Glossary

The words of mortgages, insurance, and savings, in plain terms.

Short definitions, without jargon, so you understand what an authorized person tells you. No rate, no recommendation.

A

Accredited investor: A person meeting regulatory income or asset criteria, which allows buying securities under a prospectus exemption. Qualifying removes a protection; it adds none.
AMF: Autorité des marchés financiers. The Quebec body that oversees insurance representatives, mutual fund representatives, and mortgage brokers, and maintains the public register of registered persons.
Amortization: The total planned period to repay a mortgage, as opposed to the term, which is the duration of the current contract. A longer amortization lowers the payment and raises the total cost.

B

Backflow valve: A device preventing sewer water from backing up into a building. Several insurance policies require one in working order as a condition of sewer backup coverage.

C

Cash value: An amount accessible during the insured’s lifetime under some permanent life insurance contracts. Any access has tax consequences and generally reduces the amount paid at death.
Civil liability: Coverage for damage you unintentionally cause to others, along with defence costs. It generally follows you away from home.
Closing costs: The amounts payable in cash at signing: notary fees, transfer duties, inspection, appraisal, tax adjustments. They cannot be financed through the mortgage.
CMHC: Canada Mortgage and Housing Corporation. A Crown corporation insuring high-ratio mortgages; two private insurers offer comparable products.
Coinsurance: The sharing of a risk between insured and insurer, or among several insurers. In home insurance, the term often refers to the requirement to insure a minimum percentage of value.
Coinsurance clause: A reduction of the payout in proportion to the underinsurance, where the amount insured falls below the required percentage of value. It mostly bites on partial losses.
Comparative factor: An annual coefficient applied to the municipal assessment to bring it to market value. It is used notably to calculate transfer duties.
Concealment: Failing to disclose a known circumstance likely to influence a reasonable insurer. In Quebec, the duty to disclose is not limited to the questions asked.
Contestability period: A period, generally two years, after which the insurer can no longer invoke a misrepresentation to refuse the benefit. Fraud is not subject to that limit.
Contribution room: The amount you may put into a registered account. RRSP room depends on earned income; TFSA room accumulates by calendar year, regardless of income.
Convertibility: The ability to convert term life insurance into permanent coverage with no new medical exam, up to an age set in the contract.
Critical illness: Insurance paying a single lump sum on diagnosis of a condition defined in the contract. The technical definition of each condition governs, not its common name.

D

Debt service ratio: The share of gross income devoted to debt. Lenders review the gross debt service ratio, tied to housing, and the total debt service ratio, which includes all debts.
Deductible: The share of a loss you bear before the insurer pays. Water-related coverages often carry a deductible above the policy’s own.
Deemed disposition: A tax rule treating certain property as sold at death, at its then value. The resulting tax hits a gain that produced no cash.
Deposit insurance: Statutory protection of deposits held at a member institution, within the limits and categories provided. Mutual funds, stocks, and bonds are not deposits and are not covered.
Discharge: The act by which the lender records that the loan is repaid and releases the property from the mortgage. It carries fees, generally at the time of a transfer.
Down payment: The share of the purchase price paid in cash by the buyer. Below 20%, the loan must be insured, which adds a premium to the amount borrowed.

E

Endorsement: An amendment or addition to an insurance contract that extends, restricts, or clarifies a coverage. Several important protections exist only as endorsements.
Exclusion: A risk or circumstance the contract does not cover, for its entire duration. Unlike a misrepresentation, an exclusion remains enforceable however much time has passed.
Exempt market: Investments offered without a prospectus, under specific regulatory exemptions. Often less liquid and riskier, and reserved for investors meeting defined criteria.
Extra premium: An increase in premium applied where the assessed risk exceeds standard, because of a medical history, an occupation, or a hobby.

F

FHSA: First Home Savings Account. Contributions are deductible and a qualifying withdrawal is not taxed. It has its own limits and a maximum lifespan.

G

GDS and TDS: Gross debt service and total debt service. Two ratios expressing the share of gross income going to housing costs, then to all debts. Lenders apply a cap to each.
GIC: Guaranteed investment certificate. A term deposit whose principal is guaranteed and whose return conditions are set in advance. Liquidity before maturity is generally limited.
Guaranteed issue: An insurance contract issued with no health questions. Access is simpler, the premium higher, coverage capped, and a waiting period generally applies.

H

HBP: Home Buyers’ Plan. A withdrawal from an RRSP with no immediate tax, to buy a first home, repayable to the RRSP over fifteen years.
High-ratio mortgage: A mortgage with a down payment below twenty percent of the price. It must be insured, which lowers the lender’s risk and sometimes gives access to a lower rate.
Home equity line of credit: Revolving credit secured by the property’s value. The minimum payment often covers interest only, so the debt can stay unchanged for years.

I

Indemnification: The payment by which an insurer makes good a covered loss, on the contract’s terms: replacement cost or actual cash value, category sub-limits, applicable deductible.
Interest rate differential: A method of calculating a prepayment penalty based on the gap between your rate and the market rate for the remaining term. It often far exceeds three months’ interest.
Investment horizon: How long an amount can stay invested before it is needed. It governs the acceptable level of risk more than declared tolerance does.
Investor profile: A document setting out objectives, horizon, knowledge, financial situation, capacity to absorb a loss, and risk tolerance. It underpins the suitability obligation.
Irrevocable beneficiary: A beneficiary who cannot be changed without their consent. In Quebec, the designation of a married or civil-union spouse is irrevocable by default, unless the contract says otherwise.

