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INVESTING & INSURANCE

401(k) plan
Qualified plan established by employers to which eligible employees may make salary-deferral (salary-reduction) contributions on a post- and/or pre-tax basis; employers may make matching contributions to the plan on behalf of eligible employees and may also add a profit-sharing feature; earnings accrue on a tax-deferred basis
Accident
In the case of automobiles, usually referred to as a "collision"
Actual cash value (ACV)
Value of property lost or damaged at the time of the loss
Additional insured
Person or party, other than the policyholder, who is added to a policy so that they will also be covered by that policy
Additional living expense
Included with your tenant, condo or homeowner policy, provides a specified amount per day for additional expenses in the event that you cannot live in your insured residence
After-market
Vehicle accessory or alteration purchased from a company or vendor other than the manufacturer
Aggregate personal injury protection (PIP)
Extra coverage on top of regular Personal Injury Protection (PIP) coverage, often up to $200,000 of medical expenses and lost wages; coverage may vary according to state
Altered vehicle
Vehicle that has been modified from the original manufacturer's specifications for the primary purpose of increasing its performance capabilities
Amendatory endorsement
Endorsement issued by the insurance company which makes changes to the basic policy contract
Annuity
Long-term investment vehicle designed to help accumulate funds and provide income for retirement
Appraisal
Estimate of the property value or of the extent of damage by an authorized person; performed to determine the value of the property at the time of a loss
Arbitration
Estimate of the property value or of the extent of damage by an authorized person; performed to determine the value of the property at the time of the loss
Assignment
Transfer of one person's interest in an insurance contract to another person; usually requires prior written consent of the insurer
Auto loss history
Third party consumer report that provides a history of a person's automobile losses
Bankruptcy
Official filing for protection against creditors due to the inability to pay all of one's debts as they come due
Beneficiary
Person(s) designated by the policyholder to receive the proceeds of an insurance policy upon the death of the insured; can be a spouse, child, charity or any entity or person to whom the property owner would like to leave his/her possessions and assets
Binder
Written or oral acknowledgment that insurance is in force and evidence that an applicant has accepted the insurer's offer to purchase insurance coverage
Bodily injury (BI)
Physical injury, sickness, or disease sustained by a person, including resulting death
Cancellation
Ending or terminating an insurance contract before the specified end-date noted in the policy
Carrier
An insurance company or insurer
Cash value
Amount of money one is paid at any given time if whole life policy is canceled; also the amount that can be borrowed from the policy or its loan value
Certificate of insurance
Certifies to the certificate holder that the policy indicated is in force as of the dates shown on the certificate
Claim
Amount requested by a policyholder or third party from an insurance company for losses covered by an insurance policy
Claimant
Person requesting an amount for covered losses from the insurer; insured or a third party may be the claimant
Coinsurance
Insurance held jointly by two or more insurers
Collision coverage
Optional automobile insurance coverage for direct and accidental loss to or caused by the covered auto, resulting from upset of the auto or its impact with another vehicle or object
Comprehensive coverage
Broad coverages or an extensive amount of insurance coverage under one insurance contract; in auto insurance, may cover physical damage losses to your insured vehicle other than those caused by collision or upset
Concurrent insurance
Insurance under two or more contracts, covering the same exposure and for the same policy period
Conditions
Section of an insurance policy which explains duties and responsibilities of the insured and the insurer
Continuous insurance
Policyholders who are described as continuously insured have been covered by one or more insurance companies without any lapse in coverage
Contract of insurance
Legal and binding contract in which the insurance company agrees to cover the insured's losses, provide other benefits or render services to or on behalf of the insured
Coverage exclusions
Items or conditions that are not covered by the general insurance contract
Death benefit
Intended to pay the policy limit for persons named on the policy who are killed in an automobile accident
Declarations page
Summary page of an insurance policy that identifies the policyholder, the property covered, the coverages, and the premium amounts; usually serves as the cover page of a policy document
Deductible
Amount which the insured agrees to pay as his/her part of a loss; the insurance company pays on an excess basis over the deductible amount under certain coverages
Deferred annuity
Annuity that can be paid either with a single premium or a series of installments, providing for income payments to begin at some future date
Deferred compensation plan
Benefit plan that allows an employee to save pre-tax dollars; many are set up similar to a 401(k) plan, including multiple investment options, but without regulated limits on the amount that can be deposited
Defined benefit plans
Pension plans that guarantee a specific retirement benefit
Defined contribution plan
Benefit plan under which contributions are fixed in advance by formula; benefits to retiring employees may vary
Depreciation
Decrease in the value of an item or property over time due to wear, age or other cause
Disability
Incapacity which results from bodily injury or disease and prevents the insured from performing his or her regular occupation
Endorsement
Written amendment attached to an insurance policy to change, restrict or broaden coverage
Exclusion
Provision in an insurance policy that excludes or deletes certain risks from the coverages, thus limiting the scope of coverage; lists certain causes and conditions which are not covered
Fixed annuity
Annuity contract in which premiums paid are credited with a fixed rate of return by the life insurance company
Floater policy
Policy that covers movable property such as jewelry, sports equipment, etc.
