CLHIA-ACCAP

44 Policy (Contract). The legal agreement between you and your insurance company that sets out the terms of your insurance coverage. Policy loan. A loan made by a life insurance company to a policyholder based on the policy's cash value. A policy loan reduces the cash value and the insurance company usually charges interest. Policy reserves. The pool of funds that an insurance company keeps specifically to meet its policy obligations. The law requires insurance companies to keep sufficient reserves to pay all future claims. Policyholder. The person who owns an insurance policy. Also called the "policyowner". Policyholder dividend. If you have a participating insurance policy, a policyholder dividend is a payment your insurance company makes to you when the company performs well. Dividends are not guaranteed – they depend on things like the value of claims the company pays, how the company's investments perform and its level of expenses. You can receive dividends in different ways: ■ ■ cash; ■ ■ leave them in the policy to accumulate; ■ ■ use them to pay part of the premiums (thus reducing your insurance cost); or ■ ■ use them to buy additional insurance. Pooled Registered Pension Plan (PRPP). A defined contribution pension plan designed for smaller workplaces and the self-employed. The funds in your account are pooled with other employers' funds in the plan to achieve lower investment management and administrative costs. The plans are run by licensed organizations such as insurance companies. In Quebec, this type of plan is called a Voluntary Retirement Savings Plan (VRSP). Pre-determination of benefits. A claim procedure required by many group plans before you incur large expenses. For example, if you need major dental work, your plan may require you to obtain and submit an estimate of the costs so your insurer can determine what portion of the costs your plan will cover (called a pre-determination of benefits) before you receive treatment. You can then budget for the expense knowing how much your plan will pay and how much you'll have to pay. You may be able to cover some of your costs under your spouse's or partner's plan. Pre-existing condition. A medical condition for which you've had symptoms, consulted a medical professional or received treatment before you apply for insurance or before your coverage takes effect. Some types of insurance have pre- existing condition clauses which may limit or exclude benefits if you make a claim related to that condition. Premium. The amount you pay to buy insurance. The premium is usually paid monthly, quarterly or annually. The amount of your premium may change over time. Premium offset. A payment arrangement where the insurance company uses policy dividends or cash value to pay your premiums. R Rated policy. An insurance policy where the insured person does not meet the company's standard insurance requirements (for example, because of a risky occupation). The policy has higher risks and higher premiums. Reduced paid-up insurance. A form of paid-up life insurance available as a non-forfeiture option. The policy continues, but for a reduced amount. (See "Non- forfeiture options".) Registered Education Savings Plan (RESP). A type of savings plan for your child's or your grandchild's college or university education. No tax-deduction is provided for contributions. Payouts from the plan to the student, for qualified education programs, are not taxed. Registered Pension Plan (RPP). Pension plans are subject to regulation by the Canada Revenue Agency, and such plans are called Registered Pension Plans. (See "Pension plan".) Registered Retirement Income Fund (RRIF). A type of payout plan that provides a minimum – but not guaranteed – retirement income. "Registered Retirement Savings Plans (RRSPs)" can be moved into RRIFs, or annuities, at or before their maturity date. Registered Retirement Savings Plan (RRSP). A type of savings plan. The amount you can contribute to an RRSP is based on your income and is set by the federal government. The amount you contribute reduces the income tax you pay at the time, but you generally pay tax on any money you withdraw from the account. Reinstating a policy. You may apply to restart your insurance coverage if it ended because you didn't pay your premiums. This process is called reinstating your policy. To do so you must apply within two years of the date the required premiums were not paid. You must also provide evidence of insurability and pay any outstanding costs, plus interest.

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