Sharing insight helps us all
At Manulife Securities we believe in the value of sharing financial knowledge. Our advisors understand the benefits and risks associated with various investment products and services. They also understand the importance of long-term financial planning.
Manulife Securities advisors works independently, yet they are very much a part of our team – providing us with insight into the current investment needs of their clients – clients like you.
Through the insight gained from our Manulife Securities advisors, we develop financial products and services that are real. Learning Centre is designed to provide you with an overview of the financial solutions available to you – whether you want to invest in your future, plan for retirement, prepare for the unexpected, save or protect the future of your business. Learn the basics, then contact a Manulife Securities advisor near you for a broader understanding of how these products can help you meet your financial goals.
Glossary of terms
Estate planning and life insurance
What is life insurance?
Life insurance is a policy between you and an insurer that allows you to protect your assets, survivors and dependents from the financial burden of your death.
How does life insurance work?
If you have a life insurance policy, upon your death, your beneficiaries will receive a guaranteed payment of the value of your policy - to help them cover your funeral costs, manage debts and assist with supplementing your loss of income. The type of benefit your beneficiaries receive depends on:
- Coverage - The amount of life insurance you purchase is the amount that your beneficiaries will receive, upon your death. Life insurance benefit payments are tax-free.
To help you determine how much coverage you need you should consider:
- Financial needs - Your standard of living, your assets and liabilities, and how much money will be required to ensure your beneficiaries live a comfortable life when you are gone.
- Premiums - A premium is the amount you pay, usually on a monthly basis, for your life insurance coverage. Your premium is determined by the value of the policy and the duration of coverage, e.g., one, five, ten, 20 years or life.
- Type - There are two main categories of life insurance: term insurance and permanent insurance (including whole life and universal life).
What is term life insurance?
Whether you are looking to protect your family or your business, Term life insurance offers affordable and flexible protection you can customize to meet your temporary and growing needs.
The period (or term) of the coverage can be either a fixed number of years or to a set age (e.g. age 65).
How does term life insurance work?
Term life insurance generally offers:
- Short-term coverage for a fixed period of time, often one, five, ten or 20 years, or to age 60 or 65
- Structured premium options, based on the type of term life policy and the term
- Lower premiums than permanent life insurance policies, partly because term policies do not offer cash value or other forfeiting values
If you have a term life policy, and die during the term of your policy, your beneficiaries receive a:
- Death benefit - The proceeds of your coverage, in a lump sum payment, which are tax-free
What are trust services?
Trust services are administered by a trust company. Trust companies offer services similar to banks along with the administration of trusts and estates. Trust companies may also act as trustee for a range of registered and tax-deferred savings products and plans.
How do trust services work?
A trust company can assist you with estate planning to minimize taxes and transfer your wealth, managing the administration of your trust or distributing your estate upon your death, among other things. Your advisor can provide you with the support and guidance you need to understand how a trust company could assist you.
What is universal life insurance?
Universal life insurance combines permanent life protection with tax-advantaged investment opportunities to help you increase your long term wealth. Suitable for personal or business needs, universal life insurance can help you:
- Leave proceeds to your beneficiary - tax-free
- Further your retirement and estate planning
- Build tax-deferred equity and accessible cash value over time (may be subject to taxation)
- Establish collateral for a bank loan
- Provide key person coverage for your business (business continuity)
- Insure multiple lives when you purchase the policy, or later (Term Insurance rider)
With a selection of product styles and optional coverage features (called riders), universal life is highly customizable to fit into your financial plan.
How does universal life insurance work?
Universal life insurance offers:
- Flexible terms and premiums that can be changed at any time
- Death benefit: varies depending on the premium paid
- Cash value: premiums contribute to the cash value of the policy, which can be accessed if needed
If you have a universal life insurance policy, upon your death your beneficiaries will receive the proceeds of your coverage, in a lump sum payment, tax-free.
What is whole life insurance?
Whole life insurance offers guaranteed, reliable coverage to last your entire lifetime. Ideal for personal and business needs, it provides permanent protection you can count on and guaranteed cash values that grow over time.
Whole life insurance offers:
- Long-term coverage, at a set rate, for a fixed term, or for life
- Guaranteed premiums and death benefits.
- Cash value - premiums contribute to a growing cash value of the policy, which can be accessed if needed.
