Insurance & Securities Terms
This is a list of terms
will help you while you are shopping for insurance and
securities products. It is not meant to be
all-inclusive, but should help you understand some of
the most common terms.
A | B
| C | D |
E | F | G |
H | I |
J-K | L | M |
N | O |
P-Q | R | S |
T | U-V-W-Y-Z
This retirement plan meets the
qualification requirements of Internal Revenue Code
Section 401(a). In this type of plan, employers
determine the amount of money that they may
contribute on your behalf each year, the
requirements that you must meet to receive those
contributions, and under what circumstances the
money may be made available to you. Some 401(a)
plans may allow for employee after-tax contributions
or, in the case of a 401(k) plan, employee pre-tax
contributions. Types of 401(a) plans include profit
sharing plans, pension plans, and money purchase
Under section 401(k) of the Internal
Revenue Code, employees of private corporations and,
beginning in 1997, some tax-exempt organizations,
can set aside money for retirement on a pre-tax
basis through a plan sponsored by their employer. To
encourage saving for retirement through these plans,
the federal government created special tax
advantages for 401(k) contributions.
Under Section 403(b) of the Internal
Revenue Code, employees of 501(c)(3) non-profit
institutions (such as colleges and universities,
hospitals, museums, research institutes, and
foundations and public schools) can set aside money
for retirement on a pre-tax basis through a plan
offered by their employer. To encourage saving for
retirement through these plans, the federal
government created special tax advantages for 403(b)
Under section 457 of the Internal Revenue
Code, employees of state or local governments, their
agencies, and tax-exempt employers can set aside
money for retirement on a pre-tax basis through a
plan sponsored by their employer. To encourage
saving for retirement through these plans, the
federal government created special tax advantages
for 457 contributions. Different from a 401(k) or
other type of qualified retirement plans, a 457 has
no requirement to be non-discriminatory.
Under Section 457(f) of the Internal
Revenue Code, an employer can set aside money to
supplement retirement income for a select group of
employees in their organization. Since these
programs are designed to attract and retain key
employees and do not provide a benefit for all
employees, these programs do not qualify for all of
the tax advantages that are made available to 401(a)
plans, for example.
A loan provision that allows a lender,
according to the terms of a mortgage or other loan
contract, to make the entire unpaid balance of the
loan (including principal and interest) due and
payable if specified events of default should occur.
Such conditions include failure to meet loan
payments on time, insolvency, and nonpayment of
taxes on mortgaged property.
ACCELERATED DEATH BENEFITS
A life insurance policy option that
provides policy proceeds to insured individuals over
their lifetimes, in the event of a terminal illness.
This is in lieu of a traditional policy that pays
beneficiaries after the insured's death. Such
benefits kick in if the insured becomes terminally
ill, needs extreme medical intervention, or must
reside in a nursing home. The payments made while
the insured is living are deducted from any death
benefits paid to beneficiaries.
ACCELERATED DEATH BENEFIT RIDER (ADB)
A rider added to a life insurance policy to
protect the insured against financial loss in the
event of a terminal illness. An ADB makes living
benefits payable to the insured for medical expenses
prior to death. Accelerated (or living) benefits
paid reduce the death benefit payable to the
beneficiary(ies) upon death.
ACCIDENT AND HEALTH INSURANCE
Coverage for accidental injury, accidental
death, and related health expenses. Benefits will
pay for preventative services, medical expenses, and
catastrophic care, with limits.
Pension benefits earned (vested) based on
years of service at a company and credited to the
employee using an actuarial method.
ACTUAL CASH VALUE
An amount equivalent to the fair market
value of the stolen or damaged property immediately
preceding the loss. For real property, this amount
can be based on a determination of the fair market
value of the property before and after the loss. For
vehicles, this amount can be determined by local
area private party sales and dealer quotations for
An insurance professional skilled in the
analysis, evaluation, and management of statistical
information. Evaluates insurance firms' reserves,
determines rates and rating methods, and determines
other business and financial risks.
ADDITIONAL LIVING EXPENSES
Extra charges covered by homeowners
policies over and above the policyholder's customary
living expenses. They kick in when the insured
requires temporary shelter due to damage by a
covered peril that makes the home temporarily
ADDITIONS AND ALTERATIONS
Improvements made to a home (e.g., a new
bathroom or a remodeled kitchen) that increase the
home's value and that may require additional
homeowners insurance coverage.
An individual employed by a
property/casualty insurer to evaluate losses and
settle policyholder claims. These adjusters differ
from public adjusters, who negotiate with insurers
on behalf of policyholders, and receive a portion of
a claims settlement. Independent adjusters are
independent contractors who adjust claims for
different insurance companies.
ADJUSTED GROSS INCOME
For federal income tax purposes, gross
income less adjustments (e.g., IRA deductible
contributions, self-employment health insurance
deductions, etc.), but before standard or itemized
deductions and personal exemptions.
For adjustable-rate loans, the period of
time between interest rate changes. For example, a
mortgage with an adjustment period of one year is
called a one-year ARM, and the interest rate can
change once each year.
An individual or professional organization,
such as a bank's trust department, appointed by the
probate court to administer an estate when the owner
dies without having made a will or without
nominating an executor. An executor may also be
appointed if the named executor declines to serve.
Assets recognized and accepted by state
insurance laws in determining the solvency of
insurers and reinsurers.
An insurance company licensed and
authorized to do business in a particular state.
The tendency of those exposed to a higher
risk to seek more insurance coverage than those at a
lower risk. Insurers react either by charging higher
premiums or not insuring at all, as in the case of
floods. (Flood insurance is provided by the federal
government but sold mostly through the private
The time an HMO may require you to wait
after you enroll and before your coverage begins.
HMOs that require an affiliation period cannot
exclude coverage of preexisting conditions. Premiums
cannot be charged during HMO affiliation periods.
Iowa law allows for the use of HMO affiliation
periods in small group health plans. See also HMO,
Small Group Health Plans.
Insurance is sold by two types of agents:
independent agents and exclusive or captive agents.
Independent agents are self-employed, represent
several insurance companies and are paid on
commission. Exclusive or captive agents represent
only one insurance company and are either salaried
or work on commission.
Such an investment focuses more on
increasing the value of the original investment as
an investing priority than on price stability or
income. As a result, aggressive investments involve
more investment risk.
A type of homeowners insurance that covers
losses resulting from each and every peril, except
for those specifically excluded by the policy. Also
known as open peril coverage.
According to the terms of a qualified
domestic relations order (QDRO), an individual who
has been granted the right to receive all or part of
a participant's benefits under a qualified
retirement plan. The alternate payee is generally a
spouse, former spouse, child, or other dependent of
the qualified plan participant.
For loan purposes, the systematic process
by which a lender calculates loan payments so as to
liquidate a debt over time. Payments are made at
specific time intervals to reduce the outstanding
debt to zero at the end of the loan period.
Summary of an insurer's or reinsurer's
financial operations for a particular year,
including a balance sheet. It is filed with the
state insurance department of each jurisdiction in
which the company is licensed to conduct business.
A contract sold by life insurance companies
that allows you to pay a lump sum or accumulate
money over time, and the issuing company guarantees
payment to the buyer in the future, usually at
retirement. You will not pay income taxes on the
money until those payments are made.
Periodic payments made to an annuitant or
to the annuitant's designated beneficiary. The
payments may be made on an annual, semiannual,
quarterly, or monthly basis, and may last for life
or for a specified period. Moreover, depending on
whether the annuity in question is a fixed annuity
or a variable annuity, the annuitant (or his/her
beneficiary) may receive either payments of a fixed
dollar amount or payments that vary in amount
according to the value of the underlying securities.
Laws that prohibit companies from working
as a group to set prices, restrict supplies or stop
competition in the marketplace. The insurance
industry is subject to state antitrust laws but has
a limited exemption from federal antitrust laws.
This exemption, set out in the McCarran-Ferguson
Act, permits insurers to jointly develop common
insurance forms and share loss data to help them
The dividing of a loss proportionately
among two or more insurers that cover the same loss.
A survey to determine a property's
insurable value, or the amount of a loss.
When an investment increases in value, it
appreciates. For example, a stock whose price goes
from $20 a share to $25 a share, it has appreciated
Procedure in which an insurance company and
the insured or a vendor agree to settle a claim
dispute by accepting a binding or non-binding
decision made by a third party.
Amount of any past due obligation. This
term is used to refer to the amount of interest on
bonds or dividends on cumulative preferred stock
that is due and unpaid.
The deliberate setting of a fire.
Property and resources, such as cash and
investments, comprise a person's assets; i.e.,
anything that has value and can be traded. Examples
include stocks, bonds, real estate, bank accounts,
When you divide your money among various
types of investments, such as stocks, bonds, and
short-term investments (also known as
"instruments"), you are allocating your assets. The
way in which your money is divided is called your
ASSET PROTECTION ALLOWANCE
Used when calculating the expected family
contribution as part of the federal student aid
application process, this allowance permits a family
to exempt certain assets from consideration when
There are basically six different types of
coverages. Some may be required by law. Others are
optional. They are:
- Bodily injury liability, for injuries the
policyholder causes to someone else.
- Medical payments or Personal Injury
Protection (PIP) for treatment of injuries to
the driver and passengers of the policyholder's
- Property damage liability, for damage the
policyholder causes to someone else's property.
- Collision, for damage to the policyholder's
car from a collision.
- Comprehensive, for damage to the
policyholder's car not involving a collision
with another car (example: damage from fire,
explosions, earthquakes, floods, riots and
- Uninsured motorists coverage, for costs
resulting from an accident involving a
hit-and-run driver or a driver who does not have
AVERAGE ANNUAL RETURN
This is the hypothetical rate of return
that, if the fund achieved it over a year's time,
would produce the same cumulative total return if
the fund performed consistently over the entire
period. A total return is expressed in a percentage
and tells you how much money you have earned or lost
on an investment over time, assuming that all
dividends and capital gains are reinvested.
Commercial airlines hold property insurance
on airplanes and liability insurance for negligent
acts that result in injury or property damage to
passengers or others. Damage is covered on the
ground and in the air. The policy limits the
geographical area and individual pilots covered.
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- BALANCED FUND
A mutual fund that tries to invest in a
broadly diversified portfolio of high-yielding
securities, such as common stocks, preferred stocks,
and bonds. Its share price and return will vary; a
fund that buys a mixture of common stocks, preferred
stocks, and bonds. Its goal is to blend long-term
growth from stocks with income from dividends.
Because it must have at least one-fourth of its
money invested in bonds and other debt obligations,
its price usually will not vary as much as that of a
Provides a snapshot of a company's
financial condition at one point in time. It shows
assets, including investments and reinsurance, and
liabilities, such as loss reserves to pay claims in
the future, as of a certain date. It also states a
company's equity, known as policyholder surplus.
Changes in that surplus are one indicator of an
insurer's financial standing.
A falling market, or a market in which
prices are generally decreasing. A bear market in
stocks is usually brought on by the anticipation of
declining economic activity while a bear market in
bonds is usually caused by rising interest rates.
A person who is named in a will, retirement
plan, individual retirement account, or insurance
policy and who will inherit money or other property
left by the decedent. A trust or institution also
can be named as a beneficiary.
A temporary or preliminary agreement which
provides coverage until a policy can be written or
Insurance coverage for more than one item
of property at a single location, or two or more
items of property in different locations.
BLUE CHIP STOCKS
These are stocks of well-established
companies that have a history of earnings and of
paying dividends and increasing profits. These
companies have reputations for sound management and
quality products. The stock prices tend to rise and
fall in conjunction with the overall market. These
stocks are also known as large-cap stocks.
BODILY INJURY LIABILITY COVERAGE
Portion of an auto insurance policy that
covers injuries the policyholder causes to someone
BOILER AND MACHINERY INSURANCE
Often called Equipment Breakdown, or
Systems Breakdown insurance. Commercial insurance
that covers damage caused by the malfunction or
breakdown of boilers, and a vast array of other
equipment including air conditioners, heating,
electrical, telephone, and computer systems.
BOND MUTUAL FUND
This is a mutual fund that is primarily
invested in bonds.
Essentially loans or debt. When someone
lends you money, he or she gets an IOU that promises
the loan will be repaid with interest. When you buy
a bond, you're basically buying that IOU. A bond
certificate is like an IOU: it shows the amount
loaned (principal), the rate of interest to be paid
on the loan and the date that the principal will be
paid back (maturity date). Bonds can be issued by
government agencies, such as the U.S. Treasury and
by corporations to raise money.
BOOK OF BUSINESS
Total amount of insurance on an insurer's
books at a particular point in time.
Borrowings are loans of any type.
A licensed person or organization paid by
you to look for insurance on your behalf.
A rising market, or a market in which
prices are generally increasing for stocks, bonds,
BURGLARY AND THEFT INSURANCE
Insurance for the loss of property due to
burglary, robbery or larceny. It is provided in a
standard homeowners policy and in a business
multiple peril policy.
BUSINESS INTERRUPTION INSURANCE
Commercial coverage that reimburses a
business owner for lost profits and continuing fixed
expenses during the time that a business must stay
closed because of a covered peril, such as a fire.
BUSINESS OVERHEAD EXPENSE INSURANCE
A business disability policy designed to
pay the ongoing expenses of a business in the event
the business owner becomes disabled.
