Accelerated Benefits
Benefits available with some life insurance policies prior to death, which you may use to help pay the costs of long-term care or terminal illness.
Accidental Death Benefits
A provision added to a life insurance policy for payment of an additional benefit if death is caused by an accident. This provision is often referred to as “double indemnity.”
Agent
An authorized representative of an insurance company who sells and services insurance contracts. Also may be referred to as a producer.
Annuity
A contract with an insurance company that allows you to save money for your future on a tax-deferred basis and then allows you to choose a payout option that meets your need for income when you retire, such as a lump-sum income for life, or income for a certain period of time.
Automatic Premium Loan
A provision in a life insurance policy that allows for any premium not paid by the end of the grace period (usually 30 or 31 days) to be paid automatically by a policy loan if there is sufficient cash value.
Beneficiary
The person or financial instrument (for instance, a trust fund) named in a life insurance policy as the recipient of policy proceeds in the event of the insured’s death, and is determined by the policyowner.
Cash Value (Cash Surrender Value)
The amount available in cash upon surrender of a permanent life insurance policy before it becomes payable upon death or maturity.
Contingent Beneficiary
A contingent beneficiary will receive policy proceeds if all named primary beneficiaries are deceased at the time of the death of the insured, and is determined by the policyowner.
Death Benefit
The payment made to a beneficiary from an annuity or life insurance policy when the insured dies.
Deferred Annuity
An annuity contract in which annuity payouts begin at a future date.
Defined Benefit Plan
A pension plan that specifies the benefits an employee will receive after retirement. Benefits typically are based on length of service and salary, and usually are funded by the employer on behalf of each plan participant.
Defined Contribution Plan
A pension plan that specifies the contributions made by employees and, in many cases, the employer on behalf of each plan participant. These funds accumulate for each plan participant until retirement. At retirement, funds are distributed either as a lump-sum or monthly annuity. Benefits are based on the amount of contributions plus earnings.
Disability Income Rider
An addition to a life insurance policy that provides periodic payouts when you as the insured are unable to work due to illness or injury.
Evidence of Insurability
Life insurance companies often require that potential policyholders obtain proof of a physical or medical test, such as blood pressure or cholesterol screening, before an applicant can purchase an individual life insurance policy.
Face Amount
The amount stated on the face of a life insurance policy that will be paid in the case of death or policy maturity. It does not include additional amounts payable under accidental death or other special provisions or riders.
Fiduciary
A person or organization that is authorized to control or manage pension assets or that is authorized or responsible for administering a pension plan. Fiduciaries are legally obligated to discharge their duties solely in the interest of plan participants and beneficiaries, and are accountable for any actions that may be construed by courts as breaching that trust.
Flexible-Premium Deferred Annuity
An annuity contract that permits varying the amount and frequency of premium payments from year-to-year for payouts that will occur in the future.
401(k) Plan
An employer-sponsored retirement savings plan which allows employee contributions to be made on a “before-tax” basis.
403(b) Plan
A retirement savings plan similar to a 401(k) plan for employees of charitable and educational organizations.
Grace Period
A period, usually 30 or 31 days, following each insurance premium due date, other than the first due date, during which an overdue premium may be paid. All provisions of the policy remain in force throughout this period.
Guaranteed Minimum Value
The contractual guaranteed minimum value of an annuity product, usually stated as a percentage of paid premiums, plus an interest rate amount, less any withdrawals.
Immediate Annuity
An annuity contract in which annuity payouts begin immediately or within one year.
Indexed Annuity
A variation of the deferred annuity. With this type of annuity, your money accumulates tax-deferred at a minimum fixed rate of return. Your account also may earn additional interest based on the performance of an index. Generally, the indices used are widely reported common-stock indices, the most prevalent being the Standard & Poor’s® 500 Composite Stock Price Index.
Insured
The person on whose life an insurance policy is issued.
IRA (Individual Retirement Account)
A retirement account that may be established by an employed person. Some IRA contributions are tax deductible according to certain guidelines, and the gains in the account are tax-deferred.
Joint and Survivor Annuity
An annuity where payouts are made to you as long as you live, and after your death, to your designated beneficiary as long as he or she lives.
Lapsed Policy
An insurance policy terminated at the end of the grace period because of nonpayment of premiums. (See Non-Forfeiture Values.)
Life Insurance
A contract between a person known as the insured and an insurance company as a way to provide protection against the economic loss caused by the death or disability of the insured.
