INSURANCE DOMAIN

I) What is Insurance?
Insurance is a form of risk management in which the insured transfers the cost of
potential loss to another entity in exchange for monetary compensation.

Insurance allows individuals, businesses and other entities to protect themselves

against significant potential losses and financial hardship at a reasonably affordable
rate.

II) Types of Insurance:

1) Life Insurance:
Life insurance protects an individual against death. If you have life insurance, the
insurer pays a certain amount of money to a beneficiary upon your death. You pay
a premium in exchange for the payment of benefits to the beneficiary.

2) Health Insurance:
Health insurance is a type of insurance coverage that covers the cost of an insured
individual’s medical and surgical expenses.

3) Vehicle Insurance:
a) Commercial Auto Insurance:
Commercial auto insurance protects a company’s vehicles. You can protect vehicles
that carry employees, products or equipment. With commercial auto insurance you
can insure your work vehicles.

b) Personal Automobile Insurance:

Another very important type of insurance is auto insurance. Automobile insurance
covers all road vehicles (trucks, cars, motorcycles, etc.). Auto insurance has a dual
function, protecting against both physical damage and bodily injury resulting from a
crash, and also any liability that might rise from the collision

4) General Liability Insurance:

Every business, even if home-based, needs to have liability insurance. The policy
provides both defense and damages if you, your employees or your products or
services cause or are alleged to have caused Bodily Injury or Property Damage to a
third party.

5) Property Insurance:
If you own your building or have business personal property, including office
equipment, computers, inventory or tools you should consider purchasing a policy
that will protect you if you have a fire, vandalism, theft, smoke damage etc…

6) Worker’s Compensation:
Worker’s compensation provides insurance to employees who are injured on the
job. This type of insurance provides wage replacement and medical benefits to
those who are injured while working.

7) Professional Liability Insurance:

This type of insurance is also known as Errors and Omissions Insurance. The policy
provides defense and damages for failure to or improperly rendering professional
services.

8) Directors and Officers Insurance:

This type of insurance protects the directors and officers of a company against their
actions that affect the profitability or operations of the company.

Note: Some other types of insurance also there ex: Travel Insurance, Education
Insurance, Agricultural crop Insurance etc…

III) Insurance Software

End-to-end insurance management system that supports the entire insurance policy
lifecycle of any Insurance Company.

1) Insurance Certificate Issuance Software

Certificate Issuance Software Functionality

• Automatic rating eliminates errors and saves certificate preparation and premium
calculation time.

• Generates and tracks the issuance of all types of marine insurance certificates
with duplicate printing controls.

• Provides 3rd party certificate verification.

• View policy information and other documentation online.

• Ensures compliance to policy limits and conditions including government

regulatory bodies.

• Cross-references to the US OFAC list, FBI Most-Wanted and Interpol ensuring

certificates are not issued to restricted parties.

• Automated referral workflow and escalation process for out-of-coverage

shipments.

• Generates reports on premium and loss.

• Template functionality simplifies certificate generation for repetitive shipments.

• Quote Request functionality streamlines the processing of quotes for special case
shipments.

• Multilingual issuance in multiple formats with built-in flexibility for Letters of

Credit.

• Print draft and read-only PDF format.

2) Insurance Claims Software

Insurance Claims Software Functionality

Capture First Notice of Loss

• Validates data against the policy

• Captures specific data elements to facilitate integration

• Automatic multi-level email notifications

• Escalating alerts for unacknowledged loss reports

Build the Claim File

• Capture all relevant shipment information

• Track reserves, expenses, indemnities, salvage and recoveries

• Record unlimited text notes from multiple users

• Upload and store related files of all types (e.g. survey reports, bills of lading)

• Generate template-based correspondence (e.g. acknowledgement letters,

subrogation)

Integrate with External Systems

• Standardized XML message structures and custom adapters that match specific
workflows and external system requirements

• Imports Excel Spreadsheets Without Programming

• Multiple transport protocols (MQ Series, MSMQ, VPN, Web Services, FTP, HTTP,
SMTP)

