403(b) Plan
A qualified retirement plan available only to employees of nonprofit organizations (e.g., charities, hospitals, and educational institutions). A 403(b) offers retirement savings opportunities similar to a 401(k) plan, providing for contributions up to a predefined limit that are excluded from an employee's gross income for federal and most state income taxes. Also comes in the form of a tax-sheltered annuity or TSA.

Acceleration Clause
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 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.

Accidental Death Insurance
Insurance that provides coverage in the event of death due to accidental injuries, but not illness. In the event of death, payment is made to the insured's beneficiary. If bodily injury occurs (e.g., the loss of a limb), the insured receives a sum specified by the contract. This coverage is usually used in combination with dismemberment insurance.

Accrued Benefit Pension
Benefits earned (vested) based on years of service at a company and credited to the employee using an actuarial method.

Actual Cash Value
A common clause in property insurance contracts that determines the coverage amount based on the fair market value of an item at the time it was damaged, stolen, or destroyed.

Actuary
A specialist in the mathematics of risk, especially as it relates to insurance calculations such as expectancy, premiums, dividends, and annuity rates.

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.

Adjuster
Individual employed by a property/casualty insurance company to settle claims brought by insureds. The adjuster evaluates each claim and then makes recommendations to the insurance company.

Adjusted Gross Estate
For estate tax purposes, gross taxable estate minus expenses and losses.

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.

Adjustment Period
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.

Administrator
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.

Alien
An individual who is not a citizen or national of the United States. Aliens are further defined as resident or nonresident depending on the situation.

Alimony
Support payable to a divorced spouse as required by a divorce decree or legal separation agreement. Payments are deductible by the payor and are taxable income to the payee.

All-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.

Alternate Payee
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.

Alternate Valuation Date
For federal estate tax purposes, the value of the gross estate six months after the date of death, or, if the assets are disposed of within those six months, as of the date of disposition. The alternate valuation date election can be used only if the value of the gross estate declines.

Alternative Minimum Tax (AMT)
A federal tax aimed at guaranteeing that individuals, trusts, estates, and corporations pay a minimum amount of income tax, preventing them from taking full advantage of exemptions and other tax benefits that would otherwise allow them to pay little or no income tax.

Amortization
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.

Annual Gift Tax Exclusion
An IRS provision that allows you to give $10,000 per year (1999 figure, indexed for inflation thereafter) to an unlimited number of donees (persons or organizations) without incurring gift or estate tax.

Annuity
A contract sold by life insurance companies that offers tax-deferred accumulation of earnings and various distribution options such as partial withdrawals, full surrender or a guaranteed income called annuitization. An annuitization option is one that pays a fixed or variable payment to the contract owner, either for a fixed number of years or for life.

Annuity Payments
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.

Appraisal
A professional, formal, written estimation of the value of property.

Appreciation
Increase over time in the value of an asset such as a stock, bond, commodity, or real estate.

Arrearage
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.

Assets
Property owned by a business, institution, or individual, such as cash, investments, personal property, real estate, and ownership in a business, that has a present market value or worth.

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 determining need.

Assigned Risk Plan
Automobile insurance in which individuals who cannot obtain conventional liability coverage because of their poor driving records are placed in a residual market with insurance companies assigned to write policies for them at higher prices. These plans protect motorists who suffer injury or property damage through the negligence of bad drivers who otherwise would not have insurance.

Assignee
The party to whom an assignment (a transfer of property or rights to property) has been granted.

Association Plan
A group insurance policy purchased by an association or organization to provide coverage for its members.

At-Risk
Property and assets exposed to the danger of loss.

At-Risk Rules
Tax laws that apply to any activity carried on as a trade or business or for production of income. In general, financial losses from such activities are only allowable as tax deductions to the extent of the taxpayer's actual financial risk from the activity. Losses that exceed the 'at-risk' amount are not deductible.

Attach
To seize property and/or assets, or to obtain a legal writ granting the right to seize the property and/or assets. This usually occurs when an individual has outstanding debt, is financially unable to pay the debt in cash, and has property/assets of sufficient value to cover the amount of the debt.

Attained Age
A person's age at any point in time, determined for life insurance purposes, often expressed as the age reached at the last birthday.

Attorney-in-Fact
A person designated of a durable power of attorney to act as the agent for the principal (creator).

Base Year
The base year is the year prior to the year you complete the FAFSA (Free Application for Federal Student Aid) when applying for student financial aid.

Basis
The original cost, plus out of pocket expenses, of an asset (such as property, stock, or a business interest) that is used to determine gain or loss when the asset is disposed, whether through sale, gift, or bequest. The basis is affected by the nature of the transaction by which the asset was acquired. For example, property received as a gift will have a different method of basis determination than property purchased at fair market value.

