejected due to: pre-existing conditions, not surviving 30 days after diagnosis, and any critical diagnosis within the first 90 days.
Disability-income insurance is insurance that provides financial benefits to a policyholder in the event of sickness or injury that inhibits the ability to work. Disability-income insurance is meant as a substitute of no more than 80% of income on a tax-free basis should illness keep you from earning an income in your occupation.
A type of insurance coverage that pays for medical and surgical expenses that are incurred by the insured. Health insurance can either reimburse the insured for expenses incurred from illness or injury or pay the care provider directly. Health insurance is often included in employer benefit packages as a means of enticing quality employees.
Long Term Care
Coverage that provides nursing-home care, home-health care, personal or adult day care for individuals above the age of 65 or with a chronic or disabling condition that needs constant supervision. LTC insurance offers more flexibility and options than many public assistance programs
Is insurance that is intended to cover medical expenses, trip cancellation, lost luggage, flight accident and other losses incurred while traveling, either internationally or within one's own country.
A rider attached to a life or health insurance policy. AD&D covers death by accidental means (rather than natural causes) and dismemberment, which includes loss of the use of certain body parts (including limbs or eyesight.)
These riders are usually written in such a way that the insurer must pay double the amount payable otherwise, or a specific amount of continuous income payments, and are sometimes called double indemnity riders. AD&D insurance is often offered by employers as an extra option on group health plans.
Tax-Free Savings Account (TFSA) is an account that provides tax benefits for saving in Canada. Investment income, including capital gains and dividends, earned in a TFSA is not taxed, even when withdrawn. Contributions to a TFSA are not deductible for income tax purposes, unlike contributions to a Registered Retirement Savings Plan (RRSP)
A Registered Retirement Savings Plan (RRSP) is a type of Canadian account for holding savings and investment assets. RRSPs have various tax advantages compared to investing outside of tax-preferred accounts. They were introduced in 1957 to promote savings for retirement by employees and self-employed people.
They must comply with a variety of restrictions stipulated in the Canadian Income Tax Act. Approved assets include savings accounts, guaranteed investment certificates (GICs), bonds, mortgage loans, mutual funds, income trusts, corporate shares, foreign currency and labour-sponsored funds. Rules determine the maximum contributions, the timing of contributions, the assets allowed, and the eventual conversion to a Registered Retirement Income Fund (RRIF) at age 71.
An RESP is a tax shelter, designed to benefit post-secondary students. With an RESP, contributions (comprising the investment's principal) are, or have already been, taxed at the contributor's tax rate, while the investment growth (and CESG) is taxed on withdrawal at the recipient's tax rate. An RESP recipient is typically a post-secondary student; these individuals generally pay little or no federal income tax, owing to tuition and education tax credits. Thus, with the tax-free principal contribution available for withdrawal, CESG, and nearly-tax-free interest, the student will have a good source of income to fund his or her post-secondary education.
A Registered Disability Savings Plan (RDSP) is a Government of Canada program designed to enable individuals with disabilities, with assistance from family and friends to save for their future financial security. The Government of Canada assists people to save with the Canada Disability Savings Program, consisting of the Canada Disability Savings Grant and Canada Disability Savings Bond. The Canada Disability Savings Grant matches personal contributions. The Canada Disability Savings Bond provides funding to RDSPs of people with low and moderate incomes.
The RDSP is similar to a Registered Education Savings Plan. A person who establishes an RDSP can make contributions to the plan up to a lifetime limit of $200,000 for the benefit of the person named the beneficiary.
Contributions are not tax-deductible, and earnings and growth accrue on a tax-deferred basis. Anyone can contribute. The contributions grow tax-free until withdrawn – at which time a proportion of the plan (earnings and growth received) is taxable and will need to be declared as income in the hands of the beneficiary at that time. In most cases it should not affect eligibility for provincial disability benefits. There are no maximum annuations. Contributions can be up to the end of the year in which the beneficiary turns 59 year old
Are savings made outside of any of the tax registered type of accounts noted above.
An investment vehicle that is made up of a pool of funds collected from many investors for the purpose of investing in securities such as stocks, bonds, money market instruments and similar assets. Mutual funds are operated by money managers, who invest the fund's capital and attempt to produce capital gains and income for the fund's investors. A mutual fund's portfolio is structured and maintained to match the investment objectives stated in its prospectus.
A type of pool investment that is similar to a mutual fund, but is considered an insurance product. Proceeds received by the insurance company are used to purchase underlying assets, and then shares of the segregated funds are sold to investors.
Separately Managed Account (SMA)
A privately managed investment account opened through a brokerage or financial advisor that uses pooled money to buy individual assets
The market in which shares are issued and traded, either through exchanges or over-the-counter markets. Also known as the stock market, it is one of the most vital areas of a market economy because it gives companies access to capital and investors a slice of ownership in a company with the potential to realize gains based on its future performance.
A segment of the financial market in which financial instruments with high liquidity and very short maturities are traded. The money market is used by participants as a means for borrowing and lending in the short term, from several days to just under a year. Money market securities consist of negotiable certificates of deposit (CDs), bankers acceptances, U.S. Treasury bills, commercial paper, municipal notes, federal funds and repurchase agreements (repos).
The environment in which the issuance and trading of debt securities occurs. The bond market primarily includes government-issued securities and corporate debt securities, and facilitates the transfer of capital from savers to the issuers or organizations requiring capital for government projects, business expansions and ongoing operations.
Exempt Market Securities
Exempt market securities are securities issued in Canada that fall under National Instrument 45-106. They are exempt from prospectus requirements and hence require less disclosure than a prospectus offering. To sell a security in the exempt market, an issuer must ensure that the investor qualifies under a specific exemption contained in the Instrument. Common exemptions include:
- sell only to accredited investors;
- sell only to family, friends and business associates;
- or sell a minimum of $150,000 per transaction.
Exempt market securities may involve a higher level of risk. There are no established secondary markets for exempt market securities and they are illiquid. Notably, unlike publicly traded companies, issuers of exempt market securities are not required to provide continuous disclosure to investors. Exempt market securities may be sold by an Exempt Market Dealer or Investment Dealer.