What is Deferred Acquisition Costs – DAC?
Typically used in the insurance industry, this is when a company defers the sales costs that are associated with acquiring a new customer over the term of the insurance contract. Read more for examples and further explanation including related video clips and also comments
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Tag: insurance
Bank-Owned Life Insurance – BOLI definition explanation
What is Bank-Owned Life Insurance – BOLI?
A form of life insurance purchased by banks where the bank is the beneficiary, and/or owner. This form of insurance is a tax shelter for the administering bank, as it is a tax-free funding scheme for employee benefits. Read more for examples and further explanation including related video clips and also comments
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Active Retention definition explanation
What is Active Retention?
The practice of protecting against a loss via the designation of specific funds to pay for the expected amount of the loss. This contrasts to passive retention, in which no money is set aside to cover expected losses. Read more for examples and further explanation including related video clips and also comments
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Retrocession definition explanation
What is Retrocession?
1. The practice of one reinsurance company essentially insuring another reinsurance company by accepting business that the other company had agreed to underwrite.
2. The voluntary act of returning ceded property from one group to another. Retrocession can also be the result of a request to have property returned but, by definition, is not the result of a forced transaction.
3. The process of differentiating or diversifying assets by consolidating and then subdividing them amongst a number of stakeholders. Read more for examples and further explanation including related video clips and also comments
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Flipper definition explanation
What is Flipper?
1. A short-term investor or day trader who buys pre-IPO shares, swiftly spinning them out into public markets for a quick profit.
2. A real estate participant who purchases a home, renovates it and sells it for a profit a short time later. Read more for examples and further explanation including related video clips and also comments
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Full Carry definition explanation
What is Full Carry?
A futures market in which the price difference between contracts with two different delivery months equals the full cost of carrying the commodity from the delivery month of the first contract to the next. Carrying costs include interest, insurance and storage. Also known as “”full carry market”” or “”full carrying charge market””. Read more for examples and further explanation including related video clips and also comments
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Insurance Underwriter definition explanation
What is Insurance Underwriter?
A financial professional that evaluates the risks of insuring a particular person or asset and uses that information to set premium pricing for insurance policies. Insurance underwriters are employed by insurance companies to help price life insurance, health insurance, property/casualty insurance and homeowners insurance, among others.
Underwriters use computer programs and actuarial data to determine the likelihood and magnitude of a payout over the life of the policy. Higher-risk individuals and assets will have to pay more in premiums to receive the same level of protection as a (perceived) lower-risk person or asset. Read more for examples and further explanation including related video clips and also comments
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Pure Risk definition explanation
What is Pure Risk?
A category of risk in which loss is the only possible outcome; there is no beneficial result. Pure risk is related to events that are beyond the risk-taker’s control and, therefore, a person cannot consciously take on pure risk.
This is the opposite of speculative risk. Read more for examples and further explanation including related video clips and also comments
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Adjustment Index definition explanation
What is Adjustment Index?
A modification made to a piece of numerical data, or a set of numerical data, by a product of some type of a mathematical formula. There are a number of different types of adjustment indices, ranging in scale and purpose from mortgage rate adjustment to handicapping a golfer’s score. Read more for examples and further explanation including related video clips and also comments
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Separate Account definition explanation
What is Separate Account?
1. A privately managed investment account opened through a brokerage or financial advisor that uses pooled money to buy individual assets.
2. In the context of variable annuities, these are payments made to an insurance company for the purpose of investing in securities. These securities are kept separate from the insurer’s general investments. Read more for examples and further explanation including related video clips and also comments
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