• Link to in-house claims adjustment systems as well as to 3rd party systems

Provide Status Updates to Claimants

• View claim status at any time

• Upload documents and messages

3) Declaration Management Functionality

• Customizable screens and workflow enable the recording of all data elements and
coverage specific risk information for all types of declarations including turnover
declarations, property declarations, location or geographic declarations, bulk
declarations, etc…
• Monitoring of periodical declarations with automated notifications when reports
are overdue based on frequency of reporting expected by the policy

• Ability to validate declaration details and calculate premium per declaration or

schedule line item

o Calculate all premiums, taxes, commissions and any other applicable fees based
on a configurable rating engine
o Validate all data entered as user progresses through the workflow to trigger
warnings, referrals, compliance notifications and other workflow events
o Triggering of applicable insuring conditions, warranties, exclusions or other
wordings from a clause library or form database

• Generation of all declaration documentation including inventory forms,

bordereaux, invoices or certificates

• Plug-in integration points with 3rd party data providers and rating engines

• Built-in Business Intelligence for analysis of risk exposure and aggregations based
on actual exposures derived from reported values in the declarations modules as
compared to total exposure/policy limits

• Comprehensive out-of-the-box Marine Insurance functionality for shipment and

storage declarations

4) Insurance Agent Portal Software

Agent Portals Features

• Workflow management determines the business rules for Straight-Through-

Processing and the rules by which business is referred to specific underwriters.

• Personalized portal welcome screen and co-branding for each agent

• Complete Quote-Bind-Issue workflow for multiple insurance products

• Process bordereaux declarations from Excel, ACORD XML, etc.

• Process endorsements from end to end with pro-rata premium calculation

• Process renewals with notification & alerts

• Access invoices and commission statements instantly

• Receive first notice of loss and track claim status

• Control functionality and access rights for each agent with decentralized user
management

• Deliver multi-lingual, multi-cultural and multi-currency support to your agents

around the globe
• Manage decentralized users using role-based access security

Insurance Billing Functionality

• Automatically generates premium invoices in PDF format, Excel or through an

internal accounting system which is then delivered by email based on specific
client/policy rules and billing dates.

• Automatically calculates adjustments for storage and shipment declarations.

• Records individual premium bookings and miscellaneous charges.

• Calculates charges and taxes based on specific countries associated with the risk
and the assured.

• Calculates TRIA premiums and numerous government and internal charges

against premiums.

• Provides billing period reports, including commissions and taxes associated with
each policy.

• Tracks accounts receivable; management system has the ability to query into
individual invoices, payments and shipments.

• Supports Direct Bill and Agency Bill Invoice methods.

• Produces monthly, quarterly, semi-annually or annually branded invoices for

brokers and underwriters for selected policies and present line item details.

• Choose to record payments against these invoices per line item or on complete
invoices.

5) Policy Administration System

Policy Administration Software Functionality

• Customizable screens and workflow enable the recording of all data elements and
coverage specific risk information for all lines and all transaction types… all without
programming

• Transaction workflows for new business, renewals (including automated

renewals), endorsements (including out-of-sequence endorsements), cancellations,
and reinstatements.

• Rating and underwriting rules engine is easy to configure, allowing you to:

o Calculate all premiums, taxes, commissions and any other applicable fees based
on a configurable rating engine
o Validate all data entered as user progresses through the workflow to trigger
warnings, referrals, compliance notifications and other workflow events
o Trigger applicable insuring conditions, warranties, exclusions or other wordings
from a clause library or form database
o Generate all quote and policy documents based on intuitive MS-Word templates

• Underwriters benefit from a standardized quoting process enhanced through on-

line collaboration and messaging. Working with broker portals, our policy-
administration system can deliver fully automated quote-bind-issue functionality to
brokers, agents and clients out in the field.

• A wide range of billing and invoicing methods, including a powerful tax calculation
engine to support centralized management of multinational programs.

• Plug-in integration points with 3rd party data providers, rating engines and
integration with Business Intelligence for reporting. Native support for ACORD
standards.