If you have a whole life insurance policy, upon your death your beneficiaries will receive a guaranteed death benefit , which is the proceeds of your coverage, in a lump sum payment, tax-free.
What is accident and sickness insurance?
A type of insurance that makes a payment if you have an illness, are injured or die from an accident. It includes disability income insurance and accidental death and dismemberment insurance.
How does accident and sickness insurance work?
Accident and sickness insurance, also known as catastrophic coverage, is designed to cover medical expenses, like physical rehabilitation and home nursing care that result from a major illness or accident. If you purchase accident and sickness insurance and you have a major illness or accident, you can expect to have most of your major medical expenses, as outlined in your policy.
What is business Insurance?
Business insurance protects your business and your family from the financial and operational burdens associated with your illness or death - or your business associate’s illness or death.
How does business insurance work?
As a business owner, business insurance allows you to be prepared for the unexpected —your death or illness, or the death or illness of your partner(s). Business insurance allows you to:
- Insure your partner’s shares in your company
- Insure your business loans
- Insure a key person in your company
In the event that an insured party dies or becomes incapacitated, the beneficiary of the policy will receive a lump sum payment, enabling seamless business continuity and operations.
What is critical illness insurance?
Critical illness insurance helps cover the unexpected costs and potential loss of income associated with a serious illness. From the costs of medicine and treatment, to travel, specialist and home accommodations, treating and recovering from an illness can have a devastating financial impact. Plus, if you’re unable to work during your recovery, the impact is even greater.
How does critical illness insurance work?
With critical illness insurance, if you become sick with one of the conditions covered by your policy and survive the waiting period, you receive a cash benefit. You can then use the funds as you wish.
What is disability insurance?
Disability insurance helps protect your income if you become disabled and can’t work. An individual disability insurance plan can help you meet your income requirements so you can concentrate on recovering and returning to an active life.
How does disability insurance work?
If you are injured, sick or unable to work, disability insurance can provide you, your family and your business with a monthly income to cover expenses.
Your advisor can help you understand:
- The types of disabilities that are covered by the insurance policy: accident versus illness
- The length of time you must wait before you receive your first payment
- The percentage of income you will receive and the length of time you will receive it for
What is health and dental insurance?
Health and dental insurance supplements government health insurance by providing coverage for healthcare expenses such as prescription drugs, pharmaceutical services, eye exams and dental procedures to:
- Individuals who are self-employed or do not have healthcare benefits through their employer (individual insurance)
- Associations and memberships who come together as members (association insurance)
How does health and dental insurance work?
Health and dental insurance supplements the health and dental needs of you and your family by:
- Providing extended healthcare benefits, over and above what government healthcare insurance covers
- Offering choices in the types of healthcare benefits you may need coverage for, e.g., prescriptions, eye care, dental and pharmaceutical services
- Covering expenses: extended healthcare benefits are tailored for your family, based on your family’s needs
What is living benefits insurance?
Living benefits insurance is a type of insurance that provides you with the benefit, while you are alivesuch as critical illness, disability insurance, long term care, Health & Dental and travel insurance. The benefit and coverage you receive depends on the type of living benefits insurance you purchase.
How does living benefits insurance work?
If you purchase living benefits insurance, you purchase a benefit for yourself. Living benefits insurance differs from traditional life insurance. Life insurance provides your beneficiary with the benefit, upon your death, whereas living benefits insurance provides you with the benefit, while you are alive, in the form of:
- A lump sum payment
- An income
- Expense coverage
What is travel emergency medical insurance?
Travel emergency medical insurance provides you with medical coverage when traveling outside of your home province or abroad.
How does travel emergency medical insurance work?
Travel emergency medical insurance can protect you and your family when traveling by covering the costs of medical services, should you or a family member become ill or injured while traveling.
What is long term care insurance?
Long term care insurance provides you with the support and financial resources necessary to cover the out-of-pocket expenses for care at home or in a facility, when you can no longer care for yourself.
How does long term care insurance work?
Long term care benefits help offset the costs when constant medical assistance is required. Your financial advisor can discuss the possibility of adding long term care insurance to your financial plan.
What are annuities?
An annuity is a contract that pays a set monthly income for a set period of time. With annuities, you make a lump sum investment to an insurance company and create a stream of income for yourself in the form of monthly payments.
