Term
|
Definition
| • Statisticians who specialize in estimating the probability of death based on personal characteristics, such as your age and your general health, and lifestyle specifics. |
|
|
Term
|
Definition
• Individuals share the financial risks, they face.
• Diversification
• Premium paid into the pool – depends on when you will die. |
|
|
Term
|
Definition
| 2 major types of life insurance |
|
|
Term
|
Definition
pure life insurance, specific amount paid if the policyholder dies while covered by the policy.
o Set premium paid that’s based on the probability of when you’ll die.
o Covers a very specific period of time.
o Has no face value
o Sole benefit is to provide death benefits to the policyholder’s beneficiaries.
o Primary benefit: affordability
o Disadvantage: cost rises each time your policy is renewed. |
|
|
Term
|
Definition
| • Term insurance that is renewed for an agreed-on period or up to a specified age (usually 65 or 70), regardless of the insured’s health. |
|
|
Term
|
Definition
| • Premiums remain constant, but the face value declines each year. |
|
|
Term
|
Definition
• Provided usually without a medical exam.
• Group of people associated for some purpose, other than to buy life insurance. |
|
|
Term
| o Credit or Mortgage Group Life Insurance |
|
Definition
| • Group life insurance that’s provided by a lender for its debtors. |
|
|
Term
| o Convertible Term Life Insurance: |
|
Definition
| • Term life insurance that can be converted into cash-value life insurance at the insured’s discretion, regardless of his or her medical condition and without a medical exam. |
|
|
Term
|
Definition
| two components; a life insurance and a savings plan. Permanent Insurance. |
|
|
Term
whole life
universal life
variable life |
|
Definition
| 3 types of cash value insurance |
|
|
Term
|
Definition
• Premiums are fixed and paid until face value is paid up.
• Benefit provided when the insured dies, turns 100, or reaches maximum stated age.
• Cash Value – what is left after the premium is paid and goes into a savings account. Build-up continues over the initial years of the policy, eventually resulting in a large cash value.
• Gain access before policy expires through nonforfeiture right, the right of a policy holder to choose to receive the policy’s cash value; in exchange, the policyholder gives up his or her right to a death benefit.
o Or use the cash value to purchase insurance that is paid-up or extended term insurance.
• Premium payment schedules can be; continuous-, level-, or straight-premium whole life. |
|
|
Term
|
Definition
• A type of cash-value insurance that’s much more flexible than whole life. Allows the policyholder to vary the premium payments and the level of protection.
• Funds broken down in three parts; mortality charge or term insurance, cash value or savings, and the admin. expenses.
• Value is the flexibility. |
|
|
Term
|
Definition
• Insurance that provides permanent insurance coverages as whole life does; however, the policyholder, rather than the insurance company, takes on the investment risk.
• 2 Forms; Straight Variable Life (fixed premiums) and Variable Universal life (flexible premiums).
• Returns are on a tax-deferred basis. |
|
|
Term
|
Definition
– special provisions that may be added to a policy that either provides extra benefits to the beneficiary or limits the company’s liability under certain conditions.
• Waiver of Premium for Disability Rider, Accidental Death Benefit Rider or Multiple Indemnity, Guaranteed Insurability Rider, Cost-of-Living(COLA) Rider, Living Benefits Rider. |
|
|
Term
| o Coinsurance or Percentage Participation |
|
Definition
| insurance provision that defines the percentage of each claim that the insurance company will pay. |
|
|
Term
| o Co-payment or Deductible |
|
Definition
| the amount of expenses that the insured must pay before the insurance company will pay any insurance benefits. |
|
|
Term
|
Definition
| provides reimbursement for all or part of your expenditures. Gives a good deal of freedom to choose your doctor and hospital. |
|
|
Term
|
Definition
| Entitles you to health care provided by a specified group of participating doctors, hospitals, clinics. Offered by HMO or variations of them. |
|
|
Term
| o Managed Health-Care Plans |
|
Definition
| pay for and provide health-care services. Can provide you with your own primary care physician for a small cost. Two types: HMO (ex. Blue Cross, Blue Shield) and PPO. |
|
|
Term
|
Definition
prepaid insurance plan that entitles members to the services of participating doctors, hospitals, and clinics. Members pay a flat fee.
• 3 Types; Individual practice |
|
|
Term
|
Definition
| insurance plan under which an employer or insurer negotiates with a group of doctors and hospitals to provide health care for its employees or members at its reduced rates. |
|
|
Term
| o Flexible Spending Accounts (Tax, Limits, etc): |
|
Definition
• Savings plan that will allow each employee to have pretax earnings deposited into a specially designated account.
• The employee will benefit from taxs that will allow for a limit of deposits of $2.500 each year and $500 to roll from year to year. |
|
|
Term
| o Disability Insurance Benefits |
|
Definition
• Provides payment to the insured in the event that income is interrupted by illness, sickness or accident.
• STD – provides benefits on disabilities lasting from 6 months to 2 years, after a short wait of 8 to 30 days.
