Flashcards
Coverage that is offered to an employee (and often his or her family) by an employer.
In a joint account there are two or more individuals who possess power over the account. Joint accounts must be designated as either tenants in common or joint tenants with right of survivorship.
A joint and last survivor life annuity is an annuity that pays until the last party dies. After the death of the first party, the payments will continue for the lifetime of the survivor, usually at a reduced rate.
This payout option covers two or more lives, and pays an amount monthly until the last party dies.
A life insurance policy that covers two insureds and pays when the last party dies.
A life insurance policy that covers two insureds and pays when the first party dies.
Joint tenants in common is an ownership designation where two or more individuals hold fractional interests in an undivided asset. At the death of one of the tenants, the decedent’s interest passes to his or her heirs, not to the other tenants, going through the probate process. The asset may be owned unequally.
Joint tenants with right of survivorship is an ownership designation whereby the entire asset is owned by two or more individuals equally. At the death of one of the tenants, the decedent’s interest passes to the survivor(s), avoiding probate.
Junk bonds are also called high yield bonds. They are bonds issued by issuers that have poor credit ratings. Junk bonds are risky bonds.
Life insurance covering the lives of children who are within specific age limits, generally under parental control.
Qualified retirement plan for the self-employed.
A Keogh plan is a qualified tax-deferred retirement plan for persons who are self-employed and unincorporated or who earn extra income through personal services aside from their regular employment. Keoghs are also called HR 10 plans.
Key person life insurance is purchased by the business on a company executive. The policy is owned by the business. Key person life insurance would pay the face amount to the business if the key person dies. Premiums paid for key person life insurance are not tax-deductible to the business since it is a policy that benefits the business. Life insurance proceeds are not taxable.
Keynesian economists believe that active government intervention in the market is best for strengthening the economy.
FINRA rule 2090, Know Your Customer, requires firms to use reasonable diligence in regard to the opening and maintenance of every account, and to know the essential facts concerning every customer. The know your customer obligation arises at the beginning of the customer-broker relationship and does not depend on whether or not the broker has made a recommendation. Essential facts include those required to; effectively service the customer’s account, act in accordance with any special handling instructions for the account, understand the authority of each person acting on behalf of the customer, and comply with applicable laws, regulations, and rules.
A lagging economic indicator will take 3-12 months to change after the economy has entered a new phase. Lagging indicators include the duration of unemployment and corporate profits.
The rate at which life insurance policies terminate because of failure to pay the premiums. When policies lapse before enough premium payments are made to cover early policy expenses, the company must make up this loss from remaining policyholders. Therefore, the lapse rate will affect the cost of the policy.
In general, a group health plan that covers employees of an employer that has 51 or more employees. In some states, large groups are defined as 101 or more.
Last in, first out is an accounting method in which the assets sold are assigned a cost basis from the most recent purchases, generally resulting in the smallest gain, thus the smallest tax bill due.
The law of large numbers is a statistical concept that calculates the average number of events or risks in a sample or population to predict something. The larger the population is calculated, the more accurate the predictions. In the field of insurance, the Law of Large Numbers is used to predict the risk of loss or claims of some participants so that the premium can be calculated appropriately.
Leading economic indicators change 3-12 months before the economic cycle changes. They predict where the economy is heading. Building permits, new orders for durable goods, and initial unemployment claims are all leading indicators.
Regardless of the type of municipal bond issued, the bond must be accompanied by a legal opinion of counsel. The opinion of counsel affirms that the issue is a municipal issue and that interest is exempt from federal taxation, among other items.
For an insurance policy to be a legal contract it must include four elements. C – O – A – L. L stands for legal purpose and capacity. The policy must be purchased for a legal purpose and the owner must be the age of majority in the state and of sound mind.
The amount of policy reserves (cash on hand) required under state insurance laws.
Legislative risk is the risk that tax law could change.
A letter of intent allows the investor to qualify for the reduced sales charge currently by promising to invest an amount qualifying for a breakpoint within 13 months from the date of the letter. The letter is a unilateral agreement; the client is not bound to the terms of the letter. A letter of intent may be back-dated up to 90 days, leaving 10 months going forward. Shares will be held in an escrow account to pay the additional sales charge owed if the client does not fulfill the letter of intent. Reinvested dividends and capital gains distributions do not count toward a letter of intent.
Leverage financing is the process of raising capital through the sale of bonds. Leverage is the use of borrowed funds for investment. A highly leveraged company would represent a type of financial risk to the client.
A liability is money owed. Current liabilities include monies owed in the next 12 months. Long-term liabilities are those owed in over one year.
Liability coverage protects individuals and businesses from financial loss if they’re found legally responsible (liable) for causing bodily injury or property damage to a “third party” (someone other than the insured or insurer). It pays for legal fees, medical bills, and settlements when negligence leads to harm, covering common incidents like slip-and-falls (premises liability), auto accidents, or faulty products/work (product/operations liability).