Bear Market
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.

Beneficiary
An individual designated in a will to receive an inheritance, or the individual designated to receive the proceeds of an insurance policy, retirement account, trust, or other asset.

Benefit Period
The period of time benefits are received based on a contractual agreement. The term is commonly used to refer to health or disability benefits.

Blue Chip Stock
Stock of large, stable, financially strong companies that have a long history of profits, dividend payments, and a reputation for quality management, products, and services.

Bodily Injury Liability Coverage
Part of a standard auto insurance policy that covers you (up to the policy limits) for losses that result when you inflict bodily injuries on others. Covered losses generally include medical expenses, pain and suffering, and lost income. This is required coverage in most states.

Borrowings
Borrowings are loans of any type.

Bull Market
A rising market, or a market in which prices are generally increasing for stocks, bonds, or commodities.

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.

Buy-Sell Agreement
A contract used in business succession planning for sole proprietors, partnerships, and closely held corporations that provides for the sale of a business upon an owner's death, disability, retirement, or other triggering event.

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.

Capital Asset
A long-term asset, owned for personal or investment purposes, that is not bought or sold in the normal course of business. In general, the term includes fixed assets such as land, buildings, equipment, furniture, and fixtures.

Capital Gains
Gain realized from the sale of certain assets that represent the difference between the purchase price of an asset and the selling price when the difference is positive. Capital gains are separated into short-term capital gains and long-term capital gains. A long-term capital gain applies to assets such as a stocks, bonds, or mutual funds held for at least 12 months, which are taxed at a maximum rate of 20% for taxpayers in the 28% bracket or higher. Assets held less than 12 months generate short-term capital gains, which are subject to regular income tax rates.

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 months.

Capital Loss
Amount by which the proceeds from the sale of a capital asset are less than its cost basis.

Carrier
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.

Carryover
Refers to the process of shifting to a future taxable year those losses and other deductions that exceed limits for the current tax year.

Carryover Basis
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.

Cash
Paper currency and coins, negotiable money orders and checks, and bank balances.

Cash Reserve
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 flow needs.

Cash Surrender Value
The amount that is available to the owner if a life insurance policy is surrendered. The amount represents the cash value minus surrender charges and any outstanding loans due upon cancellation of the policy.

Cash Value
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 policy.

Cash Value Life Insurance
A permanent insurance policy that builds cash value, often described as a savings account within the policy. Cash value life insurance differs from term insurance, where premiums purchase pure insurance protection only.

Casualty
Liability or loss resulting from an accident.

Certificate of Deposit (CD)
Debt instrument issued by a bank that usually pays interest based on rates set by competitive forces in the marketplace. The interest rate on a CD is guaranteed for a specific period of time.

Certificates of Coverage
A statement of coverage, also known as a Certificate of Insurance, that an individual receives when insured under a group contract. The certificate serves as proof of insurance, and outlines benefits and provisions.

Child Support
Amount payable to a custodial parent, often by court order, by a non-custodial parent on behalf of a minor child or children. Support payments generally are not taxable income to the recipient or deductible by the payor.

Churning
Refers to excessive trading of a client's account for the purpose of increasing broker commissions, and leaving the client worse off or no better off than before. Churning is illegal under SEC and exchange rules.

Claim
Written request by an insured for the insurance company to cover an incurred loss, usually submitted on the company's standard form.

Claimant
One who submits a claim for an incurred loss.

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 preferred stock.

Closed-End Lease
Auto lease that allows you to walk away from the lease at the end of the lease term without paying for any difference between the anticipated residual value and the actual value of the car.

Closing on Sale-Contingency Clause
When such a clause is included in the contract, the seller of the home you are buying agrees to the following: (1) the closing will be delayed until you've sold and closed on your present home (usually within a time limit of three to six months), and (2) if you're unable to sell and close on your present home within this time limit, the contract to purchase the new home is automatically canceled. Unless you and the seller later agree to extend the time limit, your entire deposit is returned, and you are no longer obligated to purchase the home.

COBRA (Consolidated Omnibus Budget Reconciliation)
Regulations requiring an employer who employs more than 20 people to offer continued group insurance coverage to former employees for up to 18 months. If the employee dies, the employer must offer continued group health insurance coverage to widowed spouses and dependent children for up to 36 months.

Collateral
Asset 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.

