| Term |
Definition |
| 401(k) |
A qualified, tax-deferred retirement plan
offered by employers which allows employees to save a percentage of
their current salary for retirement. |
| Add-on interest |
Interest that is computed at the beginning
of the loan, and then added to the principal, so that all must be
repaid even if the loan is paid off early. |
| Additional
principal payment |
Extra money included with a loan payment to
pay off the amount owed faster. Over time, this practice reduces the
amount of interest paid. |
| Adjustable
Rate Bond (or Preferred Stock) |
A security with an interest rate (or dividend
rate) that is adjusted each payment period according to a recognized
market rate (such as the "prime" interest rate that banks
charge, the rate on Treasury bills, etc.). |
| Adjusted Gross
Income |
The amount used in the calculation of an individual's
income tax liability. It is equal to one's income after certain adjustments
are made, but before standardized and itemized deductions and personal
exemptions are made. Includes all of the income you received over
the course of the year such as wages, interest, dividends and capital
gains minus things such as business expenses, contributions to a qualified
IRA, moving expenses, alimony and capital losses. |
| Advisory Service |
A service that offers investment information
(usually buy and sell advice) for a fee. |
| American Depository
Receipts (ADRs) |
Negotiable certificates, issued by U.S. depository
banks, which represent the actual shares of a foreign company's stock
that an overseas branch of the depository bank or a custodian is holding.
|
| American Stock
Exchange (AMEX) |
The second largest national stock exchange
in the U.S., where primarily securities of small to mid-size companies
are bought and sold. Options on many NYSE stocks are also traded on
the AMEX. |
| Amortization |
An accounting term that refers to the reduction
in the value of an intangible item, such as a patent or trademark,
through periodic reductions in income. |
| Anniversary
Date |
The annual recurrence of the policy's effective
date. The anniversary date is often the time the owner of a universal
life policy is permitted to make changes to the policy, such as increasing
the death benefit. |
| Annual fee |
A bank charge for use of a credit card levied
each year, which can range from $15 to $300, billed directly to the
customer's monthly statement. Many credit cards come without an annual
fee. |
| Annual percentage
rate (APR) |
A yearly rate of interest that includes fees
and costs paid to acquire the loan. Lenders are required by law to
disclose the APR. The rate is calculated in a standard way, taking
the average compound interest rate over the term of the loan, so borrowers
can compare loans. In mortgages, it is the interest rate of a mortgage
when taking into account the interest, mortgage insurance, and certain
closing costs including points paid at closing. There is no APR in
an automobile lease; instead, the cost of money is expressed as the
money factor. |
| Annual Report |
The formal financial statement that a corporation
issues annually to its shareholders. |
| Annual Return |
The percentage increase in the value of an
investment over a 12-month period or a series of 12-month periods,
taking into account compounding of investment dividends or capital
gains. |
| Annuitant |
The individual who is entitled to receive the
benefits of an annuity. |
| Annuity |
Regular payments to an individual according
to a contract, for a specified or an indefinite time period. |
| Asset |
Any item of economic value owned by an individual
or corporation. Usually refers to items that can be sold and converted
to cash. Examples are cash, securities, financial accounts, a house,
a car, jewelry and other property. |
| Asset Allocation |
The process of dividing investor funds among
several classes of assets to limit risk and increase opportunities
for gains. |
| Asset-Backed
Securities |
A bond backed by loans or account receivables
originated by banks, credit card companies or other credit providers.
