A Account Statement Summary of all transactions that have taken place during a particular time period between a broker/dealer and you. Usually mailed to you on a monthly basis. Foreign Account Statement Foreign Summary of all transactions that have taken place during a particular time period between a broker/dealer and you. Usually mailed to you on a monthly basis. Activities of Daily Living A list of activities, normally including mobility, dressing, bathing, toileting, transferring and eating which are used to assess degree of impairment and determine eligibility form some type of insurance benefits Age Limits Stipulated minimum and maximum ages below and above which an insurance company will not accept applications or may not renew policies. Agent An insurance company representative, licensed by the state, who solicits, negotiates or effects contracts of insurance, and provides service to the policyholder for the insurance company. Also known as an insurance broker. Annual Report The yearly record of a publicly held company's financial condition. It typically includes a description of the firm's operations, as well as its balance sheet, income statement and cash flow. It is required to be distributed to all clients. Annuitant The person during whose life an annuity is payable, usually the person to receive the annuity. Annuity A contract that provides an income for a specified period of time, such as a number of years or for life. Annuity Certain A contract that provides an income for a specified number of years, regardless of life or death. Application A signed statement of facts made by a person applying for life insurance and then used by the insurance company to decide whether or not to issue a policy. The application becomes part of the insurance contract when the policy is issued. Assignment The legal transfer of one person's interest in an insurance policy to another person. Average Maturity The average time it takes fixed income securities (bonds, notes etc.) held by a mutual fund to mature. Changes in interest rates have a greater impact on funds with a longer average life. B Basis Cost The price an investor pays for a security plus any out-of-pocket expenses. It is used to determine capital gains or losses, for tax purposes, when a stock is sold. Basis Points This refers to the yield on bonds. Each percentage point of yield equals 100 basis points. If a bond yield changes from 7.25% to 7.39%, that is an increase of 14 basis points. Bear An investor who believes that a stock or the overall market will decline. Bear Market A bear market is a prolonged period of falling stock prices, usually by 20% or more. Benefits The amount payable by the insurance company to a claimant, assignee or beneficiary under each coverage Binder A written or oral contract issued temporarily to place insurance in force when it is not possible to issue a new policy or endorse the existing policy immediately. A binder is subject to the premium and all the terms of the policy to be issued. Binding Receipt A receipt given for a premium payment accompanying the application for insurance. If the policy is approved, this binds the company to make the policy effective from the date of the receipt. Bond A long term promissory note in which the issuer agrees to pay the owner the amount of the face value on a future date and to pay interest at a specified rate at regular intervals. Broker An investment professional that is licensed with an SEC and NASD registered securities broker/dealer and is licensed to sell a variety of securities products for which he/she earns a commission. There are two primary levels of securities license: Series 6, which allows a registered representative to sell variable life, variable annuities, and mutual funds. Series 7 which allows the registered representative to sell variable life, variable annuities, mutual funds, stocks, bonds, unit investment trusts (UITs) and other types of securities. Bull Market A market that is on a consistently upward trend. C Capital Gain The profit realized on the sale of securities. Amount of money made when a security is sold for more than the seller originally paid for it. Capital Loss The loss realized on the sale of securities. Amount of money lost when a security is sold for less than the seller originally paid for it. Cash and Equivalents The value of assets that can be converted into cash immediately, as reported by a company. Cash Dividend The amount paid in cash to a company's shareholders. The amount is normally taxable as income. A cash distribution may include capital gains and return of capital in addition to the dividend. Cash Flow In investments, in represents earnings before depreciation amortization and non-cash charges. Sometimes call cash earnings. Cash Surrender Value The amount available in cash upon voluntary termination of a policy by its owner before it becomes payable by death or maturity. Chartered Financial Consultant (ChFC) An individual who has attained a higher degree of technical competency in the fields of financial planning, investments, life & health insurance and has passed 10 professional examinations administered by The American College and is expected to abide by a code of ethics. Chartered Life