Market Value Adjustment (MVA)
With an MVA, the surrender value of a contract may increase or decrease depending on changes in the U.S. Treasury rates. The adjustment applies to amounts received upon a partial or full surrender, if made during the surrender charge period. It also applies if the policy is annuitized during the surrender charge period regardless of whether or not the surrender charges are waived under certain provisions. The adjustment does not apply when funds are withdrawn under the 10% penalty-free withdrawal provision.
Non-Forfeiture Values
The value of a life insurance policy if it is cancelled, either in cash or in another form of insurance. This is also available to the policyholder if the required premium payments are not paid.
Permanent Life Insurance
Life insurance designed to provide lifelong financial protection. As long as you pay the necessary premiums, the death benefit will be paid. Most permanent policies have a feature known as cash value that builds up, tax-deferred, over the life of the policy and can be used to help fund financial goals, such as retirement or education expenses.
Policy
The printed document issued to the policyholder by an insurance company stating the terms of the insurance contract.
Policy Illustration
Shows how the life insurance policy may perform. It illustrates premiums, death benefits, cash values, and information about other factors that may affect your costs. Policy illustrations are based on current assumptions and may vary from actual performance as conditions change over time; however, it is not an insurance contract.
Policy Loan
The amount that can be borrowed at a specified rate of interest from the issuing company by the policyholder, who uses the value of the policy as collateral for the loan. In the event the policyholder dies with the debt partially or fully unpaid, the insurance company deducts the amount borrowed, plus any accumulated interest, from the amount payable to beneficiaries.
Premium
The payment, or one of regular periodic payments, that a policyholder makes to own an insurance policy.
Qualified Plan (Tax-Qualified Plan)
An employee benefit plan that meets Internal Revenue Service Code requirements. Employer contributions to these plans are immediately deductible by the employer, and contributions to, and earnings in, these plans are not included in the employee’s or beneficiary’s income until actually distributed to the recipient.
Reinstatement
The restoration of a lapsed insurance policy. The insurance company requires evidence of insurability and payment of past-due premiums plus interest.
Rider
An amendment or addition to an insurance policy that modifies the policy by expanding or restricting its benefits or excluding certain conditions from coverage. (See Accelerated Benefits, Accidental Death Benefits, Disability Income Rider.)
Roth IRA
An IRA (Individual Retirement Account) in which earnings on contributions are not taxed, as long as the contributions have been in the account for five years, and the account holder is at least age 59½, disabled, or deceased. Contributions to a Roth IRA are not tax deductible.
Settlement Options
One of several ways, other than immediate payment in a lump-sum, in which the insured or beneficiary may choose to have policy proceeds paid.
Straight Life Annuity
An annuity whose periodic payouts stop when the annuitant dies.
Tax-Deferred
A concept in which some or all taxes are paid at a future date, rather than in the year of income production. Tax-deferred investments in particular refer to retirement accounts, which allow deferral of taxes on contributions, growth, or both; taxes are not paid until withdrawal of funds during retirement.
Term Insurance
Life insurance that covers the insured for a certain period of time known as the “term.” The policy pays death benefits if the insured dies during the term, which can be up to 30 years.
Traditional IRA
An IRA (Individual Retirement Account) set up by an individual to provide retirement income that allows contributions to be deducted from income and permits earnings on contributions to accumulate tax-deferred until retirement.
Underwriting
The process of classifying applicants for insurance by identifying such characteristics as age, gender, health, occupation, and hobbies. People with similar characteristics are grouped together and are charged a premium based on the group’s level of risk.
Universal Life Insurance (Adjustable Life)
A type of permanent life insurance that allows you, after your initial payment, to pay premiums at any time, in virtually any amount, subject to certain minimums and maximums. This policy also permits you to reduce or increase the death benefit more easily than with traditional whole life insurance. To increase your death benefit, the insurance company usually requires you to furnish satisfactory evidence of your continued good health.
Vesting
The right of an employee to all or a portion of the benefits he or she has accrued, even if employment terminates. Employee contributions, as in a 401(k) plan, always are fully vested. Employer contributions vest according to a schedule defined by the plan and are usually based on years of service.
Waiver of Premium
A provision that can be added to a life insurance policy where certain conditions would allow an insurance policy to be kept in full force by the company without the payment of premiums. It is used most frequently for those policyholders who become totally or permanently disabled, but may be available in certain other cases.
Whole Life Insurance (Ordinary Life)
The most common type of permanent life insurance. With this type of policy, premiums generally remain constant over the life of the policy and must be paid periodically in the amount specified in the policy.