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Mortgages – A Guide to Calculations and Requirements

Determining a course of Action

Insurance:
Insurance provides protection against financial losses that may result from unforeseen circumstances. It helps mitigate risks by transferring the potential burden of financial loss to an insurance company. Different types of insurance exist to cover various aspects of life, such as health, life, auto, home, and disability. Online platforms make it convenient to research, compare, and purchase insurance policies. However, it’s crucial to carefully review the terms, coverage limits, and exclusions of any policy you consider. Consulting with a qualified insurance professional can provide additional guidance based on your specific needs.

Insurance:
Insurance provides protection against financial losses that may result from unforeseen circumstances. It helps mitigate risks by transferring the potential burden of financial loss to an insurance company. Different types of insurance exist to cover various aspects of life, such as health, life, auto, home, and disability. Online platforms make it convenient to research, compare, and purchase insurance policies. However, it’s crucial to carefully review the terms, coverage limits, and exclusions of any policy you consider. Consulting with a qualified insurance professional can provide additional guidance based on your specific needs.

PROFESSIONAL LIABILITY INSURANCE
Covers professionals for negligence and er- rors or omissions that injure their clients.
PROOF OF LOSS
Documents showing the insurance com- pany that a loss occurred.
PROPERTY/CASUALTY INSURANCE
Covers damage to or loss of policyholders’ property and legal liability for damages caused to other people or their property. Property/casualty insurance, which in- cludes auto, homeowners and commercial insurance, is one segment of the insurance industry. The other sector is life/health.
Outside the United States, property/casu- alty insurance is referred to as nonlife or general insurance.
PROPERTY/CASUALTY INSURANCE CYCLE
Industry business cycle with recurrent periods of hard and soft market condi- tions. In the 1950s and 1960s, cycles were regular with three year periods each of hard and soft market conditions in almost all lines of property/casualty insurance. Since then they have been less regular and less frequent.
PROPOSITION 103
A November 1988 California ballot initiative that called for a statewide auto insurance rate rollback and for rates to be based more on driving records and less on geographical location. The initiative changed many aspects of the state’s insur-
ance system and was the subject of lawsuits for more than a decade.
PURCHASING GROUP
An entity that offers insurance to groups of similar businesses with similar exposures to risk.
PURE ENDOWMENT
A life insurance contract that pays a periodic income benefit for the life of the owner of the annuity. The payment can
be monthly, quarterly, semiannually or annually.
PURE LIFE ANNUITY
A form of annuity that ends payments when the annuitant dies. Payments may be fixed or variable.
QUALIFIED ANNUITY
A form of annuity purchased with pretax dollars as part of a retirement plan that benefits from special tax treatment, such as a 401(k) plan.
RATE
The cost of a unit of insurance, usually per
$1,000. Rates are based on historical loss experience for similar risks and may be regulated by state insurance offices.
RATE REGULATION
The process by which states monitor insur- ance companies’ rate changes, done either through prior approval or open competi- tion models. (See Open competition states; Prior approval states)
RATED POLICY
An insurance policy that is classified as having a greater-than-average likelihood of loss, usually issued with special exclusions, a premium rate that is higher than the
rate for a standard policy, a reduced face amount, or any combination of these.
RATING AGENCIES
There are several major credit agencies that determine insurers’ financial strength and viability to meet claims obligations. They include A.M. Best Co.; Fitch, Inc.; Moody’s Investors Services; Standard & Poor’s Corp.; and Weiss Ratings, Inc. Factors considered
include company earnings, capital adequa- cy, operating leverage, liquidity, investment performance, reinsurance programs, and management ability, integrity and experi- ence.
RATING BUREAU
The insurance business is based on the spread of risk. The more widely risk is spread, the more accurately loss can be estimated. An insurance company can more accurately estimate the probability of loss on 100,000 homes than on ten. Years ago, insurers were required to use standard- ized forms and rates developed by rating agencies. Today, large insurers use their own statistical loss data to develop rates.
But small insurers, or insurers focusing on special lines of business, with insufficiently broad loss data to make them actuarially re- liable depend on pooled industry data col- lected by such organizations as ISO, which provides information to help develop rates such as estimates of future losses and loss adjustment expenses like legal defense costs.
REAL ESTATE INVESTMENTS
Investments generally owned by life insur- ers that include commercial mortgage loans and real property.
RECEIVABLES
Amounts owed to a business for goods or services provided.
REDLINING
Literally means to draw a red line on a map around areas to receive special treatment. Refusal to issue insurance based solely on where applicants live is illegal in all states. Denial of insurance must be risk-based.
REDUCED PAID-UP INSURANCE OPTION
One of several nonforfeiture options in- cluded in life insurance policies that allows
the owner of a policy with cash values to discontinue premium payments and to use the policy’s net cash value to purchase paid-up insurance of the same plan as the original policy. (See Nonforfeiture options)
REGISTERED PRINCIPAL
An officer or manager of a National Associ- ation of Securities Dealers (NASD) member, who is involved in the day-to-day opera- tion of the securities business, has qualified as a registered representative, and has an NASD Series 24 or 26 registration.
REGISTERED REPRESENTATIVE

