Insurance Learning Center

Acceleration Clause

A loan provision that allows a lender, according to the terms of a mortgage or other loan contract, to make the entire unpaid balance of the loan (including principal and interest) due and payable if specified events of default should occur. Such conditions include failure to meet loan payments on time, insolvency, and nonpayment of taxes on mortgaged property.
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Accelerated Death Benefit Rider (ADB)

A rider added to a life insurance policy to protect the insured against financial loss in the event of a terminal illness. An ADB makes living benefits payable to the insured for medical expenses prior to death. Accelerated (or living) benefits paid reduce the death benefit payable to the beneficiary(ies) upon death.
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Accidental Death Insurance

Insurance that provides coverage in the event of death due to accidental injuries, but not illness. In the event of death, payment is made to the insured's beneficiary. If bodily injury occurs (e.g., the loss of a limb), the insured receives a sum specified by the contract. This coverage is usually used in combination with dismemberment insurance.
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Accrued Benefit

Pension benefits earned (vested) based on years of service at a company and credited to the employee using an actuarial method.
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Actual Cash Value

A common clause in property insurance contracts that determines the coverage amount based on the fair market value of an item at the time it was damaged, stolen, or destroyed.
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Actuary

A specialist in the mathematics of risk, especially as it relates to insurance calculations such as expectancy, premiums, dividends, and annuity rates.
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Additions and Alterations

Improvements made to a home (e.g., a new bathroom or a remodeled kitchen) that increase the home's value and that may require additional homeowners insurance coverage.
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Adjuster

Individual employed by a property/casualty insurance company to settle claims brought by insureds. The adjuster evaluates each claim and then makes recommendations to the insurance company.
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Adjusted Gross Estate

For estate tax purposes, gross taxable estate minus expenses and losses.
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Adjusted Gross Income

For federal income tax purposes, gross income less adjustments (e.g., IRA deductible contributions, self-employment health insurance deductions, etc.), but before standard or itemized deductions and personal exemptions.
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Adjustment Period

For adjustable-rate loans, the period of time between interest rate changes. For example, a mortgage with an adjustment period of one year is called a one-year ARM, and the interest rate can change once each year.
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Administrator

An individual or professional organization, such as a bank's trust department, appointed by the probate court to administer an estate when the owner dies without having made a will or without nominating an executor. An executor may also be appointed if the named executor declines to serve.
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Alien

An individual who is not a citizen or national of the United States. Aliens are further defined as resident or nonresident depending on the situation.
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Alimony

Support payable to a divorced spouse as required by a divorce decree or legal separation agreement. Payments are deductible by the payor and are taxable income to the payee.
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All-Risk

A type of homeowners insurance that covers losses resulting from each and every peril, except for those specifically excluded by the policy. Also known as open peril coverage.
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Alternate Payee

According to the terms of a qualified domestic relations order (QDRO), an individual who has been granted the right to receive all or part of a participant's benefits under a qualified retirement plan. The alternate payee is generally a spouse, former spouse, child, or other dependent of the qualified plan participant.
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Alternate Valuation Date

For federal estate tax purposes, the value of the gross estate six months after the date of death, or, if the assets are disposed of within those six months, as of the date of disposition. The alternate valuation date election can be used only if the value of the gross estate declines.
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Alternative Minimum Tax (AMT)

A federal tax aimed at guaranteeing that individuals, trusts, estates, and corporations pay a minimum amount of income tax, preventing them from taking full advantage of exemptions and other tax benefits that would otherwise allow them to pay little or no income tax.
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Amortization

For loan purposes, the systematic process by which a lender calculates loan payments so as to liquidate a debt over time. Payments are made at specific time intervals to reduce the outstanding debt to zero at the end of the loan period.
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Annual Gift Tax Exclusion

An IRS provision that allows you to give $10,000 per year (1999 figure, indexed for inflation thereafter) to an unlimited number of donees (persons or organizations) without incurring gift or estate tax.
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Annuity

A contract sold by life insurance companies that offers tax-deferred accumulation of earnings and various distribution options such as partial withdrawals, full surrender or a guaranteed income called annuitization. An annuitization option is one that pays a fixed or variable payment to the contract owner, either for a fixed number of years or for life.
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Annuity Payments

Periodic payments made to an annuitant or to the annuitant's designated beneficiary. The payments may be made on an annual, semiannual, quarterly, or monthly basis, and may last for life or for a specified period. Moreover, depending on whether the annuity in question is a fixed annuity or a variable annuity, the annuitant (or his/her beneficiary) may receive either payments of a fixed dollar amount or payments that vary in amount according to the value of the underlying securities.
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Appraisal

A professional, formal, written estimation of the value of property.
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Appreciation

Increase over time in the value of an asset such as a stock, bond, commodity, or real estate.
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Arrearage

Amount of any past due obligation. This term is used to refer to the amount of interest on bonds or dividends on cumulative preferred stock that is due and unpaid.
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Assets

Property owned by a business, institution, or individual, such as cash, investments, personal property, real estate, and ownership in a business, that has a present market value or worth.
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Asset Protection Allowance

Used when calculating the expected family contribution as part of the federal student aid application process, this allowance permits a family to exempt certain assets from consideration when determining need.
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Assigned Risk Plan

Automobile insurance in which individuals who cannot obtain conventional liability coverage because of their poor driving records are placed in a residual market with insurance companies assigned to write policies for them at higher prices. These plans protect motorists who suffer injury or property damage through the negligence of bad drivers who otherwise would not have insurance.
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Assignee

The party to whom an assignment (a transfer of property or rights to property) has been granted.
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Association Plan

A group insurance policy purchased by an association or organization to provide coverage for its members.
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At-Risk

Property and assets exposed to the danger of loss.
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At-Risk Rules

Tax laws that apply to any activity carried on as a trade or business or for production of income. In general, financial losses from such activities are only allowable as tax deductions to the extent of the taxpayer's actual financial risk from the activity. Losses that exceed the 'at-risk' amount are not deductible.
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Attach

To seize property and/or assets, or to obtain a legal writ granting the right to seize the property and/or assets. This usually occurs when an individual has outstanding debt, is financially unable to pay the debt in cash, and has property/assets of sufficient value to cover the amount of the debt.
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Attained Age

A person's age at any point in time, determined for life insurance purposes, often expressed as the age reached at the last birthday.
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Attorney-in-Fact

A person designated of a durable power of attorney to act as the agent for the principal (creator).
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