Collateral assignment
Assignment of an asset (e.g., a life insurance policy's death benefit or its cash surrender value) to a creditor

Defined Contribution Plan
An employer-sponsored retirement plan in which the level of contributions is fixed through annual or periodic contributions to accounts set up for each employee. The employer contribution may be a percentage of the employee's salary, or may be related to years of service. Employee contributions are also permitted. The benefit at retirement depends on the return from investments. Common examples of defined contribution plans include 401(k), 403(b), and 457 plans, profit-sharing plans, and employee stock ownership plans (ESOPs).

Demand Loan
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 intervals.

Demutualization
The process of changing the legal structure of an insurance company from a mutual form of ownership to a stock form of ownership.

Dental Insurance
Individual or group plan that helps pay the costs of normal dental care as well as damage to teeth from an accident.

Dependent
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. Deposit Premium 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.

Earnings Record
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.

Collateralized
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
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.

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 beneficiary clause.

Common Stock
Units of ownership in a public corporation that typically entitle shareholders to vote on corporate matters as well as receive dividends on their holdings. Although the claims of preferred shareholders generally take priority over those of common shareholders in the event of insolvency, common stock generally has more potential for appreciation.

Community Property
Marital property as defined by state law under which spouses own equal interests in property acquired during a marriage. This does not include property brought to the marriage or acquired by gift or inheritance. Currently there are nine community property states: Arizona, California, Idaho, Louisiana, New Mexico, Nevada, Texas, Washington, and Wisconsin.

Compensable Injury
An injury that qualifies for benefits paid under workers' compensation.

Comprehensive Coverage
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.

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 schedules.

Contestability Period
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.

Convertible Term Insurance
Term life insurance coverage that can be converted into permanent life insurance upon the policy'sexpiration. The insured generally cannot be denied permanent coverage or charged an additional premium because of health problems.

Copayment
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.

Cost Basis
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.

Countable Assets
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.

Covered Expenses
In health insurance, reimbursement for an insured's medically-related expenses, including, but not limited to surgery, medicines, hospitalization, ambulance service, and X-rays.

Coverage Forms
Attachments to an insurance policy to complete the coverage provided by the policy.

Credit Insurance
Insurance issued to creditors as protection against losses on outstanding loans due to the death or disability of the debtor.

Crummey Power
A right exercised by the beneficiary of a trust to withdraw money from the trust for a limited amount of time each year.

Custodial Parent
The parent granted legal custody of a minor child by a divorce decree or a written separation agreement. 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 outstanding loans.

Debt Financing
Raising capital by borrowing from banks or other creditors.

Decedent's Final Return
The income tax return filed for a decedent for income earned in the year death occurred. The deadline to file is April 15th of the year following death.

Declarations Page
The section of a property and casualty insurance contract containing such information as the name, description, and location of insured property; the name and address of the insured; the period for which the policy is in force; premiums payable; and the amount of coverage.

Declination
An insurer's refusal to insure an individual after careful evaluation of the application for insurance and any other relevant factors.

Deductible
The amount that must be paid out of pocket by the insured for covered losses before the insurance company pays a claim.

Deduction
An expense allowed by the IRS or state tax authority that is used to offset taxable income. Federal deductions include some interest paid, state and local taxes, and charitable contributions.

Deed of Title
A written document conveying title of property, mostly commonly used when transferring legal title to real estate from one party to another.

Deferred Annuity
An annuity in which the income payments/withdrawals begin at some future date.

Defined Benefit Plan
An employer-sponsored retirement plan that promises to pay a specified amount to each employee who retires after a set number of years of service with the company. Generally the employer makes all contributions to such a plan, although employees do contribute to them in some cases. This is also referred to as a Defined Benefit Pension Plan or pension.

Depreciation
The annual deduction allowed to recover the cost of business property with a useful life of more than one year, such as machinery and equipment. The deduction does not apply to stock in trade, inventories, land, or personal assets and is reported as an expense that when subtracted from revenue, reduces the company's taxable income.

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.

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.

Disability
A physical or mental impairment that substantially limits one or more of an individual's major life activities. Disability may be partial or total.

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.

Disability Insurance
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.

Disappearing Deductible
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 specified obligations.

Discount Rate
The rate of interest banks must pay when they borrow funds from the Federal Reserve to meet their reserve requirement.

Discovery
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 legal proceedings.

Discretionary Income
Amount of a consumer's income remaining after essentials such as food, housing, and utilities and prior commitments have been paid.

Discretionary Trust
A trust which allows the trustee discretion in making distributions of income or principal to the beneficiary.

Dismemberment Insurance
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 insurance.

Dividend
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 asincome by the shareholder in the year received.

Dividend Addition
An amount of paid-up life insurance purchased with a policy dividend and added to the face amount of the policy.

Dollar Threshold
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 amount.

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.

Domicile
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.

Double Indemnity
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 of accidents).