|
| Assumed Investment Return (AIR) |
The guaranteed rate of return used in variable
annuities to set the initial annuity payment. |
| Average daily
balance |
This is the method by which most credit cards
calculate your payment due. An average daily balance is determined
by adding each day's balance and then dividing that total by the number
of days in a billing cycle. The average daily balance is then multiplied
by a card's monthly periodic rate, which is calculated by dividing
the annual percentage rate by 12. A card with an annual rate of 18
percent would have a monthly periodic rate of 1.5 percent. If that
card had a $500 average daily balance it would yield a monthly finance
charge of $7.50. |
| Average Tax
Rate |
An individual's average tax rate is the result
of total income taxes paid divided by taxable income. For example,
if an individual has taxable income for the year of $50,000 and paid
income taxes of $10,000, the average tax rate would be 20%. ($10,000
÷ $50,000 = .20). |
| Balance Transfer |
The process of moving an unpaid credit card
debt from one issuer to another. Card issuers sometimes offer teaser
rates to encourage balance transfers coming in and balance transfer
fees to discourage them from going out. |
| Balance Transfer
Fee |
Fee charged customers for transferring an outstanding
balance from one card to another. |
| Bankruptcy
Code |
The informal name for Title 11 of the United
States Code (11 U.S.C. § 101 - 1330), the federal bankruptcy
law. |
| Chapter
7 |
The chapter of the Bankruptcy Code
providing for "liquidation," i.e., the sale of a
debtor's nonexempt property and the distribution of the proceeds
to creditors. |
| Chapter
9 |
Chapter of the Bankruptcy Code addressing
the adjustments of debts of a municipality. |
| Chapter
11 |
A reorganization bankruptcy, usually
involving a corporation or partnership. (A Chapter 11 debtor
usually proposes a plan of reorganization to keep its business
alive and pay creditors over time. People in business or individuals
can also seek relief in Chapter 11.) |
| Chapter
12 |
Chapter of the Bankruptcy Code designed
to give special relief to a family farmer with regular income. |
| Chapter
13 |
The chapter of the Bankruptcy Code providing for adjustment of debts of an individual with regular income. (Chapter 13 allows a debtor to keep property and pay debts over time, usually three to five years.) |
| Bankruptcy
Trustee |
A private individual or corporation appointed
in all Chapter 7, Chapter 12, and Chapter 13 cases to represent the
interests of the bankruptcy estate and the debtor's creditors. |
| Beneficiary |
The party who will receive the death benefit
of the contract upon the insured's death. |
| Bereavement
period |
A period of time during which the survivors
adjust emotionally and financially to the loss of a loved one. |
| Billing Cycle |
The number of days between the last statement
date and the current statement date. |
| Billing Statement |
The monthly bill sent by a credit card issuer
to the customer. It gives a summary of activity on an account, including
balance, purchases, payments, credits and finance charges. Important
changes to a credit card account are often included in small-print
fliers that are sent with the statement. |
| Blue Chips |
The high-quality stocks of major corporations
with long records of uninterrupted earnings and dividends, capable
management, and good growth prospects. |
| Bonds |
The debt instrument of an issuer (essentially
an I.O.U. for money you lend to the issuer) that promises to pay the
holder a specified amount of interest, for a specified time period,
with principal to be repaid on the maturity date. |
| Bond Mutual
Fund |
An investment company that invests primarily
in bonds and debt securities. The objective of most bond funds is
to provide current income while protecting the principal from decreasing
in value. Both the net asset value and the monthly income can fluctuate
with changes in interest rates. |
| Broker |
An agent who executes buy and sell orders for
securities or commodities for a fee. |
| Capital Gain
(Loss) |
Profit (loss) from the sale of securities or
other capital assets. |
| Cash Surrender
Value |
The value a policyowner receives upon termination
of a permanent life insurance policy for any reason other than death
of the insured. The cash surrender value of a life insurance contract
is equal to the cash value less any surrender charge imposed by the
insurance company. Cash surrender values are typically not available
during the first year or two of the policy's life. Usually, the policyowner
is allowed to take the cash surrender value in the form of cash, a
reduced amount of paid-up life insurance, or extended term life protection. |
| Cash Value |
The "savings" element of all permanent
forms of life insurance. The cash value is the amount of money a policy
owner can get for surrendering the policy. The cash value of whole
life is pre-determined and fixed when the policy is issued. The cash
value of a universal life policy depends on the amount and timing
of premium payments, the expense and risk charges the insurance company
charges for providing benefits and the interest rate the company credits.
The cash value of a variable life or variable universal life policy
will vary depending upon the performance of the investment accounts
selected by the contract owner. Increases in cash values are not taxable
until withdrawn. Some policies may allow the owner to borrow against
the cash value. |
| Cash Value
of Life Insurance |
The amount of money accumulated in a whole
life, universal life or a variable life insurance policy. The cash
value is accumulated based on the return of the underlying investments
in the policy. |
| Certificates
of Deposit (CDs) |
An FDIC-insured account offered by banks and
savings and loans. As with a bond, they are usually opened with a
single deposit, earn a fixed return and have a set maturity date.
