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Glossary

This glossary is arranged in alphabetical order. Click on a letter in left column or scroll down to search.

< P >

Para-Med (Paramedical) Examination:

The medical examination of an applicant for the purpose of qualifying for a life insurance policy.

Para-Med (Paramedical):

A physician, nurse, or Para-Med appointed by the medical director of a life insurance company to examine applicants.

Premium Flexibility:

The policyholder's right to vary the amount of premium paid each month towards a universal life policy.

Permanent Life Insurance:

A term loosely applied to life insurance policy forms other than Group and Term, usually Cash Value Life Insurance, such as Whole Life Insurance.

Per Stirpes:

Describes the way a bequest is to be divided among a person's issue. Most people want bequests to their children to be divided equally among the children. A per stirpes distribution does this, and also governs what happens if any child has died. If a child has died, his (or her) share is divided among his issue if he has any issue. For example, presume that you have three children (Sue, Sally and John) and that your will provides for a bequest to your children per stir-pes. If all three children survive you, each would get one third of the property. If, however, John has died, his one third share would be divided among his children if he had any, or if he had no living issue his one third share would pass to Sue and Sally.

Policy:

The printed document issued to the policyholder by the company stating the terms of the insurance contract.

Policy Fee:

This is an administrative fee, which is part of most life insurance policies. It ranges from about $40 to as much as $100 per year per policy. It is not a separate fee. It is incorporated in the regular monthly, quarterly, semi-annual or annual payment that you make for your policy. Knowing about this hidden fee is important because some insurance companies offer a policy fee discount on additional policies purchased under certain conditions. Sometimes they reduce the policy fee or waive it altogether on one or more additional policies purchased at the same time and billed to the same address. The rules are slightly different depending on the insurance company. There could be enormous savings if several people in the same family or business were intending to purchase coverage at the same time.

Policyholder:

This is the person who owns a life insurance policy. This is usually the insured person, but it may also be a relative of the insured, a partnership or a corporation. There are instances in marriage break up (or relationship break up with dependent children) where appropriate life insurance on the support provider, owned and paid for by the ex-spouse receiving the support is an acceptable method of ensuring future security.

Policy Conditions:

This is the Provisions in the insurance contract, which state the rights and duties of the insured or insurer.

Policy Limit:

The maximum that the insurance company is obligated to pay in actual claims under an insurance policy. Certain additional costs may also need to be paid.

Policy Provisions:

Statements contained in an insurance policy, which explain the benefits, conditions and other features of the insurance contract.

Policy Date:

In insurance, the date on which coverage becomes effective, as shown in the policy.

Policy Year:

In insurance, that 12-month period extending from one policy anniversary to another.

Policyholder:

The individual or entity that owns the life insurance policy. The Policyholder may different from the insured. it may be a relative of the insured, a partnership or a corporation. For example, a grandparent (the Policyholder) may own a life policy on a grandchild (the insured).

Pooled Income Fund:

Also referred to as a Charitable Remainder Pooled Income Fund). This is a fund much like a mutual fund in which a donor’s assets are pooled with other gifts. Many people make up the fund of the transfers of assets to the fund that receive life income interest in exchange for their transfers, based on the value of the transfer into the fund and based on the income earned by the fund. The donor receives a variable income for his/her lifetime and/or the lifetime of another individual. The payout is determined by the income earned by the fund and will vary over time. The donor claims a charitable deduction in the year of the gift, which is based on the present value of the charitable interest. Because all capital gains are retained by the fund, the donor is not subject to capital gains tax on appreciated securities sold. The trust is managed by the charitable organization, and contributions are partially deductible for income tax purposes.

Portfolio:

The mix and composition of securities owned by an individual or an institution (like a mutual fund) holdings among different classes of securities. These combined holdings are usually made up of a combination of stocks, bonds, mortgages, money market instruments, commodities, collectibles, or real estate investments. An individual investor might have a portfolio that includes several of these investments, while the manager of an equity mutual fund will manage a portfolio that is primarily made up of stocks. A diversified portfolio will have a variety of investments.

Preferred Rates:

As non-smoking rates caused a major reduction in the cost of life insurance in the early 1980's, the emergence of preferred non-smoker rates in 1998 has caused another noteworthy reduction in rates. A growing number of insurance companies are offering better rates, which go beyond simply looking at gender or smoking habits. Other health related factors such as physical build, lifestyle, avocation and personal and family health history indicating longer life expectancy can add up to significant cost savings to new life insurance applicants.

Preferred Stock:

A security that representing shares of a corporation with the distinction that if company earnings are sufficient, and dividends are to be paid, dividends must be first paid to these holders of stock, and that is usually entitled to priority over common stock if the company liquidates. Generally, preferred stocks pay dividends at a fixed rate

Prenuptial Agreement:

A written contract entered into by a couple who intends to marry but want to establish, before the marriage, their rights in the event of death or divorce during marriage. Such a document generally limits a spouse’s rights to property, support, or inheritance upon divorce.

Price/Earnings Ratio: (P/E Ratio)

Price divided by earnings per share. Literally means the ratio of a company's stock price to the trailing twelve months' earnings per share. It expresses the number of years’ earnings (at the current rate), which a buyer is prepared to pay for a share. It is also the standard prism by which Old Economy stock pickers attempt to value or "discount" the future earnings of a company. If the earnings per share are 10 cents and the price 100 cents, then the price earnings ration is 10:1. The ratio is, in fact, the reciprocal of the earnings yield. The higher the P/E ratio a company commands, the higher the expectations for future rates of growth, and the higher the P/E ratio, the more risky and volatile a stock is.

Principal:

The amount of money borrowed to buy your house or the amount of the loan that has not yet been paid back to the lender. This does not include the interest you will pay to borrow that money. Interest is charged as a percentage of the principal. Insurance and origination fees will be deducted from this amount before disbursement. The principal balance (sometimes called the outstanding or unpaid principal balance) is the amount owed on the loan at any given time. It is the original loan amount minus the total repayments of principal you have made to date.

In a security, the principal is the amount of money that is invested, excluding earnings. In a debt instrument such as a bond, it is the face amount.

Probate:

Essentially probate involves an executor filing an inventory (that is, a listing) with the court of the assets and liabilities of the deceased. These filings generally are open for public inspection. However, there are certain types of investments and estate planning documents that are not required to be filed with the court. If privacy is an important factor you may want to consider exploring these opportunities. As these eligible investments will not form part of the probatable assets of the deceased estate – there can be a significant cost saving as well. The cost of the probate process varies, depending on the province and the assets in the estate. Essentially, probate fees are a tax on a person's estate and except for the provinces of Quebec and Alberta, there is no limit to this tax.

Profit-Sharing Plan:

This is an agreement under which employees share in the profits of their employer. The company makes annual contributions to the employees' accounts. These funds usually accumulate tax deferred until the employee retires or leaves the company.

Prospectus:

A document provided by mutual fund companies to prospective investors. It is formal written offer to sell securities that provides an investor with the necessary information to make an informed decision. A prospectus explains a proposed or existing business enterprise and must disclose any material risks and information according to the securities laws. A prospectus must be filed with the SEC and be given to all potential investors. Companies offering securities, mutual funds, and offerings of other investment companies including Business Development Companies are required to issue prospectuses describing their history, investment philosophy or objectives, risk factors and financial statements. The prospectus includes information on the minimum investment amount, the fund's objectives, past performance, risk level, sales charges, management fees, and any other expense information about the fund, as well as a description of the services provided to investors in the fund. Investors should carefully read them prior to investing.

Provisions:

Statements contained in an insurance policy, which explain the benefits, conditions and other features of the insurance contract.

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