How do annuities work?
When you purchase an annuity you purchase a guaranteed income that allows you to:
- Receive a monthly stream of income following the purchase of the annuity, defer it for a set period of time or save it for your retirement
- Select the period of time you wish to receive the income for: a set period of time or for your lifetime
- Choose fixed or variable monthly payments, depending on your risk tolerance
The amount you receive monthly depends on how much you purchase and the interest rates. Your advisor can explain how interest rates affect your monthly payment and the different ways annuities are structured.
What are bonds?
A bond is an interest-paying investment. Companies and governments issue bonds to fund operations, innovate and grow.
How do bonds work?
When you purchase a bond you become a lender - loaning money to a corporation or government entity, that promises to pay you interest for a certain period of time. The frequency and amount of interest you are paid depends on the terms of the bond:
- Long-term bonds usually pay higher interest
- Interest payments are typically paid semi-annually, annually, quarterly or monthly
Your advisor can help you learn about the different types of bonds available and how they work
What is the Manulife Securities Premier Investment Program?
Premier is a fee-based program that allows you to hold a variety of investment products in one plan. It enables you to work with your advisor to design a service package - and compensation structure - that best suits the complexity of your investment needs.
What are the benefits of using the Manulife Securities Premier Investment Program?
A Premier plan helps to further develop your relationship with your advisor - enabling transparency, objectivity, and accountability. The Premier Investment Program fee is reflective of the ongoing investment advice and service you receive from your Manulife Securities advisor. It’s based on the value of expertise and not on the number of transactions made. In consultation with your advisor, you will agree on a program fee that represents the appropriate level of service that your advisor will deliver to meet your investment needs.
What is a GIC?
A GIC is an investment issued by a financial institution such as a bank or credit union. When you purchase a GIC, you are lending the financial institution money for a pre-determined period of time, and the financial institution is promising to pay you back that money plus interest at the end of the period. Financial institutions usually offer many different types of GICs, including GICs that pay a floating rate of interest, GICs that pay interest monthly, quarterly or annually (instead of at the end of the period), and even GICs that pay interest that is tied to the performance of a stock market index. In addition, while an investment in most GICs is locked in for the length of the investment period, some GICs are redeemable before maturity.
How do GICs work?
A GIC allows you to earn interest on your money for a pre-determined period of time – ranging from six months to 10 years. However, if a GIC is issued in Canadian dollars and has a term of 5 years or less it may be eligible for deposit insurance from the Canadian Deposit Insurance Corporation.
What are mutual funds?
Mutual funds are pools of money contributed by investors with similar investment goals and managed by investment professionals. Mutual funds invest in different securities depending on the investment objective of the fund. For instance, some mutual funds invest in bonds and some invest in stocks, while others invest in both bonds and stocks.
How do mutual funds work?
Mutual fund investing offers four main advantages over individual investing:
- Professional full-time investment management, to choose and monitor securities
- Diversification to reduce the risk of “putting all your eggs in one basket”
- Liquidity that allows you to buy and sell mutual funds at any time
Convenience due to the mutual fund manager keeping all records and providing regular reports on your investments and the appropriate tax forms
What are segregated funds?
A pool of investments held by the life insurance company and managed separately (i.e. segregated) from its other investments. If you buy a variable insurance contract, sometimes called a segregated fund policy, the value of your policy varies according to the market value of the assets in the segregated funds.
How do segregated funds work?
Unlike mutual funds, segregated funds are structured as an insurance product. Investing in segregated funds provides many insurance backed benefits such as:
- Maturity guarantee—upon maturity, 75% to 100% of your investment is guaranteed back to you.
- Guaranteed death benefit—your beneficiary is paid a guaranteed amount of money upon your death, even if the value of the asset, at the time of your death, is less than the guaranteed amount.
- Creditor protection—your investment may be protected from creditors.
What is the Masters Private Account Program?
Masters is a separately managed account providing an investment management program that is private, personalized and asset-specific – designed to meet your individual and unique needs.
How does the Masters Private Account Program work?