Their maturities normally range from three months to five years. |
| Commission |
A fee an investor pays a broker for buying
or selling securities. |
| Common Stock |
Securities that represent an ownership interest
(with voting rights) in the issuing corporation. See preferred stock.
|
| Consumer Credit
Counseling Service |
A service that offers counseling about how
to work out a realistic budget and debt repayment plan and work with
creditors. The goal is to ensure that debts are paid back over time.
|
| Consumer Price
Index |
A measure of the change in prices of a fixed
basket of goods and services, including food, clothing, medical care,
transportation, housing and electricity. |
| Controllable
Expense |
An expense over which an individual has control
as to how much is spent. Examples of controllable expenses include
entertainment, clothing, food, investments and savings. |
| Conversion
Period |
The period of time during which the owner of
a term policy may convert it to a permanent policy without evidence
of insurability. |
| Convertible |
A provision in a term life insurance contract
that allows the contract owner to convert the term policy to a permanent
life policy without evidence of insurability. |
| Corporate
Bonds |
A bond issued by a corporation, which creates
an obligation by the corporation to pay interest for a specified period
and to repay the principal amount at the bond's maturity date. |
| Co-signer |
A person who signs a promissory note that is
also signed by one or more other parties. All parties take responsibility
for the debt if any of the others renege. |
| Death Benefit |
The amount of money paid to the beneficiary
when the insured dies. The death benefit is generally equal to the
policy's face value, although the death benefit can be reduced dollar-for-dollar
by the amount of any outstanding policy loan. |
| Debit card |
- A payment card that is linked directly to a customer's bank account.
Some cards require a personal identification number. Others require
a customer's signature. A PIN-based or direct debit card removes
a purchase price from a customer's checking account almost immediately.
A signature-based or deferred debit card has a Visa or MasterCard
logo and removes the purchase price from a customer's bank account
in two or three days.
- Obligations in the form of bonds, loans, notes
or mortgages, owed to another person or institution and required
to be paid by a specified date.
|
| Debt Consolidation |
The replacement of multiple loans with a single
loan, often with a lower monthly payment and a longer repayment period.
It's also called a consolidation loan. |
| Debt-to-income ratio |
The percentage of before-tax earnings that
are spent to pay off loans for obligations such as auto loans, student
loans and credit card balances. Lenders look at two ratios. The front-end
ratio is the percentage of monthly before-tax earnings that are spent
on house payments (including principal, interest, taxes and insurance).
In the back-end ratio, the borrower's other debts are factored in.
|
| Debtor |
Technically, a person who has filed a petition
for relief under the bankruptcy laws. More generally, anyone who owes.
|
| Default |
The condition that occurs when a consumer fails
to fulfill the obligations set out in a loan or lease. |
| Depreciation |
An accounting term that refers to the reduction
in the value of physical assets, such as manufacturing plants and
equipment, through periodic reductions in income. |
| Disability
Insurance |
An insurance policy designed to pay a specified
monthly income to the policyholder in the event that he/she becomes
either temporarily or permanently incapable of working. |
| Discount Broker |
A broker who charges a lower commission for
buy and sell orders than a full-commission broker. Typically, a discount
broker does not give investment advice. |
| Discretionary
Income |
The amount of an individual's income available
for spending after all fixed and necessary expenses (such as food,
clothing and shelter) have been paid. |
| Diversification |
Investing in several different companies in
various industries or in several different types of investments in
order to spread risk. |
| Dow Jones
Industrial Average |
An average of thirty blue chip stocks commonly
used as an indicator of whether the stock market is moving "up"
or "down." |
| Down payment |
An initial, partial payment on a purchase.
