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Definition of Equity-based insurance
Life insurance or annuity product in which the cash value and benefit level fluctuate according to the performance of an equity portfolio.
Provides additional financial security should an insured person be dismembered or lose the use of a limb as the result of an accident.
A method of budgeting that develops budgets based on expected activities and cost drivers – see also activity-based costing.
planning approach applying activity drivers to estimate the levels and costs of activities necessary to provide the budgeted quantity and
A method of costing that uses cost pools to accumulate the cost of significant business activities and then assigns the costs from the cost pools to products or services based on cost drivers.
A relatively new method advocated for the
a process using multiple cost drivers to predict and allocate costs to products and services;
A cost allocation system that compiles costs and assigns
a discipline that focuses on the activities incurred during the production/performance process as the way to improve the value received
The discount rate that reflects only the business risks of a project and abstracts from the
Refers to the reduction of debt by regular payments of interest and principal in order to pay off a loan by maturity.
Methods of financing in which lenders and equity investors look principally to the
Loans granted usually by a financial institution where the asset being financed constitutes the sole security given to the lender.
The ratio of total assets to stockholder equity.
an extension of activitybased costing using cost-benefit analysis (based on increased customer utility) to choose the product attribute
The person or party designated to receive proceeds entitled by a benefit. Payment of a benefit is triggered by an event. In the case of credit insurance, the beneficiary will always be the creditor.
Borrower (Credit Insurance)
A consumer who borrows money from a lender.
Bottom-up equity management style
A management style that de-emphasizes the significance of economic
Canadian Deposit Insurance Corporation
Better known as CDIC, this is an organization which insures qualifying deposits and GICs at savings institutions, mainly banks and trust companys, which belong to the CDIC for amounts up to $60,000 and for terms of up to five years. Many types of deposits are not insured, such as mortgage-backed deposits, annuities of duration of more than five years, and mutual funds.
Canadian Life and Health Insurance Association (CLHIA)
An association of most of the life and health insurance companies in Canada that conducts research and compiles information about the life and health insurance industry in Canada.
Child Insurance Rider (CIR)
insurance or insurability provided on current or future children of insured.
In medical insurance, the insured person and the insurer sometimes share the cost of services under a policy in a specified ratio, for example 80% by the insurer and 20% by the insured. By this means, the cost of coverage to the insured is reduced.
Refers to the fact that the merger of two firms decreases the probability of default on
Commercial Business Loan (Credit Insurance)
An agreement between a creditor and a borrower, where the creditor has loaned an amount to the borrower for business purposes.
Common stock/other equity
Value of outstanding common shares at par, plus accumulated retained
An account that reduces an equity account. An example is Treasury stock.
Cost of Equity
Same as the cost of common stock. Sometimes viewed as the
Cost of Insurance
The cost of insuring a particular individual under the policy. It is based on the amount of coverage, as well as the underwriting class, age, sex and tobacco consumption of that individual.
Creditor (Credit Insurance)
A lender or lending institution that offers financing and loans to a borrower, for the purpose of acquiring a commodity.
Critical Illness Insurance
Coverage that provides a lump-sum payment should you be diagnosed with a critical illness and survive a pre-determined period of time. There are no restrictions on how you use your benefit.
Critical Illness Insurance (Credit Insurance)
Coverage that provides a lump-sum payment should you become seriously ill with a specified illness. The payment is made to your creditors to pay off your debt owing.
Dead Peasants Insurance
Also known as "Dead Janitors insurance", this is the practice, where allowed, in several U.S. states, of numerous well known large American Corporations taking out corporate owned life insurance policies on millions of their regular employees, often without the knowledge or consent of those employees. Corporations profiting from the deaths of their employees [and sometimes ex-employees] have attracted adverse publicity because ultimate death benefits are seldom, even partially passed down to surviving families.
Debt (Credit Insurance)
Money, goods or services that someone is obligated to pay someone else in accordance with an expressed or implied agreement. Debt may or may not be secured.
