Definition of "Purchasing power risk"

Investment risk associated with the relationship between the yield (interest, dividends, and capital) of financial instruments and the rate of inflation in the economy. For fixed income financial instruments such as a fixed dollar annuity and fixed dollar life insurance, the financial security of the recipient is diminished in proportion to the rise of inflation.

image of a real estate dictionary page

Have a question or comment?

We're here to help.

*** Your email address will remain confidential.
 

 

Popular Insurance Terms

Plan whereby adjustments are made in the premium, as the premium increases to reflect the non proportionate increases in expenses. Generally, the expenses of acquisition costs, ...

Technique of estate planning under which an estate is divided into two parts and taxed at a lower rate rather than remaining as a whole and taxed at a higher rate. This division may be ...

Process in which the policy-holder surrenders the policy when: cash proceeds can be invested elsewhere at a higher return than that being earned on the cash value within the policy; ...

Same as term: engineering approach; human approach ...

Business income coverage form that covers an insured business in the event that a manufacturer's operations are interrupted or suspended, thereby resulting in a monetary loss because a ...

Reinsurance ceded to an insurance company that is a non admitted insurer. ...

Exchange of a new policy for one already in force. ...

Procedure that moves up the maturity date of the municipal bond to its call date. The call date permits the issuer of the bond to redeem the bond at any time after a stipulated minimum ...

in property and casualty insurance, termination of a policy because of failure to pay a renewal premium. in life insurance, termination of a policy because of failure to pay a premium and ...

Popular Insurance Questions