NONFORFEITURE VALUES
The benefits, as printed in a life insurance policy, that the insurance guarantees to the insured if the insured stops paying premi- ums.
NOTICE OF LOSS
A written notice required by insurance companies immediately after an accident or other loss. Part of the standard provi- sions defining a policyholder’s responsibili- ties after a loss.
NUCLEAR INSURANCE
Covers operators of nuclear reactors and other facilities for liability and property damage in the case of a nuclear accident and involves both private insurers and the federal government.
NURSING HOME INSURANCE
A form of long-term care policy that covers a policyholder’s stay in a nursing facility.
OCCUPATIONAL DISEASE
Abnormal condition or illness caused by factors associated with the workplace. Like occupational injuries, this is covered by workers compensation policies. (See Work- ers compensation)
OCCURRENCE POLICY
Insurance that pays claims arising out of incidents that occur during the policy term,
even if they are filed many years later. (See Claims made policy)
OCEAN MARINE INSURANCE
Coverage of all types of vessels and water- craft, for property damage to the vessel and cargo, including such risks as piracy and the jettisoning of cargo to save other prop- erty. Coverage for marine-related liabilities. War is excluded from basic policies, but can be bought back.
OPEN COMPETITION STATES
States where insurance companies can set new rates without prior approval, although the state’s commissioner can disallow them if they are not reasonable and adequate or are discriminatory.
OPERATING EXPENSES
The cost of maintaining a business’s prop- erty, includes insurance, property taxes, utilities and rent, but excludes income tax, depreciation and other financing expenses.
OPTIONS
Contracts that allow, but do not oblige, the buying or selling of property or assets at a certain date at a set price.
ORDINANCE OR LAW COVERAGE
Endorsement to a property policy, includ- ing homeowners, that pays for the extra expense of rebuilding to comply with ordinances or laws, often building codes, that did not exist when the building was originally built. For example, a building severely damaged in a hurricane may have to be elevated above the flood line when it is rebuilt. This endorsement would cover part of the additional cost.
ORDINARY LIFE INSURANCE
A life insurance policy that remains in force for the policyholder’s lifetime.

ORIGINAL EQUIPMENT MANUFACTURER PARTS/OEM
Sheet metal auto parts made by the manu- facturer of the vehicle. (See Generic auto parts)
OVER-THE-COUNTER/OTC
Security that is not listed or traded on an exchange such as the New York Stock
Exchange. Business in over-the-counter se- curities is conducted through dealers using electronic networks.
PACKAGE POLICY
A single insurance policy that combines several coverages previously sold separately. Examples include homeowners insurance and commercial multiple peril insurance.