BUSINESSOWNERS POLICY / BOP
A policy that combines property, liability,
and business interruption coverages for small to
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- CAFETERIA PLANS
An employee benefits plan that allows
employees to customize their benefit package.
Employees receive a fixed amount of dollars that can
be allocated between several fringe benefits.
The termination of insurance coverage
during the policy period. Flat cancellation is the
cancellation of a policy as of its effective date,
without any premium charge.
The supply of insurance available to meet
demand. Capacity depends on the industry's financial
ability to accept risk. Reduced capacity leads to
higher premiums, but higher premiums eventually
attract more capacity to the market.
The amount of money you have invested. When
your investing objective is capital preservation,
your priority is trying not to lose any money. When
your investing objective is capital growth, your
priority is trying to make your initial investment
grow in value.
Profit from a sale of an investment
constitutes a capital gain. For example, if you
bought a share of stock for $5 and later sold it for
$7.50, you would have a capital gain of $2.50.
CAPITAL GAINS TAX
Tax on the gain realized from the sale of
capital assets such as stock, mutual funds, business
interests, or other asset. Long-term capital gains
tax rates apply to assets held longer than 12
Amount by which the proceeds from the sale
of a capital asset are less than its cost basis.
Representative of a single insurer or fleet
of insurers who is obliged to submit business only
to that company, or at the very minimum, give that
company first refusal rights on a sale. In exchange,
that insurer usually provides its captive agents
with an allowance for office expenses as well as an
extensive list of employee benefits such as
pensions, life insurance, health insurance and
Insurance company that actually underwrites
and issues the insurance policy. The term refers to
the fact that the company carries (or assumes)
certain risks for the policyholder.
Refers to the process of shifting to a
future taxable year those losses and other
deductions that exceed limits for the current tax
Basis in property that may 'carry over'
from the transferor to the transferee. Generally
this occurs when there is an exchange of property,
or property is transferred by gift.
A system of coordinating medical services
to treat a patient, improve care, and reduce cost. A
case manager coordinates health care delivery for
An emergency or contingency fund (or
credit) set aside and held in an easily accessible
form (such as a savings account) for the purpose of
meeting emergency expenses and/or short-term cash
CASH SURRENDER VALUE
Amount available to the owner if a life
insurance policy or annuity is surrendered. The
amount represents the cash value minus surrender
charges and any outstanding loans due upon
cancellation of the policy.
The cash within a permanent life insurance
policy. Cash value is the premium paid less the cost
of insurance policy. Cash value is also adjusted by
any investment performance within the insurance
CASH VALUE LIFE INSURANCE
A permanent insurance policy that builds
cash value, often described as a savings account
within the policy.
Liability or loss resulting from an
Casualty Insurance coverage is primarily
for the legal liability of an individual or
organization that results from negligent acts and
omissions causing bodily injury and/or property
damage to a third party. However, the term is broad
and includes such property insurance as aviation
insurance, boiler and machinery insurance, glass
insurance and crime insurance.
Term used for statistical recording
purposes to refer to a single incident or a series
of closely related incidents causing severe insured
property losses totaling more than a given amount,
currently $25 million.
Risk securities that pay high interest
rates and provide insurance companies with a form of
reinsurance to pay losses from a catastrophe such as
those caused by a major hurricane. They allow
insurance risk to be sold to institutional investors
in the form of bonds, thus spreading the risk.
A percentage or dollar amount that a
homeowner must pay before the insurance policy kicks
in when a major natural disaster occurs. These large
deductibles limit an insurer's potential losses in
such cases, allowing it to insure more property. A
property insurer may not be able to buy reinsurance
to protect its own bottom line unless it keeps its
potential maximum losses under a certain level.
Probability of catastrophic loss, based on
the total number of catastrophes in a state over a
Using computers, a method to mesh long-term
disaster information with current demographic and
building data to determine potential losses for a
given geographic area.
CERTIFICATE OF CREDITABLE COVERAGE
A document provided by your health plan
that lets you prove you had coverage under that
plan. Certificates of creditable coverage will
usually be provided automatically when you leave a
health plan. You can obtain certificates at other
times as well. See also Creditable Coverage.
CERTIFICATES OF DEPOSIT
Also known as CDs, these investment
vehicles are usually issued by banks and other
financial institutions, and they pay a fixed rate of
interest for a specific period of time. Generally,
amounts up to $100,000 in a bank are insured by the
Notice to an insurer that under the terms
of a policy, a loss maybe covered.
Request by an insured for the insurance
company to cover an incurred loss, usually submitted
on the company's standard form.
Any person who asserts right of recovery.
CLASS OF STOCK
A type of share with particular rights and
privileges such as the right to vote on corporate
matters. The most common classes of stock are common
stock, voting preferred stock, and non-voting
These are expenses involved in buying or
selling real estate, such as points, survey charges,
title insurance fees, and filing fees for deeds.
Consolidated Omnibus Budget Reconciliation
Act, a federal law in effect since 1986. COBRA
permits you and your dependents to continue in your
employer's group health plan after your job ends. If
your employer has 20 or more employees, you may be
eligible for COBRA continuation coverage when you
retire, quit, are fired, or work reduced hours.
Continuation coverage also extends to surviving,
divorced or separated spouses; dependent children;
and children who lose their dependent status under
their parent's plan rules. You may choose to
continue in the group health plan for a limited time
and pay the full premium (including the share your
employer used to pay on your behalf) plus a 2%
administrative fee. COBRA continuation coverage
generally lasts 18 months, or 36 months for
dependents in certain circumstances. See also State
In property insurance, requires the
policyholder to carry insurance equal to a specified
percentage of the value of property to receive full
payment on a loss. For health insurance, it is a
percentage of each claim above the deductible paid
by the policyholder. For a 20 percent health
insurance coinsurance clause, the policyholder pays
for the deductible plus 20 percent of his covered
losses. After paying 80 percent of losses up to a
specified ceiling, the insurer starts paying 100
percent of losses.
Assets pledged to a lender until a loan is
repaid. If the borrower defaults, the lender has the
legal right to seize the collateral and sell it to
pay off the loan.
Assignment of an asset (e.g., a life
insurance policy's death benefit or its cash
surrender value) to a creditor as collateral for a
Refers to a loan or other contract that is
secured by collateral in the form of property or
other assets. In the case of a loan, the lender can
exercise its right to seize the collateral backing
the loan in the event the borrower defaults.
Collision coverage refers to the part of an
automobile insurance policy that covers damage to a
vehicle caused by an impact with another vehicle or
object or a rollover.
Products designed for and bought by
businesses. Among the major coverages are boiler and
machinery, business interruption, commercial auto,
comprehensive general liability, directors and
officers liability, fire and allied lines, inland
marine, medical malpractice liability, product
liability, professional liability, surety and
fidelity, and workers compensation. Most of these
commercial coverages can be purchased separately
except business interruption which must be added to
a fire insurance (property) policy. (See Commercial
Like a mutual fund, a commingled pool
combines your money with other investors' money and
is professionally managed. However, a commingled
pool is set up differently. While each mutual fund
is a separate investment company, is registered with
the Securities and Exchange Commission, and is
available to the general public, commingled pools
are part of a group trust maintained for qualified
pension or profit sharing plans and is open only to
participants in those qualified retirement plans. A
group trust must be maintained in accordance with
applicable Internal Revenue Code and Department of
Labor regulations. It can be invested just as a
mutual fund can -- for example, it could track a
particular market index.
Fee paid to an agent or insurance
salesperson as a percentage of the policy premium.
The percentage varies widely depending on coverage,
the insurer, and the marketing methods.
COMMON LAW MARRIAGE
A marriage deemed valid under some state
laws which is created by an agreement to marry,
followed by cohabitation between two people legally
capable of making a marriage contract. Such a
marriage requires a mutual agreement to enter into a
marriage, cohabitation sufficient to establish the
relationship of husband and wife, and an assumption
of marital duties and obligations. The cohabitation
requirement (e.g., the length of time the two people
have to live together under the same roof) and other
criteria defining a common law marriage may vary
from state to state.
COMMON POLICY PROVISIONS
Words, sentences, and paragraphs in an
insurance policy that generally take the form of
clauses that govern the policy and that set forth
the rights and obligations of both insured and
insurer under the policy. Common policy provisions
for a life insurance policy include the suicide
clause, the incontestable clause, and the
When people talk about a company's stock,
they usually mean common stock. When you own common
stock in a company, you share in its success or
failure. As part owner, you vote on important policy
issues, such as picking the board of directors. If
the company prospers, you may get part of the
profits, called a dividend. Also, the value of your
share of the company many go up; common stock
generally has the most potential for growth.
However, that value also can drop if the company
does poorly, and if it goes bankrupt common
stockholders are the last to receive any payment.
A measure used by some state insurance
departments to track consumer complaints against
insurance companies. Generally, it is written as the
number of complaints upheld against an insurance
company, as a percentage of premiums written. In
some states, complaints from medical providers over
the promptness of payments may also be included.
An injury that qualifies for benefits paid
under workers' compensation.
When you deposit money in a bank, it earns
interest. When that interest also begins to earn
interest, the result is compound interest. Investing
in a retirement plan is different from putting money
in the bank, but you still get the benefits of
compounding. Compounding occurs if bond income or
dividends from stocks or mutual funds are
reinvested. Because of compounding, money has the
potential to grow much faster.
Comprehensive coverage refers to the part
of an automobile insurance policy that covers damage
to a vehicle caused by miscellaneous hazards other
than collision, such as fire, theft, explosion,
windstorm, hail, water or contact with an animal.
A conservative investment or strategy
focuses primarily on capital preservation rather
than capital appreciation.
CONSUMER PRICE INDEX (CPI)
Measure of change in consumer prices,
published monthly by the U.S. Bureau of Labor
Statistics in the Department of Labor. This index is
widely used as a cost-of-living benchmark to adjust
Social Security payments and other payment
Coverage is for personal property items
that are movable, that is, not attached to the
building's structure (the home), such as television
sets, radios, clothes and household goods. Not
included under the coverage are animals, automobiles
Period of time, generally two years, during
which an insurance company can declare a life
insurance contract void because of misrepresentation
or concealment by the insured in obtaining the
policy. Once this period has elapsed, the company
cannot cancel the policy or refuse to pay claims for
any reason other than nonpayment of premiums.
Health insurance coverage that is not
interrupted by a break of 63 or more days in a row.
Employer waiting periods and HMO affiliation periods
do not count as gaps in health insurance coverage
for the purpose of determining if coverage is
Your right, when leaving a fully insured
group health plan, to convert your policy to an
individual health plan. In Iowa, conversion coverage
also extends to surviving or divorced spouses,
dependent children and children who lose their
dependent status under their parent's plan rules.
CONVERTIBLE TERM INSURANCE
Term life insurance coverage that can be
converted into permanent life insurance upon the
policy's expiration. The insured generally cannot be
denied permanent coverage or charged an additional
premium because of health problems.
Partial payment of certain medical costs
that individual participants may be required to make
under a health insurance policy. For example, under
your employer's health plan, you might have to pay
$5 toward each prescription.
The original price of an asset, plus any
additions and reinvested earnings, that is used to
determine capital gains or losses at the time of
sale of the asset. In the case of an inheritance,
the cost basis is the appraised value of the asset
at the time of the donor's death
In terms of eligibility for Medicaid,
countable assets are anything of value you own that
is not exempt by law or otherwise inaccessible to
you. Countable assets include, but are not limited
to: savings and checking accounts, stocks, bonds,
CDs, Treasury notes and bills, savings bonds,
investment property and vacation homes, second
vehicles, livestock, IRAs and other retirement
plans, mutual funds, precious metals and coins, and
whole life insurance above a certain surrender
value. States use the total value of your countable
assets as one of three tests to determine your
eligibility for Medicaid.
In health insurance, reimbursement for an
insured's medically-related expenses, including, but
not limited to surgery, medicines, hospitalization,
ambulance service, and X-rays.
Attachments to an insurance policy to
complete the coverage provided by the policy.
A bond's coupon rate is stated on the bond.
It tells how much interest the bond will pay every
year based on the bond's face value. For example, if
you buy a $1,000 bond with an 8% coupon rate, you'll
get $80 a year in interest. Like a bond's face
value, its coupon rate never changes.
Commercial coverage against losses
resulting from the failure of business debtors to
pay their obligation to the insured, usually due to
insolvency. The coverage is geared to manufacturers,
wholesalers, and service providers who may be
dependent on a few accounts and therefore could lose
significant income in the event of an insolvency.
CREDIT LIFE INSURANCE
Life insurance coverage on a borrower
designed to repay the balance of a loan in the event
the borrower dies before the loan is repaid. It may
also include disablement and can be offered as an
option in connection with credit cards and auto
The number produced by an analysis of an
individual's credit history. Some companies use
insurance scores as an insurance underwriting and
Protection against damage to growing crops
from hail, fire, or lightning provided by the
private market. By contrast, multiple peril crop
insurance covers a wider range of yield-reducing
conditions, such as drought and insect infestation,
and is subsidized by the federal government.
A right exercised by the beneficiary of a
trust to withdraw money from the trust for a limited
amount of time each year.
CUMULATIVE TOTAL RETURN
This number tells you a fund's actual
performance for a certain period of time. A total
return is expressed in a percentage and tells you
how much money you have earned or lost on an
investment over time, assuming that all dividends
and capital gains are reinvested.
