Glossary

Is a document that contains the detail of a company’s financial condition at a single point in time stating assets, investments and liabilities. The balance sheet also displays an insurance company’s equity, known as its Policyholder Surplus. A change in the surplus is an indicator of a company’s financial well-being.

Are funds that purchase a diversified mixture of stocks, bonds, and money market securities. The stocks for growth, the bonds for income, and the money market securities for security and income. Each fund may have a different blend of these assets and varying types of securities within each segment.

Is a company that owns or controls one or more banks. In the United States, the Federal Reserve regulates and supervises bank holding company activities. The authority of the Federal Reserve applies regardless of the fact that a bank owned by a holding company may be under the primary supervision of the Comptroller of the Currency or the Federal Deposit Insurance Corporation (FDIC).

Is a unit used for measuring interest rates. One percent is equivalent to 100 basis points.

Is an individual or financial entity (e.g. a trust fund) that is named in a life insurance policy or annuity contract as the recipient of policy proceeds upon the death of the insured.

Is the amount payable by the insurance company to a claimant, assignee, or beneficiary when an insured sustains a loss covered within the contractual terms of a policy.

See Accelerated Benefit Provision.

Is a security obligating an issuer to pay interest at specified intervals in addition to repaying the principal at maturity. Bonds can also be classified as a form of surety; there are a variety available that can, for example, guarantee a payment or reimbursement for a financial loss resulting from dishonesty, failure to perform, and other such issues.

Is an evaluation of the financial strength of a bond issued by an established rating agency such as Standard & Poor’s, Moody’s Investor Services, A.M.Best or Fitch.

Is the amount of premium that can receive a full commission in the first year of a life insurance policy.

A sales and service representative who acts as an intermediary between an insurance buyer and seller, usually charging a commission. A broker can represent one or several insurance companies at any one time.

Is an insurance policy that pays disability benefit as a partial replacement of income lost due to illness or injury. It can be purchased by a business on its (generally key) employees. This insurance is often used to protect and reimburse companies for a loss caused by the disability of a key employee.

Is a life insurance policy purchased by a company or investor on the life of a key executive. Usually the company is the policy's beneficiary, but it can also offer protection to surviving business partners in the same instance.

Buy-Sell

A buy-sell agreement is a contract that defines what will happen to specific business interests at retirement, death, or other insurable events. This agreement can be funded with life insurance. The policy owner, who would typically be a business partner, uses the proceeds from the policy to purchase the business interest that has become available.