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- R-SQUARED
- A statistic that is used in measuring investment risk or volatility with regards the degree to which a fund's past performance was affected by the returns of a specific market benchmark.
- RABBI TRUST
- A type of trust between an employee and an employer in which the employer makes contributions to an irrevocable trust. Upon the occurrence of a stipulated event (e.g., death, disability of the employee, or retirement), the trustee will make payments to the employee or his beneficiary. In order for the contributions to be tax deductible to the employer, funds from the trust must be distributed to the employee.
- RATE BANDS
- A structure of life insurance premiums that provides for lower premium rates per dollar of coverage for larger policies. This structure reflects the additional economy of scale of writing a larger policy.
- RATED POLICY
- See substandard rating.
- REASONABLE AND CUSTOMARY CHARGE
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- REAL ESTATE INVESTMENT TRUST (REIT)
- A publicly traded company that buys and manages a portfolio of properties or mortgages, or a combination of both.
- REDUCED PAID UP
- A nonforfeiture provision which uses the cash value of a permanent life insurance policy as a single premium to purchase a paid-up policy of a reduced face amount. When the premiums on a cash value life policy are prematurely stopped, the coverage will be continued in a lesser amount. The amount of the coverage is dependent on the age and sex of the insured and the amount of cash value available in the original policy.
- RE-ENTRY
- A provision in some term insurance policies that gives the insured the right to renew the policy at a more favorable rate by providing evidence of insurability. This option is generally provided for a select period of time.
- REGISTERED EMPLOYEE BENEFIT CONSULTANT (REBC)
- A professional designation of The American College that is earned by passing 5 courses related to employee benefits. Also see The American College Home Page.
- REGISTERED HEALTH UNDERWRITER (RHU)
- A professional designation of The American College that is earned by passing 3 courses related to health insurance. Also see The American College Home Page.
- REGISTERED REPRESENTATIVE
- An individual that is licensed by the National Association of Securities Dealers to sell securities, mutual funds, variable annuities or variable life insurance products to the general public.
- REINSTATEMENT
- The restoration of a lapsed life or health insurance policy. The life insurance company may require evidence of insurability and the payment of past due premiums plus interest.
- REINSURANCE
- A form of insurance that insurance companies purchase from other insurance companies. This is done to reduce the possible maximum loss on either an individual risk or a group of risks. There are several forms of reinsurance, including:
- Coinsurance,
- Modified Coinsurance, and
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- REINSURANCE POOL
- A reinsurance method of distributing the insurance risk of a group of policies among the participants of the pool.
- REINVESTMENT RISK
- See interest rate risk.
- REIT
- See Real Estate Investment Trust.
- RENEWAL COMMISSIONS
- The commission payments made to insurance agents that are based on the premium payments made after the policy's first year.
- RENEWABLE TERM LIFE INSURANCE
- A term insurance policy where the insured has the option to renew the coverage without taking a new medical examination. The insurance is renewed at a rate that does not reflect the current physical condition of the insured. The premiums do reflect the insured's current age at the time of each renewal.
- REPURCHASE AGREEMENTS
- An investment agreement involving the purchase of a security and a simultaneous agreement (generally with a bank or broker dealer) to repurchase that security at a specified price and date. Repurchase agreements are used as a way to earn income on idle cash.
- RESIDENT LICENSE
- An insurance licenses issued by the state that the agent or broker is a resident. This is contracted with a nonresident license.
- RESIDUAL DISABILITY BENEFITS
- A provision or option that is found in some disability income policies, that provides a benefit when the insured returns to work part time. The benefit is generally based on the percentage of income lost due to the disability.
- RETIREMENT PLANS
- There are two major categories of retirement plans. They are as follows:
- Non-Qualified Pension Plans, and
- Qualified Pension Plans.
- RETROCESION
- A form of reinsurance where a risk or a portion of that risk that was assumed by a reinsurance company is ceeded to another reinsurance company.
- RETURN OF CASH VALUE RIDER
- A rider on a life insurance policy that increases the death benefit of a cash value life insurance by the amount of the cash value.
- REVERSE STOCK SPLIT
- A process whereby a corporation reduces the number of outstanding shares without affecting the total market value of its stock.
- REVERSIONARY TRUST
- A type of trust that is limited to a specified period of time. This period may be a specified number of years or for the life of the beneficiary. At the end of the period, the trust is automatically terminated and the trust property is returned to the grantor or the trust.
- REVOCABLE BENEFICIARY
- A beneficiary that can be changed by the policy owner without the authorization of the revocable beneficiary. Also see irrevocable beneficiary
- REVOCABLE TRUST
- A type of trust that can be changed or terminated during lifetime of the grantor. Contrasted with irrevocable trust
- RIDERS
- Additions or modification to the coverage of an insurance policy. The more common life insurance policy riders are as follows:
- RIGHT TO RETURN PROVISION
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- RISK
- In Property and Casualty Insurance, risk refers to a peril (e.g., fire, wind storm or auto collision).
People view investment risk in many ways that can involve a number of different factors. Good financial planning involves both understanding different types of risk and taking steps to reduce the effects of these risks. There are several types of investment risks that should be considered in any investment. These are as follows:
- Call Risk,
- Capital Risk,
- Credit Risk,
- Default Risk,
- Inflationary Risk,
- Interest Rate Risk,
- Legislative Risk,
- Liquidity Risk,
- Market Risk,
- Selection Risk, and
- Timing Risk.
- RISK AMOUNT
- See Net Amount at Risk.
- RISK MANAGEMENT TECHNIQUES
- Different investment strategies designed to help control or reduce the risk of investing and financial loss. Among these are:
- RISK PROFILE
- A measurement of an individual's tolerance for risk.
- RISK TOLERANCE
- A measurement of the amount of investment risk that an individual is willing to assume. This amount of risk may change for an individual as their personal and economic situation changes.
- ROLLOVER INDIVIDUAL RETIREMENT ACCOUNT
- An account established for the purpose of transferring the proceeds from qualified pension or retirement plans without incurring tax penalties. This allows the continuation of tax-deferred distributions until the appropriate age is attained.
- RULE OF 72
- A very easy method of estimating the number of years it takes for an investment's value to double at a specific interest rate or rate of return. For a complete explanation see Rule of 72.
- RUSSELL 2000 INDEX
- A stock market index that measures the performance of small-cap stocks. A total of 2,000 U.S. companies are represented in the index. The index is an indicator of small-cap stock performance and is used as a benchmark for many small-cap mutual funds.
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