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- DEATH BENEFIT
The amount payable, as stated in a life
insurance policy, to the designated beneficiary(ies)
upon the death of the insured. The amount paid is
the face value, plus any riders, less any
This is another name for bonds, mortgages,
and other kinds of loans.
Part of a property or liability insurance
policy that states the name and address of
policyholder, property insured, its location and
description, the policy period, premiums, and
supplemental information. Referred to as the "dec
The company refuses to accept the request
for insurance coverage.
The amount of the loss which the insured is
responsible to pay before benefits from the
insurance company are payable. You may choose a
higher deductible to lower your premium.
An annuity in which the income
payments/withdrawals begin at some future date.
DEFINED BENEFIT PLAN
This is a type of retirement plans that
provides a fixed amount of money after you retire
following a set number of years (in other words, the
benefit is "defined" in advance). Once you retire,
the amount you receive is fixed and usually does not
increase with inflation.
DEFINED CONTRIBUTION PLAN
This is a type of retirement plan in which
the level of contributions and the benefits will
vary, depending on the return from the investments.
You don't owe any income taxes on the money or any
earnings until you make a withdrawal.
A loan with no set maturity date that can
be called for repayment when the lender chooses.
Interest on these loans is usually billed at fixed
The conversion of insurance companies from
mutual companies owned by their policyholders into
publicly-traded stock companies.
Individual or group plan that helps pay the
costs of normal dental care as well as damage to
teeth from an accident.
An individual for whom the taxpayer
provides at least 50 percent of the support
regardless of where they live. Generally the
individual bears a specific relationship to the
taxpayer (i.e., child, sibling, parent) and/or
resides primarily in taxpayer's household.
The premium deposit paid by a prospective
policyholder when an application is made for an
insurance policy. It is usually equal to at least
the first month's estimated premium and is applied
toward the total policy premium when billed.
A decrease in value due to age, wear and
DIFFERENCE IN CONDITIONS INSURANCE (DIC)
"All-risks" policy that covers other perils
not insured by basic property insurance contracts,
supplemental to and excluding the coverage provided
by underlying contracts.
DIMINUTION OF VALUE
The idea that a vehicle loses value after
it has been damaged in an accident and repaired.
Property/casualty premiums collected by the
insurer from policyholders, before reinsurance
premiums are deducted. Insurers share some direct
premiums and the risk involved with their reinsurers.
DIRECT RESPONSE SYSTEM
A marketing method where insurance is
purchased by customers without the solicitation or
advice of an agency (though an agent may be needed
to complete the transaction). Potential customers
are solicited by advertising in the mail,
newspapers, magazines, television, and other media.
In insurance, reducing regulatory control
over insurance rates and forms. Commercial insurance
for businesses of a certain size has been
deregulated in many states.
A physical or mental impairment that
substantially limits one or more of an individual's
major life activities. Disability may be partial or
DISABILITY BENEFIT PERIOD
The period during which disability
insurance benefits are paid. While this period may
vary between policies, benefits paid until age 65
are common for long-term policies and benefits paid
for 26 weeks are common for short-term policies.
DISABILITY INCOME RIDER
Addition to a life insurance policy stating
that when an insured becomes disabled for at least
six months, premiums are waived. Depending on the
rider, the insured may also begin to receive monthly
income payments from the policy.
Also known as disability income insurance,
this type of policy provides income benefits to the
insured if he or she becomes ill or is injured and
can no longer work.
Deductible in an insurance contract that
provides for a decreasing deductible amount as the
size of the loss increases, so that small claims are
not paid but large losses are paid in full.
DISCHARGE OF BANKRUPTCY
Refers to a court order which terminates
bankruptcy proceedings and frees the debtor of legal
responsibility for dischargeable debts and other
The rate of interest banks must pay when
they borrow funds from the Federal Reserve to meet
their reserve requirement.
Refers to the process by which a party to a
legal action supplies the other party with certain
relevant information and/or documents (as required
by law or by a judge) either before or during the
Amount of a consumer's income remaining
after essentials such as food, housing, and
utilities and prior commitments have been paid.
A trust which allows the trustee discretion
in making distributions of income or principal to
A form of health insurance that provides
payment when the insured loses one or more limbs, or
the sight in one or both eyes. This coverage is
usually issued in combination with accidental death
This refers to a withdrawal from your
This concept of spreading your money across
different kinds of investments could potentially
moderate your investment risk. It's the idea of not
putting all your eggs in one basket. A diversified
portfolio can help shield you from large losses
because even if some securities falter, others may
Distribution of a company's earnings to
shareholders, generally on a quarterly basis, paid
in cash or additional shares of the company's stock.
The dividend amount per share is decided by the
company's board of directors. Dividends must be
declared as income by the shareholder in the year
An amount of paid-up life insurance
purchased with a policy dividend and added to the
face amount of the policy.
DOLLAR COST AVERAGING
This is a method of investing. Money is
invested at regular intervals in the same
investment. Because you invest the same amount each
time, you automatically buy less of the investment
when its price is higher and more when its price is
lower. Though the method doesn't guarantee a profit
or guard against loss in declining markets, the
average cost of each share is usually lower than if
you buy at random times. For dollar cost averaging
to work you must continue to invest regularly over
time and purchase shares in both market ups and
In certain states with no-fault auto
insurance, the dollar threshold prevents individuals
from suing to recover for pain and suffering unless
their medical expenses exceed a specified dollar
DOMESTIC INSURANCE COMPANY
Term used by a state to refer to any
company incorporated there.
DOMESTIC PARTNER BENEFITS
Employer benefits offered to unmarried
partners of employees. Although laws regarding
domestic partner benefits apply only to same-sex
couples, in practice, many employers offer domestic
partner benefits to both same- and opposite-sex
couples. Benefits may include health insurance,
leave to care for an ill partner, and bereavement
leave at a partner's death.
The place an individual resides and that is
intended to be the permanent residence. Domicile
does not refer to a summer home or a temporary
residence. Once a domicile has been established, it
will remain so until the individual moves to a
different location with the intent of making that
location the permanent residence.
Also called an accidental death benefit, a
life insurance policy provision that doubles payment
of a designated death benefit when death results
from certain specified causes (usually certain types
DOW JONES INDUSTRIAL AVERAGE
The most widely used indicator of how the
country's industrial leaders are performing. The
DJIA is a formula based on the stock prices of 30
major industrial companies. These 30 companies are
chosen from sectors of the economy most
representative of our country's economic condition.
There are three other Dow Jones Averages: the
transportation, the utility, and the composite.
DRIVER EDUCATION CREDIT
Discount on auto insurance premiums for
which young drivers become eligible upon completion
of a driver education course.
DUPLICATION OF BENEFITS
Overlapping or identical medical insurance
coverage under two or more separate health plans.
DURABLE POWER OF ATTORNEY
Legal document which appoints an individual
to act on the principal's behalf and remains in
effect even if the principal becomes incapacitated.
An insurance policy for liability covering
a building's structure and usually its contents when
the building is used as a dwelling. This type of
coverage is normally purchased when the building
can't be covered under a homeowner's policy (for
example, when the individual does not own a home).
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- EARLY WARNING SYSTEM
A system of measuring insurers' financial
stability set up by insurance industry regulators.
An example is the Insurance Regulatory Information
System (IRIS), which uses financial ratios to
identify insurers in need of regulatory attention.
Income generated by providing goods or
services and received in the form of wages and
EARNED INCOME LIMIT
An annually adjusted limit that applies to
Social Security recipients who continue to work
while receiving benefits. This applies only to
individuals under age 70, and limits earned income
to an annually adjusted level, above which Social
Security benefits are reduced. Also known as the
retirement earnings test.
The portion of premium that applies to the
expired part of the policy period. Insurance
premiums are payable in advance but the insurance
company does not fully earn them until the policy
Record compiled by the Social Security
Administration that shows an individual's actual
lifetime earnings as reported to the SSA by an
employer, or for self-employed individuals, by the
Internal Revenue Service (IRS). Only earnings that
are less than the maximum earnings limit for that
year are credited to the earnings record and will be
used to compute Social Security benefits.
Covers a building and its contents, but
includes a large percentage deductible on each. A
special policy exists because earthquakes are not
covered by standard homeowners or most business
Total financial loss resulting from the
death or disability of a wage earner, or from the
destruction of property. Includes the loss of
earnings, medical expenses, funeral expenses, the
cost of restoring or replacing property, and legal
expenses. It does not include noneconomic losses,
such as pain caused by an injury.
ELECTRONIC COMMERCE / E-COMMERCE
The sale of products such as insurance over
A kind of deductible or waiting period
usually found in disability policies. It is counted
in days from the beginning of the illness or injury.
EMPLOYEE BENEFIT PROGRAM
The collection of non-salary compensation
offered by an employer that may include health
insurance, life insurance, disability insurance,
pensions or other retirement plans, tuition
reimbursement, stock options, and child care
Amendment to the policy used to add or
delete coverage. Also referred to as a "rider."
The period during which all employees and
their dependents can sign up for coverage under an
employer group health plan. Besides permitting
workers to elect health benefits when first hired,
many employers and group health insurers hold an
annual enrollment period, during which all employees
can enroll in or change their health coverage. See
also Group Health Plan, Special Enrollment Period.
ENVIRONMENTAL IMPAIRMENT LIABILITY
A form of insurance designed to cover
losses and liabilities arising from damage to
property caused by pollution.
This term refers to stocks or stock
investments. When you own part of something, such as
your home, you have equity in it. A stock is an
equity investment because each share means you own
part of the company that issued it. An equity mutual
fund buys equities.
EQUITY CREDIT LINE
When someone grants you a line of credit
for a certain amount, you have the ability to borrow
that amount as you need it. An equity credit line is
backed by the equity you have in your home -- in
other words, the amount of the loan that you have
already paid off, not counting interest. If you
can't repay the loan, the lender can lay claim to
This mutual fund invests primarily in
stocks. The fund's goal is to make money from
increases in the prices of the stocks that it holds.
An equity growth fund invests primarily in growth
ERRORS AND OMISSIONS COVERAGE / E&O
A professional liability policy covering
the policyholder for negligent acts and omissions
that may harm his or her clients.
Funds that a lender collects to pay monthly
premiums in mortgage and homeowners insurance, and
sometimes to pay property taxes.
All assets a person owns at the time of
death, including securities, real estate, business
interests, physical property, and cash, less
outstanding liabilities. The estate is distributed
to heirs according to the terms of the person's will
or, if there is no will, by court ruling.
Techniques or methods used to control the
future appreciation of assets for the purpose of
reducing estate taxes.
The process of developing and implementing
a master plan that facilitates the distribution of
your property after your death according to your
goals and objectives.
A tax imposed by the federal government and
some state governments on the transfer of assets to
EXCESS & SURPLUS LINES
Property/casualty coverage that isn't
available from insurers licensed by the state
(called admitted insurers) and must be purchased
from a non-admitted carrier.
This action refers to moving some or all of
the money from your account from one investment
option to another.
Certain causes and conditions listed in the
policy, which are not covered.
The signing, sealing, and delivery of a
contract or agreement making it valid. Also, a
broker who buys or sells shares of stock upon a
client's request is said to have executed an order.
An individual or professional organization,
such as a bank's trust department, named in a will
to administer an estate upon the death of the owner.
Assets that are not considered for
bankruptcy proceedings. Exempt is also used to refer
to assets not considered in the determination of
eligibility for Medicaid.
Percentage of each premium dollar that goes
to insurers' expenses including overhead, marketing,
Record of losses.
The date on which the policy ends.
Possibility of loss.
An endorsement added to an insurance
policy, or clause within a policy, that provides
additional coverage for risks other than those in a
EXTENDED REPLACEMENT COST COVERAGE
Pays a certain amount above the policy
limit to replace a damaged home, generally 120
percent or 125 percent. Similar to a guaranteed
replacement cost policy, which has no percentage
limits. Most homeowner policy limits track inflation
in building costs. Guaranteed and extended
replacement cost policies are designed to protect
the policyholder after a major disaster when the
high demand for building contractors and materials
can push up the normal cost of reconstruction.
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- FACE AMOUNT
The dollar amount to be paid to the
beneficiary when the insured dies. It does not
include other amounts that may be paid from
insurance purchased with dividends or any policy
FAIR ACCESS TO INSURANCE REQUIREMENTS
PLANS / FAIR PLANS
Insurance pools that sell property
insurance to people who can't buy it in the
voluntary market because of high risk over which
they may have no control. FAIR Plans, which exist in
28 states and the District of Columbia, insure fire,
vandalism, riot, and windstorm losses, and some sell
homeowners insurance which includes liability. Plans
vary by state, but all require property insurers
licensed in a state to participate in the pool and
share in the profits and losses.
FAIR MARKET VALUE
The price that a willing buyer would pay a
Package policy that protects the
policyholder against named perils and liabilities
and usually covers homes and their contents, along
with barns, stables, and other structures.
Status you attain once you have had 18
months of continuous creditable health coverage. To
be federally eligible, you also must have used up
any COBRA or state continuation coverage; you must
not be eligible for Medicare, Medicaid, or a group
health plan; you must not have other health
insurance; and you must apply for individual health
insurance within 63 days of losing your prior
creditable coverage. When you are buying individual
health coverage, federal eligibility confers greater
protections on you than you would otherwise have in
most other states. In Iowa you do not need to meet
all of the requirements of federal eligibility to
have these protections. See also COBRA, Continuous
Coverage, Creditable Coverage, State Continuation
FEDERAL GIFT TAX
A federal tax that is imposed on the
transfer of securities, property, or other assets.
