Variable life insurance policy

Similar financial terms

Stochastic variable
A variable whose future value is uncertain.

Variable rate loan
Loan made at an interest rate that fluctuates based on a base interest rate such as the Prime Rate or LIBOR.

Variable rated demand bond
Variable rated demand bond (VRDB) is a floating rate bond that can be sold back periodically to the issuer.

Variable rate CDs
Short-term certificate of deposits that pay interest periodically on roll dates. On each roll date, the coupon on the CD is adjusted to reflect current market rates.

Variable price security
A security, such as stocks or bonds, that sells at a fluctuating, market-determined price.

Variable cost
A cost that is directly proportional to the volume of output produced. When production is zero, the variable cost is equal to zero. A variable is a cost of producing the product which a company sells. It would include such items as materials and labor that go directly into producing the shipped item. Another term for this is direct cost. These costs are usually shown directly under revenues on an income statement as the first costs associated with producing the revenues that are recorded.

Variable annuities
Annuity contracts in which the issuer pays a periodic amount linked to the investment performance of an underlying portfolio.

Variable
A value determined within the context of a model. Also called endogenous variable.

Random variable
A function that assigns a real number to each and every possible outcome of a random experiment.

Normal random variable
A random variable that has a normal probability distribution.

Continuous random variable
A random value that can take any fractional value within specified ranges, as contrasted with a discrete variable.

Variable Price Limit
A price limit schedule, determined by an exchange, that permits variations above or below the normally allowable price movement for any one trading day.

Weighted average life
For amortizing securities, investors do not talk in terms of a bond’s maturity since its principal is made over time. This is because the stated maturity of such securities only identifies when the final principal payment will be made.

Half-life
The point in the life of a mortgage-backed security guaranteed or issued by the Government National Mortgage Association, the Federal National Mortgage Association or the Federal Home Loan Mortgage Corporation, when half the principal has been repaid

Whole life insurance
A contract with both insurance and investment components: (a) It pays off a stated amount upon the death of the insured, and (b) it accumulates a cash value that the policyholder can redeem or borrow against.

Universal life
A whole life insurance product whose investment component pays a competitive interest rate rather than the below-market crediting rate.

Term life insurance
A contract that provides a death benefit but no cash build-up or investment component. The premium remains constant only for a specified term of years, and the policy is usually renewable at the end of each term.

Term insurance
Provides a death benefit only, no build-up of cash value.

Portfolio insurance
A strategy using a leveraged portfolio in the underlying stock to create a synthetic put option. The strategy's goal is to ensure that the value of the portfolio does not fall below a certain level.

Keyman Insurance
Companies often take out insurance policies on essential (i.e. key) managers or employees to protect them against the loss (accidents, death) of such talent. This is referred to as keyman insurance.

Coinsurance effect
Refers to the fact that the merger of two firms decreases the probability of default on either firm's debt.

Coinsurance
An insurance policy under which the policyholder bears a percentage of the loss along with the insurance company.

Insurance
A contract that provides compensation for specific losses in exchange for a periodic payment. An individual contract is known as an insurance policy, and the periodic payment is known as an insurance premium. An insurance contract can be looked upon as an option.

Traditional view (of dividend policy)
An argument that "within reason," investors prefer large dividends to smaller dividends because the dividend is sure but future capital gains are uncertain.

Tax differential view ( of dividend policy)
The view that shareholders prefer capital gains over dividends, and hence low payout ratios, because capital gains are effectively taxed at lower rates than dividends.

Signaling view (on dividend policy)
The argument that dividend changes are important signals to investors about changes in management's expectation about future earnings.

Policy asset allocation
A long-term asset allocation method, in which the investor seeks to assess an appropriate long-term "normal" asset mix that represents an ideal blend of controlled risk and enhanced return.

Perfect market view (of dividend policy)
Analysis of a decision on dividend policy, in a perfect capital market environment, that shows the irrelevance of dividend policy in a perfect capital market.

Monetary policy
Actions taken by the Board of Governors of the Federal Reserve System to influence the money supply or interest rates.

Collection policy
Procedures followed by a firm in attempting to collect accounts receivables.