6) Policy Issuance Software

Insurance Document Software Functionality

• Create and maintain insurance document templates using MS-Word.

• Quickly and easily build business rules within the insurance document without any
programing.

• Use business rules to determine which documents can be issued and when.

• Generate documents in editable docx format or as a secure PDF, combine multiple

forms within a single PDF, or make each document available for separate issuance.

• Maintain a library of industry clauses that can be pulled into issued documents.

• Automatically generate and/or e-mail insurance documents based on the

transaction type or triggered by a workflow event.

• Preview generated insurance documents which, once accepted, are automatically

stored with the policy, for on-demand retrieval and review.

7) Underwriter Workstation Functionality

• Submission queues, task management, diaries and reminders help underwriters
stay on top of your business.

• Rating engine that calculates all premiums by coverage and tracks or validates
the variance from standard or guideline rates when overriding rating or applying
discretionary factors

• Generation of all quote and policy documents based on intuitive MS-Word

templates

• Built-in collaboration tools and e-mail correspondence to improve communication

with agents and other parties.
• The underwriter workstation records a history of all communications, documents,
activities and more, providing a full audit trail for internal and reporting purposes.

• Validation and enforcement of underwriting authority with escalation and

collaboration to resolve blocks

• The underwriter workstation seamlessly pulls data from third-party providers for
inclusion in the underwriting process.

8) Insurance Reporting & Analysis

Insurance Reporting Functionality

• Real-time alerts of important events through dashboards and email notification

• Access to vital metrics for decision making

• Review of workflow controls and exceptions for system maintenance and audit

• User customized dashboards displaying KPI data for exception management

• Ad hoc reporting flexibility and scheduling for up to the minute vital data sharing
across the organization, with minimal training or IT requirements

• User-defined queries and business reports can be prompted to a professional

authoring environment for further formatting and distribution

• Multiple report outputs (Screen, Excel, PDF) can be stored, edited and shared

• Profit & loss by broker, product, coverage & year

• Insurance analysis of submission-quote success ratio to help guide underwriting

• Detailed and searchable audit trail of all changes

• Automatic filters allowing individual users to utilize reporting features without

accessing unauthorized data

IV) Important Terms in Insurance Domain:

Accidental Death Benefit – In a life insurance policy, benefit in addition to the death
benefit paid to the beneficiary, should death occur due to an accident.
Agent -individual who sells and services insurance policies.
Annual Administrative Fee – Charge for expenses associated with administering a
group employee benefit plan.
Annuity – An agreement by an insurer to make periodic payments that continue
during the survival of the annuitant(s) or for a specified period.
Approved for Reinsurance – Indicates the company is approved (or authorized) to write
reinsurance on risks in this state.
Assets – Assets refer to “all the available properties of every kind or possession of an
insurance company that might be used to pay its debts.”
Automobile Liability Insurance – Coverage if an insured is legally liable for bodily injury
or property damage caused by an automobile.
Balance Sheet – An accounting term referring to a listing of a company’s assets,
liabilities and surplus as of a specific date.
Benefit Period – In health insurance, the number of days for which benefits are paid
to the named insured and his or her dependents.
Broker – Insurance salesperson that searches the marketplace in the interest of
clients, not insurance companies.
Capital – Equity of shareholders of a stock insurance company. The company’s
capital and surplus are measured by the difference between its assets minus its
liabilities.
Capitalization or Leverage – Measures the exposure of a company’s surplus to various
operating and financial practices.
Case Management – A system of coordinating medical services to treat a patient,
improve care and reduce cost.
Casualty – Liability or loss resulting from an accident.
Claim – A demand made by the insured, or the insured’s beneficiary, for payment of
the benefits as provided by the policy.
Collision Insurance – Covers physical damage to the insured’s automobile resulting
from contact with another inanimate object.
Commercial Lines – Refers to insurance for businesses, professionals and commercial
establishments.
Commission – Fee paid to an agent or insurance salesperson as a percentage of the
policy premium.
Coverage – The scope of protection provided under an insurance policy.
Coverage Area – The geographic region covered by travel insurance.
Death Benefit – The limit of insurance or the amount of benefit that will be paid in the
event of the death of a covered person.
Dividend – The return of part of the policy’s premium for a policy issued on a
participating basis by either a mutual or stock insurer.
Earned Premium – The amount of the premium that as been paid for in advance that
has been “earned” by virtue of the fact that time has passed without claim.
Exclusions – Items or conditions that are not covered by the general insurance
contract.
General Account – All premiums are paid into an insurer’s general account.
Health Reimbursement Arrangement – Owners of high-deductible health plans who are
not qualified for a health savings account can use an HRA.
Health Savings Account – Plan that allows you to contribute pre-tax money to be used
for qualified medical expenses.
Income Taxes – Incurred income taxes (including income taxes on capital gains)
reported in each annual statement for that year.
Insurable Interest – Interest in property such that loss or destruction of the property
could cause a financial loss.
Investment Income – The return received by insurers from their investment portfolios
including interest, dividends and realized capital gains on stocks.
Liability – Broadly, any legally enforceable obligation. The term is most commonly
used in a pecuniary sense.
Liquidity – Liquidity is the ability of an individual or business to quickly convert
assets into cash without incurring a considerable loss.
Loss Ratio – The ratio of incurred losses and loss-adjustment expenses to net
premiums earned.
Medical Loss Ratio – Total health benefits divided by total premium.
Member Month – Total number of health plan participants who are members for each
month.
Mortgage Insurance Policy – In life and health insurance, a policy covering a
mortgagor with benefits intended to pay off the balance due on a mortgage upon
the insured’s death, or to meet the payments due on a mortgage in case of the
insured’s death or disability.
Net Income – The total after-tax earnings generated from operations and realized
capital gains.
Net Premium – The amount of premium minus the agent’s commission. Also, the
premium necessary to cover only anticipated losses, before loading to cover other
expenses.
Peril – The cause of a possible loss.
Personal Injury Protection – Pays basic expenses for an insured and his or her family
in states with no-fault auto insurance.
Personal Lines – Insurance for individuals and families, such as private-passenger
auto and homeowners insurance.
Policy – The written contract effecting insurance, or the certificate thereof, by
whatever name called, and including all clause, riders, endorsements, and papers
attached thereto and made a part thereof.
Premium – The price of insurance protection for a specified risk for a specified period
of time.
Renewal – The automatic re-establishment of in-force status effected by the
payment of another premium.
Risk Management – Management of the pure risks to which a company might be
subject.
Secondary Market – The secondary market is populated by buyers willing to pay what
they determine to be fair market value.
Separate Account – A separate account is an investment option that is maintained
separately from an insurer’s general account.
Stop Loss – Any provision in a policy designed to cut off an insurer’s losses at a given
point.
Surplus – The amount by which assets exceed liabilities.
Term Life Insurance – Life insurance that provides protection for a specified period of
time.
Total Annual Loan Cost – The projected annual average cost of a reverse mortgage
including all itemized costs.
Umbrella Policy – Coverage for losses above the limit of an underlying policy or
policies such as homeowners and auto insurance.
Underwriter – The individual trained in evaluating risks and determining rates and
coverages for them.
Underwriting – The process of selecting risks for insurance and classifying them
according to their degrees of insurability so that the appropriate rates may be
assigned.
Unearned Premiums – That part of the premium applicable to the unexpired part of
the policy period.
Utilization – How much a covered group uses a particular health plan or program.
Variable Life Insurance – A form of life insurance whose face value fluctuates
depending upon the value of the dollar, securities or other equity products
supporting the policy at the time payment is due.
Whole Life Insurance – Life insurance which might be kept in force for a person’s
whole life and which pays a benefit upon the person’s death, whenever that might
be.
BANKING DOMAIN
What is Domain?
It is an area, IT industry point view it is project’s business area, example: BFSI,
ERP, ECommerce, Healthcare, Telecom and Retail Market etc…
Domain Knowledge
It is knowledge about a specific field of interest/subject. Considering a software
Development case, domain knowledge is knowledge about the environment in
which the target system operates.
Banking Domain:
A bank is a business; banks sell financial services such as Vehicle loans, home
mortgage loans, business loans, checking accounts, credit card services, certificates
of deposit, and individual retirement accounts etc…

Some people go to banks in search of a safe place to keep their money. Others are
seeking to borrow money to buy a house or a car, start a business, expand a farm,
pay for college, or do other things that require borrowing money.