Driver Education Credit
Discount on auto insurance premiums for which young drivers become eligible upon completion of a driver education course.

Dunning Letters
Written correspondence received from creditors requesting payment of debt and/or threatening legal or other action if payment is not made by a certain date.

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.

Durable 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 proxy.

Dwelling Policy
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).

Earned Income
Income generated by providing goods or services and received in the form of wages and salaries.

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.

Elimination period
Period of time (beginning with the first day of illness or injury) during which no benefits are payable under a disability insurance policy. Benefits are paid only for costs incurred after the end of the elimination period.

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 benefits.

Endorsement
A written agreement attached to an insurance policy to add or subtract coverage. Once attached, the endorsement takes precedence over the original terms of the policy.

Enrolled Agent
An individual who has demonstrated technical competence in the field of taxation and can represent taxpayers before administrative levels of the Internal Revenue Service.

Equitable Division State
The philosophy followed by most states, providing that property must be divided fairly, rather than equally, when determining how divorcing couples divide property. This applies to property acquired during a marriage as well as separate property and property brought to a marriage.

Equity
An ownership interest such as that held by shareholders in a corporation. Equity also represents the difference between the market value of real estate and the outstanding balance on the loan(s) secured by that property.

Estate
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.

Estate Freeze
Techniques or methods used to control the future appreciation of assets for the purpose of reducing estate taxes.

Estate Planning
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.

Fixed Annuity
A type of annuity that guarantees your principal and provides an investment return at least equal to a specified fixed rate until you annuitize. In addition, the amount of your payout can be fixed once you begin receiving distributions from the annuity.

Fixtures
Improvements attached to real estate that are not intended to be moved and so become part of the real estate.

Float
The time period between the deposit of a check in a bank and payment. The term also applies to the number of shares of a corporation that are outstanding and available for trading by the public.

Floater
Coverage for property which moves from location to location. If the floater covers "scheduled" property, coverage is listed separately for each item. If the floater covers "unscheduled" property, all property is covered for the same limits of insurance.

Flood Insurance
Insurance that provides coverage for losses resulting from a flood. This coverage is not included in a standard homeowners policy, but can sometimes be added for an extra premium. In addition, depending on the community where you live, you may be eligible for federal flood insurance through the National Flood Insurance Act.

Forced Liquidation or Sale
A sale that occurs when creditors force a debtor to sell or auction off assets to satisfy debts.

Foreclose
The process by which a lender seizes an asset (usually a home or other real estate) after the owner has defaulted on the loan.

Estate Tax
A tax imposed by the federal government and some state governments on the transfer of assets to heirs.

Exclusions
Items that are specifically denied coverage under the terms of an insurance policy. For example, most property/casualty contracts exclude coverage for normal wear and tear. You can often purchase additional coverage to override one or more exclusions.

Execution
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.

Executor/Executrix
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.

Exempt
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.

Extended Coverage
An endorsement added to an insurance policy, or a clause included in the policy, to provide additional coverage for risks other than those covered under the basic policy provisions.

Face Amount
The amount of death benefit coverage that is purchased under a life insurance policy.

Fair Market Value
The price at which property would change hands between a willing buyer and a willing seller, where both parties have reasonable knowledge of the relevant facts and neither party is under any compulsion to buy or sell.

Family Support Ratio
A formula used to determine life insurance need using the income replacement approach. This formula considers the percentage of the insured's after-tax income that goes toward supporting family members minus the percentage that would be needed for the insured's self-maintenance.

Fannie Mae
The Federal National Mortgage Corporation (FNMA) is a publicly owned government-sponsored corporation that was established in 1938 to purchase government-backed and conventional mortgages. The objective of this organization is to increase the affordability of home mortgage funds for low, moderate, and middle-income home buyers. Fannie Mae is a shareholder-owned company that is traded on the New York Stock Exchange.

Federal Estate Tax
A tax that is imposed by the federal government, and some state governments, on the transfer of assets to heirs. The Taxpayer Relief Act of 1997 provides that the amount of assets each person can exclude from estate taxes is $675,000 in 2000 and 2001, rising to $1 million in 2006 and later years.

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 for 1999 (indexed for inflation).

Federal Methodology
Federal methodology is a formula that was created by Congress and is used to determine financial need when an individual applies for federally funded student aid with the Free Application for Federal Student Aid (FAFSA).

Federal Unemployment Tax Act (FUTA)
Legislation under which federal and state governments require employers (and, in some states, employees) to contribute to a fund that pays unemployment insurance benefits.

FICA Federal Insurance Contributions Act
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) plan.

Fiduciary
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 beneficiaries.

Fiduciary Capacity
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 agents.

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.