For more than 40 years, the London Interbank Offered Rate—commonly known as LIBOR—was a key benchmark for setting the interest rates charged on adjustable-rate loans, mortgages, and corporate debt. LIBOR was set each day by collecting estimates from up to 18 global banks on the interest rates they would charge for different loan maturities, given their outlook on local economic conditions. LIBOR was based upon estimates, not actual transactions. Over the last decade, LIBOR has been burdened by scandals and crises. LIBOR has been replaced by the Secured Overnight Financing Rate (SOFR), which many experts consider a more accurate and more secure pricing benchmark.
Required for an insurance producer (agent) to legally engage in the business of insurance in a state. Issued for a period of time, states will require a fee and many require continuing education to be completed to renew a license.
A life annuity is a type of annuity that pays the annuitant monthly, until death. A life annuity has the highest risk to the annuitant, thus it will pay the highest monthly payment. There is no beneficiary on a life annuity. Life annuities are also called life only or straight life annuities.
A life annuity with a period certain has a guarantee that payments will continue for a set number of years. If the annuitant dies before the set period has expired, payments will be made to a beneficiary for its duration.
The probability of an individual living to a certain age according to a particular mortality table. This is the beginning point in calculating the pure cost of life insurance and annuities and is reflected in the basic premium.
Insurance against loss due to the death of the named insured. If the insured dies during the policy period, the insurer agrees to pay a stated death benefit to the policy’s beneficiary.
A cap on the total lifetime benefits you may get from an insurance company. An insurance company may impose a total lifetime dollar limit on benefits (like a $1 million lifetime cap) or limits on specific benefits (like a $200,000 lifetime cap on organ transplants or one gastric bypass per lifetime) or a combination of the two. After a lifetime limit is reached, the insurance plan will no longer pay for covered services.
A limit order is an order to buy or sell at stock at a certain price or better. Limits are orders that are away from the current market price and as such, they are held on the books of the specialist (designated market maker). Open buy limits are below the current market price, and open sell limits are above the current market price. Limit orders can be good for the day or good ‘til canceled. Limit orders never become market orders.
An LLC is a business entity that is recognized at the state level but is not recognized by the IRS. An LLC has one or more members. An LLC is a pass-through entity that provides members with limited liability.
A limited partner, also called a subscriber, is an investor in a limited partnership. Limited partners have no say in how the partnership is managed. Limited partners have limited liability, they can lose whatever they have invested as well as any amount related to a recourse note. Limited partners receive form K-1 with their portion of profits or losses that flow through onto their individual tax returns.
A limited partnership is a form of business with one or more general partners and one or more limited partners. The general partners have unlimited liability. The limited partners have limited liability. It is a flow through tax entity that files Form 1065, as an information return only.
The limited partnership agreement spells out the responsibilities of the partners.
A limited pay whole life policy is a whole life policy that has a shortened premium pay-in period.
A limited power of attorney grants a third party limited trading authority. It allows a person other than the account owner to place trades in the account, but they cannot withdraw money or securities. Often referred to as a limited trading authorization.
Limits of liability are the maximum amounts an insurer will pay for covered damages or losses, capping financial responsibility for events like accidents or property harm. These limits are crucial for managing risk, often structured as per-occurrence (for a single event) and aggregate (total for a policy period), protecting both the policyholder from huge payouts (beyond the limit, you pay out-of-pocket) and the insurer from unlimited financial exposure, defining coverage for bodily injury, property damage, and legal fees.
Liquidation is the process of redeeming mutual fund shares. Also called redemption. Liquidation can also refer to the process of settling debts after a corporate bankruptcy.
In the event of a corporate liquidation who gets paid when is the liquidation priority. Secured creditors are paid first, then unsecured creditors (back wages, taxes, and debentures), preferred stock, common stock, and lastly foreign investors.
Liquidity refers to how easily can an asset be turned into cash.
Liquidity risk is the risk that the asset may not be easily sold. Liquidity risk is also referred to as marketability risk. Direct participation programs (DPPs) have the greatest liquidity risk since they do not trade in the secondary market.
Listed securities are those securities that meet the requirements to be listed on one of the national securities exchanges. There are many nationally registered securities exchanges in the United States. Listing requirements vary amongst the different exchanges. The three exchanges that conduct the largest volume of trades in the United States include the NASDAQ Stock Market, the NYSE, and the BATS Exchange.
Livestock coverage is designated for horses and other farm animals if they are damaged or destroyed. The insurance includes registered cattle and herds, other farm livestock, and zoo animals. This type of insurance protects the farmer or rancher against the premature death of animals resulting from natural causes, fire, lightning, accidents, act of God, acts of individuals other than the owner or employees, and destruction for humane purposes.