Where do banks get the money to lend?

They get it from people who open accounts. Banks act as go-betweens for people
who save and people who want to borrow. If savers didn’t put their money in
banks, the banks would have little or no money to lend.

Types of Banks:
a) Saving Banks
Saving banks are established to create saving habit among the people. These banks
are helpful for salaried people and low income groups. The deposits collected from
customers are invested in bonds, securities, etc. At present most of the commercial
banks carry the functions of savings banks. Postal department also performs the
functions of saving bank.

b) Commercial Banks
Commercial banks are established with an objective to help businessmen. These
banks collect money from general public and give short-term loans to businessmen
by way of cash credits, overdrafts, etc. Commercial banks provide various services
like collecting cheques, bill of exchange, remittance money from one place to
another place.

c) Industrial Banks
Industrial or Development banks collect cash by issuing shares & debentures and
providing long-term loans to industries. The main objective of these banks is to
provide long-term loans for expansion and modernization of industries.

d) Land Mortgage Banks

Land Mortgage or Land Development banks are also known as Agricultural Banks
because these are formed to finance agricultural sector. They also help in land
development.

e) Central / Federal / National Bank

Every country of the world has a central bank. In India, Reserve Bank of India, in
U.S.A, Federal Reserve and in U.K, Bank of England. These central banks are the
bankers of the other banks. They provide specialized functions i.e. issue of paper
currency, working as bankers of government, supervising and controlling foreign
exchange. A central bank is a non-profit making institution. It does not deal with
the public but it deals with other banks. The principal responsibility of Central Bank
is thorough control on currency of a country.

f) Co-operative Banks
Co-operative banks generally give credit facilities to small farmers, salaried
employees, small-scale industries, etc. Co-operative Banks are available in rural as
well as in urban areas. The functions of these banks are just similar to commercial
banks.
g) Exchange Banks
These banks are mainly concerned with financing foreign trade.
Following are the various functions of Exchange Banks:-
1. Remitting money from one country to another country,
2. Discounting of foreign bills,
3. Buying and Selling Gold and Silver, and
4. Helping Import and Export Trade.
h) Consumers Banks
Consumers bank is a new addition to the existing type of banks. Such banks are
usually found only in advanced countries like U.S.A. and Germany. The main
objective of this bank is to give loans to consumers for purchase of the durables
like Motor car, television set, washing machine, furniture, etc. The consumers have
to repay the loans in easy installments.

Types of Bank Accounts

Savings accounts:
They are for people who want to keep their money in a safe place and earn interest
at the same time. We don’t need a lot of money to open a savings account.

Certificates of deposit:
They are savings deposits that require you to keep a certain amount of money in
the bank for a fixed period of time. Usually banks charge a penalty if we withdraw
our money early.

Individual retirement accounts: They are savings deposits that offer an excellent
way to save for our later years.

Checking accounts or Current accounts:

They offer safety and convenience. We keep our money in the account and write a
check when we want to pay a bill or transfer some of our money to someone else.
Banks sometimes charge a fee for checking accounts, many banks also offer no-fee
checking and checking accounts that earn interest if you agree to keep a certain
amount of money—a minimum balance—in the account.

Money market deposit accounts:

They are similar to checking accounts that earn interest, except that they usually
pay a higher rate of interest and require a higher minimum balance.
Types of Loans
Personal Loans
Personal Bank Loans are the credits which a bank offers to its customer to meet his
instant personal requirements ranging from home renovation to purchasing of new
laptop, a getaway with family or for reimbursing the credit card liabilities, for
buying a new car or for child’s education, etc. Personal loan simplifies the cash flow
of the customer besides handling its immediate needs.