The tax is based on the fair market value of the
transferred assets and applies to transfers valued
over $10,000 per individual per year (indexed for
FEDERAL INSURANCE ADMINISTRATION / FIA
Federal agency in charge of administering
the National Flood Insurance Program.
FICA - FEDERAL INSURANCE CONTRIBUTIONS
Commonly known as Social Security, it is a
federal law that requires employers to withhold
wages and make payments to finance the Old Age,
Survivors, Disability, and Health Insurance (OASDHI)
FEDERAL RESERVE BOARD
Seven-member board that supervises the
banking system by issuing regulations controlling
bank holding companies and federal laws over the
banking industry. It also controls and oversees the
U.S. monetary system and credit supply.
A form of protection that covers
policyholders for losses that they incur as a result
of fraudulent acts by specified individuals. It
usually insures a business for losses caused by the
dishonest acts of its employees.
A person, company, or association that
holds assets in trust for a beneficiary. The
fiduciary is charged with the responsibility of
investing the assets wisely for the beneficiary's
benefit. Examples of fiduciaries include executors
of wills and estates, trustees, and those who
administer the assets of underage or incompetent
A person is said to act in a fiduciary
capacity when business is transacted, or money and
property are handled for the benefit of another. The
term is not limited to technical or express trusts,
but may also apply to such offices or relations as
attorneys, guardians, executors, brokers, and
FIDUCIARY INCOME TAX RETURN
An income tax return that is filed by the
court representative or estate administrator for a
decedent's estate, trust, or a bankruptcy estate to
report income, deductions, gains, losses,
distributions, income that is accumulated or held
for future distribution, income tax liability of the
estate or trust, and employment taxes on wages paid
to household employees. The return is not required
if the decedent's estate is not probated.
States where insurers must file rate
changes with their regulators, but don't have to
wait for approval to put them into effect.
FINANCIAL GUARANTEE INSURANCE
Covers losses from specific financial
transactions and guarantees that investors in debt
instruments receive timely payment of principal and
interest if there is a default. Raises the credit
rating of debt to which the guarantee is attached.
Investment bankers who sell securities backed by
loan portfolios use this insurance to enhance
FINANCIAL RESPONSIBILITY LAW
A state law requiring that all automobile
drivers show proof that they can pay damages up to a
minimum amount if involved in an auto accident.
Varies from state to state but can be met by
carrying a minimum amount of auto liability
FINITE RISK REINSURANCE
Contract under which the ultimate liability
of the reinsurer is capped and on which anticipated
investment income is expressly acknowledged as an
underwriting component. Also known as Financial
Reinsurance because this type of coverage is often
bought to improve the balance sheet effects of
statutory accounting principles.
Coverage protecting property against losses
caused by a fire or lightning that is usually
included in homeowners or commercial multiple peril
Coverage for the policyholder's own
property or person. In no-fault auto insurance it
pays for the cost of injuries. In no-fault states
with the broadest coverage, the personal injury
protection (PIP) part of the policy pays for medical
care, lost income, funeral expenses and, where the
injured person is not able to provide services such
as child care, for substitute services.
A contract issued by an insurance company
allowing for a fixed rate of interest in both the
accumulation and income phases; periodically
adjusted by the insurance company.
FIXED INCOME SECURITIES
These securities pay a fixed rate of return
by investing in government, corporate, or municipal
bonds, which pay such a fixed rate. These
investments could offer you an advantage in times of
low inflation, but are not likely to protect you
against the declining buying power of your money
during times of high inflation.
Attached to a homeowners policy, a floater
insures movable property, covering losses wherever
they may occur. Among the items often insured with a
floater are expensive jewelry, musical instruments,
and furs. It provides broader coverage than a
regular homeowners policy for these items.
Coverage for flood damage is available from
the federal government under the National Flood
Insurance Program but is sold by licensed insurance
agents. Flood coverage is excluded under homeowners
policies and many commercial property policies.
However, flood damage is covered under the
comprehensive portion of an auto insurance policy.
FORCED PLACE INSURANCE
Insurance purchased by a bank or creditor
on an uninsured debtor's behalf so if the property
is damaged, funding is available to repair it.
FOREIGN INSURANCE COMPANY
Name given to an insurance company based in
one state by the other states in which it does
Intentional lying or concealment by
policyholders to obtain payment of an insurance
claim that would otherwise not be paid, or lying or
misrepresentation by the insurance company managers,
employees, agents, and brokers for financial gain.
FREE LOOK PERIOD
The right of an insured to examine an
insurance policy for a stated period, often 10 days,
and if not satisfied, the right to return the policy
and receive a full refund of the initial premium.
Number of times a loss occurs. One of the
criteria used in calculating premium rates.
Non-cash benefits (such as group health
insurance, term life insurance, and disability
insurance) made available to employees in addition
to salary, but are generally not taxable to the
A procedure in which a primary insurer acts
as the insurer of record by issuing a policy, but
then passes the entire risk to a reinsurer in
exchange for a commission. Often, the fronting
insurer is licensed to do business in a state or
country where the risk is located, but the reinsurer
is not. The reinsurer in this scenario is often a
captive or an independent insurance company that
cannot sell insurance directly in a particular
FULLY INSURED GROUP HEALTH PLAN
Health insurance purchased by an employer
from an insurance company. Fully insured health
plans are regulated by the state of Iowa. See also
Self-Insured Group Health Plans.
FUTURE BENEFIT INCREASE RIDER
A rider attached to a disability insurance
policy that guarantees the insured's right to
purchase additional coverage without going through
medical underwriting to prove physical insurability.
Also called a Guaranteed Purchase Option Rider.
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- GAAP ACCOUNTING
Generally accepted accounting principles (GAAP)
are used in financial statements that publicly-held
companies prepare for the Securities and Exchange
The profit made on a securities transaction
realized when a stock, bond, mutual fund, futures
contract, or other financial instrument is sold for
more than its purchase price. When the security has
been held for more than one year, the gain is
taxable at more favorable capital gain rates. If the
asset is held for less than one year the gain is
taxed at regular income tax rates.
An automobile insurance option, available
in some states, that covers the difference between a
car's actual cash value when it is stolen or wrecked
and the amount the consumer owes the leasing or
finance company. Mainly used for leased cars.
Includes information about family history
or genetic test results indicating your risk of
developing a health condition. A health plan cannot
consider preexisting a condition about which you
have genetic information, unless that health
condition has been diagnosed by a health
Coverage for glass breakage caused by all
risks; fire and war are sometimes excluded.
Insurance can be bought for windows, structural
glass, leaded glass, and mirrors. Available with or
without a deductible.
A period (usually 31 days) after the
premium due date, during which an overdue premium
may be paid without penalty. The policy remains in
force throughout this period.
Financial services legislation, passed by
Congress in 1999, that removed Depression-era
prohibitions against the combination of commercial
banking and investment-banking activities. It allows
insurance companies, banks, and securities firms to
engage in each others' activities and own one
GROUP DISABILITY INSURANCE
A disability insurance policy that covers a
group of individuals who are affiliated in some way,
either through an employer, trade association, or
other organization. Group disability coverage is
generally less expensive than individual disability
coverage, however, benefits are limited to a stated
length of time and the maximum monthly income
benefit is usually no more than 50 to 60 percent of
GROUP HEALTH PLAN
Health insurance (usually sponsored by an
employer, union or professional association) that
covers at least 2 employees. See also Fully Insured
Group Health Plan, Self-Insured Group Health Plan.
These funds try to make money from
increases in the prices of stock that they hold
rather than from dividends. They are more risky than
more conservative funds; their value can rise and
fall quickly, and they pay little or no dividends.
However, over time these funds have the potential to
offer higher returns.
GROWTH AND INCOME FUND
This fund invests for both long-term growth
from stocks as well as regular dividend income. Some
growth and income funds are weighted more heavily
toward growth, others toward income.
Some companies' stocks have shown or are
expected to show quick earnings and revenue growth.
These stocks may be more risky investments than most
other stocks, and you usually receive little or no
GUARANTEED INCOME CONTRACT / GIC
Often an option in an employer-sponsored
retirement savings plan. Contract between an
insurance company and the plan that guarantees a
stated rate of return on invested capital over the
life of the contract.
An option that permits the policyholder to
buy additional stated amounts of life insurance at
stated times in the future without evidence of
A requirement that health plans must permit
you to enroll regardless of your health status, age,
gender, or other factors that might predict your use
of health services. All health plans sold to small
employers in Iowa are guaranteed issue.
A feature in health plans that means your
coverage cannot be canceled because you get sick.
GUARANTEED REPLACEMENT COST COVERAGE
Homeowners policy that pays the full cost
of replacing or repairing a damaged or destroyed
home, even if it is above the policy limit.
The mechanism by which solvent insurers
bail out the policyholders of companies that fail.
Such a fund is required in all 50 states, the
District of Columbia, and Puerto Rico, but what is
included varies from state to state.
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A coverage that protects businesses engaged
in electronic commerce from losses caused by
A seller's market in which insurance is
expensive and in short supply.
Because of the tax advantages given to
workplace retirement plans, they are subject to
certain withdrawal restrictions. Some 401(a),
401(k), and 403(b) plans have hardship withdrawal
provisions. If you have no other way of getting the
money for a large expense, you may be able to
withdraw money from your retirement plan. However,
restrictions vary by plan. If you need money for the
purchase of a primary home, medical emergency costs,
to prevent foreclosure on or eviction from your
home, or college tuition, you might be able to take
money from your 401(k) or 403(b) plan for those
expenses. If your company's plan allows withdrawals,
you'll owe ordinary income tax on the money you take
out, plus a possible 10% penalty if you're under age
59½. Federal income tax will be withheld at a rate
of 20% unless eligible rollover distributions are
directly rolled over to an Individual Retirement
Account or another employer's plan. But if you have
a 457 retirement plan, such a withdrawal may only be
allowed for unforeseen emergencies that cause you a
severe financial hardship. Under these plans, the
Internal Revenue Code does not provide for hardship
withdrawals. However, your employer may be
ultimately responsible for determining whether a
certain instance constitutes an emergency for
A circumstance that increases the
likelihood or probable severity of a loss.
A policy that will pay specified sums for
medical expenses or treatments. Health policies can
offer many options and vary in their approaches to
HEALTH PLAN FLEXIBLE SPENDING ACCOUNT
Central fund into which employees
contribute pre-tax earnings to pay for health
insurance premiums and uninsured medical costs. When
the employee submits evidence of medical expenses
paid out-of-pocket, he or she is reimbursed from the
HEALTH PLAN YEAR
The calendar period during which your
health plan coverage is in effect. Many group health
plan years begin on January 1, while others begin in
a different month.
When used in this guide, refers to your
medical condition (both physical and mental
illnesses), claims experience, receipt of health
care, medical history, genetic information, evidence
of insurability (including conditions arising out of
acts of domestic violence), and disability. See also
An individual who inherits some or all of
the estate of a deceased person by virtue of being
in the direct line of descent, or being designated
in a will or by legal authority. The term is often
applied to those who would inherit by will, deed, or
operation of law.
HIGH-YIELD BOND FUND
These mutual funds invest in high-yield
bonds, sometimes known as "junk" bonds. The chance
that the company issuing such bonds will default on
that loan is higher than with other bonds. That's
why higher-yield bonds usually pay a higher interest
rate to get people to buy them, but these bonds also
have greater risk associated with them.
The Health Insurance Portability and
Accountability Act, better known as Kassebaum-Kennedy,
after the two senators who spearheaded the bill.
Passed in 1996 to help people buy and keep health
insurance, even when they have serious health
conditions, the law sets basic requirements that
health plans must meet. Since states can and have
modified and expanded upon these provisions,
consumers' protections vary from state to state.
Health maintenance organization. A kind of
health insurance plan. HMOs usually require you to
get care from doctors who work for or contract with
the HMO. They generally do not require deductibles,
but often do charge a small fee, called a
co-payment, for services like doctor visits or
prescriptions. HMOs in Iowa can require affiliation
periods. See also Affiliation Period.
HOLD HARMLESS AGREEMENT
A clause in a contract in which one party
agrees not to hold the other responsible for, or to
protect the other from, any claims.
Length of time an asset is held by its
Credit offered to homeowners on the
accumulated equity of their homes. The amount of
money available for these loans is based on how much
the homeowner has actually paid so far on the house
itself, excluding other payments, such as interest
on the mortgage.
An elective combination of coverages for
the risks of owning a home. Can include losses due
to fire, burglary, vandalism, earthquake, and other
A state law provision that permits the home
to be exempted from creditors claims.
Facility that provides short-term
continuous care in a home-like setting for
terminally ill people with a life expectancy of six
months or less. Some health insurance plans cover
hospice stays up to a certain limit with no
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- IMMEDIATE ANNUITY
An annuity that begins to make income
payments immediately (or soon after) after the first
premium is paid, as opposed to a deferred annuity.
The inability to properly care for one's
property and/or person, or to make or communicate
rational decisions concerning one's affairs.
INCIDENTS OF OWNERSHIP
A policyowner's rights under a life
insurance policy, including the right to change the
beneficiary and the right to surrender the policy
for the cash value.