Garaging location
Address and ZIP code where an insured vehicle is principally parked or garaged; usually this is the location of policyholder's primary residence
General account
Undivided account in which all investments are held
Indemnification
After a loss occurs, restoring an insured to his/her financial position before the loss
Insurable interest
Interest in property such that loss or destruction of the property could cause a financial loss
Insured
Person(s) or party(ies) who are insured or protected by an insurance policy
Insurer
Company who provides the insurance coverage and services on a specific policy
Lapse
Any period of time during which you did not maintain the minimum insurance limits required by your state; also termination of a policy because of failure to pay the premium
Lease
Contract granting use/occupation of property during a specified period in exchange for a specified rent
Leaseholder
Individual who possesses or has use of property through a lease
Lessee
Individual to whom a lease is granted
Liability coverage (auto)
Insurance that pays the losses of other people which an insured may cause unintentionally or through negligence
Liability coverage (homeowner)
Insurance that pays for damages to property owned by third parties or injuries to third parties which an insured may cause unintentionally or through negligence
Lienholder
Party who has a claim upon real or personal property until the satisfaction of some debt or duty
Life insurance
Provides a monetary payment to a designated beneficiary upon the death of the insured
Limits of insurance
Maximum amount stated in the declarations page an insurance company will pay for a covered loss
Long term care insurance
Policy that provides benefits for the chronically ill or disabled over a long period of time
Loss
Direct and accidental damage to the insured automobile or property used as the basis for filing a claim
Market value
Open market selling price; price varies with economic conditions at any given time
Named insured
Person specifically designated by name as the insured in an insurance policy; this person is also referred to as the policyholder
Named perils
Insurance that covers loss by specific perils listed in the policy
Personal injury protection coverage (PIP)
Insurance coverage that pays for medical bills and/or funeral expenses if a covered driver or accompanying passengers are injured or killed while in an insured vehicle, regardless of the fault of an accident
Personal liability
Liability insurance that provides protection for the personal actions of an individual, which cause bodily injury or property damage to another
Personal property
Personal belongings of the insured, in contrast to real estate
Policy
Written contract or certificate of insurance
Policy date
Date provisions of the insurance policy take effect
Policy period
Period of time during which an insurance contract or policy is in effect; also referred to as Policy term and Term of Policy
Policy term
Period of time during which an insurance policy is in effect; also referred to as Policy Period and Term of Policy
Policy type
Describes the specific coverage provided by the policy based on the type of item being insured
Policyholder
First person named as the insured in the insurance policy
Premium
Amount of money an insurance company charges in return for providing coverage
Primary driver
Person who drives the vehicle most often; also referred to as the Principal Driver
Primary insurance
Coverage which applies first to the loss if more than one policy covers the same property
Primary insured
Person named in the base policy who is covered by the insurance
Primary residence
Place a person will live for the majority of the term of his/her policy
Primary use (auto)
This is the vehicle's typical use. 'Work' refers to a vehicle that is primarily used for commuting to and from work or school. 'Pleasure' refers to a vehicle primarily used for personal errands, trips, etc.
