Glossary

Is additional life insurance coverage that is generally purchased with policy dividends.

Is an insurance policy that will remain in force, with no requirement to pay additional premiums. It can often be seen as a Non-Forfeiture Option which refers to the Reduced Paid-Up Insurance available.

Is a benefit sometimes found in disability income policies providing for the payment of a reduced monthly income if the insured is prevented from working full time or is unable to earn a specified percentage of pre-disability earnings due to a disability.

Is the surrender of a portion of the cash surrender value of a Universal Life (UL) or Variable Universal Life (VUL) contract. Partial surrenders reduce the death benefit and the cash value account and could trigger a taxable event if the policy is a modified endowment contract, or if the withdrawn proceeds exceed the premiums paid into the policy.

Is a life insurance policy under which the insurance company distributes to policyholders the part of its surplus that its board of directors has determined will not be required at the end of the business year. Such a distribution retroactively reduces the premium that the policyholder has paid. See Policy Dividend and Non-Participating Policy.

A program that provide employees with retirement income after they meet minimum age and service requirements. Over time, the responsibility for funding these retirement accounts has passed from the employers, who offered defined benefit plans promising a predetermined retirement income, to employees who typically now have defined contribution plans that are financed by their own contributions which are often, but not always, matched by their employers.

Is the rate of return of each investment option within an Equity Indexed Universal Life, a Universal Life (UL) or a Variable Universal Life (VUL) policy.

Is an insurance that will generally stay in force for the life of the insured and accrues cash value, such as a whole life or endowment contract. May also be referred to as Ordinary Life Insurance which includes Universal Life Insurance and Variable Universal Life Insurance.

In addition to the interest being credited on each monthly anniversary day, an insurance company may offer a bonus to incentivize policy owners to not lapse their policies. The bonus amount will be determined on a prospective basis as of the annual anniversary date and be applied automatically to increase the existing cash value of the policy.

As part of the underwriting process, the PHI is used as a verification of the details declared in an application, and also helps to clarify any medical history. It also provides a way of obtaining any additional information that may be available.

Are the scheduled periodic premium payments elected by the policy owner.

Is the printed document that an insurance company issues to a policyholder, stating the terms and conditions of a contract of insurance.

Is the twelve-month period measured from the date of issue.

Policy Dividend

Is a refund of some of the premium paid on a participating life insurance policy due as a result of any difference between the premium charged and actual experience.

Is a computer generated depiction of how a life insurance policy will work. It is originally produced for agents to use when showing their prospective clients the projected premiums, death benefits, cash values, and information regarding other factors that may affect policy costs.

Is a loan issued by an insurance company (at a specified rate of interest) that uses the cash value of a life insurance policy as collateral. If the policyholder dies with the debt partially or fully unpaid, the insurance company deduct the amount borrowed, plus accumulated interest, from the death benefit payable.

Policy Owner

Is the owner of an insurance policy, who will most likely be the insured, a relative of the insured, a life insurance trust, or can be an entity such as a partnership or corporation.

Are the liquid assets that an insurer has earmarked to fulfill all of its policy obligations, which can be claims from in-force policies and any other outstanding liabilities. Reserve limits are established by state regulatory agencies which determine the reserves required by deducting the present value of future premiums to be received, plus interest, from a percentage of the total present value of in-force insurance.

Policy Split Option

Is a provision that allows a Survivorship Policy to be split into two new separate policies, without the need for underwriting, providing the exchange is applied for within 12 months of a tax law change, or within 24 months of a divorce, with the split of the policy becoming effective 24 months following the divorce. Policies issued with one uninsurable must provide underwriting on that individual to exercise the option. State variations may apply. Also known as a Change of Plan Provision.

Is the one-year period starting on the day and the month the policy was issued and ending on the day before the policy’s first anniversary date.

See Policy Owner.

Is the amount of capital that is remaining after an insurance company’s liabilities are subtracted from its assets.

Preferred Loans

Are loans that come about as a result of loan interest being offset by a persistency bonus, typically on a backend basis. Also known as Zero Net Cost Loans.

Preferred Risk

Is an individual who is considered less of a risk than the standard risk. Preferred underwriting is available only up to age 80.

Is an underwriting classification for insured individuals who are considered to have a less than average likelihood of loss (see Preferred Risk). Preferred underwriting is available only up to age 80.

Is the payment, or one of the periodic or non-periodic payments, that a policyholder makes to purchase and maintain ownership of an insurance policy or annuity.

Is a fund made up of interest earning amounts held for payments of future contractual obligations to policyholders under an individual life insurance policy. Premiums are deducted from the fund each year.

Are additional charges made by the insurer to cover items such as sales expenses, federal and state taxes. A portion of the premium load is applied each time a premium payment is made to the policy.

A premium loan will automatically be made from the policy’s cash value to pay the premium if, at the end of the grace period, the premium due has not been paid.

Is an investment strategy category for ultra conservative investors. Investors in this category seek to hold the principal value of an investment stable or close to stable through all market conditions. It is a strategy typically deployed by individuals approaching retirement as a way of protecting the value of accumulated funds. Funds suitable for this investor type, such as a Guaranteed Account or Money Market fund, may credit a stated rate of return or minimum periodic interest rate.

Principal (annuities)

Is the amount paid into an annuity contract, but not including the earnings that are credited to it. This can also be referred to as a Purchase Payment or a Contribution.

See Agent.

Is a contract between an insurer and reinsurer that share liabilities in a clearly defined proportion. Premiums and claims are also split according to the respective share of the risk.

See Principal.