Home Loans
Almost everyone will require a home loan if they are looking to buy a house of their
own. In fact providing that we can afford it, getting a home loan is one of the best
investment decisions that we can make.

Tax Benefits on Home Loans:

Any person who opts for home loan is entitled for tax benefits under Income Tax
Act, 1961 on principal and the interest amount in the form of deductions from the
chargeable earnings.

Bank Loans against Property:

Property Loan or Loan against property is a kind of loan which is allowed by the
bank on the condition of keeping the customer’s current assets as a security with
them. These loans are very useful when other resources of financing get exhausted.

Business Loans:
Before starting a business, the entrepreneur should be mentally and financially
prepared to encounter the fiscal setbacks during the process. To bail the companies
out from the fiscal crunch, several banks in India offers business Loans both for
meeting urgent official growth and expenses. Other details of Business Loans
offered by Banks in India are:

Vehicle Loans:
Every individual want to own a car. Hence, the need for car loans emerges at some
point or the other. While selecting a car loan it is always wise to scrutinize the
various options accessible in the market besides analyzing its fiscal suitability.

Education Loans
Education Loans offered by various banks in India provide much required assistance
to fund your child’s education when all other resources of finance get exhausted.
Education Loans are offered by almost every Indian bank thus providing ample
opportunity to students to undergo higher education both in India and abroad.

Types of Deposits
a) Savings account –
These are the simplest of deposits. We deposit money into our account and we can
withdraw it anytime. There would be a small limitation on the number of times we
can withdraw money from our account.

b) Current account –
These are similar to Savings accounts with two small differences. One is, the money
in a current account does not earn interest and two is, you can withdraw any
number of times. This account is for business people who would have high number
of transactions in one single day.

c) Fixed Deposit –
This is a deposit product where we deposit a certain sum of money with the bank
for a specific duration of time. As per the deposit agreement we are expected to let
the money be with the bank based on the deposit tenure. Hence the interest
offered on such deposits is higher than normal deposits. Also we will attract a
penalty charge for pre-closing such deposits

d) Recurring Deposits –
These are similar to fixed deposits with a difference being, you deposit a small
amount of money every month into this account for a specified duration of time and
the bank would compound the interest every month and pay you in lump at the end
of the tenure.