Fiduciary Responsibility
The duty that arises when one individual acts on behalf of, or for the benefit of, a third party.

Financial Responsibility Law
A law that requires the operator of an automobile to show financial ability to pay for automobile-related losses. In many states evidence usually takes the form of a minimum amount of automobile liability insurance.

401(k) Plan
A defined contribution plan whereby an employee may elect, as an alternative to receiving taxable cash in the form of compensation or a bonus, to contribute pretax dollars to a qualified tax-deferred retirement plan. Contributions are limited to $10,000 for 1999 (adjusted annually) and matching contributions may be made by the employer. Also known as a cash or deferred arrangement (CODA) or salary reduction plan.

403(b) Plan
A qualified retirement plan available only to employees of nonprofit organizations (e.g., charities, hospitals, and educational institutions). A 403(b) offers retirement savings opportunities similar to a 401(k) plan, providing for contributions up to a predefined limit that are excluded from an employee's gross income for federal and most state income taxes. Also comes in the form of a tax-sheltered annuity or TSA.

Fraudulent Conveyance
The gift, sale, or transfer of property made with the intent of defrauding creditors by attempting to place assets beyond the reach of creditors.

Freddie Mac
The Federal Home Loan Mortgage Corporation (FHLMC), a publicly chartered agency that buys qualifying residential mortgages from lenders, packages them into new securities backed by those pooled mortgages, provides certain guarantees, and then resells the securities on the open market. Established in 1970, the corporation's stock is owned by savings institutions across the U.S. and is held in trust by the Federal Home Loan Bank System. The corporation has created an enormous secondary market which provides more funds for mortgage lending and allows investors to buy high yielding securities backed by federal guarantees.

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.

Fringe Benefits
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 employee.

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.

Gain
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.

Generation Skipping Transfer (GST)
A transfer of property made to a family member who is more than one generation below the donor, that occurs either during life as a gift or at death by will or bequest.

Generation-Skipping Transfer Tax (GSTT)
A federal tax on transfers of property made to a family member who is more than one generation below the donor, that occur either during life as a gift or at death by will or bequest.

Gift Tax
A graduated tax imposed by the federal government (and most state governments) on transfers of assets over $10,000 per year per donee.

Gifting Strategies
Gifting strategies are estate planning techniques that allow a donor to transfer assets to heirs during the donor's lifetime with the intention of reducing federal and state estate taxes.

Grace Period
A period of time in most loan contracts and insurance policies during which default or cancellation will not occur even though payment is due. This term also refers to the number of days (typically 25) between when a credit card bill is sent and when the payment is due without incurring interest charges.

Gross Estate
The total value of all property in an estate before liabilities (i.e., debts and taxes) are deducted.

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 earnings.

Group Insurance
An insurance contract that covers a group of individuals who are affiliated in some way, either through an employer, trade association, or other organization.

Guaranteed Insurability Rider
An addition to an insurance policy that guarantees the insured can purchase more insurance at specified ages without providing proof of insurability.

Guaranteed Renewable
A provision in an insurance contract that guarantees that the contract is renewable for the period stated in the contract provided that premiums are paid in a timely fashion. The insurer cannot make any changes in the provisions other than a change in the premium rate for all insureds in the same class.

Guarantor
An individual who is responsible for another person's loan or other debt in the event that the principal debtor defaults and cannot meet the debt.

Guardian
An individual who has the legal right to care for a minor or act as an administrator of the assets of another who is incapacitated or declared incompetent.

Guardianship
A formal, court-appointed method of substitute decision making on behalf of an individual who is a minor or who has been declared legally incapacitated or incompetent. Guardians of the estate are sometimes referred to as conservators. Guardianship can be general, limited, or temporary and can act on behalf of the person, the estate, or both (plenary).

Hazard
A circumstance that increases the likelihood or probable severity of a loss. For example, an unattended lit cigarette is a hazard that increases the likelihood of a fire.

Health Maintenance Organization (HMO)
Health insurance plan that entitles individual members to an array of medical services provided by participating physicians, hospitals, and clinics.

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 fund.

Heir
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. Heirs and Assigns Heirs are individuals who inherit 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 a legal authority. Assigns or assignees is a broader term that includes anyone to whom property is, will, or may be assigned. An assign may receive property from an assignor by conveyance, descent, or an act of law.

High-3 Average Pay
Any three consecutive years of creditable service, at the employee's highest compensation level, that is used to calculate a maximum retirement benefit.

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.

Holding Period
Length of time an asset is held by its owner.

Homestead Exemption
A state law provision that permits the home to be exempted from creditors claims.

Hospice
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 stay up to a certain limit with no deductible.

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.

Incapacity
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.

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.