Underwriter (CLU) An individual who has attained a high degree of technical competency in the fields of life and health insurance and who is expected to abide by a code of ethics. Must have a minimum of 3 years of experience in life or health insurance sales and have passed 10 professional examinations administered by The American College. Churning Excessive trading of a client's account in order to increase the broker's commissions. Commission The part of an insurance premium paid by the insurer to an agent or broker for their services in procuring and servicing the insurance. Commission The fee paid to a broker to execute a trade, based on the number of shares, bonds, options and/or their dollar value. Common Stock/Other Equity Value of outstanding common shares at par, plus accumulated retained earnings. Conditional Receipt A receipt given for premium payments accompanying an application for insurance. If the application is approved as applied for, the coverage is effective as of the date of the prepayment of the date on which the last of the underwriting requirements, such as a medical examination, has been fulfilled. Confirmation The written statement that follows any "trade" in the securities markets. Confirmation is issued immediately after a trade is executed. It includes such information as settlement date, terms, commission, etc. Contract A binding agreement between two or more parties for the doing or not doing of certain things. A contract of insurance is embodied in a written document called the policy. Contract Holder The group, entity or person to whom a group annuity contract is issued. Convertible Term Insurance Term insurance that can be exchanged, at the option of the policyholder and without evidence of insurability, for another plan of insurance. Corporate Bond Debt instrument (i.e. promissory note) issued by a corporation to raise money for its business purposes (acquisitions, capital investment, cash flow purposes, etc.). The interest is taxable by the Federal government, state government and local government, if applicable. Cost-of-Living Rider Benefit that can be added to a life insurance policy under which the policy owner can purchase one-year term insurance equal to the percentage change in the consumer price index with no evidence of insurability. D Death Benefit A payment made to a designated beneficiary upon the death of the insured. Deferred Annuity An annuity providing for the income payments to begin at some specified future date. Deferred Compensation Arrangements by which compensation to employees for past or current services is postponed until some future date. Defined Benefit Plan A pension plan stating either (1) the benefits to be received by employees after retirement or (2) the method of determining such benefits. Defined Contribution Plan A plan under which the contribution rate is fixed and benefits to be received by employees after retirement depend to some extent upon the contributions and their earnings. Demutualization The process of changing the legal structure of an insurance company from a mutual form of ownership (owned by policyholders) to a stock form of ownership (owned by stockholders) Disability A physical or mental impairment that substantially limits one or more major life activities of an individual. See also Partial Disability and Total Disability. Disability Income Insurance A form of health insurance that provides periodic payments to replace income when an insured person is unable to work as a result of illness, injury or disease. Dividend Distribution of a portion of a company's earnings, cash flow or capital to shareholders in cash or additional stock E Earnings Net income for the company during a specific period. Elimination Period A specified number of days at the beginning of each period of disability during which no disability income benefits are paid. The elimination period may be as short as a few days or as long as one year or more. Endorsements An additional piece of paper, not a part of the original contract, which cites certain terms and which, when attached to the original contract, becomes a legal part of that contract. Evidence of Insurability Any statement of proof of a person's physical condition and/or other factual information affecting his/her acceptance for insurance. Exchange The marketplace in which shares, options and futures on stocks, bonds commodities and indices are traded. Principal US stock exchanges are New York Stock Exchange (NYSE), American Stock Exchange (AMEX). While not an exchange, the National Association of Securities Dealers Automated Quotation (NASDAQ) is a national market system. Exclusions Specific conditions or circumstances listed in the policy for which the policy will not provide benefit payments. F Face Amount The amount stated on the face of the policy that will be paid in case of death or at the maturity of the policy. It does not include additional amounts payable under accidental death or other special provisions, or acquired through the application of policy dividends. Fixed Amount Option Life insurance settlement option in which the policy proceeds are paid out in fixed amounts. Fixed Annuity Annuity whose periodic payment is a guaranteed fixed