|
| Economic Value |
The value of the tasks a family member provides
to the rest of the family. The economic value for a non-working spouse
would be equal to the cost the family would incur to hire someone
to complete the tasks in the absence of the non-working spouse less
the cost of that spouse's personal maintenance. These costs usually
include childcare and housekeeping but may also include transportation,
the cost of eating out more often, tutoring and the like. |
| Emergency
Fund |
An emergency fund is money set aside to allow
you to weather any unexpected events or expenses in your life. Emergency
funds are often used to pay for expenses not incorporated into the
budget such as property losses or medical expenses not covered by
insurance, or living expenses during a period of unemployment. It
is generally recommended that your emergency fund equal three to six
months of your living expenses. |
| Estate Planning |
The process of planning for the efficient transfer
of assets at one's death. Estate planning begins with preparing a
will and may also include naming a power of attorney, establishing
trusts and making pre-death gifts. |
| Estate Tax |
Tax imposed by a state or the federal government
on the transfer of property from a deceased to his/her heirs. |
| Evidence of
Insurability |
Proving that you are a good risk for the insurance
company by answering health and lifestyle related questions and possibly
submitting to a medical exam. |
| Executor |
An individual or institution that is tasked
with the settling of an estate for the deceased. Activities may include
gathering the assets, paying the taxes and distributing the estate
in accordance with the Will. |
| Expense |
An individual's cost or obligation to meet
a need or pay a debt. |
| Face Amount |
The named dollar amount of coverage provided
by a life insurance policy. Generally, for a whole life or term policy,
the face amount is the same as the death benefit - the amount paid
to the named beneficiary upon the insured's death. |
| Final Expenses |
Expenses that occur at the death of an individual
that must be paid before concluding the probate process. Examples
include estate taxes, medical bills, funeral expenses, legal fees,
probate costs, outstanding debts, appraisal fees and the like. |
| Fixed Annuities |
An investment contract offered by an insurance
company that pays a fixed return principal (which may be periodically
adjusted by the insurance company) that is guaranteed by the insurance
company to be repaid at a specified date. Any earnings on the account
remain tax-deferred until the interest is withdrawn from the contract.
The contract can be converted to a guaranteed stream of fixed payments
to the owner, either for life or for a specified period. |
| Fixed Expenses |
Expenses that are set and difficult to change
or minimize. Examples include mortgage payments, car payments, utility
bills, and income and social security taxes. |
| Fixed-Income
Securities |
Investments, primarily bonds and bond funds
that generate a predictable flow of income over a specified period.
|
| Fixed Investment |
A security or investment account that pays
a fixed rate of return. |
| Front-End
Load (Sales Charge) |
A front-end load (or front-end sales charge)
is usually associated with Class A shares of a mutual fund. It is
a sales commission, over and above the net asset value of the shares
purchased, which is charged at the time you purchase shares. It's
computed as a percentage of the dollar amount you're investing. For
example, if you pay a front load of 3% on a $10,000 transaction, $300
of your $10,000 is paid to the mutual fund distributor, and the remaining
$9,700 is used to purchase shares. The fund distributor keeps a small
portion of the sales charge for its services, and the bulk of the
sales charge is paid to the selling broker/dealer firm or financial
institution. The agent selling the funds to you receives a portion
of the sales charge from his/her firm. You can find a listing of the
sales charges you will pay in the front of your fund's prospectus,
or you can ask your broker. |
| Fund Objective |
A fund's primary goal — for example,
current income, capital appreciation or preservation of principal.
|
| Gross Income |
Total personal income before taxes or other
deductions. |
| Growth Stock |
The stock of a corporation whose sales and
earnings are expanding faster than the general economy. |
| Guaranteed
Renewable |
A provision in term insurance contracts that
allows the owner to renew the policy at the end of its term without
evidence of insurability. |
| Health Insurance |
Insurance that covers medical expenses or health
care services. |
| High-grade
Bonds |
Debt securities or bonds with an AAA or AA
rating from an independent rating organization. |
| Homeowners
Insurance |
Insurance that combines liability insurance
and hazard insurance and protects homeowners against property and
casualty damage. |
| Income Stock |
Common stock that pays out a relatively large
portion of earnings as dividends, resulting in a high yield for investors.
