A
Accelerated death benefit (ADB) rider
A rider added to a life insurance policy to protect against financial loss in the event of a terminal illness. With an ADB rider, an insured person can access the death benefits of his or her policy prior to death in order to cover medical expenses. These "accelerated" or "living" benefits reduce the death benefit payable to the beneficiary(ies) upon death.
Accidental death and dismemberment (AD&D) insurance
Insurance that provides coverage in the event of death due to an accident, but not illness (accidental death) or in the event that an insured person loses one or more limbs or the sight in one or both eyes (dismemberment). In the event of death, payment is made to the beneficiary(ies). If an injury occurs, the insured person receives a sum specified by the contract. This coverage is usually used in combination with life insurance.
Account value
The accumulation of premiums paid, with interest added and deductions made in accordance with the terms of a universal life policy.
Actuary
A person who is professionally qualified in mathematical and technical aspects of life insurance and related fields, in particular, the calculation of premiums, reserves and other values.
Additional coverage death benefit
Part of a life insurance policy's total death benefit. It is the additional coverage that can be added to the base coverage to increase a policy's death benefit, i.e., a Paid-up Additions rider or term rider.
Agent
A licensed insurance agent who generally represents only one insurance company (also called a "captive agent" or "career agent").
Annuitant
The person receiving payments from an annuity.
Annuity
A contract sold by life insurance companies that provides income payments at regular (typically monthly) intervals, either for a specified period of time or for the owner's lifetime. An annuity:
may be bought in installments or with a lump sum,
benefits can begin immediately (an immediate annuity) or at a later date or specified age, such as 65 (a deferred annuity), and
may be fixed (the insurer guarantees a fixed rate of interest for one to five years) or variable (you direct your investment into mutual fund-like portfolios of stocks, bonds, and cash equivalents).
Annuity payments
Periodic payments made to an annuitant or to the annuitant's designated beneficiary. The payments:
may be made on an annual, semiannual, quarterly, or monthly basis,
may last for life or for a specified period, and
may be the same amount or may vary in amount, depending on whether it is a fixed or variable annuity.
Assignee
The party to whom all or certain rights of the policy are transferred under an assignment. An assignment is a legal transfer of all or certain ownership rights under a life insurance policy from one party to another.
Automatic premium loan
Uses a life insurance policy's net cash surrender value as loan collateral to pay the premiums as they become due. The policy owner will be billed for the loan interest.
B
Base coverage death benefit
Part of a life insurance policy's total death benefit. It includes the base face amount, base dividends, and any riders or benefits on the base coverage. It does not include additional coverage death benefits, deductions for outstanding loans, or additional coverage dividends earned.
Base face amount
The specified face amount of the policy excluding any dividends, policy riders or benefits.
Base PUA dividends cash value
Earned on Whole Life participating insurance policies. The Paid-up Additions (PUA) dividend option purchases additional paid-up death benefit that has a cash surrender value.
Beneficiary
The person(s) or organization designated by the owner of a life insurance policy to receive the proceeds of the policy when (and if) they become payable (e.g., upon the death of the insured person).
Benefit period
The period of time specified in a health or disability policy contract for which benefits can be received.
Bill-to Date
Indicates the time period to which premiums have been billed to.
Bond
A type of security that pays a fixed amount of interest at a regular interval over a certain period of time. Bonds are essentially loans given to companies and governments who promise to pay back the loan at a specified interest rate.
Broker
A licensed independent insurance agent who sells products from a variety of insurance companies.
Buy-sell agreement
A business succession planning tool for sole proprietors, partnerships, and closely held corporations that establishes an agreement providing for the sale of a business upon the occurrence of certain triggering events, such as an owner's death, disability, or retirement.
C
Capital gains/loss
The difference between an asset's purchase price and selling price for income tax purposes. If the difference is positive, it's a capital gain; if it's negative, it's a capital loss. Capital gains are further divided into long-term capital gains, which apply to the sale of assets held for at least 12 months, and short-term capital gains, which are held less than 12 months.
Capital gains tax
Tax that applies to any gain realized from the sale of capital assets such as stocks or mutual funds. The tax rate for long-term capital gains (assets held longer than 12 months) is lower than that for short-term capital gains.
Cash surrender value
The amount of money that is available in cash if the owner of a life insurance policy voluntarily terminates (surrenders) the policy before it becomes payable.
Cash value
The equity build-up of a whole life contract, providing premiums have been paid as scheduled.