Principal driver
Person who drives the vehicle most often; also referred to as the Primary Driver
Proof of loss
Formal document containing the signed and sworn statement of the insured in regard to a loss for which a claim has been filed
Property damage
Destruction of, or physical injury to, property including damage to the value of the property and loss of use of the property
Qualified plan
Plan purchased with pre-tax dollars, generally under a pension plan, specially sponsored program, or individual retirement account that the IRS approves as meeting the requirements of Section 401(a) of the 1986 Internal Revenue Code, as amended; such plans receive tax advantages
Real property
Real estate property, including buildings and land, as opposed to personal property
Registered owner
Person registered by the department of motor vehicles (DMV) as the owner of a vehicle
Renewal
Continuation of coverage under an insurance policy, beyond its original term
Replacement cost
Cost of replacing damaged or destroyed property without deduction for depreciation in the value of the property
Repossessions
Seizure of an automobile by a creditor due to a person's inability to pay the vehicle loan
Social Security Number (SSN)
Number issued to individuals by the Social Security Administration that may be used in order to confirm identity and/or obtain certain reports
SR-22
Document used to provide proof of financial responsibility; usually required by a court of law for a driver who has been convicted of certain traffic violations
Surrender charges
Charges made against withdrawals from the contract value of most variable annuities for a period of time
Term of policy
Period of time during which an insurance policy is in effect; also referred to as Policy Period and Policy Term
Term life insurance
No-frills insurance for a specific, but temporary, period of time
Title
Legal document or certificate showing ownership (i.e. a vehicle or house)
Universal life insurance
Permanent insurance with flexible premiums that lets policyholder accumulate cash value and take out tax-free loans
Variable annuity
Annuity contract in which the funds are invested in investments for which the underlying values can fluctuate
Variable life insurance
Securities-based whole life insurance policy that has a fixed premium and provides variable cash values and death benefit, depending on the performance of the separate account
Variable universal life insurance
Death benefit protection with investment features that can help invest for retirement
Whole life insurance
Also called permanent life insurance, it offers long-term protection, fixed premiums and cash value

Investing

Account statement
Contains data about all operations of one's bill at the broker for the chosen period
Annual report
Annual publication that public corporations must provide to shareholders to describe their operations and financial conditions
Basis point
In the bond market, the smallest measure used for quoting yields is a basis point (1 basis point is 0.01% of a bond's yield; basis points also are used for interest rates; an interest rate of 5% is 50 basis points greater than an interest rate of 4.5%)
Bond
Certificate reflecting a firm's promise to pay the holder a periodic interest payment until the date of maturity and a fixed sum of money on the designated maturing date
Broker
Intermediary in the market, who puts together buyers and sellers for a fee or commission
Brokerage house
Place from which a broker conducts business; often referred to as a broker, brokerage or a brokerage firm
Brokerage fee
Money charged by a broker for executing a transaction
Bear market
Any market in which prices are in a declining trend
Bull market
Market in which there is a continuous rise in stock prices
Capital gain
When a stock is sold for a profit, it's the difference between the net sales price of securities and their net cost, or original basis; if a stock is sold below cost, the difference is a capital loss
Cash flow
In investments, it represents earnings before depreciation, amortization and non-cash charges; also called cash earnings
Certificate of deposit (CD)
Time deposit, FDIC insured to $100,000 per person ($250,000 on retirement accounts), with a fixed maturity date, typically from three months to five years; it usually pays higher interest than a savings account, and a penalty is charged for withdrawing funds before the maturity date
Commission
Fee investor pays a broker for buying or selling securities
Common shares
Securities that represent equity ownership in a company; lets an investor vote on such matters as the election of directors; gives the holder a share in a company's profits via dividend payments or the capital appreciation of the security
Compounding
Also known as compound interest, ability of an asset to generate earnings, which are then reinvested in order to generate their own earnings
Dividend
Money earned on stock holdings; usually, it represents a share of profits paid in proportion to the share of ownership
Dow Jones Industrial Average
Stock price index, based on 30 prominent stocks, that is a commonly used indicator of general trends in the prices of stocks and bonds in the U.S.
