LOMA Glossary

The LOMA Glossary of Insurance and Financial Services Terms

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valid contract. A contract that is enforceable by law. Contrast with void contract and voidable contract.

validation point. See breakeven point.

valuation. The process of calculating the monetary value of a company’s assets, liabilities, and capital for accounting and financial reporting purposes.

valuation actuary. A type of actuary who specializes in rendering a professional opinion as to the proper values for an insurance company’s assets and liabilities, including its reserves.

valuation mortality table. A type of mortality table that has a margin built into the mortality rates, is used to calculate policy reserves, and is inherently more conservative than is a basic mortality table. Contrast with basic mortality table.

valued contract. A type of insurance contract that specifies in advance the amount of the benefit that will be payable when a covered loss occurs, regardless of the actual amount of the loss incurred. A life insurance policy is a valued contract. Contrast with contract of indemnity.

variable annuity. An annuity under which the amount of the accumulated value and the amount of the periodic income payments fluctuate in accordance with the performance of one or more specified investment funds. Contrast with fixed annuity.

variable budget. See flexible budget.

variable cost. A business cost that changes in direct response to changes in the level of operating activity. Contrast with fixed cost.

variable interest rate. An interest rate that fluctuates according to the rise and fall of interest rates in the marketplace.

variable life (VL) insurance. A form of cash value life insurance in which premiums are fixed, but the death benefit and other values may vary, reflecting the performance of investment subaccounts that the policyowner selects.

variable rate certificate of deposit. A certificate of deposit that pays an interest rate that rises and falls in accordance with a benchmark rate. Also known as an adjustable rate certificate of deposit.

variable rate mortgage. See adjustable rate mortgage.

variable universal life (VUL) insurance. Cash value life insurance that combines the premium and death benefit flexibility of universal life insurance with the investment flexibility and risk of variable life insurance.

variance. In budgeting, the difference between an actual result and an expected result. See also favorable variance and unfavorable variance.

venture capital. An equity (capital) investment in a new and usually risky enterprise.

vested. In regard to a group retirement plan, a plan participant’s right to receive partial or full benefits under the plan even if he terminates employment prior to retirement.

vested commission. For life insurance sales, a commission that is guaranteed payable to a producer whether or not the producer represents the company when the commission becomes due. Contrast with nonvested commission.

viatical settlement. A financial transaction in which a policyowner, typically a terminally-ill individual with a life expectancy of twenty-four months or less, sells an insurance policy to a third party for more than its cash value but less than its face value. See also viatical settlement company. Contrast with life settlement.

viatical settlement company. An organization that exists to buy life insurance policies from policyowners at a discount. The organization assumes a policy’s premium payments and collects the death benefit of the policy upon the policyowner's death. When the policyowners are terminally ill individuals with a life expectancy of twenty-four months or less, the transaction is known as a viatical settlement. When the policyowners are senior adults with somewhat longer life expectancies, the transaction is known as a life settlement. Also known as a life settlement company.

vision care coverage. Medical expense coverage that provides the insured with benefits for expenses incurred in obtaining eye examinations and corrective lenses.

VL insurance. See variable life insurance.

void contract. A contract that does not meet one or more of the legal requirements to create a valid contract and, thus, is never enforceable. Contrast with valid contract and voidable contract.

voidable contract. A contract under which one party has the right to avoid his obligations under the contract. Contrast with valid contract and void contract.

voluntary trade association. A multiple-employer group that consists of individual employers that work in similar industries and have common business interests.

VUL insurance. See variable universal life insurance.

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