A policy provision in which the company
agrees not to contest the validity of the contract
after it has been in force for a certain period of
time, usually two years.
INCOME IN RESPECT OF A DECEDENT
All gross income that the decedent had a
right to receive, but did not receive, prior to
death such as uncollected wages, deferred
compensation, and pension benefits. These income
amounts are not included on the final Form 1040 but
are reported on the fiduciary return or the
beneficiary's tax return.
INCOME MUTUAL FUND
This fund invests in securities that
produce dividend income.
INCOME PROTECTION ALLOWANCE
An allowance that is based on the living
costs of those family members who are not attending
post secondary school. The allowance is included
when calculating the expected family contribution as
part of an application for federal student aid.
Benefit in disability insurance policies
where an injured or sick wage earner receives a
monthly income payment that is sufficient to replace
a percentage of lost earnings.
The annual tax on income that is levied by
the federal government and by certain state and
The inability to properly care for one's
property and/or person, or to make or communicate
rational decisions concerning one's person.
INCURRED BUT NOT REPORTED LOSSES / IBNR
Losses that are not reported to the insurer
or reinsurer until years after the policy is sold.
Liability claims may be filed long after the event
that caused the injury to occur. Asbestos-related
diseases, for example, do not show up until decades
after the exposure. Also, estimates made about
claims already reported but where the full extent of
the injury or property damage is not yet known.
Insurance companies regularly adjust reserves for
such losses as new information becomes available.
Losses occurring within a fixed period,
whether or not adjusted or paid during the same
Provide financial compensation for losses.
The principle upon which all
property/casualty insurance contracts are based.
According to this principle, the objective of
insurance is to restore the insured to the same
financial position after a loss that he/she was in
prior to the loss.
A type of health insurance plan that
provides reimbursement of covered medical expenses
and gives plan participants considerable freedom to
choose their own health care providers.
A contractor who represents different
insurance companies, is not controlled by any one
company, and earns commissions from policies sold.
A statistical composite that measures
changes in the economy or in financial markets by
measuring the ups and downs of stock, bond, and
commodities markets, and reflecting market prices
and the number of shares outstanding for the
companies in the index. Some well known indexes
include the New York Stock Exchange Composite Index,
S&P 500, American Stock Exchange Composite Index,
and Dow Jones Industrial Average.
A mutual fund that tries to match the
results of a particular index, such as the S&P 500,
an unmanaged index of common stock prices. A bond
index measures the bond market's ups and downs by
reflecting the behavior of a broad selection of
A loss that arises from a peril, but is not
directly and immediately caused by it.
An insurance policy (life, health, or
disability) that provides coverage for an individual
person (and, in some cases, his/her family members),
as opposed to a group policy that provides coverage
for a group of individuals.
INDIVIDUAL RETIREMENT ACCOUNT
Also known as an IRA, this tax-advantaged
retirement account allows an employed person to
invest up to $2,000 each year. Depending on your
income, whether you're married, and whether your
employer offers a retirement plan at work, your
contribution may be tax deductible on your tax
When the price of goods and services rises,
the result is called inflation. This means that
things you buy today at one price are likely to cost
more in the future.
An attachment or amendment to an insurance
policy that provides protection against inflation by
adjusting the level or amount of the benefit to keep
pace with inflation.
It is the risk you run that the return on
your investments will not keep up with the cost of
living. If they do not, your money will buy less and
less as time goes on.
INLAND MARINE INSURANCE
A broad type of coverage developed for
shipments that do not involve ocean transport.
Covers all forms of land and air transit. Floaters
are included in this category.
Insurer's inability to pay debts. Insurance
insolvency standards and the regulatory actions
taken vary from state to state. The last resort in
the case of insolvency is liquidation.
A sale made with the agreement that the
purchased goods or services will be paid for in
fractional amounts over a specified period of time.
An individual applicant who qualifies for
an insurance policy based on the coverage standards
that are set by the insurance company.
A relationship between an insured person or
property and the potential beneficiary of the
insurance. This requirement must be present at the
time the life insurance policy is applied for but
doesn't need to exist at the time of the insured's
death. Insurable interest exists because there is a
reasonable expectation that the beneficiary will
benefit from the continued life of the insured, or
experience a loss at the death of the insured.
Risks for which it is relatively easy to
get insurance and that meet certain criteria. These
include being definable, accidental in nature, and
part of a group of similar risks large enough to
make losses predictable. The insurance company also
must be able to come up with a reasonable price for
The policyholder - the person(s) protected
in case of a loss or claim.
The insurance company.
INTERMEDIATE BOND FUND
Generally, this is a mutual fund that buys
bonds with maturities from three to ten years.
This is the amount you pay for your
INSURANCE REGULATORY INFORMATION SYSTEM /
Uses financial ratios to measure insurers'
financial strength. Developed by the National
Association of Insurance Commissioners. Each
individual state insurance department chooses how to
The cost charged for the use of money,
expressed as a rate per period of time, usually one
year (in which case it is called an annual rate of
interest). The rate is derived by dividing the
dollar amount of interest by the amount of principal
INTEREST RATE CAP
Method of limiting the interest-rate
increases of an adjustable rate mortgage (ARM). A
periodic rate cap limits how much the interest rate
can increase from one adjustment period to the next.
A lifetime cap limits the interest rate increase
over the life of the mortgage.
The risk that changes in interest rates
will adversely affect the value of an investment
portfolio. Interest-rate risk affects portfolios
with large holdings in long-term bonds or many
dividend-paying utility company stocks because the
value will fall in the event interest rates rise.
INTERNATIONAL STOCK FUND
This type of fund buys securities of
companies around the world. Because they are
affected by changes in value of various currencies,
international funds involve greater risk and greater
potential return than U.S. investments.
An insurer that sells exclusively via the
INTERNET LIABILITY INSURANCE
Coverage designed to protect businesses
from liabilities that arise from the conducting of
business over the Internet, including copyright
infringement, defamation, and violation of privacy.
Investment contracts are offered to
retirement savings plans by insurance companies,
banks, and other financial institutions. By
investing in these contracts, plan participants are
essentially lending money to the financial
institution. The institution is, in turn, promising
to pay a specified rate of interest on that loan and
to repay principle when the loan (contract) matures.
These contracts are unsecured obligations, and
neither the FDIC, investment manager, nor the plan
sponsor guarantees repayment.
Income generated by the investment of
assets. Insurers have two sources of income,
underwriting (premiums less claims and expenses) and
investment income. The latter can offset
underwriting operations, which are frequently
IOWA COMPREHENSIVE HEALTH ASSOCIATION
The state-run program for people with high
health risks (called a high-risk pool). ICHA also
sells individual and family coverage to those who
are federally eligible and to certain individuals
not eligible for a standard or basic individual
health plan. See also Federally Eligible.
IOWA INDIVIDUAL HEALTH BENEFIT
An association established by the State of
Iowa to help spread the cost of insuring people with
serious health conditions broadly across all
participating insurance companies. Every insurance
company in the state of Iowa is required to
participate. Self-insured group health plans can
participate on a voluntary basis. See also
Self-Insured Group Health Plan.
A beneficiary designation that cannot be
A trust that cannot be altered, amended,
revoked, or terminated by the settlor.
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- JOINT LIFE EXPECTANCY
The probability that two people will live
to specific ages according to a mortality table.
JOINT UNDERWRITING ASSOCIATION / JUA
Insurers which join together to provide
coverage for a particular type of risk or size of
exposure, when there are difficulties in obtaining
coverage in the regular market, and which share in
the profits and losses associated with the program.
JUAs may be set up to provide auto and homeowners
insurance and various commercial coverages, such as
Decision by a court of law ordering someone
to pay a certain amount of money. The term also
refers to the condemnation awards by government
entities in payment for private property taken for
A court judgment that terminates all
interest and rights of a mortgagor (borrower) in the
property covered by the mortgage. Such a judgment
usually results from the mortgagor defaulting on the
mortgage loan, exposing the mortgaged property to
the enforceable lien held by the lender (usually a
bank). When a judgment foreclosure occurs, the
mortgaged property is generally sold under court
supervision and the proceeds are used to satisfy the
outstanding mortgage debt.
Corporate bonds with credit ratings of BB
or less. They pay a higher yield than investment
grade bonds because issuers have a higher perceived
risk of default. Such bonds involve market risk that
could force investors, including insurers, to sell
the bonds when their value is low. Most states place
limits on insurers' investments in these bonds. In
general, because property/casualty insurers can be
called upon to provide huge sums of money
immediately after a disaster, their investments must
be liquid. Less than 2 percent are in real estate
and a similarly small percentage are in junk bonds.
(see HIPPA) requires all health plans to be
guaranteed renewable. Your coverage can be canceled
for other reasons unrelated to your health status.
KEY PERSON INSURANCE
Insurance on the life or health of a key
individual whose services are essential to the
continuing success of a business and whose death or
disability could cause the firm a substantial
Coverage up to specific limits for the cost
of ransom or extortion payments and related
expenses. Often bought by international corporations
to cover employees. Most policies have large
deductibles and may exclude certain geographic
areas. Some policies require that the policyholder
not reveal the coverage's existence.
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A method of staggering the purchase of
certificates or bonds whereby, when the investment
matures, the funds can be reinvested in short or
long-term investments depending on the current
The expiration of a right or privilege when
one party does not live up to its obligations during
the time allowed.
LAST IN FIRST OUT (LIFO)
This refers to a method used to distribute
cash value withdrawals for policies where the
withdrawals are treated as first coming out of
interest and are considered taxable income.
LARGE GROUP HEALTH PLAN
One with more than 50 eligible employees.
Enrollment in a health plan at a time other
than the regular or a special enrollment period.
Iowa requires fully insured group plans to cover you
if you are a late enrollee. However, you may be
subject to a longer preexisting condition exclusion
period. See also Special Enrollment Period.
LAW OF LARGE NUMBERS
The theory of probability on which the
business of insurance is based. Simply put, this
mathematical premise says that the larger the group
of units insured, such as sport-utility vehicles,
the more accurate the predictions of loss will be.
LEHMAN BROTHERS AGGREGATE BOND INDEX
This unmanaged index of U.S. bonds, which
includes reinvestment of any earnings, is widely
used to measure the overall performance of the U.S.
LEVEL TERM POLICY
This is a type of insurance that pays a
level benefit in case of death during the term of
the policy. The premium is also level.
A claim on the assets of a company or
individual to satisfy a debt.
Protection for your negligent acts that
result in bodily injury and/or damage to another's
A creditor's claim against assets to secure
a debt. Liens may also be granted by courts to
An annuity that makes regular (e.g.,
monthly, quarterly, etc.) income payments for the
life of a person (the annuitant). The annuitant
cannot outlive the payments. Upon his/her death,
however, all income payments cease and there are no
A form of property ownership, also known as
a life interest, giving the holder (the life tenant)
an interest in the property to possess, use, and
enjoy the property, or income from the property, for
the duration of their life. Upon the death of the
holder, the remainder interest automatically reverts
to the original owner or passes to a beneficiary
(known as the remainder person).
The number of years a person is expected to
live as determined by actuaries using mortality
(actuarial) tables This information is used to
calculate annuity payments, life insurance premiums,
and annual minimum distributions from IRAs.
LIFE EXPECTANCY TABLES
Mortality tables that are used to calculate
life expectancy figures.
A policy that will pay a specified sum to
beneficiaries upon the death of the insured.
The purchase of life insurance contracts by
a Viatical Settlement Company, for a fraction of the
policy's face amount, from healthy individuals with
a life expectancy of greater than two years These
are also known as Senior Settlements, since the
typical person selling his or her life insurance
policy is at least 65 years old.
Maximum amount a policy will pay either
overall or under a particular coverage.
LIMITED HEALTH INSURANCE
A health insurance contract that provides
limited coverage in special circumstances.
This fund ranking is calculated quarterly
or annually by Lipper Analytical Services of New
York. Each fund is ranked within a universe of funds
similar in investment objective. Lipper Analytical
Services, Inc. is an independent, nationally
recognized organization that reports on mutual fund
total return performance and calculates fund
The ability to buy or sell an asset
quickly, or to convert an asset to cash quickly, and
in large volume without substantially affecting the
price of the asset. The asset is considered
LIVING BENEFITS PROVISION
In the event of a terminal illness where
medical and long term care costs occur, life
insurance benefits that are payable to the insured
prior to death through the use of an accelerated
death benefit rider (ADBR). Accelerated or 'living'
benefits paid will reduce the amount of death
benefits payable to the beneficiary upon the
A revocable or irrevocable trust created
during the life of the grantor that is also known as
an inter vivos trust.
LLOYD'S OF LONDON
A marketplace where underwriting
syndicates, or mini-insurers, gather to sell
insurance policies and reinsurance. Originally,
Lloyd's was a London coffee house in the 1600s
patronized by shipowners who insured each other's
hulls and cargoes.
This is a sales charge added to the price
of a mutual fund share. Mutual funds that don't have
sales charges are called no-load funds.
The amount which can be borrowed at a
specified rate of interest from the issuing company
by the policyholder, using the value of the policy
as collateral. In the event the policyholder dies
with the debt partially or fully unpaid, then the
amount borrowed plus any interest is deducted from
the amount payable.