Indicator of financial leverage. Compares assets provided by creditors to assets provided
A comparison of debt to equity in a company's capital structure.
A widely used financial statement ratio to assess the
A common term for convertible bonds because of their equity component and the
insurance that pays you an ongoing income if you become disabled and are unable to pursue employment or business activities. There are limits to how much you can receive based on your pre-disability earnings. Rates will vary based on occupational duties and length of time in a particular industry. This kind of coverage has a waiting period before you can begin collecting benefits, usually 30, 60 or 90 days. The benefit paying period also varies from 2 years to age 65. A short waiting period will cost more that a longer waiting period. As well, a long benefit paying period will cost more than a short benefit paying period.
Disability Insurance (Credit Insurance)
Group insurance designed to cover monthly obligations due to a borrower being unable to work due to sickness or injury.
Dual syndicate equity offering
An international equity placement where the offering is split into two
Represents ownership interest in a firm. Also the residual dollar value of a futures trading account,
Funds raised from shareholders.
Amounts contributed to the company by the owners (contributed capital) plus the residual earnings of the business (retained earnings).
Refers to one of the two basic sources of capital for a business, the
The difference between the total of all recorded assets and liabilities on the balance
Ownership. Common stock represents equity in a corporation.
The net worth of a business, consisting of capital stock, capital (or paid-in) surplus (or retained earnings), and, occasionally, certain net worth reserves. Common equity is that part of the total net worth belonging to the common shareholders. Total equity includes preferred shareholders. The terms common stock, net worth, and common equity are frequently used interchangeably.
The net worth of a company. This represents the ownership interest of the shareholders (common and preferred) of a company. For this reason, shares or stocks are often known as equities.
Refers to the investors percentage ownership of a company that can be re-acquired by the company, usually at a pre-determined amount.
An agreement in which one party, for an upfront premium, agrees to compensate the other at
Also called a residual claim, a claim to a share of earnings after debt obligation have been
The simultaneous purchase of an equity floor and sale of an equity cap.
Equity contribution agreement
An agreement to contribute equity to a project under certain specified
An agreement in which one party agrees to pay the other at specific time periods if a specific
Through equity investment, investors gain part ownership of the corporation. The primary type of equity investment is corporate stock.
Used to refer to warrants because they are usually issued attached to privately placed bonds.
Related: Variable life
Accounting method for an equity security in cases where the investor has sufficient
Total assets divided by total common stockholders' equity; the amount of total assets per
Securities that give the holder the right to buy or sell a specified number of shares of stock, at
An ownership interest in an enterprise, including preferred and common stock.
A swap in which the cash flows that are exchanged are based on the total return on some stock
Those holding shares of the firm's equity.
Errors and Omissions Insurance
insurance coverage purchased by the agent/broker which provides protection against loss incurred by a client because of some negligent act, error, oversight, or omission by the agent/broker.
Securities sold in the Euromarket. That is, securities initially sold to investors
Export Credit Insurance
The granting of insurance to cover the commercial and political risks of selling in foreign markets.
Federal Deposit Insurance Corporation (FDIC)
A federal institution that insures bank deposits.
Federal Insurance Contributions Act of 1935 (FICA)
A federal Act authorizing the government to collect Social Security and Medicare payroll taxes.
Foreign equity market
That portion of the domestic equity market that represents issues floated by foreign companies.
GEMs (growing-equity mortgages)
Mortgages in which annual increases in monthly payments are used to
Group Life Insurance
This is a very common form of life insurance which is found in employee benefit plans and bank mortgage insurance. In employee benefit plans the form of this insurance is usually one year renewable term insurance. The cost of this coverage is based on the average age of everyone in the group. Therefore a group of young people would have inexpensive rates and an older group would have more expensive rates.