Joint Tenancy
Ownership of property by two or more individuals with equal interest in the property. Upon death, a joint tenant's interest passes to the other joint tenant(s) and does not pass into the estate.

Judgment
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 public use.

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.

Income Replacement
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.

Income Tax
The annual tax on income that is levied by the federal government and by certain state and local governments.

Incompetency
The inability to properly care for one's property and/or person, or to make or communicate rational decisions concerning one's person.

Indemnity
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.

Indemnity Plan
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.

Independent Agent
A contractor who represents different insurance companies, is not controlled by any one company, and earns commissions from policies sold.

Index
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.

Indirect Loss
A loss that arises from a peril, but is not directly and immediately caused by it.

Individual Policy
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 (IRA)
A personal, tax-deferred retirement account that an individual can establish and fund with earned income up to a maximum amount. Deposits up to a maximum of $2,000 per year may be deductible within prescribed income levels and retirement plan participation. Income earned is tax deferred until it is withdrawn.

Inflation Rider
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.

Inflation-Adjusted Yield
The net rate of return after taking inflation into account.

Inland Marine Insurance
A form of property-casualty insurance that covers portable property and goods in transit over land, extending the coverage that is provided by Ocean Marine insurance over water.

Insolvent
The inability to pay debts when due and/or meet other current financial obligations.

Installment Payments
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.

Institutional Methodology
A formula that is administered by the College Scholarship Service and is used to determine financial need when applying for institutionally funded student aid.

Insurable
An individual applicant who qualifies for an insurance policy based on the coverage standards that are set by the insurance company.

Insurable Interest
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.

Inter Vivos
Property that is transferred while living, as opposed to being transferred by will.

Interest
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 borrowed. 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.

Interest-Rate Risk
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.

Intestacy Laws
State laws governing the disposition of property when an individual dies without a valid will.

Intestate
To die without leaving a valid will.

Intestate Succession
Distribution of property according to state laws of descent upon the death of an individual who has not left a valid will.

Irrevocable
Something that cannot be legally undone, altered, amended, revoked, or terminated.

Irrevocable Beneficiary
A beneficiary designation that cannot be changed.

Irrevocable Trust
A trust that cannot be altered, amended, revoked, or terminated by the settlor.

Joint Life Expectancy
The probability that two people will live to specific ages according to a mortality table.

Judgment Foreclosure
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.

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.

Present Value
Value today of a future payment, or stream of payments, discounted at some appropriate compound interest or discount rate.

Presumptive Disabilities
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.

Principal
The amount borrowed or unpaid on a loan.

Principal Residence
The home that a taxpayer lives in most of the time during the taxable year.

Simplified Needs Test
A simplified test for calculating the expected family contribution for a student applying for federal student financial aid. If the family's adjusted gross income is less that $50,000, then the simplified needs test may be used. This test takes only income into account and usually results in a greater financial aid award for applicants in this category.

Key Employee
A key employee is an individual who may have special skills and makes a significant contribution to the business. Executives and managers may be considered key employees, in addition to certain shareholders who actively participate in the ongoing success of the business.

Key Person Insurance
Insurance designed to pay benefits to a business that loses the essential services of a key employee due to disability or death, and the business suffers a financial loss as a result.

Kiddie Tax
Tax, at the parents' top tax rate, filed on Form 8615 for investment income of children under age 14 exceeding $1,400 in 1999 (indexed annually).

Laddering
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 interest rate.

Lapse
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 universal life policies where the withdrawals are treated as first coming out of interest and are considered taxable income.

Levy
To assess, exact, or collect, as with a tax or a fine. Levy can also mean to obtain money by legal process through the seizure and sale of property.

Liabilities
A claim on the assets of a company or individual to satisfy a debt.

Liability insurance
Coverage for sums that an insured becomes legally obligated to pay because of bodily injuries and/or property damage or financial losses caused to other people.

Lien
A creditor's claim against assets to secure a debt. Liens may also be granted by courts to satisfy judgments.

Life Annuity
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 beneficiary benefits.

Life Estate
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).

Life Expectancy
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.

Life Insurance
A legal contract between an insurance company and an owner/insured to provide protection against adverse financial consequences of the death of an individual in the form of payment to a beneficiary.

Life Insurance Trust
An agreement that establishes a trust for the designated beneficiary(ies) of a life insurance policy. Upon the death of the insured, the trust is legally obligated to pay the death benefit proceeds in the manner specified in the trust agreement.

Life Insurance Underwriting
The process by which an insurance company examines, accepts, or rejects insurance risks so as to charge the proper premium for the coverage and to spread the risk among a pool of insureds in a manner that is both fair to the insureds and profitable for the company. The company classifies the accepted applicants into different risk categories in order to charge the proper premium.