LONG-TERM CARE INSURANCE
Coverage that, under specified conditions,
provides skilled nursing, intermediate care, or
custodial care for a patient (generally over age 65)
in a nursing facility or his or her residence
following an injury.
Disabilities that last more than two years
are said to be long-term. Disability policies that
pay benefits for long-term disabilities are said to
offer long-term coverage.
LONG-TERM DISABILITY INSURANCE
A disability insurance policy that provides
coverage in the form of monthly income payments for
as long as the insured remains disabled (usually up
to age 65).
Experts generally consider an investment a
"long-term" one if it is held for at least eight
years, or long enough to outlast the longest amount
of time the stock market has stayed in an extended
down cycle in the past.
The maximum length of time, immediately
prior to enrolling in a health plan, that can be
examined for evidence of preexisting conditions. See
also Preexisting Condition.
A reduction in the quality or value of a
property, or a legal liability.
LOSS ADJUSTMENT EXPENSES
The sum insurers pay for investigating and
settling insurance claims, including the cost of
defending a lawsuit in court.
The portion of an insurance rate used to
cover claims and the costs of adjusting claims.
Insurance companies typically determine their rates
by estimating their future loss costs and adding a
provision for expenses, profit, and contingencies.
LOSS FREQUENCY METHOD
Procedure used by insurance companies to
project the number of future losses within a given
time frame. This prediction of future losses is used
as the basis for setting policyholder premiums.
LOSS OF INCOME
A definition of disability based on income
loss, not on loss of occupation. Loss-of-income
disability definitions are used in residual
disability (income replacement) policies.
Percentage of each premium dollar an
insurer spends on claims.
The company's best estimate of what it will
pay for claims, which is periodically readjusted.
They represent a liability on the insurer's balance
LOSS OF USE
Part of a standard homeowners policy that
covers financial losses (up to a certain limit) you
suffer when your home is damaged and temporarily
unfit to live in. These losses generally refer to
living expenses (e.g., hotel, dining, telephone)
that you must incur in order to maintain your usual
standard of living until you move back into your
When you withdraw all your money during one
tax year from a retirement plan, such as a 401(k) or
403(b) retirement account, you get a lump-sum
distribution. This type of withdrawal does not apply
to some other retirement plans, such as 457 plans.
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- MAJOR MEDICAL PLAN
A kind of health plan that reimburses you
or your health care provider on the basis of
services rendered. Major medical plans generally do
not restrict you to a limited network of providers
for covered care. However, major medical plans often
impose other restrictions on covered services. For
example, plans can require prior authorization of
hospital care or other expensive services.
Professional liability coverage for
physicians, lawyers, and other specialists against
suits alleging negligence or errors and omissions
that have harmed clients.
A kind of health insurance plan. Like an
HMO, managed care plans can limit coverage to health
care provided by doctors and hospitals that work for
or contract with them - also called "network
providers." Often managed care plans will require
you to get permission (a "referral") from your
family doctor before you get care from a specialist
in their network. Some managed care plans will
reduce coverage for your care if you go to a
non-network provider or if you get specialist care
without a referral. See also HMO.
A mutual fund pays this fee to its
investment manager or advisor for overseeing the
fund's investments. A management fee is usually
between one-half and one percent of the fund's share
price, or net asset value.
A book published by an insurance or bonding
company or a rating association or bureau that gives
rates, classifications, and underwriting rules.
Coverage for goods in transit, and for the
commercial vehicles that transport them, on water
and over land. The term may apply to inland marine
but more generally applies to ocean marine
insurance. Covers damage or destruction of a ship's
hull and cargo and perils include collision,
sinking, capsizing, being stranded, fire, piracy,
and jettisoning cargo to save other property. Wear
and tear, dampness, mold, and war are not included.
(See Inland marine and Ocean marine)
If a child catches the flu, there's a good
chance the rest of the family will, too. Market risk
works the same way for stocks and bonds. If
investors are pessimistic, the sentiment may spread,
thereby tending to cause prices of all stocks to
drop, regardless of how well any one company is
doing. You cannot eliminate market risk, but you can
take steps to reduce your exposure to it, such as
diversifying your investments among many different
securities or investing in mutual funds, which offer
Securities that are easily sold or that can
be readily converted into cash such as government
securities, banker's acceptances, and commercial
The policyholder / applicant makes a false
statement of any material (important) fact on
Federal law signed in 1945 in which
Congress declared that states would continue to
regulate the insurance business. Grants insurers a
limited exemption from federal antitrust
This is the length of time (term) before a
debt, a bond or policy is due to be paid in full.
A federal/state public assistance program
created in 1965 and administered by the states for
people whose income and resources are insufficient
to pay for health care.
MEDICAL PAYMENTS INSURANCE
A coverage in which the insurer agrees to
reimburse the insured and others up to a certain
limit for medical or funeral expenses as a result of
bodily injury or death by accident. Payments are
without regard to fault.
MEDICAL UTILIZATION REVIEW
The practice used by insurance companies to
review claims for medical treatment.
Federal program for people 65 or older that
pays part of the costs associated with
hospitalization, surgery, doctors' bills, home
health care, and skilled-nursing care.
Policies that supplement federal insurance
benefits particularly for those covered under
An incorrect estimate of the insurance
MODIFIED ENDOWMENT CONTRACT (MEC)
A special class of life insurance. Funds
withdrawn from a MEC policy in the form of policy
loans, partial surrenders, assignments, and pledges
are treated as gross income to the recipient and
therefore subject to taxation.
MONEY MARKET FUNDS
These mutual funds invest in short-term
securities but are not insured or guaranteed by the
government. Because the price of each share tends to
stay at $1, investors often use them to temporarily
hold money to be invested later. The funds try to
maintain a $1 share price, but there is no assurance
that they will.
MORTALITY (ACTUARIAL) TABLE
A statistical table showing the rate of
death at each age in terms of the number of deaths
per thousand, indicating the probability of a
certain number of people from a group dying in a
given year. Insurance companies and the IRS use
mortality (actuarial) tables to establish premiums
for different age groups, to base life estates, and
The cost of the insurance protection based
on a statistical projection of future deaths.
MULTIPLE PERIL POLICY
A package policy, such as a homeowners or
auto insurance policy, that provides coverage
against several different perils. It also refers to
the combination of property and liability coverage
in one policy. In the early days of insurance,
coverages for property damage and liability were
MUNICIPAL BOND INSURANCE
Coverage that guarantees bondholders timely
payment of interest and principal even if the issuer
of the bonds defaults. Offered by insurance
companies with high credit ratings, the coverage
raises the credit rating of a municipality offering
the bond to that of the insurance company. It allows
a municipality to raise money at lower interest
rates. A form of financial guarantee insurance.
MUNICIPAL LIABILITY INSURANCE
Liability insurance for municipalities.
Corporation or trust, managed by an
investment adviser, that raises money from
shareholders and invests it in securities, such as
stocks, bonds, options, commodities and/or money
market securities. Registered with the US Securities
and Exchange Commission under the Investment Company
Act, mutual funds offer investors the advantages of
diversification and professional management for
which they charge a management fee.
MUTUAL HOLDING COMPANY
An organizational structure that provides
mutual companies with the organizational and capital
raising advantages of stock insurers, while
retaining the policyholder ownership of the mutual.
MUTUAL INSURANCE COMPANY
A company owned by its policyholders that
returns part of its profits to the policyholders as
dividends. The insurer uses the rest as a surplus
cushion in case of large and unexpected losses.
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- NAMED PERIL
Peril specifically mentioned as covered in
an insurance policy.
NATIONAL FLOOD INSURANCE PROGRAM
Federal government-sponsored program under
which flood insurance is sold to homeowners and
NET ASSET VALUE
Also known as NAV, this is the share price
(or dollar value) of one share of a mutual fund. NAV
is calculated at the end of every business day. It
is figured by adding up the value of all the
securities and cash in the mutual fund's portfolio
(its assets), subtracting the fund's liabilities,
and dividing that number by the number of shares
that the fund has issued. It does not include a
sales charge. The NAV increases (or decreases) when
the value of the mutual fund's holdings increases
A person's net worth is equal to the total
value of all possessions, such as a house, stocks,
bonds, and other securities, minus all outstanding
debts, such as mortgage and revolving credit lines.
Auto insurance coverage that pays for each
driver's own injuries, regardless of who caused the
accident. No-fault varies from state to state. It
also refers to an auto liability insurance system
that restricts lawsuits to serious cases. Such
policies are designed to promote faster
reimbursement and to reduce litigation.
A type of accident coverage in homeowners
A mutual fund that does not charge a sales
fee for mutual fund transactions, such as buying and
selling shares, is called a "no-load" fund.
NONCANCELLABLE GUARANTEED RENEWABLE
An insurance policy that is not subject to
alteration, termination, or increase in premium upon
NOTICE OF LOSS
A written notice required by insurance
companies immediately after an accident or other
loss. Part of the standard provisions defining a
policyholder's responsibilities after a loss.
Covers operators of nuclear reactors and
other facilities for liability and property damage
in the case of a nuclear accident and involves both
private insurers and the federal government.
NURSING HOME INSURANCE
A form of long-term care policy that covers
a policyholder's stay in a nursing facility.
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- OCCUPATIONAL DISEASE
Abnormal condition or illness caused by
factors associated with the workplace. Like
occupational injuries, this is covered by workers
Condition surrounding a work environment
that increases the probability of death, illness, or
disability to a worker. This type of hazard is
considered when evaluating an application for
Insurance that pays claims arising out of
incidents that occur during the policy term, even if
they are filed many years later.
OCEAN MARINE INSURANCE
Coverage of all types of vessels and
watercraft, for property damage to the vessel and
cargo, including such risks as piracy and the
jettisoning of cargo to save the property of others.
Coverage for marine-related liabilities has been
expanded to include transit by rail, truck, etc.
OPEN COMPETITION STATES
States where insurance companies can set
new rates without prior approval, although the
state's commissioner can disallow them if they are
not reasonable and adequate or are discriminatory.
OPEN ENROLLMENT PERIOD
A period of time, often once or twice a
year, during which individuals are permitted to
enroll in group insurance plans.
OPEN PERIL COVERAGE
Insurance coverage for all risks other than
those that the policy specifically excludes.
ORDINANCE OR LAW COVERAGE
Endorsement to a property policy, including
homeowners, that pays for the extra expense of
rebuilding to comply with ordinances or laws that
did not exist when the building was originally
ORDINARY LIFE INSURANCE
A life insurance policy that remains in
force for the policyholder's lifetime.
ORIGINAL EQUIPMENT MANUFACTURER PARTS /
Sheet metal auto parts made by the
manufacturer of the vehicle.
A term for a disability policy that
provides benefits when the insured is unable to
perform the usual and customary duties of one's own
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- PACKAGE POLICY
A single insurance policy that combines
several coverages previously sold separately.
Examples include homeowners insurance and commercial
multiple peril insurance.
PAID UP ADDITIONS
An amount of paid up insuranced purchase
with a policy dividend and added to the face amount
of the policy.
Inability of the insured to perform one or
more of the important daily duties of his or her
regular occupation. The income payment to the
insured is reduced from that of total disability.
An insured individual or a beneficiary who
receives a loss or benefit payment from an insurer.
The cause of a possible loss. For example,
fire, theft, hail, windstorm, flood, or theft.
Also known as defined benefit retirement
plans, these provide a specified amount of money
after you retire following a set number of years of
service (in other words, the benefit is "defined" in
advance). Once you retire, the amount you receive is
fixed and usually does not increase with inflation.
In the insurance context, permanent life
insurance is ordinary life insurance such as whole
life--as opposed to term life insurance which
expires unless renewed at the end of each term.
PERSONAL LIABILITY INSURANCE
Part of a standard homeowners policy that
covers financial losses you suffer when you
accidentally cause bodily injuries to others or
damage to their property.
Property/casualty insurance products that
are designed for and bought by individuals,
including homeowners and automobile policies.
For homeowners insurance purposes, this
term generally includes all the contents of your
household (e.g., furniture, jewelry, knickknacks,
etc.). Coverage for personal property is
automatically set at 50 percent of your coverage
limit for your house, unless you choose to raise
your coverage. This coverage is generally subject to
Health insurance policy that allows the
employee to choose between in-network and
out-of-network care each time medical treatment is
To cover administrative costs, lenders
often require you to pay mortgage origination fees,
called "points." One point equals one percent of
your mortgage amount. You may have to pay as much as
three points. You may also choose to pay more than
the minimum; the more points you pay, the lower your
The written contract of insurance.
The maximum amount a policy will pay,
either overall or under a particular coverage.
The amount that the owner of a life
insurance policy can borrow, at an interest rate set
by the company, from the insurer up to the cash
surrender value. If interest is not paid when due it
is deducted from any remaining cash value. At the
death of the policyholder any outstanding policy
loans and interest due are subtracted from the death
Time period during which an insurance
policy is in force.
POWER OF ATTORNEY FOR HEALTH CARE
A durable power of attorney for health
care. Allows a representative to make medical
decisions only for an individual who is seriously
ill or incapacitated. Also called a health care
POWER OF ATTORNEY
A written document that authorizes an
individual to perform certain acts on behalf of the
person signing the document. The document, which
must be witnessed by a notary public or some other
public officer, may bestow either full power of
attorney or limited power of attorney and it becomes
void upon the death of the signer.