Charitable Lead Trust
A tax-exempt trust that provides the specific charity named in the trust document with income for a term of years or for the life (lives) of the donor(s) after the assets are donated to the trust. At the end of the specified term of the trust, the trust assets plus any appreciation are transferred to the non-charitable beneficiaries, usually the children of the donor(s) with no further gift tax involved.
Charitable Remainder Annuity Trust
A tax-exempt trust agreement between a donor(s) and a charity(ies) that pays a fixed amount or percentage of the initial trust value on at least an annual basis to the trust's non-charitable income beneficiary(ies). The term of the trust is for the life(lives) of the donor(s) or a term of years not to exceed 20.
Charitable Remainder Trust (CRT)
A trust used to provide for a future gift to a qualified charity. Using a CRT for estate planning, a person can avoid or defer the payment of capital gains taxes upon the sale of highly appreciated assets, increase cash flow and may receive a current income tax deduction, if it is a living trust. A CRT may reduce the value of a person's taxable estate and therefore, his or her estate tax liability.
Claim
The written request to an insurance company asking it to pay for a loss under an insurance policy (e.g., such as upon the death of the insured). This is usually submitted on a standard form.
Claimant
The person submitting a claim for a loss under an insurance policy.
Contestability period
The period of time (usually two years) during which an insurance company can declare a life insurance contract void because of misrepresentation or concealment by the insured in obtaining the policy. Once this period is over, the company cannot cancel the policy or refuse to pay claims for any reason other than nonpayment of premiums.
Continued insurance
When a policy's account value is used as a single premium to purchase term insurance for as long as the account value will support it.
Contract
The document issued to the owner of an insurance policy or annuity by an insurance company stating the terms and conditions of the insurance or annuity coverage.
Corporate-owned life insurance (COLI)
Typically large life insurance policies that are owned by companies and used to fund things such as non-qualified deferred compensation plans and other corporate needs.
Credit Shelter Trust
A trust used to help assure that both spouses in a couple use their federal estate and gift tax credits, exempting up to $1,350,000 of assets from estate and/or gift tax in 2000, if set up properly. An amount equal to the applicable exclusion amount ($675,000 per person in 2000) is placed in the trust, removing the assets from transfer taxes in both spouse's estates. The surviving spouse and/or family members may receive income and principal (if any one of the four ascertainable standards are met) from the credit shelter trust.
D
Death benefit (Whole Life policies)
The amount of money paid to the beneficiary of a life insurance policy when the insured person dies. This amount is the base face amount decreased by any outstanding loans and increased by any dividend accumulations, riders or supplemental benefits.
Death benefit (Universal Life policies)
The amount of money paid to the beneficiary of a life insurance policy when the insured person dies. With Universal Life policies, a level or increasing death benefit can be provided, depending on the option chosen.
Option A - Specified Face Amount. The death benefit is the greater of a) the specified face amount, or b) a percentage of the account value.
Option B - Specified Face Amount Plus Account Value. The death benefit is the greater of a) the specified face amount plus the account value, or b) a percentage of the account value.
Option C - Specified Face Amount Plus Premium. The Death Benefit is the greater of a) the Face Amount plus gross premiums, or b) the account value times the corridor factors.
In either option, the death benefit would be decreased by any outstanding loans and increase by any supplemental benefits.
Deferred annuity
An annuity in which the income payments or withdrawals begin at some future date.
Demutualization
The process by which a mutual insurance company (owned by participating policyholders) converts to a company with common shares (owned by its shareholders).
Disability insurance
Insurance that provides income to an insured person if he or she becomes ill or is injured and can no longer work.
Dividend
See Policy Dividends and Share Dividends.
Dividend option
The way a dividend on a Whole Life participating policy is applied.
Cash: A check is sent to the policy owner for the dividend allotment on the policy anniversary.
Premium Reduction: The dividend is applied to the next year's policy premium. If the amount is insufficient, the policy owner is billed for the difference. If it is in excess, it is applied to a loan, if any, and the remainder is sent out in a check.
Deposit: The dividend is left on deposit with the company to accumulate interest. See "Dividends on Deposit".
Paid-up Additions: The dividend is used as a net single premium to purchase additional paid-up whole life insurance, based upon the insured's age.
5th Dividend (Level Term): The dividend is used to purchase one-year term insurance equal to the cash surrender value, and the excess is used to purchase Paid-up additions.
Modified 5th: The dividend is used to purchase one-year term insurance, and any money left is used to pay the premium.
Term Dividend Option: For the first 10 years, the dividend purchases Paid-up additions. For years 11-25, the dividend purchases one-year term insurance.
