Flashcards

The date on which an insurance policy becomes effective.

The effective date is the date that the registration of an issue of securities becomes effective with the SEC. Shares of a new issue can be sold as of the effective date.

The effective tax rate is the overall tax rate paid by a taxpayer. The effective tax rate will always be less than the marginal tax rate.

The efficient market hypothesis has three forms: weak, semi-strong, and strong. In the weak form, fundamental analysis may produce excess returns. In the semi-strong form, trading on inside information may work to produce excess returns. In the strong form, there is no way to beat the market, it is best to build a broadly diversified portfolio and invest for the long run.

The EMMA website is funded and operated by the Municipal Securities Rulemaking Board (MSRB), the self-regulatory organization charged by Congress with promoting a fair and efficient municipal securities market. The SEC designated the EMMA website as the official repository for municipal securities disclosures in 2009. EMMA houses hundreds of thousands of municipal disclosure documents that provide information about municipal securities. These include offering documents, called official statements, for most new offerings of municipal bonds, notes, 529 savings plans, ABLE programs, and other municipal securities issued since 1990. EMMA also provides access to advance refunding documents, which detail arrangements made when new bonds are issued to establish escrows to pay off existing bonds (usually to refinance the old debt at a lower interest rate). Also available are continuing disclosure documents that describe material information throughout the life of a bond and must be provided by municipal bond issuers.

There are four elements required to have a legal contract: C – O – A – L. Consideration, offer, acceptance, and legal purpose and capacity.

Not all risks are insurable. Pure risk involves no chance of gain. Pure risk is insurable. Speculative risk, like gambling, involves a chance of gain or chance of loss. Speculative risk is not insurable.

The elimination period, or waiting period, is the amount of time that a person is unable to work before the coverage kicks in. The elimination period begins when the person meets the policy’s definition of totally disabled. The longer the elimination period, the lower the premium.

Employee stock options are designed to align the employee’s interests with those of the company by allowing the employee to buy shares of the company’s stock at specific prices, over time. Employee stock options may be qualified (incentive) or non-qualified.

The entire contract is admissible in court. The entire contract includes the policy and anything else attached at issue, such as the application and any riders. The entire contract clause protects both the insurer and the insured. No changes may be made to the policy after issuance unless both parties agree to the change.

With ESG investing a set of standards for a company’s operations is used to screen investments. ESG investing is a form of socially conscious investing.

An equipment trust certificate is a type of secured bond. It is backed by rolling stock, such as airplanes, fleet vehicles, or railroad cars. The title to the equipment is held by a trustee until the company pays off the bonds.

Stock (common or preferred) is sold to individuals and institutions. In return for the money paid, the individual or institution receives an ownership interest in the corporation.

An equity indexed annuity is a type of annuity issued by an insurance company. An equity indexed annuity has a minimum interest rate that it promises to pay to the annuitant, commonly referred to as the floor. It also has a cap rate, which is the most it can earn. Equity indexed annuities have a participation rate as well. The participation rate describes how much of the earnings of the index the account will be credited with and varies by insurance company and product offered. An equity indexed annuity is not considered a security. The only license required to sell an equity indexed annuity is a life insurance license.  This product is best for moderate and conservative investors. It has higher fees than a mutual fund.

A fixed deferred annuity that combines a minimum guaranteed interest rate with the ability to be credited with additional earnings depending upon the performance of an index.

A type of professional liability insurance that protects an insurance producer from claims arising from services provided (or those not provided). E&O does not cover criminal acts.

A set of 10 categories of services health insurance plans must cover under the Affordable Care Act. These include doctors’ services, inpatient and outpatient hospital care, prescription drug coverage, pregnancy and childbirth, mental health services, and more. Some plans cover more services. All plans must offer dental coverage for children. Dental benefits for adults are optional. Specific services may vary based on each state’s requirements.

The quantity of wealth or property at an individual’s death.

Due within 9 months of a person’s death, estate tax is only owed on the amount over the current year’s estate tax exclusion. When a married person dies their assets pass in their entirety to the surviving spouse. Estate taxes are not due until the death of the second spouse (if owed at all).

A Eurobond is a long-term bond that is issued by either a government or corporation that is denominated in the currency of the issuer, but sold in another country.

Eurodollars are U.S. dollars that are held in banks that are outside of the United States.

European style options can only be exercised at expiration, if in the money.

A statement or proof of your health, finances, or job, which helps the insurer decide if you are an acceptable risk for life insurance.

The ex-dividend date is the date that the stock trades without the dividend attached. The price of the security is reduced by the amount of the dividend on the ex-date. Normally the ex-dividend date is the business day before the record date.