Banking Domain Knowledge for Software Professionals

Banking Terms:
Account Holder:
Any person designated and authorized to transact business on behalf of an account.
Each account holder’s signature needs to be on file with the bank. The signature
authorizes that person to conduct business on behalf of the account.
Affidavit:
A sworn statement in writing before a proper official, such as a notary public.
Annual Percentage Rate (APR):
The cost of credit on a yearly basis, expressed as a percentage.
Application:
An oral or written request for an extension of credit that is made in accordance with
the procedures established by a creditor for the type of credit requested.
Appraisal:
The act of evaluating and setting the value of a specific piece of personal or real
property.
Automated Teller Machine (ATM):
A machine, activated by a magnetically encoded card or other medium, that can
process a variety of banking transactions. These include accepting deposits and
loan payments, providing withdrawals, and transferring funds between accounts.
Automatic Bill Payment:
A checkless system for paying recurring bills with one authorization statement to a
financial institution. For example, the customer would only have to provide one
authorization form/letter/document to pay the cable bill each month. The necessary
debits and credits are made through an Automated Clearing House (ACH).
Available Balance:
The balance of an account less any hold, uncollected funds, and restrictions against
the account.
Balance Transfer:
The process of moving an outstanding balance from one credit card to another. This
is usually done to obtain a lower interest rate on the outstanding balance. Transfers
are sometimes subjected to a Balance Transfer Fee.
Bank Statement:
Periodically the bank provides a statement of a customer’s deposit account. It
shows all deposits made, all checks paid, and other debits posted during the period
(usually one month), as well as the current balance.
Business Day:
Any day on which offices of a bank are open to the public for carrying on
substantially all of the bank’s business.
Cashier’s Check:
A check drawn on the funds of the bank, not against the funds in a depositor’s
account. However, the depositor paid for the cashier’s check with funds from their
account. The primary benefit of a cashier’s check is that the recipient of the check
is assured that the funds are available.
Certificate of Deposit:
A negotiable instrument issued by a bank in exchange for funds, usually bearing
interest, deposited with the bank.
Check:
A written order instructing a financial institution to pay immediately on demand a
specified amount of money from the check writer’s account to the person named on
the check or, if a specific person is not named, to whoever bears the check to the
institution for payment.
Check Truncation:
The conversion of data on a check into an electronic image after a check enters the
processing system. Check truncation eliminates the need to return canceled checks
to customers.
Checking Account:
A demand deposit account subject to withdrawal of funds by check.
Co-Maker:
A person who signs a note to guarantee a loan made to another person and is
jointly liable with the maker for repayment of the loan. (Also known as a Co-
signer.)
Credit Life Insurance:
A type of life insurance that helps repay a loan if you should die before the loan is
fully repaid. This is optional coverage.
Credit Limit:
The maximum amount of credit that is available on a credit card or other line of
credit account.
Debit:
A debit may be an account entry representing money you owe a lender or money
that has been taken from your deposit account.
Debit Card:
A debit card allows the account owner to access their funds electronically. Debit
cards may be used to obtain cash from automated teller machines or purchase
goods or services using point-of-sale systems. The use of a debit card involves
immediate debiting and crediting of consumers’ accounts.
Demand Deposit:
A deposit of funds that can be withdrawn without any advance notice.
Draft:
A signed, written order by which one party (the drawer) instructs another party
(the drawee) to pay a specified sum to a third party (the payee), at sight or at a
specific date. Typical bank drafts are negotiable instruments and are similar in
many ways to checks.
Drawee:
The person (or bank) who is expected to pay a check or draft when it is presented
for payment.
Drawee Bank:
The bank upon which a check is drawn.
Drawer:
The person who writes a check or draft instructing the drawee to pay someone else.
Electronic Banking:
A service that allows an account holder to obtain account information and manage
certain banking transactions through a personal computer via the financial
institution’s Web site on the Internet. (This is also known as Internet or online
banking.)

Electronic Funds Transfer (EFT):

The transfer of money between accounts by consumer electronic systems-such as
automated teller machines (ATMs) and electronic payment of bills-rather than by
check or cash. (Wire transfers, checks, drafts, and paper instruments do not fall
into this category.)

First Mortgage:
A real estate loan which is in a first lien position, taking priority over all other liens.
In case of a foreclosure, the first mortgage will be repaid before any other
mortgages.
Fixed Rate Loan:
The interest rate and the payment remain the same over the life of the loan. The
consumer makes equal monthly payments of principal and interest until the debt is
paid in full.

Fixed Rate Mortgage:

A mortgage with payments that remain the same throughout the life of the loan
because the interest rate and other terms are fixed and do not change.
Float:
The amount of uncollected funds represented by checks in the possession of one
bank but drawn on other banks
Foreign Transaction Fees:
A fee assessed by your bank for making a transaction at another bank’s ATM.
Forged Check:
A check on which the drawer’s signature has been forged.
Forgery:
The fraudulent signing or alteration of another’s name to an instrument such as a
deed, mortgage, or check. The intent of the forgery is to deceive or defraud.
Guarantor:
A party who agrees to be responsible for the payment of another party’s debts
should that party default.
Home Equity Loan:
A home equity loan allows you to tap into your home’s built-up equity, which is the
difference between the amount that your home could be sold for and the amount
that you still owe.
Inactive Account:
An account that has little or no activity; neither deposits nor withdrawals having
been posted to the account for a significant period of time.
Individual Account:
An account in the name of one individual.
Insufficient Funds:
When a depositor’s checking account balance is inadequate to pay a check
presented for payment.
Interest:
The term interest is used to describe the cost of using money, a right, share, or title
in property.
Joint Account:
An account owned by two or more persons. Either party can conduct transactions
separately or together as set forth in the deposit account contract.
Lender:
An individual or financial institution that lends money with the expectation that the
money will be returned with interest.
Line of Credit:
A pre-approved loan authorization with a specific borrowing limit based on
creditworthiness. A line of credit allows borrowers to obtain a number of loans
without re-applying each time as long as the total of borrowed funds does not
exceed the credit limit.
Loan Fee:
A fee charged by a lender to make a loan (in addition to the interest charged to the
borrower).
Local Check:
A check payable by, at, or through a bank in the same check processing region as
the location of the branch of the depository bank. The depository bank is the bank
into which the check was deposited.:
Maturity:
The date on which the principal balance of a loan, bond, or other financial
instrument becomes due and payable.
Minimum Balance:
The amount of money required to be on deposit in an account to qualify the
depositor for special services or to waive a service charge.
Minimum Payment:
The minimum dollar amount that must be paid each month on a loan, line of credit,
or other debt.
Missing Payment:
A payment that has been made but not credited to the appropriate account.
Mortgage:
A debt instrument used in a real estate transaction where the property is the
collateral for the loan. A mortgage gives the lender a right to take possession of the
property if the borrower fails to pay off the loan.
Mortgage Loan:
A loan made by a lender to a borrower for the financing of real property.
Mortgagee:
The lender in a mortgage loan relationship.
Mortgagor:
The borrower in a mortgage loan relationship. (Property is used as collateral to
make payment.)
Mutual Fund:
A fund operated by an investment company that raises money from shareholders
and invests it in stocks, bonds, options, commodities, or money market securities.
These funds offer investors the advantages of diversification and professional
management.
Official Check:
A check drawn on a bank and signed by an authorized bank official. (Also known as
a cashier’s check.)
Online Banking:
A service that allows an account holder to obtain account information and manage
certain banking transactions through a personal computer via the financial
institution’s web site on the Internet. (This is also known as Internet or electronic
banking.)
Outstanding Check:
A check written by a depositor that has not yet been presented for payment to or
paid by the depositor’s bank.
Overdraft:
When the amount of money withdrawn from a bank account is greater than the
amount actually available in the account, the excess is known as an overdraft, and
the account is said to be overdrawn.
Overdraw:
To write a check for an amount that exceeds the amount on deposit in the account.
Overlimit:
An open-end credit account in which the assigned dollar limit has been exceeded.
Passbook:
A book in ledger form in which are recorded all deposits, withdrawals, and earnings
of a customer’s savings account.
Payee:
The person or organization to whom a check, draft, or note is made payable.
Paying (Payor) Bank :
A bank upon which a check is drawn and that pays a check or other draft.
Payment Due Date:
The date on which a loan or installment payment is due. It is set by a financial
institution. Any payment received after this date is considered late; fees and
penalties can be assessed.
Payoff:
The complete repayment of a loan, including principal, interest, and any other
amounts due. Payoff occurs either over the full term of the loan or through
prepayments.
Personal Identification Number (PIN):
Generally a four-character number or word, the PIN is the secret code given to
credit or debit cardholders enabling them to access their accounts. The code is
either randomly assigned by the bank or selected by the customer. It is intended to
prevent unauthorized use of the card while accessing a financial service terminal.
Prepayment:
The payment of a debt before it actually becomes due.
Refund:
An amount paid back because of an overpayment or because of the return of an
item previously sold.
Renewal:
A form of extending an unpaid loan in which the borrower’s remaining unpaid loan
balance is carried over (renewed) into a new loan at the beginning of the next
financing period.
Statement:
A summary of all transactions that occurred over the preceding month and could be
associated with a deposit account or a credit card account.
Stop Payment:
An order not to pay a check that has been issued but not yet cashed. If requested
soon enough, the check will not be debited from the payer’s account. Most banks
charge a fee for this service.
Terms:
The period of time and the interest rate arranged between creditor and debtor to
repay a loan.
Time Certificate of Deposit:
A time deposit evidenced by a negotiable or nonnegotiable instrument specifying an
amount and maturity.
Uncollected Funds:
A portion of a deposit balance that has not yet been collected by the depository
bank.
Wire Transfer:
A transfer of funds from one point to another by wire or network such the Federal
Reserve Wire Network (also known as FedWire).