Due diligence
Process by which a person conducts inquiries for the purposes of timely, sufficient and accurate disclosure of all material statements/information or documents which may influence the outcome of the transaction; is a critical component in mergers and acquisitions
Early withdrawal penalty
Depositor forfeits interest or is assessed a service charge for withdrawing funds from or closing out a time deposit before its maturity date
Employee stock ownership plan (ESOP)
Plan where employees have a vested interest (stock ownership) in the company
Fiduciary
Person or company entrusted with assets owned by another party (beneficiary) and responsible for investing the assets until they are turned over to the beneficiary
Growth stock
Stock of a company whose business is considered recession-resistant and also possesses an above-average growth rate
Hedge
Position that reduces the risk of one's primary position
Hedging
Practice of offsetting the price inherent in any cash market position by taking the opposite position in the futures market
Income statement
Financial statement that measures a company's financial performance over a specific accounting period; also known as the profit and loss statement or statement of revenue and expense
Indemnity
Obligation of one party to reimburse another party for losses which have occurred or which may occur
Individual Retirement Account (IRA)
An investing tool used by individuals to earn and earmark funds for retirement savings; contributions may be tax-deductible; earnings are not taxed until the funds are withdrawn at age 59� or later
Initial public offering
Stock in a company that is being traded on an exchange for the first time
Insiders
Directors and senior officers of a corporation (those who have access to inside information about a company); ALSO someone who owns more than 10% of the voting shares of a company
Interest
Cost for borrowing a sum of money, or the amount earned on an interest-bearing deposit account, usually calculated at a percentage rate over a period of time
Interest income
Earnings on investments such as savings accounts, certificates of deposit and money markets
Interest rate
Annual rate paid on an interest-bearing account, such as a savings accounts and CDs, which does not reflect compounding
Interest transfer
vProcess that allows interest earned in one account to be transferred to another account
IRA rollover
Transfer of funds from a retirement account into a Traditional IRA or a Roth IRA
Joint venture
Two or more businesses joining together under a contractual agreement to conduct a specific business enterprise with both parties sharing profits and losses; venture is for one specific project only, rather than for a continuing business relationship as in a strategic alliance
Junk bond
Bond with a speculative credit rating of BB or lower; offers investors higher yields than bonds of financially sound companies
Maturity
Date on which the principal balance of a loan becomes due and payable; also marks the date when a bond pays its principal
Money market account
High-yield savings account, FDIC-insured, that allows depository financial institutions to be more attractive with money market mutual funds
Money market fund
Mutual fund that invests only in short term securities, such as bankers' acceptances, commercial paper, repurchase agreements and government bills; funds are not federally insured, although the portfolio may consist of guaranteed securities and/or the fund may have private insurance protection
Municipal bond
Offered by state or local government, these bonds pay for special projects such as highways or sewers; interest that investors receive is exempt from some income taxes
Mutual fund
Pools of money managed by an investment company; offer investors a variety of goals, depending on the fund and its investment charter
Net operating income (NOI)
Company's operating income after operating expenses are deducted, but before income taxes and interest are deducted; if this is a positive value, it is referred to as net operating income; a negative value is called a net operating loss
New York Stock Exchange (NYSE)
Largest stock exchange in the U.S., located on Wall Street in New York City; responsible for setting policy, supervising member activities, listing securities, overseeing the transfer of member seats and evaluating applicants
Portfolio
Collection of investments all owned by the same individual or organization
Security
Piece of paper that proves ownership of stocks, bonds and other investments
Securities and Exchange Commission (SEC)
Independent, non-partisan, quasi-judicial regulatory agency that regulates the U.S. financial markets; goal is to protect investors and ensure that they have access to disclosure of all material information concerning publicly traded securities
Stock ticker
Lettered symbol assigned to securities and mutual funds that trade on U.S. financial exchanges
Tax deferred
Investment which accumulates earnings that are not subject to taxes until the investor takes possession of the earnings, often at a point at which the investor is in a lower tax bracket than before, such as retirement
Term
Time to the maturity of a loan or deposit; expressed in months or years
Total value
Present worth of account, factoring all funds, including funds on hold or pending approval
Yield
Income on invested capital in the form of percent; counted for the term of one year