Masters provides access to collaborative investment technology and leading edge Portfolio Managers who understand your assets. Through Masters, world-class Portfolio Managers manage your money and construct portfolios that best suit your objectives. Some of Canada’s largest and most respected money managers have partnered with the Masters program, including:
- Beutel Goodman & Company Limited
- Connor, Clark & Lunn
- Guardian Capital
- Jarislowsky Fraser Limited
- Mawer Investment Management
- Manulife Asset Management
- Sionna Investment Managers
What are stocks?
Stocks represent a share or partial ownership in a company. A company sells its stock, typically through the stock market, to help grow and improve its business operations.
How do stocks work?
When you purchase a company’s stock, you buy a share in the company and gain partial ownership of that company. As a shareholder you have a right to:
- Receive cash payments for any dividends the company pays on your stocks.
- Receive a portion of the proceeds if the company is bought by another company.
Your advisor can help you understand both the growth potential and risks associated with stocks.
Retirement & Savings
What is a high-interest savings account?
A high-interest savings account is a safe, accessible, short- or long-term vehicle where your money typically earns a higher rate of interest when compared to the interest rates offered in a traditional savings account.
How does a high-interest savings account work?
Having a high-interest savings account allows you to:
- Start saving with a minimum deposit: Depending on the bank, often $500 will allow you to open an account
- Earn interest monthly: Typically at a higher rate of interest than a traditional daily interest account offers – interest compounds daily and is credited to your account monthly
- Access your money at any time, conveniently through online banking services
- Consolidate your money with other investment purchases: Your money is ready to be invested when you are
A high-interest savings account can be held in a variety of investment vehicles including:
- High-interest chequing accounts
- Tax-free savings accounts (TFSA)
- RRSP accounts
- Investment savings accounts
- Business accounts
What is a Registered Retirement Savings Plan (RRSP)?
An RRSP is a retirement plan that is registered with the Canada Revenue Agency (CRA) and that you or your spouse make contributions to. Because deductible contributions can be used to reduce your tax and because income or growth earned in the plan is usually exempt from tax while the funds remain in the plan, an RRSP acts like a tax shelter that provides you with a powerful incentive to save money for your retirement years.
How does a Registered Retirement Savings Plan (RRSP) work?
An RRSP is generally available to you if you have qualifying income. Once you contribute funds into an RRSP, any growth or income earned on the underlying investment will not be taxed until you withdraw that money. In addition, you can claim deductions for contributions you make to your RRSP.
You can contribute to an RRSP at any time. However, for contributions to be tax-deductible for any given year, they must be made on or before the 60th day of the next calendar year. This date typically falls on or about March 1.
Annual contributions to an RRSP are generally limited to your annual contribution limit. Unused deduction room from previous years can be carried forward. You can find your unused RRSP deduction room on your Notice of Assessment from the prior calendar year.
What is a Registered Retirement Income Fund (RRIF)?
A RRIF is a retirement income plan that is registered with the Canada Revenue Agency (CRA) and that receives cash and qualified investments from a Registered Retirement Savings Plan (RRSP). Income and growth on investments in a RRIF are tax free. However, a prescribed minimum amount must be withdrawn from a RRIF each year and all amounts withdrawn are taxable as income in the year of withdrawal.
How does a RRIF work?
You can continue to own and maintain the tax shelter on investments in an RRSP after the RRSP matures by transferring those assets to a RRIF. This must happen no later than the end of the year in which you turn 71.
A minimum amount prescribed by the government must be withdrawn from a RRIF each year. As you age, the minimum amount increases as a percentage of the value of the RRIF.
While there is a minimum withdrawal amount, there is no limit to the amount of the withdrawal up to the value of the RRIF. Withholding tax will be held back on certain withdrawals, but do count as tax payable in the year of withdrawal.
What is a TFSA?
A Tax-Free Savings Account is a flexible, general-purpose savings vehicle that allows you to make contributions each year and to withdraw funds at any time in the future.
How does a TFSA work?
A TFSA provides you with a powerful incentive to save by allowing the investment growth to accumulate and be withdrawn tax free. However, unlike an RRSP, you cannot claim a tax deduction for contributions you make to a TFSA.
Starting in 2009, all Canadian residents who are 18 years of age or older can contribute a legislated dollar maximum per year a TFSA. If you do not contribute or do not contribute the full amount, the unused amount will carry forward indefinitely.
Also, if you withdraw money from your TFSA, the amount withdrawn will be added to your contribution room in the next calendar year.