amount. Flexible Premium Policy or Annuity A life accident policy or annuity under which the policyholder or contract holder may vary the amounts or timing of premium payments. Flexible Premium Variable Life Insurance A life insurance policy that combines the premium flexibility feature of universal life insurance with the equity-based benefit feature of variable life insurance. G Good Til Cancelled This means an order to buy or sell stock that is good until you cancel it. Sometimes called "GTC". Brokerages usually set a limit of 30-60 days, at which time the GTC will expire if not restated. Grace Period A specified period after a premium payment is due, in which the policyholder may make such payment, and during which the protection of the policy continues. Group Annuity A contract providing annuities at retirement to a group of people under a master contract. It is usually issued to an employer for the benefit of employees. The individual members of the group hold certificates as evidence of their annuities. Group Life Insurance Life insurance usually without medical examination, on a group of people under a master policy. It is typically issued to an employer for the benefit of employees, or to members of an association, for example a professional membership group. The individual members of the group hold certificates as evidence of their insurance. Guaranteed Renewable Contract A contract that the insured has the right to continue in force by the timely payment of premiums (1) until at least age 50 or (2) in the case of policy issued after age 44 for at least five years from its date of issue, during which period the insurer has no right to make unilaterally any change in any provision of the contract while the contract is in force, except that the insurer may make changes in premium rate by classes. I Immediate Annuity An annuity providing for payment to begin immediately. Incontestability Life policies provide that, except for non-payment of premiums and certain other circumstances, the policy shall be incontestable after the policy has been in force for two years during the lifetime of the insured. Individual Insurance Policies that provide protection to the policyholder and/or his/her family. Sometimes called personal insurance as distinct from group and blanket insurance. Individual Retirement Account (IRA) An account to which an individual can make contributions for retirement on a tax-favored basis. Contributions to a standard IRA are tax deductible for many workers; contributions to a Roth IRA are made with after-tax dollars, but can be withdrawn tax-free at retirement. Inheritance Tax A tax on the right on an heir to receive property at the death of another. Initial Public Offering (IPO) A company's first sale of stock to the public. Investors purchasing stock in IPOs generally must be prepared to accept very large risks for the possibility of large gains. Inspection Report A report (usually written) of an investigation of an applicant, conducted by an independent agency that specializes in insurance investigations. The report covers such matters as occupation, financial status, health history and moral problems. Insurability Acceptability to the company of an application for insurance. Insurance A system under which individuals, businesses and other organizations or entities, in exchange for payment of a sum of money (a premium), are guaranteed compensation for losses resulting from certain perils under specified conditions. Protection by written contract against the financial hazards (in whole or in part) of the happenings of specified injurious events. Insurance Broker An insurance company representative, licensed by the state, who solicits, negotiates or effects contracts of insurance, and provides service to the policyholder for the insurance company. Also known as an agent. Insurance Company An organization chartered to operate as an insurer. Any corporation primarily engaged in the business of furnishing insurance protection to the public. Insured A person or organization covered by an insurance policy, including the "named insured" and any other parties for whom protection is provided under the policy terms. Irrevocable Beneficiary Beneficiary designation allowing no change to be made in the beneficiary of an insurance policy without the beneficiary's consent. Irrevocable Trust A trust in which the creator does not reserve the right to reacquire the trust property. J Joint Tenants With Rights of Survivorship A form of joint account ownership with rights of survivorship, i.e. in which the survivors automatically own the share of a deceased co-owner. K Key Person Insurance Insurance designed to protect a business firm against the loss of income resulting from the death or disability of a key employee. L Lapse The termination or discontinuance of an insurance policy due to non-payment of a premium. Level Premium A premium that remains unchanged throughout the life of a policy. Level Premium Life Insurance Life insurance for which the premium remains the same from year to year. Life Annuity A series of payments under which payments, once begun, continue throughout the remaining lifetime of the annuitant but not beyond. Life Expectancy The average number