Glossary

A contract under which two or more individuals manage and operate a business venture.

A class of life insurance policies that do not expire—as long as premiums are kept current—and which combine a death benefit with a savings component. This savings portion can accumulate a cash value against which the policy owner may be able to borrow funds. Several factors will affect the cost and availability of life insurance, including age, health and the type and amount of insurance purchased. Life insurance policies have expenses, including mortality and other charges. If a policy is surrendered prematurely, the policyholder also may pay surrender charges and have income tax implications. You should consider determining whether you are insurable before implementing a strategy involving life insurance. Any guarantees associated with a policy are dependent on the ability of the issuing insurance company to continue making claim payments.

A loan made by an insurance company to a policyholder. Policy loans are secured by the cash value of a life insurance policy. Withdrawals of earnings are fully taxable at ordinary income tax rates. If you are under age 59½ when you make the withdrawal, you may also be subject to a 10% federal income tax penalty. Also, withdrawals may reduce the benefits and value of the contract.

A provision to a life insurance policy that is purchased separately from the basic policy and that provides additional benefits at additional cost.

The person or entity who holds an insurance policy; usually the client in whose name an insurance policy is written.

The combined investments of an individual investor or mutual fund.

A legal document that grants one person authority to act for another person in specific legal or financial matters in the event that said individual becomes incapacitated.

Securities that represent ownership in a corporation and have a higher claim on a company’s assets and earnings than common stock. Dividends on preferred stock are generally paid out before dividends to common stockholders.

A contract entered into by those contemplating marriage that sets forth how their individual property will be divided should they ultimately divorce.

A ratio calculated by dividing a stock’s price by its earnings per share. Investors use this ratio to learn how much they are paying for a company’s earnings.