Any condition (either physical or mental)
for which medical advice, diagnosis, care, or
treatment was recommended or received within the
6-month period immediately preceding enrollment in a
group health plan. Pregnancy cannot be counted as a
preexisting condition. Genetic information about
your likelihood of developing a disease or
condition, without a diagnosis of that disease or
condition cannot be considered a preexisting
condition. Newborns, newly adopted children, and
children placed for adoption covered within 30 days
cannot be subject to preexisting condition
PREEXISTING CONDITION EXCLUSION PERIOD
The time during which a health plan will
not pay for covered care relating to a preexisting
condition. See also Preexisting Condition.
PREFERRED PROVIDER ORGANIZATION
Network of medical providers which charge
on a fee-for-service basis, but are paid on a
negotiated, discounted fee schedule.
An insured or applicant for insurance who
has a lower expectation of incurring a loss than the
standard applicant and can obtain favorable
When you own this stock, you get
preferential treatment. When a company distributes
its profits, you get paid a fixed dividend even if
common stockholders don't. Also, if the company goes
bankrupt, you have a better chance of getting your
money back before common stockholders do. However,
your dividend payments do not go up if the company
does well, and usually you cannot vote on company
policy. And, just as with common stock, the value of
your stock can go up or down.
A bond premium is the amount by which a
bond sells above its par (face) value. For
insurance, the premium is the amount you pay for
your insurance policy.
A policyholder contracts with a lender to
pay the insurance premium on his/her behalf. The
policyholder agrees to repay the lender for the cost
of the premium, plus interest and fees.
A state tax on premiums paid by its
residents and businesses and collected by insurers.
The total premiums on all policies written
by an insurer during a specified period of time,
regardless of what portions have been earned. Net
premiums written are premiums written after
Value today of a future payment, or stream
of payments, discounted at some appropriate compound
interest or discount rate.
The assumption of total disability when an
insured loses sight, hearing, speech, or a limb.
PRIMARY INSURANCE AMOUNT (PIA)
The monthly benefit payable to a retired or
disabled worker under Social Security that is
calculated using the average monthly earnings of the
covered person while working.
Price stability protects the original
dollars you put into an investment. A mutual fund's
price stability is seen in changes in its net asset
value over time.
The amount borrowed or unpaid on a loan.
The applicant for or subject of insurance.
The one from whom an agent derives his or her
The home that a taxpayer lives in most of
the time during the taxable year.
PRIOR APPROVAL STATES
States where insurance companies must file
proposed rate changes with state regulators, and
gain approval before they can go into effect.
A section of tort law that determines who
may sue and who may be sued for damages when a
defective product injures someone. No uniform
federal laws guide manufacturer's liability, but
under strict liability, the injured party can hold
the manufacturer responsible for damages without the
need to prove negligence or fault.
PRODUCT LIABILITY INSURANCE
Protects manufacturers' and distributors'
exposure to lawsuits by people who have sustained
bodily injury or property damage through the use of
PROFESSIONAL LIABILITY INSURANCE
Covers professionals for negligence and
errors or omissions that injure their clients.
PROFIT SHARING PLAN
With this type of defined contribution
retirement plan, your employer allows you to share
in the organization's profits. Profit sharing plans
generally allocate an amount of money annually to an
eligible employee's account, based on the employer's
profits. Contributions are made to the profit
sharing accounts of each eligible employee, and
those contributions may then be invested in options
similar to the organization's other defined
PROPERTY DAMAGE LIABILITY COVERAGE
Part of a standard auto insurance policy
that covers you (up to the policy limit) for losses
that result when you damage or destroy someone
else's personal property. This is required coverage
in most states.
Property Insurance indemnifies an insured
whose property is stolen, damaged, or destroyed by a
covered peril. The term property insurance includes
direct or indirect property losses covered in
several lines of insurance.
A November 1988 California ballot
initiative that called for a statewide auto
insurance rate rollback and for rates to be based
more on driving records and less on geographical
location. The initiative changed many aspects of the
state's insurance system and was the subject of
lawsuits for more than a decade.
When the policy is terminated midterm by
the insurance company, the earned premium is
calculated only for the period coverage was
provided. For example: an annual policy with premium
of $1,000 is cancelled after 40 days of coverage at
the company's election. The earned premium would be
calculated as follows: 40/365 days X $1,000=.110 X
This printed brochure provides a thorough
description of a mutual fund. It explains the fund's
objective, how it invests its money, and describes
fees and expenses associated with the fund.
Words, sentences, and paragraphs in an
insurance contract that specify the terms and
limitations of the policy as well as the rights and
obligations of the insured and the insurer.
The actual cause of loss under an insurance
The offering to the investment public of
new securities, after registration requirements of
the Securities and Exchange commission (SEC) have
been complied with, at a public offering price
agreed upon by the issuer and the investment
The difference between the face amount of a
life insurance policy and and its cash value.
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QUALIFIED RETIREMENT PLAN
A retirement plan that permits
contributions by both you and your employer and
enables you to defer both contributions and any
earnings from taxes until you withdraw money from
the plan. A 401(a) and 401(k) are examples of
An estimate of the cost of insurance, based
on information supplied to the insurance company by
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Cost per unit of insurance. When used to
calculate a premium, it must be adequate enough to
pay expected losses according to frequency and
severity, reasonable to the point that insurers do
not not earn an excessive profit and not
discriminatory or inequitable. Based on the amount
of coverage needed, an individual will purchase the
appropriate number of units of insurance with the
total cost reflected in a premium payment.
A policy for which the insured pays a
higher-than-standard premium because of a higher
risk due to a physical impairment, past medical
condition, hazardous occupation, or a hazardous
hobby. This type of policy is sometimes called an
The process by which states monitor
insurance companies' rate changes, done either
through prior approval or open competition models.
Six major credit agencies determine
insurers' financial strength and viability to meet
claims obligations. They are A.M. Best Co.; Duff &
Phelps Inc.; Fitch, Inc.; Moody's Investors
Services; Standard & Poor's Corp.; and Weiss
Ratings, Inc. Factors considered include company
earnings, capital adequacy, operating leverage,
liquidity, investment performance, reinsurance
programs, and management ability, integrity and
experience. A high financial rating is not the same
as a high consumer satisfaction rating.
Literally means to draw a red line on a map
around areas to receive special treatment. Refusal
to issue insurance based solely on where applicants
live is illegal in all states. Denial of insurance
must be risk-based.
You pay this when you redeem, or sell, your
shares. Not all funds charge redemption fees.
The restoring of a lapsed policy to full
force and effect. The reinstatement may be effective
after the cancellation date, creating a lapse of
coverage. Some companies require evidence of
insurability and payment of past due premiums plus
Insurance bought by insurers. A reinsurer
assumes part of the risk and part of the premium
originally taken by the insurer, known as the
primary company. Reinsurance effectively increases
an insurer's capital and therefore its capacity to
sell more coverage. The business is global and some
of the largest reinsurers are based abroad.
Reinsurers don't pay policyholder claims. Instead,
they reimburse insurers for claims paid.
A form of insurance that covers a
policyholder's belongings against perils such as
fire, theft, windstorm, hail, explosion, vandalism,
riots, and others. It also provides personal
liability coverage for damage the policyholder or
dependents cause to third parties. It also provides
additional living expenses, known as loss-of-use
coverage, if a policyholder must move while his or
her dwelling is repaired. It also can include
coverage for property improvements. Possessions can
be covered for their replacement cost or the actual
cash value that includes depreciation.
The cost to repair or replace lost or
damaged property with new materials of like kind and
quality, at current prices. Some insurance only pays
the actual cash or market value of the item at the
time of the loss, not what it would cost to repair
or replace it. If you have personal property
replacement cost coverage, your insurance will pay
the full cost to repair an item or buy a new one
once the repairs or purchases have been made.
The full cost to repair or replace the
damaged property with no deduction for depreciation,
subject to policy limits and contract provisions.
Usually known as an endorsement, a rider is
an amendment to the policy used to add or delete
The chance of loss -or- the person or
entity that is insured.
Management of the varied risks to which a
business firm or association might be subject. It
includes analyzing all exposures to gauge the
likelihood of loss and choosing options to minimize
loss. These options typically include reducing and
eliminating the risk with safety measures, buying
insurance, and self-insurance.
RISK RETENTION GROUPS
Insurance companies that band together as
self-insurers and form an organization that is
chartered and licensed as an insurer in at least one
state to handle liability insurance.
The need for insurance companies to be
capitalized according to the inherent riskiness of
the type of insurance they sell. Higher-risk types
of insurance, liability as opposed to property
business, generally necessitate higher levels of
An Individual Retirement Account can hold
money distributed from an employer's qualified or
403(b) retirement plan.
An individual retirement account which
permits account holder's capital to accumulate tax
free under certain conditions. Individuals can
invest up to $2,000 per year, subject to income
limitations. Withdrawals of principal and earnings
are totally tax free after age 59 1/2 as long as the
assets have remained in the IRA for at least five
years after the first contribution. In addition,
there are no minimum distribution requirements.
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Damaged property an insurer takes over
after paying a claim to reduce its loss. Insurers
receive salvage rights over property on which they
have paid claims, such as badly-damaged cars.
Insurers that paid claims on cargoes lost at sea now
have the right to recover sunken treasures. Salvage
charges are the costs associated with recovering
The organized trading of securities
(stocks, bonds, etc.) through various exchanges and
over-the-counter markets where securities are bought
and sold subsequent to their original issuance.
Trading in secondary markets is subject to the rules
and regulations of the SEC.
This is another word for stocks, bonds, and
SECURITIES AND EXCHANGE COMMISSION / SEC
The organization that oversees
publicly-held insurance companies. Those companies
make periodic financial disclosures to the SEC,
including an annual financial statement (or 10K),
and a quarterly financial statement (or 10-Q).
Companies must also disclose any material events and
other information about their stock.
SELF-INSURED GROUP HEALTH PLANS
Plans set up by employers who set aside
funds to pay their employees' health claims. Because
employers often hire insurance companies to run
these plans, they may look to you just like fully
insured plans. Employers must disclose in your
benefits information whether an insurer is
responsible for funding, or for only administering
the plan. If the insurer is only administering the
plan, it is self-insured. Self-insured plans are
regulated by the U.S. Department of Labor, not by
the state of Iowa.
SERIES EE SAVINGS BONDS
The U.S. government issues these bonds in
amounts from $50 to $10,000. The interest is exempt
from state and local taxes, and no federal tax is
due until the bonds are redeemed.
For a mutual fund, the value of one share
is known as its share price, or its net asset value
(NAV), and is calculated daily or even hourly.
That's because the value of a fund's securities
changes in response to the movements of the stock,
bond, and money markets. Multiplying the share
price, or NAV, times the number of shares you have
in the fund gives you the value of your investment.
SHARE PRICE APPRECIATION
When a share increases in value, it
appreciates. For example, a mutual fund share whose
net asset value (NAV) goes from $20 a share to $25 a
share appreciated by $5.
When the policy is terminated prior to the
expiration date at the policyholder's request.
Earned premium charged would be more than the
pro-rata earned premium. Generally, the return
premium would be approximately 90 percent of the
pro-rata return premium. However, the company may
also establish its own short-rate schedule.
SHORT-TERM BOND FUND
This mutual fund invests in bonds that
mature in one to three years. It is sometimes used
as an alternative to a money market fund because it
usually pays a higher rate of interest, although the
risk of loss is greater.
Coverage that lasts less than one year in
SHORT-TERM DISABILITY INSURANCE
A disability insurance policy that pays
benefits only for a limited period of time (e.g., 26
weeks or one year).
The ability to convert an asset into cash
relatively easily. This concept also is simply known
SMALL GROUP HEALTH PLANS
Plans with at least 2 but not more than 50
Insurance companies' ability to pay the
claims of policyholders. Regulations to promote
solvency include minimum capital and surplus
requirements, statutory accounting conventions,
limits to insurance company investment and corporate
activities, financial ratio tests, and financial
SPECIAL ENROLLMENT PERIOD
A time, triggered by certain specific
events, during which you and your dependents must be
permitted to sign up for coverage under a group
health plan. Employers and group health insurers
must make such a period available to employees and
their dependents when their family status changes or
when their health insurance status changes. Special
enrollment periods must last at least 30 days.
Enrollment in a health plan during a special
enrollment period is not considered late enrollment.
See also Late Enrollment.
SPLIT DOLLAR LIFE INSURANCE
Life insurance policy in which premiums,
ownership rights, and death benefit proceeds are
split between an employer and an employee.
SPREAD OF RISK
The selling of insurance in multiple areas
to multiple policyholders to minimize the danger
that all policyholders will have losses at the same
time. Companies are more likely to insure perils
that offer a good spread of risk. Flood insurance is
an example of a poor spread of risk because the
people most likely to buy it are the people close to
rivers and other bodies of water that flood.
STANDARD & POOR'S 500 INDEX (S&P 500)®
The S&P 500, a registered trademark of the
Standard & Poor's Corporation, is a widely
recognized, unmanaged index of common stocks. The
index returns reflect reinvestment of all dividends
paid by stocks included in this index but do not
reflect any brokerage commissions or other fees you
might pay if you actually invested in those stocks.
