Glossary

If a policyholder fails to pay their premium by a certain date, the policy will become lapsed, meaning coverage will no longer be in effect. A policyholder can reinstate their policy (potentially with the same premium and death benefit), but would have to re-qualify and pay any unpaid balance first. 

In tort states, liability coverage is typically the minimum requirement for an insurance policy, to cover the costs of another driver if you are found at-fault for an accident. Liability insurance can cover another driver’s (or their passengers’) bodily injuries or property damage to their vehicle.

A cross between a credit card and a personal loan, a line of credit account allows borrowers to "draw" from a fund (similar to a credit limit) on an as-needed basis, and pay back what they owe based on a monthly billing cycle.

The contract between a borrower and lender on a loan, which state the obligations of both parties and the details of the loan.

The act of temporarily freezing payments on a loan, to keep the loan in good standing and to avoid late fees and penalties while a borrower is unable to make regular payments. Loan deferment does not forgive a loan, and can also result in accumulating interest charges.

Typical of student loans, forgiveness releases a borrower from having to pay part or all of their current debt obligation.

The life of the loan, also known as the loan repayment period. A term can be stretched out to reduce the monthly installment, but will result in greater total interest charges.

For mortgages, the loan-to-value (LTV) ratio compares the amount of your mortgage to the appraised value of the property. The lower the ratio (which correlates with a higher down payment), the less risky the applicant in the eyes of lenders.

A payment that is made all at once and in full, as opposed to being distributed through equally-timed installments. A lump sum can also be used to describe the amount borrowed for a loan (e.g., personal loan, auto loan, student loan, mortgage), which is then paid back to the lender through monthly installments.