of years of life remaining for a group of persons of a given age according to a particular mortality table. Life Income Option Life insurance settlement option in which the policy proceeds are paid during the lifetime of the beneficiary. A certain number of guaranteed payments may also be payable. Life Insurance Insurance providing for payment of a specified amount on the insured's death, either to his or her estate or to a designated beneficiary; or in the case of an endowment policy, to the policyholder at a specified date. Lifetime Disability Benefit A benefit to help replace income lost by an insured person as long as he/she is totally disabled, even for a lifetime. Living Benefits Rider A rider that allows insureds who are terminally ill or who suffer from certain catastrophic diseases to collect part of their life insurance benefits before they die, primarily to pay for the care they require. Load Fund A mutual fund with shares sold at a price including a sales charge-typically 4% to 8% of the net amount invested. A load implies that the fund purchaser receives some investment advice or other service worthy of the charge. Long-Term Care The continuum of broad-ranged maintenance and health services to the chronically ill, disabled or retarded. Services may be provided on an inpatient (rehabilitation facility, nursing home, mental hospital), outpatient or at-home basis. Long-Term Disability Income Insurance Insurance issued to an employer (group) or individual to provide a reasonable replacement of a portion of an employee's earned income lost through serious and prolonged illness or injury during the normal work career. M Market Order An order to buy or sell stock at the going (or market) price. Misrepresentation A false, incorrect, improper or incomplete statement of a material fact, made in the application for a policy. Money Market Fund A mutual fund that invests only in short-term securities, such as bankers' acceptances, commercial paper, repurchase agreements and government bills. The net asset value per share is maintained at $1. Such funds are generally not federally insured. Mortality Table A statistical table showing the death rate at each age usually expressed as so many per thousand. Municipal Bond Bonds issued by states, cities, counties, and towns to fund public capital projects like roads, schools, sanitation facilities, bridges, as well as operating budgets. These bonds are exempt from federal taxation and from state and local taxes for the investors who reside in the state where the bond is issued. Mutual Fund (Open-end) An open-end investment company that pools investors' money to invest in a variety of stocks, bonds or other securities. A mutual fund issues and redeems shares to meet demand. The redemption value per share is the net asset value per share less, in some cases, a redemption fee, which represents a rear-end load. These funds are sold by prospectus. Mutual Insurance Company An insurance company in which the ownership and control is vested in the policyholders and a portion of surplus earnings may return to policyholders in the form of dividends. No capital stock exists. N National Association of Securities Dealers (NASD) The self-regulatory agency, which oversees all registered broker dealers in the United States who are members of it. Net Asset Value (NAV) The value of a fund's investments. Usually represents the fund's market price, subject to any sales or redemption charges. No-Load Fund An open-end investment company in which shares are sold without a sales charge. There can be other distribution charges, such as 12-b1 fees. A true "no load" fund will have neither a sales charge nor a distribution fee. Noncancellable A contract that the insured has the right to continue in force by the timely payments of premiums set forth in the contract (1) until at least age 50 or (2) in the case of a policy issued after age 44 for at least 5 years from its date of issue, during which period the insurer has not right not make unilaterally any change in any provision of the contract while the contract is in force. Nonforfeiture Option One of the choices available if the policyholder discontinues premium payments on a policy with a cash value. This, if any, may be taken in cash, as extended term insurance or as reduced paid-up insurance. Nonparticipating Insurance Plan of insurance under which the policyholder is not entitled to share in the dividend distribution of the company. O Ordinary Life Insurance Life insurance usually issued in amount of $1,000 or more with premiums payable on an annual, semiannual, quarterly or monthly basis. Also called Whole Life or Straight Life. Applied to a type of policy that continues during the whole of the insured's life and provides for the payment of amount insured at the insured's death. Overhead Insurance A type of short-term disability income insurance that reimburses the insured person for specified, fixed monthly expenses, normal and customary in the operation and conduct of his/her business or office. P Partial Disability The result of an illness or injury that prevents an insured from performing one or more of the functions of his/her regular job. Provides for the payment of reduced monthly income in