L

Land Register: The Quebec public register where rights over immovables are published, including deeds of sale and mortgages. Registering a deed triggers the transfer duty bill.
Loss: A covered event giving rise to a claim. Reporting it within the required time and meeting maintenance obligations condition the payout.

M

Management expense ratio: The annual percentage of assets deducted inside a fund, bundling management, operating expenses, and taxes. It is taken before the stated return, which makes it invisible.
Marginal rate: The tax rate applying to your next dollar of income. It is this rate, not the average rate, that settles most RRSP-versus-TFSA choices.
Misrepresentation: Inaccurate or omitted information at underwriting, capable of influencing the assessment of risk. It can allow annulment of the contract or reduction of the benefit, even in good faith.
Mortgage broker: An authorized person who compares lenders on the borrower’s behalf and presents the options. Registered with the AMF and, in most cases, paid by the lender.
Mortgage default insurance: Insurance compensating the lender if the borrower stops paying and the sale does not cover the balance. Mandatory below a twenty percent down payment. It protects the lender, not the borrower.
Mortgage life insurance: Coverage offered by the lender that clears the loan balance at death. Distinct from individual life insurance, whose beneficiary is chosen by the insured.
Municipal assessment: The value entered on the municipality’s assessment roll. It serves, among other things, as a basis for calculating transfer duties, through a comparative factor.

N

Non-cancellable: A disability insurance contract whose premium and coverage are guaranteed to the stated age. To be distinguished from guaranteed renewable, where the insurer may change a class’s premium.

O

Own occupation: The most favourable disability definition: the insured is paid if they can no longer perform their own job, even if they could hold another.

P

Pension adjustment: An amount that reduces your RRSP contribution room when you participate in an employer pension plan. It appears on your employment tax slip.
Portability: The ability to move a loan to a new property without penalty, on the lender’s conditions. A clause to check before signing, not when moving.
Pre-approval: A lender’s commitment to hold a rate for a given period, based on a preliminary file. It does not replace an approval, which also depends on the property.
Prepayment penalty: A charge from the lender if the loan is repaid or transferred before the term ends. Calculated on three months’ interest or on the interest rate differential, depending on the contract.
Prepayment privilege: A contractual right to pay a lump sum to principal or raise the payment without penalty, within set limits and windows. An unused privilege generally does not carry forward.
Prime rate: The reference rate of financial institutions, from which variable rates are set. It moves following Bank of Canada decisions.
Prospectus exemption: An exception letting an issuer sell securities without the detailed disclosure document reviewed by the regulator. “Exempt” does not exempt anyone from risk.
Public register: A free directory allowing you to verify that a person or firm is authorized, their sector, their affiliation, and where applicable any disciplinary sanctions.

Q

Qualification test: The calculation by which a lender verifies the borrower could carry a rate above the contract rate. It caps the amount borrowable, independently of the rate obtained.
Qualifying rate: A rate higher than your contract rate, at which a lender tests your ability to pay. It is the higher of a regulatory floor or your rate plus a set spread.

R

Rebuilding value: The estimated cost of rebuilding a structure new. It matches neither market value nor the municipal assessment, and forms the basis of the amount insured in home insurance.
Registered person: A person authorized to act in a specified sector and category. The registered sector must match exactly the product being offered.
Replacement cost: Settlement at the cost of replacing an item with an equivalent new one, with no deduction for wear. It is generally conditional on actually replacing the item.
RESP: Registered education savings plan. Contributions are not deductible, but they attract federal and Quebec grants, and growth is sheltered until withdrawal.
Revocable beneficiary: A beneficiary the policyholder can change freely, without consent. In Quebec, the designation of a married or civil-union spouse is irrevocable by default unless the contract states otherwise.
RRIF: Registered retirement income fund. The vehicle an RRSP is converted into no later than the deadline set by law, and from which a minimum annual withdrawal becomes mandatory.
RRSP: Registered retirement savings plan. The contribution is deductible, growth is sheltered, and the withdrawal is fully taxable. Tax is deferred, not eliminated.

S

Segregated fund: An individual variable insurance contract, issued by an insurer, carrying guarantees at maturity and at death. Its fees exceed those of a comparable mutual fund.
Sewer backup: Sewer or drain water rising into a building. Almost always covered by a separate endorsement: without it, a flooded basement is not paid.
Simplified issue: Underwriting without a medical exam, based on a short health questionnaire. The amount is generally capped and the cost per dollar of coverage higher.
Stability period: The period during which a health condition must have remained unchanged before departure to be covered by travel insurance. A medication adjustment can break it.
Suitability: The fit between a product and a person’s situation, objectives, and risk tolerance. A registered person must assess it before making any recommendation.
Suitability obligation: A registered person’s duty to ensure a product suits your documented situation before recommending it. An accommodating questionnaire answer weakens that protection.
Survival period: The number of days an insured must survive after diagnosis for a critical illness benefit to be payable. Often thirty days.
Syndicate of co-owners: The legal person grouping the co-owners, which insures the building and common portions. Law frames a co-owner’s responsibility for its deductible.

T

Term: The duration of the current mortgage contract, at the end of which it must be renewed. Distinct from amortization, the total repayment period.
TFSA: Tax-free savings account. Contributions are not deductible, but growth and withdrawals are tax-free. A withdrawal only frees up contribution room as of the following January 1.
Total disability: A state in which the insured can no longer perform the duties defined in the contract. Depending on whether the definition is “own occupation” or “any occupation”, the outcome differs for the same person.
Transfer duties: A municipal tax collected on every transfer of property, often called the welcome tax. It is paid in cash after the transaction and is not included in the loan.

W

Waiting period: A period at the start of an insurance contract during which the full benefit is not paid. Common in guaranteed-issue contracts.