STATE CONTINUATION COVERAGE
A program similar to COBRA for small
employers. In Iowa, if you are in a fully insured
group health plan sponsored by an employer with 2 to
19 employees, you have the right to continue your
health coverage for up to 9 months when your job
ends. Under state continuation coverage, you will be
required to pay the full premium (including the
share your employer used to pay on your behalf). See
When you own a company's stock, you own
part of the company. How much you own depends on how
many shares of stock you have. Holders of common
stock are the last to be paid any profits from the
company but are likely to profit most from the
company's growth. Owners of preferred stock are paid
a fixed dividend before owners of common stock, but
the amount of the dividend doesn't usually grow if
the company grows.
STOCK MUTUAL FUND
Such a mutual fund invests primarily in
stocks. Sometimes it is called an equity or growth
A short-term option, often lasting only two
to four weeks, granted to existing shareholders of a
corporation the right to subscribe to shares of a
new common stock issue at a designated subscription
price. The subscription price is usually set lower
than the common stock's current market value.
To make shares of its stock more
affordable, a company may decide to issue more stock
but cut the price of each share. Each stockholder
gets enough additional shares but the dollar amount
of the total investment at the time of the split
does not change.
An option issued along with bonds or
preferred stock that entitles the holder to buy a
stated number of shares of the company's common
stock at a specified price. The option price is
usually set higher than the stock's market price at
the time the fixed income security is issued.
Warrants are generally used as sweeteners to enhance
the marketability of the accompanying fixed income
securities. Most warrants are detachable and can be
traded on the major stock exchanges.
Debts that are repayable only after other
debts with a higher claim have been satisfied. Some
subordinated debt may have less claim on assets than
other subordinated debt.
The legal process by which an insurance
company, after paying for a loss, seeks to recover
the amount of the loss from another party who is
SUBSTANTIALLY EQUAL PAYMENTS
A method of distributing funds from a
traditional IRA or retirement plan where the owner
or participant had not yet begun taking required
minimum distributions. This method allows you to
withdraw approximately equal amounts each year based
on your life expectancy.
Limitation in life insurance policies to
the effect that no death benefits will be paid if
the insured commits suicide during a specified
initial period, usually the first two years that the
policy is in force.
An extra charge applied by the insurer. For
automobile insurance, a surcharge is usually for
accidents or moving violations.
A guarantee to one party that the
contractor will perform specified acts, usually
within a stated period of time. Contractors are
often required to purchase surety bonds if they are
working on public projects. The surety company
becomes responsible if the contractor defaults.
Property/casualty coverage that isn't
available from insurers licensed by the state,
called admitted companies, and must be purchased
from a non-admitted carrier. Examples include risks
of an unusual nature that require greater
flexibility in policy terms and conditions than
exist in standard forms or where the highest rates
allowed by state regulators are considered
inadequate by admitted companies. Laws governing
surplus lines vary by state.
To terminate or cancel a life insurance
policy before the maturity date. In the case of a
cash value policy, the policyholder may exercise one
of the nonforfeiture options at the time of
Many annuities impose a surrender charge to
discourage withdrawals in the early years of the
contract. The charges typically decline year by year
-- perhaps from 5% in year one of the plan to 4% in
year two and so on -- until they eventually no
SURRENDER TO BASIS
With cash value life insurance policies
that allow policy withdrawals, this is a strategy
where the policyholder withdraws only up to his or
her basis (i.e., the amount he or she has paid into
the policy) so as to avoid having the withdrawal
taxed. Investment earnings, which would be taxable
upon withdrawal, are left in the policy.
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- TAX-DEFERRED RETIREMENT PLANS
This is a retirement plan that allows you
to not pay current income taxes on pre-tax money
invested or any earnings in an account until you
withdraw it from the plan. Such a plan allows you to
set aside part of your pay for retirement.
Section 1035 of the Internal Revenue Code
provides that certain exchanges of life insurance
contracts, annuity contracts, and modified endowment
contracts will generally not trigger a taxable gain
as long as the owner is the same person under both
Protection against premature death that
comes in a form of life insurance. It pays a benefit
only when an insured dies within a specified period,
and a designated beneficiary receives the death
benefit. If the insured lives beyond the specified
period, the beneficiary receives nothing.
A method of classifying risks by geographic
location to set a fair price for coverage. The
location of the insured may have a considerable
impact on the cost of losses. The chance of an
accident or theft is much higher in an urban area
than in a rural one, for example.
Outside group that performs clerical
functions for an insurance company.
Liability coverage purchased by the
policyholder as a protection against possible
lawsuits filed by a third party. The insured and the
insurer are the first and second parties to the
Insurance that indemnifies the owner of
real estate in the event that his or her clear
ownership of property is challenged by the discovery
of faults in the title.
A wrongful act, resulting in injury or
damage on which a civil action may be based.
The body of law governing negligence,
intentional interference, and other wrongful acts
for which civil action can be brought, except for
breach of contract, which is covered by contract
Refers to legislation designed to reduce
liability costs through limits on various kinds of
damages and through modification of liability rules.
The condition of an automobile or other
property when damage is so extensive that repair
costs would exceed the value of the vehicle or
TRANSFER FOR VALUE RULE
The transfer of some or all of the
ownership rights in a life insurance policy to
another party in exchange for cash or other forms of
valuable consideration (as defined by the IRS). In
general, if you effect a transfer for value with a
life insurance policy, the death benefit proceeds
payable under the policy may lose their income
Also known as "T-Bills", these investments
mature in a year or less and are issued by the U.S.
government. They require at least a $10,000
investment. They are sold at less than face value;
and the interest is paid when the T-Bills mature or
reach face value.
Treasury bonds are long-term debt
instruments with maturities of 10 years or longer.
They are issued in minimum denominations of $1,000.
Though repayment of the initial investment in a
"T-bond" is guaranteed when the bond matures, its
value can go up and down in the meantime, like that
of Treasury notes and other bonds. That means that
when you sell it before maturity, it could be worth
more or less than you paid for it.
These are intermediate government
securities with maturities of one to 10 years.
Denominations range from $1,000 to $1 million or
more. Notes are sold by cash subscription, in
exchange for outstanding or maturing government bond
issues, or at auction.
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Coverage for losses above the limit of an
underlying policy. It applies to losses over a large
dollar amount, but terms of coverage are sometimes
broader than those of underlying policies.
Unscrupulous or unreasonable; in legal
terms, an unconscionable contract is one found to
lack meaning because the contract is one-sided
and/or unfairly executed.
The process of selecting applicants for
insurance and classifying them according to their
degrees of insurability so that the appropriate
premium rates may be charged. The process includes
rejection of unacceptable risks.
The insurer's profit on the insurance sale
after all expenses and losses have been paid. When
premiums aren't sufficient to cover claims and
expenses, the result is an underwriting loss.
Underwriting losses are typically offset by
The portion of a premium already received
by the insurer under which protection has not yet
been provided. The entire premium is not earned
until the policy period expires, even though
premiums are typically paid in advance.
UNINSURABLE RISK Risks for which it is
difficult for someone to get insurance.
The result of the policyholder's failure to
buy sufficient insurance. An underinsured
policyholder may only receive part of the cost of
replacing or repairing damaged items covered in the
UNINSURED MOTORISTS COVERAGE
Portion of an auto insurance policy that
protects a policyholder from uninsured and
A policy whose premium is the same for both
men and women, mandated by certain states and
optional in others.
UNIVERSAL LIFE INSURANCE
A flexible premium policy that combines
protection against premature death with a savings
account that typically earns a money market rate of
interest. Premiums can be changed during the life of
the policy within limits and the policy will lapse
if there isn't enough money to cover mortality and
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- VALUED POLICY
A policy under which the insurer pays a
specified amount of money to or on behalf of the
insured upon the occurrence of a defined loss. The
money amount is not related to the extent of the
loss. Life insurance policies are an example.
The malicious and often random destruction
or spoilage of another person's property.
A type of annuity that has a variety of
investment options available for your selection. The
rate of return you receive will depend on the
performance of the investments you choose.
While a fixed annuity offers a return
guaranteed by the issuing insurance company, a
variable annuity offers a chance to increase the
return through a portfolio of underlying
investments, typically stocks, bonds, and money
markets. However, the contract holder also could
face greater risk along with the greater potential
gain. The contract holder hopes the underlying
portfolios increase in value over time, but the
eventual payouts could vary substantially as the
value of the annuity units fluctuates with the value
of the underlying portfolios. You may have a gain or
loss when you withdraw money.
VARIABLE LIFE INSURANCE
A policy that combines protection against
premature death with a savings account that can be
invested in stocks, bonds, and money market mutual
funds at the policyholder's discretion.
VARIABLE UNIVERSAL LIFE INSURANCE
A form of permanent cash value life
insurance that combines features of both variable
life and universal life. As with universal life, you
have flexibility with both premium payments and
death benefit coverage. As with variable life, the
rate of return on the cash value portion of the
policy is not fixed, but rather depends on the
performance of the underlying investments selected.
Depending on your plan's provisions, after
you have been with your employer for a certain
amount of time, you can take ownership of
employer-contributed money in a pension fund or
profit sharing plan when you leave the company. You
are "vested" in that fund or plan.
VIATICAL SETTLEMENT AGENT
A viatical settlement agent represents the
viatical settlement provider and sells the viatical
settlement investment contract to a viatical
settlement investor. A viatical settlement agent
must be registered with the Iowa Insurance Division.
VIATICAL SETTLEMENT BROKER
A person that negotiates viatical
settlement contracts between a life insurance
policyholder and a viatical settlement provider for
a commission. A viatical settlement broker must be
licensed with the Iowa Insurance Division.
VIATICAL SETTLEMENT COMPANIES
Firms that buy life insurance policies at a
discount from policyholders who are often terminally
ill. The companies provide early payouts to the
policyholder, assume the premium payments, and
collect the face value of the policy upon the
VIATICAL SETTLEMENT CONTRACT
A viatical contract is made when an
investor purchases the right to receive the benefits
of a life insurance policy. This is often done when
the policy owner is terminally ill and wants to
receive the cash payout. (How the viatical
settlement contract works: A viatical settlement
broker arranges the sale of a policyholder's life
insurance policy to a viatical settlement provider.
A viatical settlement provider then may resell all
or a portion of its interest in the life insurance
policy to an investor through a viatical settlement
VIATICAL SETTLEMENT INVESTMENT CONTRACT
A viatical settlement investment contract
is made when an investor purchases the right to
receive the benefits of a life insurance policy from
a viatical settlement provider. (How the viatical
settlement investment contract works: A viatical
settlement provider sells an interest in a
viaticated life insurance policy to an investor at a
discount. The investor may be required to make the
remaining premium payments and collects all or a
portion of the face value of the policy upon the
VIATICAL SETTLEMENT INVESTOR
A person who buys an interest in all or a
portion of the death benefits of a life insurance
policy through a viatical settlement investment
VIATICAL SETTLEMENT PROVIDER
A company that buys life insurance policies
at a discount from persons that no longer need the
life insurance policies or that have an immediate
need for cash due to a terminal illness. The
provider may then resell all or a portion of its
interests to an investor through a viatical
settlement investment contract. Companies typically
assume the premium payments, collect the face value
of the policy upon the policyholder's death and pay
settlement benefits to the viatical settlement
investor. A viatical settlement provider must be
licensed with the Iowa Insurance Division.
VISION CARE INSURANCE
Insurance that provides coverage for
expenses relating to routine eye care (e.g., eye
examinations, glasses, contact lenses).
A policy contract that for some reason
specified in the policy becomes free of all legal
effect. One example under which a policy could be
voided is when information a policyholder provided
is proven untrue.
Most homeowners policies cover damage from
a volcanic eruption.
In investing, volatility refers to the ups
and downs of the price of an investment. The greater
the ups and downs, the more volatile the investment.
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- WAITING PERIOD
The time you may be required to work for an
employer before you are eligible for health
benefits. Not all employers require waiting periods.
Waiting periods do not count as gaps in health
insurance for purposes of determining whether
coverage is continuous. If your employer requires a
waiting period, your preexisting condition exclusion
period begins on the first day of the waiting
period. See also Preexisting Condition Exclusion
The surrender of a right or privilege which
is known to exist.
WAIVER OF PREMIUM
A clause or rider on a life insurance,
disability, or long-term care insurance policy that
cancels the premium payments the insured must make
if he or she is disabled longer than a certain time
period (usually six months) and as long as he or she
continues to be disabled. The policy remains in
force even though the insured is no longer paying
Special coverage on cargo in overseas ships
against the risk of being confiscated by a
government in wartime. It is excluded from standard
ocean marine insurance and can be purchased
separately. It often excludes cargo awaiting
shipment on a wharf or on ships after 15 days of
arrival in port.
A type of business interruption insurance
that compensates for financial losses caused by
adverse weather conditions.
The insurance policy offers protection in
case the insured dies, but it also builds up cash
value over time. Under normal circumstances, the
policy remains active for the lifetime of the
insured or for until a specified age. The insured
usually pays a level annual premium, and the
earnings on the cash value in the policy accumulate
tax-deferred. You may borrow against the premium.
Insurance that pays for medical care and
physical rehabilitation of injured workers and helps
to replace lost wages while they are unable to work.
Broad policy coordinated to cover liability
exposures for a large group of businesses that have
something in common. Might be used to insure all
businesses working on a large construction project,
such as an apartment complex.
To insure, underwrite, or accept an
application for insurance.
These are bonds that are sold at less than
their face value and pay no interest until they are
redeemed at face value on a specific date. They are
often used to plan for a specific investment goal.
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