the event the insured cannot work full time and/or is prevented from performing one or more important daily duties pertaining to his/her occupation. Participating Insurance Insurance issued by an insurance company providing participation in dividend distribution. Permanent Life Insurance A phrase used to cover any form of life insurance except Term; generally insurance that accrues cash value, such as whole life or endowment. Policy The printed legal document stating the terms of the insurance contract that is issued to the policyholder by the company. The legal document issued by the company to the policyholder, which outlines the conditions and terms of the insurance; also called the policy contract or the contract. Policy Dividend A refund of part of the premium on a participating life insurance policy reflecting the difference between the premium charged and actual experience. Policy Loan A loan made by a life insurance company from its general funds to a policyholder on the security of the cash value of a policy. Policyholder A person who pays a premium to an insurance company in exchange for the insurance protection provided by a policy of insurance. Preferred Stock A security that shows ownership in a corporation and gives the holder a claim, prior to the claim of common stockholders, on earnings and generally on assets in the event of liquidation. This stock does not usually carry voting rights. Premium The sum paid by a policyholder to keep an insurance policy in force. Prospectus Formal written document associated with a new issue that describes the plan for a proposed business enterprise, or the facts concerning an existing business enterprise that an investor needs to make an informed decision. A prospectus is used by mutual funds to describe the fund's objectives, risks and other essential information. Proxy A document that is intended to provide shareholders with information necessary to vote in an informed manner on matters to be brought up at a stockholders meeting. R Rated Policy Sometimes called an "extra-risk" policy, an insurance policy issued at a higher-than-standard premium rate to cover the extra risk, where, for example, an insured has impaired health or a hazardous occupation. Rebating Giving any valuable consideration, usually all or part of the commission, to the prospect or insured as an inducement to buy or renew. Rebating is prohibited by law in almost all states. Registered Investment Advisor (RIA) A person or entity that has registered with the SEC or a State who represents their clients' interests and offers advice and guidance to their clients. They are compensated by way of an advisory fee, based on the amount of assets a client holds or a fee for given advice. The RIA is not paid a commission, as is a traditional broker. Registered Representative (Broker) An investment professional that is licensed with an SEC and NASD-approved securities broker/dealer and is licensed to sell a variety of securities products for which they earn a commission. There are two primary levels of securities license: Series 6 which allows a registered representative to sell mutual funds, variable life & variable annuities, and Series 7 which allows the registered representative to sell variable life, variable annuities, mutual funds, stocks, bonds, unit investment trusts (UITs) and other types of securities. Also known as a broker. Renewable Term Insurance Term insurance that can be renewed at the end of the term, at the option of the policyholder and without evidence of insurability, for a limited number of successive terms. The rates increase at each renewal as the age of the insured increases. Renewal Continuance of coverage under a policy beyond its original term by the insurer's acceptance of the premium for a new policy. Rollover Transfer of IRA or other qualified pension funds from one financial institution (trustee) to another. Roth IRA A special type of IRA to which an individual can make contributions with after-tax dollars. Funds can be withdrawn tax-free at retirement. S Sales Charge The fee charged by a mutual fund when purchasing shares, usually payable as a commission to a marketing agent, such as a broker dealer, who is compensated for his assistance to the purchaser. It represents the difference, if any, between the share purchase price and the share net asset value. Secondary Market Provides for the purchase or sale of previously owned securities. Most trading is done in the secondary market. The New York Stock Exchange, as well as all other stock exchanges, bond markets, etc. are secondary markets. Securities and Exchange Commission (SEC) The primary federal regulatory agency of the securities industry. Separate Account An asset account established by a life insurance company separate from other funds, used primarily for pension plans and variable life products. This arrangement permits wider latitude in the choice of investments, particularly in equities. Settlement Date The date on which payment is made to settle a trade. For stocks traded on U.S exchanges, the most common settlement is 3 business days after the trade (regular way). There are other types of settlement. Settlement Options The several ways, other than immediate payment in cash, which a policyholder or beneficiary may choose to have policy benefits paid. Shares Certificates or book entries representing ownership in a corporation or similar entity. Stock Insurance Company A company organized and owned by stockholders, as distinguished from the mutual form of company organization that is owned by its policyholders. Legal ownership and control is vested in the stockholders. Stock Series An instrument that signifies an ownership position in a corporation. T Ten Day Free Look A notice on the first page of a policy that the insured has 10 days in which to examine the policy and returned it for a refund of premium if he/she is not satisfied with the policy. 