|
| Individual
Retirement Account (IRA) |
A tax-favored retirement account that allows
all earners to make contributions (in many cases, tax deductible contributions)
of up to $2,000 a year and defer income tax on the IRA earnings until
distributions are made from the IRA. |
| Inflation |
The general increase in the cost of goods and
services. Inflation is often measured by the Consumer Price Index,
which represents a fixed basket of goods such as food, utilities,
transportation, and medical care. |
| Insurable |
An individual is insurable if he or she is
able to obtain life insurance under the insurance company's underwriting
criteria. Insurability is usually based upon the individual's age,
health, occupation and lifestyle. |
| Insurer Risk |
The risk that an insurance company will be
unable to meet its obligations to policyholders. |
| Interest Rate
Risk |
The risk that a rise in interest rates will
cause the price of bonds to fall. In general, there is an inverse
relationship between interest rates and bond prices so that when interest
rates rise, bond prices fall and vice versa. |
| Investment
Vehicle |
An investment product that usually provides
the investor with a diversified portfolio of securities. Examples
are mutual funds, unit investment trusts and variable annuities. |
| IRC |
The Internal Revenue Code, which is the federal
tax law in the United States. |
| Junk Bonds |
Below investment-grade bonds that provide high
yields with high risk. |
| Large Cap
Funds |
Mutual funds that primarily invest in stocks
of large corporations such as those found in the S&P 500 like
General Electric, Wal-Mart or Microsoft. Large-Cap funds typically
invest in companies with a market capitalization greater than $5 billion.
|
| Leading Economic
Indicators |
A group of economic activity reports that tend
to foretell an upswing in general economic activity. |
| Liabilities |
A financial obligation, debt, or claim against
a person or institution. Simply put, liabilities are the debts you
owe. You subtract your liabilities from the total value of the assets
you own to determine your net worth. Liabilities include your mortgage,
credit card debt, installment and auto loans, loans against a life
insurance policy, students loans and loans against your investments
(such as margin loans with a brokerage firm). Other liabilities include
any taxes you owe -- even taxes you would owe if you sold all of your
investments today. |
| Life Insurance |
An insurance policy that pays a death benefit
to the beneficiaries when the insured dies. |
| Living Trust |
A trust established during the lifetime of
the person creating the trust, rather than under the person's will.
|
| Liquidity |
The ability of an asset to be converted into
cash quickly and without significant loss of value. |
| Load |
A sales charge on the purchase of certain
mutual funds. |
| Long-Term
Care Insurance |
An insurance policy that provides medical and
nursing home benefits for the chronically ill or disabled. |
| Long-Term
Growth of Principal |
Increase in the value of an investment over
a sustained period-typically 12 months or longer. |
| Money Market |
The market for borrowing and lending large
amounts of short-term funds. Money-market instruments include notes,
negotiable certificates of deposit, Treasury bills, and the like.
|
| Money Market
Accounts |
Federally insured accounts (with banks and
other financial institutions) that pay rates established by the bank
based upon money-market yields. Money Market Mutual Funds, however,
are similar to Money Market accounts but are not federally insured.
|
| Money Market
Deposit Accounts |
A highly liquid account offered by banks that
typically provides a higher interest rate than that of a savings account.
The account is FDIC insured and its rate of interest is usually sensitive
to changes in market rates. |
| Money Market Funds |
Mutual funds that invest in money-market instruments.
|
| Money Market
Mutual Fund |
An open-end mutual fund that invests only in
cash or cash equivalents. The fund's net asset value remains a constant
$1 per share, although not guaranteed, and the interest rate fluctuates
with the market. |
| Morningstar |
A mutual fund and variable annuity research
and reporting company. |
| Mortality
Cost |
The amount of money the insurance company charges
(usually monthly) for providing the death benefit in a universal life
policy or a variable universal life policy. |
| Municipal
Bonds |
A bond issued by a state, a municipality, or
a state agency or authority for the purpose of funding some governmental
function, which pays interest that is exempt from federal income tax.
|
| Municipal
Bond Fund |
A mutual fund that invests primarily in bonds
and debt securities issued by states or municipalities. The objective
of most municipal bond funds is to provide current income that is
exempt from federal income taxes while protecting the principal from
decreasing in value. Both the net asset value and the monthly income
can fluctuate with changes in interest rates. |
| Mutual Fund |
An investment company that enables its shareholders
to pool their funds for professional management as a single investment
account. |
| NASDAQ |
The National Association of Securities Dealers
Automated Quotations system is a computerized system where prices
are quoted for many small over the counter (OTC) securities along
with many NYSE listed securities. |
| Net Income |
For an individual, gross income minus expenses.
