Actual cash value
A property claim settlement basis that accounts for depreciation, subject to the policy wording and deductible. Apply the term in Replacement Cost vs. Actual Cash Value: Model the Claim Gap.
Contract, loan and insurance glossary
Use these plain-English definitions to identify terms that change cost, risk or rights. The wording in your actual contract, disclosure or policy controls the transaction.
A
Amortization
The scheduled reduction of a loan balance through payments allocated between interest and principal. Apply the term in Extra Loan Payment Calculator.
APR
Annual percentage rate: a yearly measure intended to reflect the interest rate plus certain finance charges. Compare like loan types and terms. Apply the term in APR vs. Interest Rate: What to Compare.
Arbitration
A private dispute process in which a neutral decision-maker hears a claim outside ordinary court litigation. Apply the term in Arbitration Clauses: What to Check Before Agreeing.
B
Balloon payment
A final payment substantially larger than the regular scheduled payments. Apply the term in Balloon Payment Checklist: Plan for the Balance Due.
C
Cash to close
The amount a buyer must provide at closing after accounting for down payment, costs, deposits, credits and adjustments. Apply the term in Closing Cost Calculator and Worksheet.
Combined single limit
One auto-liability limit shared among covered bodily injury and property damage in an accident. Apply the term in Auto Insurance Limits: Read the Numbers as Claim Scenarios.
Contingency
A contract condition that gives a party specified rights if an inspection, financing, appraisal or other event does not satisfy stated terms. Apply the term in Home Inspection Contingency Checklist: Dates, Scope and Exit Rights.
D
Deductible
The portion of a covered loss the policyholder pays under the policy before or alongside the insurer’s payment. Apply the term in Insurance Deductible Break-Even Calculator.
Discount point
An upfront mortgage charge equal to one percent of the loan amount per point, paid in exchange for a quoted rate reduction. Apply the term in Mortgage Points Break-Even Calculator.
E
Escrow
Money held and disbursed for an identified purpose, such as taxes and insurance or transaction funds. Apply the term in Closing Cost Checklist for Home Buyers.
Exclusion
Policy language removing specified causes, property, people or circumstances from coverage. Apply the term in Insurance Exclusions and Sublimits to Find Before You Sign.
F
Finance charge
The dollar cost of consumer credit as defined by applicable disclosure rules; it is not always identical to total transaction cost. Apply the term in APR vs. Interest Rate: What to Compare.
G
Guaranteed asset protection
A product that may cover some difference between an auto-loan balance and an insurer’s covered vehicle payment, subject to its terms. Apply the term in GAP Coverage Checklist: Benefit, Exclusions and Cancellation.
I
Indemnity
A contractual allocation requiring one party to cover specified loss, liability or cost suffered by another. Apply the term in How to Compare Insurance Policies Properly.
L
Lender credit
A mortgage credit that offsets upfront closing cost, commonly in exchange for a higher interest rate. Apply the term in Loan Estimate Checklist: What to Verify on Every Page.
Loan-to-value
Loan balance divided by the property or vehicle value used by the lender, expressed as a percentage. Apply the term in PMI, Down Payments and the Break-Even Question.
M
Margin
A percentage added to a variable-rate index to determine the contractual interest rate, subject to the agreement’s rules and caps. Apply the term in Fixed vs. Variable Interest Rates: A Stress-Tested Comparison.
N
Negative equity
The amount by which debt secured by an asset exceeds the asset’s current value or net trade value. Apply the term in Negative Equity Rollover Calculator.
O
Origination fee
A lender charge for making or processing a loan, collected upfront, deducted from proceeds or sometimes financed. Apply the term in Loan Origination Fees: Compare the Net Proceeds, Not the Headline Amount.
P
Personal guarantee
An individual’s contractual promise to answer for another person’s or entity’s obligation. Apply the term in Personal Guarantees: What You Put at Risk.
PMI
Private mortgage insurance that generally protects the lender, not the borrower, against certain default loss on a conventional mortgage. Apply the term in PMI Break-Even Calculator.
Prepayment penalty
A contractual charge triggered by paying some or all of a loan earlier than stated conditions permit. Apply the term in Prepayment Penalties: Check Before Paying a Loan Early.
R
Rate lock
A written mortgage arrangement setting identified rate-dependent terms for a limited period and subject to stated conditions. Apply the term in Mortgage Rate Lock Checklist: Dates, Costs and Extensions.
Replacement cost
A property settlement basis tied to repair or replacement with like kind and quality without a depreciation deduction, subject to policy conditions. Apply the term in Replacement Cost vs. Actual Cash Value: Model the Claim Gap.
Residual value
The contractual estimated value of a leased vehicle at the end of the lease, used in calculating depreciation charges and often the purchase option. Apply the term in Lease vs. Buy Car Calculator.
Rider or endorsement
A document that adds, removes or modifies terms in an insurance policy or other contract. Apply the term in Insurance Exclusions and Sublimits to Find Before You Sign.
S
Sublimit
A coverage cap below the policy’s broader headline limit for specified property, loss or expense. Apply the term in Insurance Exclusions and Sublimits to Find Before You Sign.
T
Total of payments
The disclosed sum of scheduled payments and applicable amounts over a loan’s full term, as defined on the disclosure. Apply the term in How to Compare Loan Offers Before You Sign.
U
Underinsured motorist coverage
Auto coverage that may respond when an at-fault driver’s liability insurance is insufficient, subject to state law and policy terms. Apply the term in Auto Insurance Limits: Read the Numbers as Claim Scenarios.