Life Interest
A form of property ownership, also known as a life estate, 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).

Lifetime Gift
A gift made during someone's life, as opposed to a post-mortem gift.

Limitations
The maximum amount of insurance coverage that is available under a policy. Coverage limitations can often be increased for an additional premium.

Limited Health Insurance
A health insurance contract that provides limited coverage in special circumstances.

Liquidity
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.

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 insured's death.

Living Trust
A revocable or irrevocable trust created during the life of the grantor that is also known as an inter vivos trust.

Long-Term Care Insurance
An insurance contract that pays benefits in the event the insured needs long-term medical care in a facility other than a hospital.

Long-term Coverage
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).

Look-Back Period
The period of time, currently 36 months, during which a hospitalized or institutionalized individual may be ineligible for benefits payable under a state Medicaid plan when assets are transferred for less than their fair market value for the purpose of qualifying for payment.

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 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 house.

Managed Care Plan
Health care plan based on practice guidelines or protocols that health care providers must follow. The goals of a managed care plan are to lower health care costs, provide as comprehensive coverage as possible, and improve the methods used to select health care providers.

Marginal Tax Bracket
A tax bracket that applies to a particular range of income.

Marginal Tax Rate
The amount of tax imposed on an additional dollar of income.

Marital Deduction
Provision in the federal estate and gift tax law allowing all the assets of a marriage partner to pass to the surviving spouse free of estate taxes.

Marketable Securities
Securities that are easily sold or that can be readily converted into cash such as government securities, banker's acceptances, and commercial paper.

Maximum Family Benefit
The largest monthly Social Security benefit payable to an individual if more than two persons receive payments on the same Social Security record.

Maximum Taxable Amount
The greatest amount of earnings that can be credited annually to an individual's Social Security earnings record. Social Security taxes are not payable on any income earned in excess of this limit, however, there is no limit for Medicare taxes. This limit is adjusted annually to rise in the future to match the national wage levels.

Medical Information Bureau (MIB)
A central computerized facility that keeps on file the health history of the applicants for life and health insurance with member MIB companies. This information is made available to insurance companies for the purpose of evaluating an applicant's insurability and preventing fraud.

Medical Payments Coverage
Part of a standard auto insurance policy that provides coverage of medical expenses incurred by you and your passengers in the event of an accident, regardless of who is at fault.

Minimum Wage
As required by federal law, the minimum hourly wage that employers must pay their employees. Adjusted periodically for inflation and other factors, the minimum wage is supposed to provide workers with the income needed to be self-sustaining and to obtain the ordinary requirements of life.

Mobile Home Insurance
Coverage similar to a homeowners insurance policy in that Section I covers property and Section II covers liability.

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.

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 annuity valuations.

Mortality Charge
The cost of the insurance protection based on a statistical projection of future deaths.

Mortgage
A debt instrument by which the borrower (mortgagor) gives the lender (mortgagee) a lien on property as security for the repayment of a loan. The borrower has use of the property, and the lien is removed when the obligation is fully paid.

Mortgage
Clause Attachment to a property insurance policy to protect the interest of the mortgage holder in the mortgaged property. The mortgage holder is indemnified up to the stated interest in the property if the property is damaged or destroyed.

Mutual Fund
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 Insurance Company
An insurance company owned by its policyholders. Mutual insurance company stock is not available for purchase on the stock exchange. Members are policy holders entitled to name the directors or trustees and to receive dividends or

Named Perils Coverage
Insurance contract under which covered perils are listed and benefits for a covered loss are paid to the policyholder.

Negative Amortization
Financing arrangement in which monthly payments may be less than the true amortized amounts and the loan balance may increase, rather than decreases, over the term of the loan. The interest shortage can be added back to unpaid principal or can be added back to the loan and payable at maturity.

Net Worth
Total financial worth after totaling all assets and subtracting all liabilities.

No-Fault Insurance
Auto insurance laws in some states that require insurance companies to cover their policyholders' losses in the event of an accident, regardless of who caused the accident.

Noncancellable
A type of contract that cannot be canceled by the insurance company and is used for health and disability insurance.

Noncancellable Guaranteed Renewable
An insurance policy that is not subject to alteration, termination, or increase in premium upon renewal.

Nonqualified Deferred Compensation Plan (NQDC)
Nonqualified deferred compensation (NQDC) is an arrangement between an employer and employee that defers the receipt of currently earned compensation. A NQDC plan does not have to comply with the discrimination and administrative rules that govern qualified benefit plans, such as Section 401 of the Internal Revenue Code and the Employee Retirement Income Security Act (ERISA).