• LTD – provides benefits until you reach the age specified in the contract or for your lifetime. Only a LTD policy makes sense because it protects against financial catastrophe.
• Waiting or elimination periods- period after the disability during which no benefits occurs. Longer the wait period the cheaper the policy.
• Waiver of Premium – waives premium payments if you become disabled.
• Noncancellable – prevents policy from being canceled, if for some reason your risk increases, guarantees the policy is renewable. Protects against rate increases.
• Rehabilitation Coverage – provision that provides for vocational rehabilitation, allowing the policyholder to be retrained for employment. |
|
|
Term
|
Definition
| named perils (peril must be listed to be covered) |
|
|
Term
|
Definition
| named perils (peril must be listed to be covered) |
|
|
Term
|
Definition
| open perils (covers all perils, except those specifically mentioned) |
|
|
Term
|
Definition
|
|
Term
|
Definition
|
|
Term
|
Definition
|
|
Term
| Property Insurance (loss of your property and possessions due to various perils) and Personal Liability Insurance (financial losses incurred is someone is injured on property or as result of your actions). |
|
Definition
| o All forms are divided into two sections; |
|
|
Term
|
Definition
| Dwelling; house and any structures attached. |
|
|
Term
|
Definition
| Other Structures; structures that are not attached to the house. Can only carry 10 percent of homes coverage. If building is used for business purposes it is not covered. |
|
|
Term
|
Definition
| Personal Property; protects personal property that’s owned or used by the policyholder, regardless of the location of this property. Coverage is equal to 50 percent of the home’s coverage. $200 limit on money, notes, gold and silver. $1,000 limit on stamps, securities, valuable paper, tickets, etc. $2,500 limit on silverware, goldware and pewterware. Pets are excluded. |
|
|
Term
|
Definition
| Loss of Use; if your home cannot be used because of an insured loss. Limited to 20 percent of the amount of insurance on the house. Three benefits are provided; additional living expenses, fair rental value, prohibited use. |
|
|
Term
| o Section 2: Personal Liability Coverage: |
|
Definition
• Protect from catastrophic losses from liability lawsuits.
• Coverage per accident is $100,000.
• Also covers medical expenses, family or animal owned by anyone injured by the policyholder.
• Covers $1,000 for medical expenses to nonfamily members. |
|
|
Term
|
Definition
| written attachment to an insurance policy to add or subtract coverage. |
|
|
Term
| • Personal Articles Floaters |
|
Definition
| all risk” basis, covers losses of any kind of personal property other than specifically included perils, which include war, wear and tear, mechanical breakdown, vermin, and nuclear disaster. |
|
|
Term
|
Definition
| automatically updates the level of property coverage based on an index of replacement costs that continually update the cost of building a home. |
|
|
Term
|
Definition
requires that if you do not pay a portion of your own losses if you do not purchase what they consider an adequate level of insurance.
• Many companies follow the 80 percent rule and require you to purchase insurance to cover at least 80 percent of your home’s full replacement cost. (dwelling only and not personal property). |
|
|
Term
| • Location, type of structure, level of coverage and policy type. |
|
Definition
| o Determinants of the cost of homeowners: |
|
|
Term
| o Discounts/Savings Methods: |
|
Definition
• High deductible discounts – the amount you are responsible for paying before insurance coverage kicks in.
• Security system/smoke detector discounts
• Multiple policy discounts – combine policies such as homeowner’s and automobile.
• Pay premiums annually
• Consider a Direct Writer – distributes its products to customers without the use of agents.
• Shop Around and double-check policy. |
|
|
Term
| • Personal Automobile Policy (PAP) |
|
Definition
| standardized insurance policy for an individual or family. |
|
|
Term
|
Definition
| protects policyholder and includes payment for any judgment awarded, court costs and legal defense. |
|
|
Term
| o Combined single-limit coverage |
|
Definition
| combines both bodily injury and property damage liability without a separate limit for each person. |
|
|
Term
|
Definition
| separate coverage limits for bodily injury and property damage, split-coverage limits per person, or both. |
|
|
Term
| • Part B (Medical Expense) AI |
|
Definition
| medical bills, funeral expense, with limits per persono Pays all reasonable medical and funeral expenses incurred within 3 years of an accident by the policyholder. |
|
|
Term
| • Part C (Uninsured motorist protection) AI |
|
Definition
Required and protects you by covering bodily injury (and property damage in a few states) caused by drivers without liability insurance.
o Underinsured motorists coverage can also be added to provide protection against negligent drivers who don’t carry adequate liability insurance. |
|
|
Term
| • Part D (Damage to your automobile coverage) AI |
|
Definition
collision or comprehensive and provides coverage for theft of your auto and for damage from almost any peril other than collision.
