Glossary

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A

Accidental Death Benefit

A benefit from a life insurance policy that is paid when an insured’s death is the direct result of an accident and has occurred within a certain period of time following the accident.

Age at Issue

The insured’s age at the time coverage takes effect. Life insurance plans typically define issue age as either the age at the insured’s last birthday or nearest birthday.

Agent

An authorized representative of a life insurance company who solicits and services insurance contracts. Also known as an Associate.

Annuitant

The individual whose lifetime is used to calculate the pay period of a life annuity.

Annuity

A contract issued by a life insurance company where guaranteed or variable periodic payments begin at a specified time.

B

Beneficiary

The individuals or entities designated to receive the death benefits from a life insurance policy or annuity contract.

Broker

An insurance sales representative who, on behalf of his or her clients, solicits life insurance quotes and generally sells various kinds of insurance for several companies.

Broker-Dealer

A business entity licensed and registered with the Securities and Exchange Commission (SEC) and the National Association of Securities Dealers (NASD). A broker-dealer has the legal right to offer securities products to the public. An agent selling variable life insurance, variable annuity products and other securities, such as mutual funds, must be registered with a broker-dealer.

C

Cash Surrender Value

The amount available to a policy owner when a life insurance policy is terminated for a reason other than the insured’s death.

Contestable Clause (or Incontestable Clause)

A provision in a life insurance policy that states the time (called the contestable period) during which a policy may be contested or voided by the insurer based on misrepresentations contained in the application or medical examination. By law, the maximum contestable period is two years.

Contract (Policy)

The basic written agreement between the insurer and the policy owner or contract owner (sometimes referred to as “contract holder”).

Conversion

A policy provision that states that the policy may be exchanged for another life insurance policy under certain circumstances, typically without further underwriting requirements. For instance, term life insurance can be converted to whole life or, in some cases, another form of permanent life insurance.

D

Date of Issue

The effective date of the policy or contract as issued by the insurer.

Death Benefit

The amount paid to the beneficiary upon the death of the insured regardless of cause.

Deferred Annuity

An annuity in which periodic benefit payments do not begin until after a specified number of years or the annuitant reaches a specific age.

E

Evidence of Insurability

Proof of a person’s physical condition, occupation or other factors. This is used by a life insurance company to determine the acceptability of the applicant for life insurance.

F

Face Amount

The amount stated on the life insurance policy that will be paid in the event of the death of the insured or at the policy’s maturity, whichever occurs first. This does not include additional amounts which may be payable under accidental death or other special provisions or amounts acquired through the application of policy dividends, if any.

Fixed Amount Periodic Payment

Payments made in a specified amount that will completely exhaust a principal sum over a specified time period.

Fixed Annuity

An annuity that guarantees a minimum rate of interest during any accumulation period and provides a guaranteed periodic payment at annuitization.

Flexible Premium Deferred Annuity

An annuity that allows additional payments after the initial funding with annuitization beginning after a specified number of years.

Free-Look Provision

A provision in a life insurance policy or annuity contract that gives the policy owner or contract owner a stated amount of time to review a new policy or contract after issuance and receipt. The policy or contract can be returned and voided within this time frame for a refund of all premiums paid; for life insurance policies, cancellation of coverage is effective from date of issue.

G

Grace Period

The time period following a monthly anniversary during which a life insurance policy will continue in force when the net cash surrender value is not sufficient to cover the monthly expense charge currently due.

I

Immediate Annuity

An annuity that begins payments within 12 months of the purchase date. An immediate annuity usually makes a payment at the end of each period of payment. The interval may be monthly, quarterly, semi-annually or annually.

Individual Retirement Annuity (IRA)

An annuity, available as a retirement account, for someone who is employed. IRAs receive favorable tax status under Section 408 of the Internal Revenue Code. IRAs are sometimes referred to as Individual Retirement Accounts.

Insured

The person whose life is covered by a life insurance policy.

Interest Rate (Current)

The current rate of interest credited to the life insurance policy or annuity contract.

nterest Rate (Loan)

The current rate at which interest is charged for a life insurance policy loan.

Irrevocable Beneficiary

A beneficiary designation that cannot be changed without the beneficiary’s consent.