Nonresident Alien
An individual whose residence is not within the United States, who is not a citizen of the United States, and who has not been granted permanent resident status.

Nonwage Income
Income other than what is earned in the form of wages or salary.

Normal Retirement Age
The age at which a pension plan participant can retire and immediately receive unreduced benefits. The normal retirement age for Social Security retirement benefits.

Occupational Disease
An illness contracted as a result of employment-related exposures and conditions. Coverage for these situations is provided through workers compensation.

Occupational Hazard
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. Occurrence Basis Coverage (in liability insurance) for harm suffered by others or their property due to events occurring while a policy is in force, regardless of when a claim is actually made.

Ocean Marine Insurance
Property-casualty insurance coverage for damage or destruction of a ship's hull and cargo as a result of the occurrence of an insured peril.

Open-End Lease
A lease agreement that provides for an additional payment after the property is returned to the lessor to adjust for any change in the value of the property.

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.

Ordinary Income
Income from the normal activities of an individual or business that is not capital gains from the sale of assets.

Own Occupation
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 occupation.

Partial Disability
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.

Payee
An insured individual or a beneficiary who receives a loss or benefit payment from an insurer.

Payment Cap
A contractual limit on the percentage amount of adjustment allowed in the monthly payment for an adjustable rate mortgage (ARM) in any one adjustment period.

Peril
A specific cause of loss. Common examples include fire, flood, earthquake, vandalism, and theft.

Permanent
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.

Permanent and Total Disability
A disability in which a wage earner is forever prevented from working because of injury or illness suffered.

Permanent Resident Alien
A citizen of another country living in the United States who has been granted permanent resident status in the U.S. but is not a US citizen.

Personal Earnings and Benefit Estimate Statement (PEBES)
A statement generated by the Social Security Administration containing a complete earnings history, estimate of benefits for early retirement, full retirement and benefits at age 70, and an estimate of disability benefits. Also included in this statement are estimates of benefits payable to spouse and children in the event of the worker's retirement, disability, or death.

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.

Personal Property
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 a deductible.

Personal Representative
The person named by the court to handle an estate if no executor is named in the will, or if an executor declines to serve. This individual is responsible for filing tax returns on behalf of the estate.

Points
Prepaid fees, often used to decrease the interest rate on a mortgage, or to induce lenders to make a mortgage loan. One point equals one percent of the loan principal. Points have the effect of reducing the amount of money advanced by the lender. Mortgage lenders commonly charge one point as a loan origination fee. Additional points may be charged to raise the loan yield to current market interest rates.

Policy Basis
The amount of the policyholder's investment in a life insurance policy reduced by any dividends and any cash value withdrawals.

Policy Loan
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 benefit.

Policy Period
Time period during which an insurance policy is in force.

Post Mortem
After death.

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.

Preexisting Condition
An illness or medical condition for which a person was treated or advised within a specified time period before applying for a life or health insurance policy. A preexisting condition can result in the cancellation of the policy if it is not disclosed up front.

Preferred Risk
An insured or applicant for insurance who has a lower expectation of incurring a loss than the standard applicant and can obtain favorable premiums.

Preferred Stock
A special class of capital stock that pays dividends at a specified rate and that has preference over common stock in the payment of dividends and the liquidation of assets. It typically doesn't entitle holders to voting rights, although it may be converted to common stock with voting rights.

Premium
The payment required for an insurance policy to remain in force.

Private Letter Ruling
The response or interpretation issued by the Internal Revenue Service to a specific taxpayer or taxpayers about a specific question on tax law or a request for an interpretation of the tax code.

Probate
The court-supervised process of administering a will.

Probate Estate
Property that passes to beneficiaries according to the terms of a will.

Probated
Refers to a will that has gone through the legal process of probate and thereby determined by a court to be either valid or invalid. Once the probate process is complete and the will proven valid, the property in the estate can be distributed according to the terms of the will. In current usage, the term 'probate' has been expanded to generally include all matters and proceedings relating to the administration of to estates, guardianships, etc.

Promissory Note
A written promise committing the borrower to pay the lender a specified sum of money either on demand or at a fixed or determinable future date, with or without interest. Instruments meeting this criteria are generally negotiable.

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.

Prospectus
A formal written offer to sell securities that sets forth the plan for a proposed business enterprise or the facts concerning an existing one that an investor needs in order to make an informed decision.

Provisions
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.

Proximate Cause
In property/casualty insurance, the cause of a loss whereby that cause, the loss itself, and all intervening events form an unbroken chain.

Public Offering
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 bankers.

Pure Insurance
The difference between the face amount of a life insurance policy and and its cash value.

QTIP Qualified Terminable Interest Property