10-K A comprehensive annual report required by the SEC each year from publicly registered entities. Must be filed within 90 days after fiscal year end. A 10Q report is filed quarterly. Term Insurance Life insurance payable to a beneficiary only when an insured dies within a specified period. Life or health insurance protection during a limited number of years but expiring without value if the insured survives the stated period. Total Disability An illness or injury that prevents an insured person from continuously performing every duty pertaining to his/her occupation or engaging in any other type of work. The actual wording of this definition varies among insurance companies. Trade A verbal or electronic transaction involving one party buying a security from another party. Once a trade is consummated, it is considered "done" or final. Settlement occurs 1-3 days later (depending if trade is for stock or mutual fund) Trade Date The date on which a trade occurs. Trades generally settle (are paid for) 1-3 business days after a trade date (1 day for mutual funds, 3 days for stocks). Treasury Bond A debt instrument (i.e. IOU) issued by the Federal government to meet its cash flow needs between tax collection dates and to cover cash flow deficits caused by governmental spending which exceeds tax receipts. The interest is taxable by the Federal government. Trust A legal instrument allowing one party to control property for the benefit of another. 12B-1 Fees The percent of a mutual fund's assets used to defray marketing and distribution expenses. The amount of this fee is stated in the fund's prospectus. The SEC has proposed that 12b1 fees in excess of 0.25% be classified as a "load". A true "no load" fund has neither a sales charge nor a 12b1 fee. Twisting The practice of inducing, by misrepresentation or inaccurate or incomplete comparison, a policyholder in one company to lapse, forfeit or surrender his/her insurance for the purpose of taking out a policy in another company. U Uninsurable Risk One not acceptable for insurance due to excessive risk. Unit Investment Trust A registered investment company that buys and holds a relatively fixed portfolio of stocks, bonds or other securities. "Units" in the trust are sold to investors (unitholders) who receive a share of principal and interest or dividends. Universal Life Insurance A flexible premium life insurance policy under which the policyholder may change the death benefit from time to time (with satisfactory evidence of insurability for increases) and vary the amount or timing or premium payments. Premiums (less expense charges) are credited to a policy account from which mortality charges are deducted and to which interest is credited at a rate that may change from time to time. V Variable Annuity A retirement vehicle issued commonly by life insurance companies. Your money can be invested in professionally managed portfolios, with the value varying over time, depending on the performance of the portfolios into which your money was invested. They are tax deferred, as you do not pay taxes on the earnings until you withdraw the money. It also provides a death benefit. Variable Life Insurance Life insurance under which the benefits relate to the value of assets behind the contract at the time the benefit is paid. The insured has a choice of funds into which they can invest (referred to as separate accounts) The amount of death benefit payable would never be less than the initial death benefit payable under the policy. W Watch List A list of securities selected for special surveillance by a brokerage, exchange, regulatory organization or broker-dealer. Firms on the list are often takeover targets, companies planning to issue new securities or stock showing unusually high activity. Whole Life Insurance Life insurance payable to a beneficiary at the death of the insured whenever that occurs. Premiums may be payable for a specified number of years (limited payment life) or for life (straight life). Will The legal statement of a person's wishes concerning the disposal of his or her property after death. Y Yield The percentage rate of return paid on a stock in the form of dividends or the rate of interest paid on a bond or note. Yield to Call The percentage rate of a bond or note, if you were to buy and hold the security until the call date. This yield is valid only if the security is called prior to maturity. Yield to Maturity The percentage rate of return paid on a bond, note or other fixed income security if you buy and hold it to its maturity date.