Glossary

The difference between the price at which an asset was purchased and the price for which it was sold. When the sale price is higher than the purchase price, the difference is a capital gain; when the sale price is lower than the purchase price, the difference is a capital loss.

Assets that are most easily converted into cash and which have a very low risk of price fluctuation. For example, money market funds may be considered a cash alternative. Money held in money market funds is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Money market funds seek to preserve the value of your investment at $1.00 a share. However, it is possible to lose money by investing in a money market fund.

The amount a policyholder would receive when voluntarily terminating a cash-value life insurance policy before the insured event occurs or when cashing out an annuity contract before its maturity. Computation of cash surrender value is stated in the life insurance or annuity contract.

A deposit with a bank, thrift institution, or credit union that promises a fixed interest rate on funds deposited for a specified period of time. Bank savings accounts and CDs are FDIC insured up to $250,000 per depositor per institution and generally provide a fixed rate of return, whereas the value of money market mutual funds can fluctuate.

A trust established for the benefit of a charitable organization under which the charitable organization receives payment of a specified amount (at least annually) from the trust. On the death of the grantor, remainder interest in the trust passes to his or her heirs. Using a trust involves a complex set of tax rules and regulations. Before moving forward with a trust, consider working with a professional who is familiar with the rules and regulations.

A trust established for the benefit of a charitable organization under which the grantor can designate an income beneficiary to receive payment of a specified amount—at least annually—from the trust. The grantor may also be the income beneficiary. On the death of the grantor, remainder interest in the trust passes to the charitable organization. Using a trust involves a complex set of tax rules and regulations. Before moving forward with a trust, consider working with a professional who is familiar with the rules and regulations.

A request for payment under the terms of an insurance policy.

A federal law that requires group health plans sponsored by employers with more than 20 employees to offer terminated or retired employees the opportunity to continue their health insurance coverage for a specified period at the employees’ expense.

A policy provision under which an insurance company and the insured party share the total cost of covered medical services after the policy’s deductible has been met.

An unsecured, short-term debt security issued by a corporation to finance short-term liabilities. These notes are normally backed only by the issuing corporation’s promise to pay the face amount on the maturity date specified on the note, which is usually less than six months.