The exchange privilege is the right of an investor who has invested in one fund to transfer to another fund under the same management without incurring an additional sales charge.  The exchange is considered a sale and repurchase under the tax code.

An exchange traded fund (ETF) is a type of investment company that may track an index or may be actively managed. The ETF trades in the secondary market, at the market price, which may be more, less, or equal to the value of the underlying assets. ETFs may be shorted, purchased on margin, and may even have options that are written on them.

Health care services that a health insurance plan doesn’t pay for or cover.

An exclusion is an event (peril, accident, occupation, avocation) that an insurance policy will not cover.

The exclusion allowance is the amount of money that the employer may withhold for the employee for the purchase of a (TSA) 403b tax-sheltered annuity.

Executive bonus life insurance is a type of group life insurance product offered to individuals in C-suite positions, such as chief executives, operations executives, or chief financial officers. Executive bonus life insurance enables a business to provide life insurance to a given key employee or high-performance employees in a tax-advantaged way. The premium paid by the business for executive bonus life insurance is tax deductible so long as the bonus is considered reasonable compensation. The policy is owned by the executive. The key employee names the beneficiary and can access the policy’s cash value.

The executor is the person named in a will to settle the financial affairs and distribute the assets of a deceased person.

An exempt security is a security that may be sold without registration, it is exempt from the Securities Act of 1933 and/or the Uniform Securities Act. U.S. Government securities and municipal securities are both exempt securities. Exempt securities are not required to file sales and advertising materials.

: An exempt transaction is a transaction that does not require registration or the filing of a registration statement. Exempt transactions include private placements, fiduciary transactions, unsolicited transactions, and institutional transactions.

Exercise limits for options are the same as the stock’s position limits, so they will vary depending on the capitalization of the company and the volume of shares traded in the past six months. For the largest stocks, no more than 250,000 contracts of the same class may be exercised within 5 consecutive business days.

The exercise price is the price found in an option contract or a warrant. On a call, the owner can buy shares from the seller at the exercise price. On a put, the owner can sell shares to the seller at the exercise price. The exercise price is also known as the strike price.

An expansion is also called a recovery. During an expansion, there is growth in the economy. It is one of the four phases of the business cycle. Expansions are followed by a peak and preceded by a trough.

Expansionary monetary policies are designed to grow the economy (get the economy out of a contraction). Expansionary policies include lowering interest rates, lowering banks’ reserve requirements, and buying U.S. government bonds. Expansionary policies increase the money supply and are used to fight deflation.

Your policy’s share of the company’s operating costs; fees for medical examinations and inspection reports, underwriting, printing costs, commissions, advertising, agency expenses, premium taxes, salaries, rent, etc. Such costs are important in determining dividends and premium rates.

The expense guarantee is part of a variable annuity contract that guarantees that the amount of the net annuity payment will not be reduced by increased operating expenses of the company.

The expense ratio of a mutual fund takes the fund’s operating expenses divided by the net asset value of the fund. Actively managed funds have higher expense ratios than index funds due to the higher management fee paid to the investment adviser.

Monthly equity, index, and cash-settled currency options expire on the third Friday of the expiration month.

: In 2016 NASAA adopted The Model Act to Protect Vulnerable Adults from Financial Exploitation. The Act gives industry participants and state regulators new tools to help detect and prevent the financial exploitation of vulnerable adults.

In insurance, exposure is a measure of the potential risk faced by an insurance company as a result of their normal business operations—namely, selling insurance policies. When an insurer sells a policy, they must cover insured losses that fall within the terms and conditions of coverage.

Express authority in insurance refers to the explicit powers and permissions granted to an agent (producer) through a written agreement. It outlines the agent’s scope of authority and activities they are authorized to undertake on behalf of the insurer.

One of the three non-forfeiture options. Extended term may be chosen by the insured. It is the automatic option when a life insurance policy with cash value has lapsed and the insurer has not heard otherwise from the owner. The extended term policy will have the same face amount as the original whole life insurance policy. How long the term is will be a function of how much cash value was there, as well as the age, and gender of the insured.

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.

Face-amount certificate companies are a type of investment company. The FACC issue certificates, usually purchased on an installment basis at a discount, that mature after a period of years for the face amount.

The Act (Title VI of the Consumer Credit Protection Act) protects information collected by consumer reporting agencies such as credit bureaus, medical information companies, and tenant screening services. Information in a consumer report cannot be provided to anyone who does not have a purpose specified in the Act.

Misstating an insurance company’s financial position is an unfair trade practice.

False or deceptive advertising is an unfair trade practice.