Dividends on deposit
A dividend allotment that is earned and left on deposit with the life insurance company to accumulate interest. The interest earned is 100% taxable.
E
Effective date
The date that the life insurance policy or coverage began or was "in force".
Employee benefits
Non-salary compensation offered by an employer that may include health insurance, life insurance, disability insurance, pensions or other retirement plans, tuition reimbursement, stock options, and child care benefits.
Enhanced PUA cash value
Earned on an Enhanced Life Paid-up Additions (PUA) rider on a whole life policy. It provides additional death benefit as well as a cash surrender value.
Estate
All the assets a person owns at the time of his or her death, including stocks and bonds, real estate, business interests, physical property, and cash, minus any outstanding debts. The estate is distributed to heirs according to the terms of a person's will or, if there is no will, by court ruling.
Estate equalization
A life insurance concept used in a situation where a family business forms greater than 50% of the parents' estate and the business will therefore be bequeathed to only one child, leaving the other children with a less than equal share of the estate when the parent dies. Life insurance is purchased on the life(lives) of the family business owner(s), with the non-involved children as beneficiaries of the life insurance contract. The net result is to equalize the percentage of the estate going to each child.
Estate tax
A tax imposed by the Federal Government and some state governments on the transfer of assets in your estate to your heirs. Estate taxes are not charged when the estate passes to your spouse..
Extended term
Allows the policyowner to use the net cash surrender value to purchase term insurance equal to the current death benefit.
F
Face amount
The specified face amount of the policy excluding any dividends, policy riders or benefits.
Fixed annuity
An annuity that guarantees your principal and provides an investment return at least equal to a specified fixed interest rate. In addition, the amount of your payout can be fixed once you begin receiving payments from the annuity.
G
Generation Skipping Transfer (GST) Tax
A flat 55% federal tax imposed, in addition to estate and gift tax, when property is transferred to a family member who is more than one generation below the donor, i.e. a gift from a grandparent to a grandchild. The tax applies whether it is a gift transferred during the donor's life or at death by will or bequest. Each individual is entitled to a GST tax exemption of $1,030,000 (indexed for inflation) in 2000. This means that there will be no GST tax due on a transfer of assets up to $1,030,000.
Gift tax
A graduated tax imposed by the federal government (and most state governments) on gifts that exceed $10,000 in 2000 (indexed for inflation) per person.
Grace period
The period of time in most life insurance policies (as well as in loan contracts) during which the policy will not be cancelled (or the loan will not be in default) even though payment is due.
Grantor Retained Annuity Trust
A vehicle for passing highly appreciating assets to family members. The property is discounted for gift tax purposes. It provides an annuity interest for a period of years to the grantor and/or grantor's spouse. If the grantor survives the period, the assets are distributed to the beneficiaries free of additional gift or estate tax. A donor may be subject to a gift tax on the value of the assets transferred to the trust, but the gift tax may be significantly discounted based on his/her annuity interest in the trust assets and the length of the trust term.
Group insurance
An insurance policy that covers a group of individuals, such as employees or members of a trade association. It is usually issued to an employer for the benefit of employees. The individual members of the group hold certificates as evidence of their insurance.
H
Heir
An individual who inherits some or all of a person's estate, either because he or she is in the direct line of descent, or because he or she is listed in the will or by legal authority.
I
Immediate annuity
An annuity that immediately begins to make payments to the annuitant, as opposed to a deferred annuity in which payments do not begin until later
In-force policy
A policy in good standing, with all premiums paid to date.
Income Date
The date the annuity payments will start. Unless state law requires otherwise, the Income Date will be the Annuitant's 90th birthday.
Income replacement
A benefit available in disability insurance policies in which an injured or sick employee receives a monthly income payment that covers a percentage of his or her lost earnings.
Income tax
The annual tax on income that is imposed by the federal government and some state and local governments.
Individual insurance
A life insurance policy that is issued on the life of a specified individual (the "insured").
Individual Retirement Account (IRA)
A tax-deferred retirement savings account for individuals. In a "traditional IRA," you can make contributions to it that you may deduct from your taxes (up to $2,000 a year). There is no tax on income earned in the fund until it is withdrawn (generally at retirement after age 59 ½). Since 1997, there have also been "Roth IRAs" that operate differently.
Insured
The person whose life is covered under an individual life insurance policy.
Interest-sensitive life insurance
See "Universal life insurance."
Insurable
An individual who meets an insurance company's underwriting standards (for health, etc.) and qualifies for an insurance policy is said to be "insurable."
