Insurance Terms

Partial Disability

Inability of the insured to perform one or more of the important daily duties of his or her regular occupation. The income payment to the insured is reduced from that of total disability.
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Payee

An insured individual or a beneficiary who receives a loss or benefit payment from an insurer.
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Payment Cap

A contractual limit on the percentage amount of adjustment allowed in the monthly payment for an adjustable rate mortgage (ARM) in any one adjustment period.
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Peril

A specific cause of loss. Common examples include fire, flood, earthquake, vandalism, and theft.
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Permanent

In the insurance context, permanent life insurance is ordinary life insurance such as whole life--as opposed to term life insurance which expires unless renewed at the end of each term.
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Permanent and Total Disability

A disability in which a wage earner is forever prevented from working because of injury or illness suffered.
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Permanent Resident Alien

A citizen of another country living in the United States who has been granted permanent resident status in the U.S. but is not a US citizen.
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Personal Earnings and Benefit Estimate Statement (PEBES)

A statement generated by the Social Security Administration containing a complete earnings history, estimate of benefits for early retirement, full retirement and benefits at age 70, and an estimate of disability benefits. Also included in this statement are estimates of benefits payable to spouse and children in the event of the worker's retirement, disability, or death.
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Personal Liability Insurance

Part of a standard homeowners policy that covers financial losses you suffer when you accidentally cause bodily injuries to others or damage to their property.
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Personal Property

For homeowners insurance purposes, this term generally includes all the contents of your household (e.g., furniture, jewelry, knickknacks, etc.). Coverage for personal property is automatically set at 50 percent of your coverage limit for your house, unless you choose to raise your coverage. This coverage is generally subject to a deductible.
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Personal Representative

The person named by the court to handle an estate if no executor is named in the will, or if an executor declines to serve. This individual is responsible for filing tax returns on behalf of the estate.
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Points

Prepaid fees, often used to decrease the interest rate on a mortgage, or to induce lenders to make a mortgage loan. One point equals one percent of the loan principal. Points have the effect of reducing the amount of money advanced by the lender. Mortgage lenders commonly charge one point as a loan origination fee. Additional points may be charged to raise the loan yield to current market interest rates.
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Policy Basis

The amount of the policyholder's investment in a life insurance policy reduced by any dividends and any cash value withdrawals.
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Policy Loan

The amount that the owner of a life insurance policy can borrow, at an interest rate set by the company, from the insurer up to the cash surrender value. If interest is not paid when due it is deducted from any remaining cash value. At the death of the policyholder any outstanding policy loans and interest due are subtracted from the death benefit.
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Policy Period

Time period during which an insurance policy is in force.
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Post Mortem

After death.
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Power of Attorney

A written document that authorizes an individual to perform certain acts on behalf of the person signing the document. The document, which must be witnessed by a notary public or some other public officer, may bestow either full power of attorney or limited power of attorney and it becomes void upon the death of the signer.
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Preexisting Condition

An illness or medical condition for which a person was treated or advised within a specified time period before applying for a life or health insurance policy. A preexisting condition can result in the cancellation of the policy if it is not disclosed up front.
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Preferred Risk

An insured or applicant for insurance who has a lower expectation of incurring a loss than the standard applicant and can obtain favorable premiums.
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Preferred Stock

A special class of capital stock that pays dividends at a specified rate and that has preference over common stock in the payment of dividends and the liquidation of assets. It typically doesn't entitle holders to voting rights, although it may be converted to common stock with voting rights.
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Premium

The payment required for an insurance policy to remain in force.
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Present Value

Value today of a future payment, or stream of payments, discounted at some appropriate compound interest or discount rate.
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Presumptive Disabilities

The assumption of total disability when an insured loses sight, hearing, speech, or a limb.
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Primary Insurance Amount (PIA)

The monthly benefit payable to a retired or disabled worker under Social Security that is calculated using the average monthly earnings of the covered person while working.
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Principal

The amount borrowed or unpaid on a loan.
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Principal Residence

The home that a taxpayer lives in most of the time during the taxable year.
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Private Letter Ruling

The response or interpretation issued by the Internal Revenue Service to a specific taxpayer or taxpayers about a specific question on tax law or a request for an interpretation of the tax code.
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Probate

The court-supervised process of administering a will.
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Probate Estate

Property that passes to beneficiaries according to the terms of a will.
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Probated

Refers to a will that has gone through the legal process of probate and thereby determined by a court to be either valid or invalid. Once the probate process is complete and the will proven valid, the property in the estate can be distributed according to the terms of the will. In current usage, the term 'probate' has been expanded to generally include all matters and proceedings relating to the administration of to estates, guardianships, etc.
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Promissory Note

A written promise committing the borrower to pay the lender a specified sum of money either on demand or at a fixed or determinable future date, with or without interest. Instruments meeting this criteria are generally negotiable.
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Property Damage Liability Coverage

Part of a standard auto insurance policy that covers you (up to the policy limit) for losses that result when you damage or destroy someone else's personal property. This is required coverage in most states.
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Prospectus

A formal written offer to sell securities that sets forth the plan for a proposed business enterprise or the facts concerning an existing one that an investor needs in order to make an informed decision.
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Provisions

Words, sentences, and paragraphs in an insurance contract that specify the terms and limitations of the policy as well as the rights and obligations of the insured and the insurer.
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Proximate Cause

In property/casualty insurance, the cause of a loss whereby that cause, the loss itself, and all intervening events form an unbroken chain.
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Public Offering

The offering to the investment public of new securities, after registration requirements of the Securities and Exchange commission (SEC) have been complied with, at a public offering price agreed upon by the issuer and the investment bankers.
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Pure Insurance

The difference between the face amount of a life insurance policy and and its cash value.
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