Glossary of Terms

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Legal capacity
The ability to enter into a legal contract, i.e. being of legal age, sane, not a convict or enemy alien. Only such an individual is considered a legally competent party.

Life insurance trust
A trust for the purpose of distributing life insurance proceeds. Life insurance companies usually cannot act as trustees or guardians, nor exercise discretion in making payments to beneficiaries. In some cases, it is advisable to have policy proceeds paid to a designated trustee and distributed under the terms of a trust agreement, thereby permitting greater flexibility in the distribution of the proceeds. Such an arrangement constitutes an unfunded life insurance trust. Under a funded life insurance trust, the trustee is given not only control over the policy proceeds but also securities or other property to provide funds out of which to pay the premiums.

Liquidation
The using up of a fund previously created; the conversion of holdings into cash.

Liquidity
Health care centers that stress preventive health care, early diagnosis, and treatment on an outpatient basis. An organized system of health care delivery and financing that provides a broad range of services to a voluntarily enrolled group for a fixed and periodic payment. The HMO participant pays a flat annual premium and is entitled to medical check-ups and routine health care, plus major medical coverage.

Living trust
A trust created to take effect during the lifetime of the grantor; also called an inter vivos trust.

Locked-in vesting
That form of vesting in a contributory pension plan under which the participant may not withdraw contributions after benefits attributable to employer contributions have vested, except possibly upon disability or with tax penalty.

Market price
With respect to assets (stocks, bonds, debentures, real estate, etc.) the price actually paid or the price considered to be obtainable in the open market under current conditions.

Market value
The value of assets (stocks, bonds, debentures, real estate, etc.) based on a current market valuation.

Mature
In life insurance, the time when a policy becomes payable. A whole life policy matures upon the death of the insured or when its cash value equals its cash value (usually at age 100). In either case the face amount becomes payable. Also, the status of a bond when it reaches the date on which it is redeemable for its full maturity value.

Medicaid
A joint state and federal welfare program, administered by states and subsidized by federal government grants, under which specified medical expenses are paid for low income, needy people who qualify. Generally, those who qualify are persons whose income and resources are below the limits set by state law. Technically referred to as Title XIX benefits because Medicaid is the 19th addition to the 1935 Social Security Act.

Medicare
Title XVIII to the Social Security Act, a federally financed plan of medical expense health insurance for persons who qualify, primarily those over age 65. Part A, Medicare Basic Hospital Insurance, is completely paid by the federal government out of mandatory payroll taxes for social security. Benefits are predominantly hospitalization daily room and board coverage and some home health care provision. Part B, Supplemental Medical Insurance, is financed equally by the recipient and by the federal government. Benefits are similar to a basic medical plan with some surgical coverage, equipment rental, etc.

Medicare Supplement Insurance (Medigap)
Private insurance issued to fill in coverage gaps not met by Medicare.

Mortgage insurance
One of the basic uses for life insurance, so called because many family income earners leave insurance for the specific purpose of paying off any mortgage balance outstanding at their death. Many companies have designed special policies for this purpose. Insurance is generally made payable to a family beneficiary instead of to the mortgagee.

MSA
A Medical Savings Account or MSA is a combination of a high deductible health insurance policy and a separate savings account. Congress created the MSA as another way to cover your medical expenses, and it is subject to IRS regulations and guidelines.

Mutual fund
An investment company that raises money by selling its own shares to the public and investing the proceeds in other equities and/or securities, with the value of its shares fluctuating with the investment experience of its portfolio. Investment companies are of two types: (1) open-end, commonly called mutual funds, in which capitalization is not fixed and more shares may be sold at any time, and (2) closed-end, in which capitalization is fixed and only the number of shares originally authorized may be sold.

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