o Covers damage from fire, theft or larceny, windstorm, falling objects, earthquakes or similar losses. Covers loses, regardless of who caused the accident. |
|
|
Term
| o Unsystematic risk (firm specific risk or diversifiable) |
|
Definition
| – eliminated through investor diversification. Factors that are unique to a specific firm. |
|
|
Term
| o Systematic risk (market-related or non- diversifiable risk) |
|
Definition
| portion of a security’s risk or variability that can’t be eliminated through investor diversification. Factors that affect all securities. |
|
|
Term
|
Definition
| risk of fluctuations in security prices due to changes in the market interest rate. |
|
|
Term
|
Definition
| reflects the likelihood that rising prices will eat away the purchasing power of your money and that changes in the anticipated level of inflation will result in interest rate changes, will in turn cause security price fluctuations. |
|
|
Term
|
Definition
| if a company takes on too much debt. |
|
|
Term
|
Definition
| how good or bad the company’s decisions or poorly the firm’s products are doing in the marketplace. |
|
|
Term
|
Definition
| how money should be divided among stocks, bonds and other investments. |
|
|
Term
• Time horizon – the more time you need the money, the more risk you can afford to take.
• Capacity for risk and financial situation – how much risk can be afforded? Make sure you have sufficient short term and or long term assets to cover needs.
• Risk tolerance - long-term is risk needed. |
|
Definition
| o Value of time and leverage: |
|
|
Term
|
Definition
| all relevant information about the stock is reflected in the stock price. |
|
|
Term
|
Definition
| new stocks and bonds are traded. |
|
|
Term
|
Definition
| previously issued and bought. |
|
|
Term
| o Organized exchanges (ex. NYSE, ASE, etc.) |
|
Definition
| occupies a physical location where trading occurs such as the NYSE. Actual building. |
|
|
Term
| o Over the counter trading (ex. NASDAQ, etc.) |
|
Definition
| over the telephone or via computer trading. |
|
|
Term
|
Definition
| – legal document that describes a securities issue and is made available to potential investors. |
|
|
Term
|
Definition
| to short sell, the seller may be required to put up collateral during the period of the short sale. |
|
|
Term
|
Definition
| the more the stock price decreases the more you make. |
|
|
Term
| o Stop or Stop-loss order |
|
Definition
| sell security if the price drops below a specified level or to buy if the price climbs above a specified level. |
|
|
Term
|
Definition
| specifies that the trade is to be made only at a certain price or better. |
|
|
Term
| o GTC (good-till-canceled orders |
|
Definition
| remain effective until filled or canceled |
|
|
Term
|
Definition
| more than 100 shares bought. |
|
|
Term
|
Definition
| 1 to 99 shares bought, processed by “odd-lot dealers” who buy and sell out of their inventory. |
|
|
Term
|
Definition
| broker who gives advice and is paid a commission, where that commission is based on the sales volume generated. |
|
|
Term
|
Definition
| a “no-frills” broker who executes trades without giving advice and thus charges much lower commission than a full-service broker. |
|
|
Term
|
Definition
| – an order to buy or sell a set number of securities immediately at the best price available. |
|
|
Term
|
Definition
| increasing the number of stock shares outstanding by replacing the existing shares of stock with a given number of new shares. Ex. In a two-for-one split, every share of existing stock you hold, you will receive two shares of new stock. |
|
|
Term
|
Definition
| liabilities minus assets divided by number of common shares outstanding, gives a historical measure. |
|
|
Term
|
Definition
| uses net income minus preferred stock and divided by number of shares outstanding and gives more of a current measure for earnings power of each stock. |
|
|
Term
|
Definition
| the ratio of the annual dividends to the market price of the stock. |
|
|
Term
| Market-to-Book (Price-to-Book) ratio |
|
Definition
| range from 1.0 up to 2.5 and measure how highly valued the firm is. It uses BV so a historical measure might not be very useful depending on the age of its assets. |
|
|
Term
|
Definition
| rising prices in the market. |
|
|
Term
|
Definition
| when all stocks tend to decline in price. |
|
|
Term
|
Definition
| Common stocks that carry considerably more risk and variability than typical stock. |
|
|
Term
|
Definition
| Common stocks issued by companies whose earnings tend to move with the economy. |
|
|
Term
|
Definition
| – Common stocks issued by companies whose earnings tend not to be affected by swings in the economy and in some cases actually perform better during downturns. |
|
|
Term
|
Definition
| Common stocks issued by companies that have exhibited sales and earnings growth well above their industry average. Generally, these are smaller stocks, and many times they are newly formed. |
|
|
Term
|
Definition
| common stocks issued by large, nationally known companies with sound financial histories of solid dividend and growth rates. |
|
|
Term
|
Definition
| Common stocks issued by mature firms that pay relatively high dividends, with little increase in earnings. |
|
|
Term
|
Definition
| those whose value is derived from the value of other assets – these include options. |
|
|
Term
|
Definition
| gives its owner the right to buy or sell an asset – generally common stock. “zero-sum” game, where buyer and seller are betting against each other. |
|
|
Term
| o Nominal (or quoted) rate of return |
|
Definition
| rate of return earned on an investment without any adjustment for inflation. |
|
|
Term
|
Definition
| nominal rate of return after you’ve taken out inflation, tells you how much you’ve really earned after adjusting for inflation. |
|
|