|
| Net Worth |
Total assets minus total liabilities of an
individual or company. |
| NYSE |
The New York Stock Exchange is the largest
national stock exchange in the U.S. where the securities of large
American companies are bought and sold. The NYSE also maintains regulatory
authority over firms that are members of the exchange. |
| Ordinary Life |
A whole life policy where the premiums are
paid throughout the life of the insured. Also known as "straight
life". |
| Over-the-Counter
Market |
A market for trading stocks not listed on an
exchange. |
| Pension Plan |
A qualified retirement plan established by
a corporation or organization to provide income for its employees
when they retire. |
| Policy Holder |
The individual or entity that owns the life
insurance policy. The Policyholder may be different from the insured.
For example, a grandparent (the Policyholder) may own a life policy
on a grandchild (the insured). |
| Policy Value |
A Universal Life policy's equivalent of a cash
value. The policy value is built by the accumulation of premiums plus
interest less charges for expenses and mortality costs and other risk
charges. In Variable policies, this accumulation depends on the performance
of the underlying assets and not on an interest rate set by the insurance
company. |
| Political
and Legislative Risk |
The risk that governments of many foreign nations
are not as stable as the U.S. and any change in power could affect
the value or ownership rights of that nation's securities. It also
includes the risk that new laws may adversely affect the companies
you invest in, including companies in the U.S. |
| Portfolio |
An individual's or institution's total investment
holdings. |
| Preferred
Stock |
A class of stock that has preference for dividend
payments over the common stock and, in many cases, also for the liquidation
of the company's assets. See common stock. |
| Premium |
The money the owner pays to the insurance company
in order to obtain life insurance protection. |
| Prime Rate |
The base interest rate that commercial banks
charge on loans. |
| Prospectus |
A printed offering to sell a security that
fully discloses relevant information on that security. |
| Recession |
A period of general and sustained economic
decline. |
| Renewal Rate |
The fixed rate the insurance company will pay
after the initial rate period expires. Usually set annually at the
end of each policy year. |
| Return on
Investments |
The money you earn or lose on your investment,
expressed as a percentage of your original investment. |
| Revocable
Trust |
A living trust that the creator of the trust
may amend or end (revoke). See living trust and trust. |
| RISK |
The measurable possibility of economic loss.
There is risk involved if the outcome of an investment is uncertain
at the time the investment is made. Although the outcome is uncertain,
it is measurable. |
| Risk Tolerance |
An investor's ability to withstand declines
in the value of his/her portfolio, financially and emotionally. |
| "Rollover"
IRA |
An IRA (individual retirement account) started
to receive all or part of the taxable portion of an eligible distribution
from a tax-qualified retirement plan. The eligible distribution amount
transferred to the IRA (together with any earnings on that amount
while in the IRA) escape taxation until distributions are made from
the IRA. |
| S&P 500 |
The Standard & Poor's 500 is an index made
up of 500 blue chip stocks. The index is commonly used to measure
stock market performance. |
| Sales Commission |
A fee an investor pays a broker for buying
or selling securities. |
| Securities |
An instrument issued by a corporation or government
that denotes a debt or ownership interest. Stocks and bonds are referred
to as securities. |
| Shares Outstanding
|
The shares of a corporation's stock that have
been issued to the public and are in the hands of investors. |
| Single-Pay
Life |
A whole life policy purchased with one premium
payment. |
| Small Cap
Funds |
Mutual funds that primarily invest in small,
start-up or very specialized companies. Small cap funds typically
invest in companies with a market capitalization greater than $300
million but less than $1 billion. |
| Stock |
Stock represents ownership in a company. The
stock holder's percentage of ownership in the company can be calculated
by dividing the number of shares he or she owns by the total number
of shares outstanding. The value of a stock will fluctuate with the
company's performance and the stock market in general. |
| Stock Dividend |
A dividend paid in stock (or other securities)
rather than in cash. |
| Stock Fund |
A mutual fund that invests in many stocks,
offering investors diversification and professional management. |
| Stock Mutual
Fund |
An investment company that invests primarily
in stocks. The investment objective of most stock funds is growth,
although some funds also have a secondary objective of income. |
| Stock Split |
An allocation of newly issued stock to shareholders
according to their current holdings so that there is no change in
the shareholders' relative ownership positions. A company generally
uses a stock split to reduce its stock's price to what the company
believes will be a more marketable trading level. |
| Surrender
Charge |
The fee an insurance company would assess against
the cash value of a life insurance policy if the owner were to surrender
the policy. The amount of the surrender charge will usually be highest
in the first year of a policy and decreases over time until eventually
it is zero. |
| Surrender
Charge Period |
The number of years during which the insurance
company would charge the owner a fee if the owner chooses to surrender
the contract. |
| Surrender
Charge Schedule |
A schedule illustrating the fee the insurance
company charges for making early withdraws from the annuity contract.
