Glossary of Terms

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Capital gain (or loss)
The gain (or loss) resulting from the sale of a capital asset in relation to its purchase price or value at the time of acquisition.

Capital gains tax
A provision in the federal income tax law that previously subjected profits from the sale of capital assets to less tax than would be required for ordinary income.

Capitalization
The act or process of converting (obtaining the present worth of) future incomes into current equivalent capital value.

Capital needs analysis
A capital conservation method of total needs selling, showing how future financial needs can be met from the economic value and income-producing capabilities of current and future assets.

Capital sum
In health insurance, the amount provided for the loss of life, or of two bodily members (such as arms or legs), or the sight of both eyes, or the loss of any two members and/or eyes. Indemnities for loss of one member of the sight of one eye are usually percentages of the capital sum. Often used interchangeably with principal sum or accidental death benefit.

Carrier
In insurance, another term for insurer, used because the insurance company assumes or carries the risk for its policyowners.

Cash basis of accounting
A method of accounting that recognizes revenue only when cash is actually received and expenses only when they are paid.

Cash value
The equity amount available to the policy owner when a life insurance policy is surrendered to the company, or the amount upon which the total available for a policy loan is determined. During the early policy years in a traditional whole life policy, the cash value is the reserve less a surrender charge; in the later policy years, the cash surrender value usually equals or closely approximates the reserve value.

Casualty insurance
Most insurance except life (including personal accident), marine and, sometimes, fire. It is principally concerned with insurance against loss due to legal liability to third persons. Accident and sickness insurance was originally considered a part of casualty insurance and is still so classified by many states.

Claim
A policyowner's request or demand on the insurance company for payment of benefits according to the provisions of a policy.

Cognitor
An agent appointed to act for another in an action.

Coinsurance
A health insurance principle under which the company insures only part of the potential loss, with the insured paying the other part. For instance, in a major medical policy, the company may agree to pay 75 percent of the insured's expenses, the insured to pay the other 25 percent. Most commonly used as synonymous with risk-sharing or loss-sharing. The coinsurance provision states that the insurance company and the policyowner will share covered losses.

Compound interest
Interest earned on interest. Interest earned on principal over a given period that is then added to the original principal to become the new principal upon which interest is earned during the new period, and so on, from period to period.

Comprehensive coverage
Protection under one insurance agreement that covers all hazards within the general scope of the contract, except those specifically excluded.

Compulsory health insurance
Plans of insurance under the supervision of a state or federal government, providing protection for medical, hospital, surgical, and disability benefits to all who qualify.

Date of maturity
The stipulated date upon which a debt must be paid. The term is usually applied to those debts evidenced by a written agreement, such as a note, bond, etc. Also, the date upon which a life insurance policy endows if the insured is still living.

Deferred annuity
A life annuity contract in which the first payment is not paid to the annuitant until after a specified number of years or until the annuitant attains a specified age. Deferred annuities may be purchased either on the single premium or annual premium basis. Annual premium deferred annuities are usually known as retirement annuities.

Defined contribution plan
A tax-qualified retirement plan in which annual contributions are determined by a contribution formula set forth in the plan. The benefits paid to a participant vary with the amount of contributions made on his or her behalf and with the length of service under the plan.

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