Issue Age

The insured’s age at the time life insurance coverage takes effect. Insurance plans typically define issue age as either the age at the insured’s last birthday or nearest birthday.

J

Joint Annuity (Joint Life Annuity)

An annuity payable to two or more annuitants until one of the two annuitants dies. The joint annuity may provide for continuation of payment or a reduced payment during the life of the surviving annuitant.

L

Lapse

The termination of an insurance policy due to nonpayment of premiums or, in the case of variable life and universal life insurance policies, the depletion of cash value below the amount needed to keep the policy in force. Under certain circumstances, coverage might continue under a settlement option.

Life Annuity

An annuity that pays a fixed income during the annuitant’s lifetime. Payments cease at the annuitant’s death, even if the annuity has not yet returned an amount equal to the premiums paid.

Lifetime Income with Period Certain

Income paid for the life of the annuitant, guaranteeing payment for a certain number of years if the annuitant does not survive. In the event the annuitant dies within the certain period, the beneficiary receives benefits for the remainder of the designated period.

Loan

A sum granted by a life insurance company to the owner of a life insurance policy, secured by the policy’s cash surrender value.

>

The total amount of policy loans, including both principal and interest accrued.

M

Maturity Date

For life insurance policies, the maturity date is the end of the contract term.

Monthly Anniversary

The same day as the policy date for each succeeding month.

N

Net Cash Surrender Value

The cash surrender value less any outstanding loans and/or surrender charges.

P

Period-Certain Annuity

An annuity with a predetermined guaranteed number of payments, at equal intervals made over a specified period. The payments are payable whether or not the annuitant dies prior to the end of the stipulated period.

Planned Periodic Payment

The premium designated at the time of application as the planned amount to be paid at specific intervals until the maturity date.

Policy Anniversary

An anniversary of the policy issue date.

(Policy) Contract

The basic written agreement between the insurer and the policy owner or contract owner. The policy or contract, together with the application and all endorsements and attached papers, constitutes the entire contract of insurance. A policy is usually life insurance; a contract is usually an annuity.

Policy Date

The date on which coverage becomes effective, as shown on the policy date page.

Policy Owner/Contract Owner (Owner)

An individual or entity that owns an insurance policy or annuity contract. The policy owner/contract owner may be the insured or the beneficiary. The policy owner pays the premium and is typically the only individual or entity who is permitted to make changes to a policy or contract, such as to change the beneficiary, withdraw cash values, or make loans on the policy. He or she may, or may not, also be the insured on the policy. Such rights may be limited in the event the policy has a collateral assignment.

Premium

Payments to the insurance company to purchase a life insurance policy and to keep it in force.

R

Rider

A written agreement attached to a life insurance policy or annuity contract that limits or expands the policy’s or contract’s terms or coverage. Riders may increase the premium you pay to the insurance company.

S

Surrender

The policy owner’s right to terminate policy coverage in exchange for the policy’s cash surrender value or other equivalent nonforfeiture values.

Surrender Charge

As provided in the provisions of a life insurance policy or annuity contract, surrender charges are charges an insurance company may deduct if the owner surrenders a life insurance policy or annuity contract for the cash or accumulation value. Companies may also deduct this charge if the owner borrows money on his or her life insurance policy, if the policy lapses for nonpayment, or if the policy owner elects to decrease the face amount of the policy.

T

Term Insurance

A plan of insurance that covers the insured for a specified period of time (term) and not for his or her entire life. The policy pays a death benefit only if the insured dies during the term and if the policy has not lapsed for nonpayment of the premiums due.

U

Universal Life

A flexible-premium, current-assumption, adjustable death benefit policy. Similar to traditional life insurance policies, universal life pays a death benefit and accumulates cash value; however, unlike traditional life insurance policies, a universal life insurance policy allows the policy owner to adjust the death benefit and to vary the amount and/or frequency of premium payments.

V

Variable Life Insurance

A life insurance policy that provides flexible premiums and death benefits, as well as the opportunity to build cash value in separate investment options. The cash surrender value is not guaranteed, but will fluctuate with the market value of the separate account investment portfolio. The policy owner bears the risk of poor fund performance.

W

Whole Life Insurance

A life insurance policy that covers the insured for life, with level premiums payable for his or her entire lifetime.