Guaranteed insurance contract
A contract promising a stated nominal interest rate over some specific time
Health Insurance Portability and Accountability Act of 1996 (HIPAA)
A federal Act expanding upon many of the insurance reforms created by
insurance that is offered to individuals rather than groups.
In Canada, a general statute that contains most of the insurance law of a common law province, and regulates the conduct of insurers and insurance agents within the province.
A firm licensed to sell insurance to the public.
Insurance Policy (Credit Insurance)
A policy under which the insurance company promises to pay a benefit of the person who is insured.
The law of averages. The average outcome for many independent trials of an experiment
The balance of a margin account. Related: buying on margin, initial margin requirement.
Job Loss Insurance (Credit Insurance)
Coverage that can pay down your debt should you become involuntarily unemployed. The payment is made to your creditors to reduce your debt owing.
Lease (Credit Insurance)
Contract granting use of real estate, equipment or other fixed assets for a specified period of time in exchange for payment. The owner or a leased property is the lessor and the user the lessee.
Lender (Credit Insurance)
Individual or firm that extends money to a borrower with the expectation of being repaid, usually with interest. Lenders create debt in the form of loans. Lenders include financial institutions, leasing companies government lending agencies and automobile dealers.
Level Premium Life Insurance
This is a type of insurance for which the cost is distributed evenly over the premium payment period. The premium remains the same from year to year and is more than actual cost of protection in the earlier years of the policy and less than the actual cost of protection in the later years. The excess paid in the early years builds up a reserve to cover the higher cost in the later years.
Stock in a firm that relies on financial leverage. Holders of leveraged equity face the
insurance that provides protection against an economic loss caused by death of the person insured.
Life Insurance (Credit Insurance)
Group Term life insurance that pays or reduces the balance due on a loan if the borrower dies before the loan is repaid.
Long-term debt to equity ratio
A capitalization ratio comparing long-term debt to shareholders' equity.
Mortgage (Credit Insurance)
An agreement between a creditor and a borrower, where the creditor has loaned an amount to the borrower for purposes of purchasing a loan secured by a home.
Commonly sold in the form of reducing term life insurance by lending institutions, this is life insurance with a death benefit reducing to zero over a specific period of time, usually 20 to 25 years. In most instances, the cost of coverage remains level, while the death benefit continues to decline. Re-stated, the cost of this kind of insurance is actually increasing since less death benefit is paid as the outstanding mortgage balance decreases while the cost remains the same. Lending institutions are the most popular sources for this kind of coverage because it is usually sold during the purchase of a new mortgage. The untrained institution mortgage sales person often gives the impression that this is the only place mortgage insurance can be purchased but it is more efficiently purchased at a lower cost and with more flexibility, directly from traditional life insurance companies. No matter where it is purchased, the reducing term insurance death benefit reduces over a set period of years. Most consumers are up-sizing their residences, not down-sizing, so it is likely that more coverage is required as years pass, rather than less coverage.
Mortgage Life insurance (Credit Insurance)
Decreasing term life insurance that provides a death benefit amount corresponding to the decreasing amount owed on a mortgage.
Refers to the capital invested in a business by its shareowners
The total of all capital contributions and retained earnings on a business’s
Personal Line of credit (Credit Insurance)
A bank's commitment to make loans to a borrower up to a specified maximum during a specific period, usually one year.
A strategy using a leveraged portfolio in the underlying stock to create a synthetic put
Pre-existing medical condition (Credit Insurance)
A medical condition that existed before you became insured. Most policies exclude benefits if the condition is related to the event that triggers a claim if occurs within a certain period (6-12 months) after you became insured.
Preferred equity redemption stock (PERC)
Preferred stock that converts automatically into equity at a
Premium (Credit Insurance)
Annual or monthly amounts payable, by a client, for a selected insurance coverage to insure debt obligations to their creditors are protected.
A budget that allocates funds in line with strategies.
Funds, other than paid-up capital and retained earnings, employed in a business and which will remain in a business as permanent capital.
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