The surrender charge is generally on a sliding scale that decreases
the longer you have owned the annuity. |
| Survivors
|
Individuals, usually family members, who face
emotional and sometimes financial setbacks because of your death.
|
| Tax-Deferred
Investment |
An investment whose income and/or capital gains
are not taxed until they are removed from the investment. Examples
of tax-deferred investments include annuities and the cash value of
life insurance. Tax-deferral can also be accomplished through the
use of IRAs and corporate retirement plans such as 401(k)s. |
| Tax Shelter |
In general, any means used to provide favorable
tax treatment for all or part of an individual's or corporation's
income. More usually, "tax shelter" is an investment device
that generates tax deductions larger than the income from the investment.
|
| Taxable Income |
The amount used in the calculation of an individual's
income tax liability. It is equal to one's income after certain adjustments
have been made and standardized or itemized deductions and personal
exemptions have been deducted. |
| 30-Day Treasury
Bill |
A U.S. government security that matures 30
days after it is issued. They are sold at weekly auctions at a discount
and are redeemed at face value. |
| Treasury Bills |
U.S. government securities that mature (are
redeemed) sooner than one year after issue. They are sold at weekly
auctions at a discount and are redeemed at face value. |
| Treasury Bonds |
U.S. government securities with a maturity
longer than seven years. |
| Treasury Notes |
U.S. government securities that mature between
one and seven years after issue. |
| Trust |
A legal arrangement that one party (the grantor)
uses to transfer assets to a second party (the trustee). The assets
are held and invested for the benefit of one or more third parties
(the beneficiaries). See living trust and revocable trust. |
| Trustee |
The institution or individual that is named
to hold, manage, and distribute a trust's assets. |
| Underwriter |
Makes the determination of who can be insured
and at what rate. |
| Uninsurable |
An individual who is unable to obtain life
insurance coverage due to the high risk he or she represents to the
insurance company. For example, most insurance companies would consider
an individual with a serious life threatening disease to be uninsurable.
|
| U.S. Treasury
Bills |
U.S. government securities that mature (are
redeemed) sooner than one year after issue. They are sold at weekly
auctions at a discount and are redeemed at face value. |
| Value Stocks |
Overlooked or under performing companies that
have a low price to earning ratio (P/E), and are trading at relatively
low prices compared to their earnings. |
| Variable Annuity |
An annuity contract whose growth and subsequent
income payout are based on the performance of the securities held
in the underlying sub-accounts selected by the contract owner. All
income and capital gains produced by the sub-accounts are tax-deferred.
|
| Volatility |
A measure of price stability. An investment
is volatile if its price is subject to wide swings. |
| Waiting Period |
The length of time a disability policy holder
must wait after submitting a claim before disability income benefits
begin. |
| Will |
A legally enforceable document allowing an
individual to direct the distribution of his/her property after death.
|
| Yield |
The interest or dividend payable on a security,
expressed as a percentage of the price of the security. Some investment
advisors also include capital gain as part of the yield. |
| Zero Coupon Bond |
A bond that pays no periodic interest, but
is sold at a deep discount from the face value payable at maturity.
See bond and municipal bond. |
Glossary
Index