The word equity denotes a portion of ownership of an asset. If you have equity in a company (by owning equities issued by that company, for example), you are party owner of that company. If you have equity in a piece of real estate, you are part owner of that piece of property.
The term is often used in relation to homes purchased using a mortgage to differentiate between the portion of the property owned by the homeowner (the mortgagor), and the portion owned by the lender (the mortgagee).
Equity is also a common term in whole life insurance. In this case, equity in a whole life insurance policy refers to the policy’s cash value in relation to its face value.
Example of equity as used in corporate ownership:
If a company’s combined stock is worth 500,000 Swiss francs and is divided into 100,000 shares worth 5 francs each, an investor who purchases 50,000 shares would have 50% equity in the company.
Example of equity as used in insurance:
If a life insurance policy has a face value of 500,000 Swiss francs and the cash value of the policy (the savings built up by the policyholder) is 200,000 francs, the policyholder has 200,000 francs of equity in their life insurance policy.