Terms & Definitions - I
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Impaired annuity: If you have a medical condition that could result in a lower life expectancy, you may qualify for an annuity (in the case of life annuities only) that will pay out as if you were of an older age. Such impaired annuities result in higher payments because the actuarial tables used by life insurance companies project a shorter than normal life span.
Income-reducing annuity: This form of joint-and-lastsurvivor life annuity provides higher monthly payments until the death of one spouse. Payments to the surviving spouse are then reduced. The rationale for this reduction is that one person will not require as much income as two.
Income fund: Mutual fund that invests primarily in fixed-income securities such as bonds, mortgages and preferred shares. Their primary objective is to produce income for investors, while preserving capital.
Income splitting: The spreading of income among family members.
Incurred But Not Reported Reserve (IBNR): The fund held by the insurer to cover the potential liability at contract termination for claims that have been incurred but have not yet been reported.
Incurred Claims: Paid claims plus the change in the Incurred But Not Reported claims reserve.
Index fund: A mutual fund constructed to follow the basic stock markets, such as the Toronto 300 (TSE 300) or 35 Index (TSE 35) and the U.S. Standard and Poor's 500 (S&P 500). They usually rank in the upper 30 percent of performance, and generally mirror market performance.
Indexed annuity: Annuities structured to provide protection from inflation in return for lower payments - in the beginning anywhere from 30 percent to 45 percent less. Payments then increase every year, based on one of four formulas.
Individual Pension Plan (IPP): A registered pension plan designed for a specific individual, usually an owner/manager of a company.
Inflation: Annual cost-of-living increases, usually defined as changes in the Consumer Price Index (CPI), a Statistics Canada measurement of such changes.
Insured annuity: This combines two insurance products, a life annuity with no guarantee period, and a Term-to-100 life insurance policy. This product offers annuity payments with the additional feature of preserving capital for your estate. However, you must be in good enough health to qualify for the life insurance (able to pass a medical examination).
Interest: Payments made by a borrower to a lender for the use of the lender's money. A corporation pays interest on bonds to its bondholders.
Interest income: By far the most common source of investment income in Canada, from bonds, GICs, CSBs, deposit accounts, and other interest-bearing investments. Such income receives no tax advantage. An investor pays tax at his or her marginal rate (the rate paid on their last dollar).
International fund: A mutual fund that invests in securities of a number of countries.
Intrinsic value: The amount by which the price of a warrant or call option exceeds the price at which the warrant or option may be exercised.
Investment adviser: Investment counsel to a mutual fund. Also may be the manager of a mutual fund.
Investment company: A corporation or trust whose primary purpose is to invest the funds of its shareholders.
Investment counsel: A firm or individual which furnishes investment advice for a fee.
Investment dealer: A securities firm.
Investment fund: A term generally interchangeable with "mutual fund."
Investment Funds Institute of Canada (IFIC): The mutual fund industry trade association set up to serve its members, co-operate with regulatory bodies, and protect the interests of the investing public that use mutual funds as a medium for their investments.
Intestate: Dying without a will, where upon provincial regulations determine the distribution of the estate.
Issued shares: The number of securities of a company outstanding. This may be equal to or less than the number of shares a company is authorized to issue.
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