Insurable interest
The beneficiary of a life insurance policy must have an "insurable interest" in the insured person for the policy to be issued. This means there must be a reasonable expectation that the beneficiary will benefit from the continued life of the insured, or experience a loss at the death of the insured.
Interest
The cost charged for borrowing an amount of money, calculated as a percentage rate over a period of time.
Interest rate
The percentage rate charged for borrowing a sum of money, usually calculated over the period of a year (in which case it is called an annual rate of interest). For example, if you borrowed $100 at 10% annual interest, you would pay $10 interest over the year.
Irrevocable beneficiary
A beneficiary designation that cannot be changed.
Irrevocable trust
A trust that cannot be altered, amended, revoked, or terminated by the person who created it.
J
K
Key employee/person insurance
Insurance designed to pay benefits to a business that loses the services of a "key" employee due to disability or death and suffers a financial loss as a result. A "key employee" is an individual who is considered to have special skills and makes a significant contribution to the business. This could include executives and managers, as well as shareholders who actively participate in the ongoing success of the business.
L
Lapsed Policy
A policy no longer in force as a result of the non-payment of premiums.
Level cash value
Earned on the Level Plus Paid-up Additions (PUA) rider on a whole life policy. It provides additional death benefit as well as a cash surrender value.
Life expectancy
The number of years a person is expected to live as determined by actuaries using mortality (actuarial) tables This information is used to calculate annuity payments, life insurance premiums, and annual minimum distributions from IRAs.
Life insurance
A type of insurance that protects against the death of a person by providing a financial benefit to the insured person's beneficiary(ies) on his or her death.
Long-term disability (LTD) insurance
An insurance policy that protects an insured person against financial loss because of injury or illness by providing monthly income payments for as long as the person remains disabled (usually up to age 65).
Loss of income
A definition of disability that looks at how much income a disabled insured person has lost, as opposed to whether or not he or she is able to work at the same occupation. This definition is used in income replacement disability policies.
M
Marital Deduction
A provision in the federal estate and gift tax law that allows a spouse to inherit his or her spouse's estate without having to pay estate taxes.
Marital Deduction Trust
A trust funded with property to be held for the benefit of the deceased's spouse, who is eligible for the unlimited marital deduction. The property in the trust is subject to estate taxes in the surviving spouse's estate at his/her death. The most common type of marital trusts are a Qualified Terminal Interest Property Trust (QTIP) and a General Power of Appointment Trust (GPOA). In a QTIP trust, the deceased spouse controls the final disposition of the trust principal. In a GPOA trust, the surviving spouse may control the final disposition of trust principal through his/her will or living trust.
Market Value Adjustment
A withdrawal or transfer from a Fixed Sub Account may increase, decrease, or have no effect on your Account Value due to changes in interest rates. The MVA is calculated by comparing the interest rate of your Guarantee Period(s) and its length of time remaining in the period to the current interest rate, which is explained in the Market Value Adjustment section of the prospectus.
In general, if the interest rate offered for a new Fixed Sub Account is 3% and your comparable interest rate is 3.5% with 3 years remaining in the term, a positive market value adjustment would be reflected.
NOTE: MVA is calculated separately for each Fixed Sub Account; however it is the net MVA amount of all Fixed Sub Accounts that is displayed on this site for inquiry purposes. MVA will not apply to Variable Sub Accounts.
Maturity
The time when the policy proceeds are paid due to either the death of the insured, or the insured has survived the maturity date of the contract.
Medical stop-loss insurance
A type of insurance purchased by employers who self insure their own medical plans and want to protect themselves against unexpected loss. Specific stop-loss coverage protects employers from a large medical claim for any one individual. Aggregate stop-loss insurance protects employers from higher than expected overall costs.
Mortality (Actuarial) Table
A statistical table that shows the rate of death at each age, expressed as the number of deaths per thousand. This indicates the probability of a certain number of people from a group dying in a given year. Insurance companies use mortality (actuarial) tables to establish premiums for different age groups and annuity valuations.
Mortality charge
The portion of a life insurance premium that covers the direct cost of life insurance protection based on mortality tables.
Mutual fund
A fund composed of contributions from many investors, managed by professional investment advisers who make decisions as to where to invest the money (i.e., in stocks, bonds, commodities, options, money market securities or other investments) depending on the investment objectives of the particular fund.
Mutual insurance company
A life insurance company which is owned by participating policyholders and in which management is directed by a board of directors elected by holders of those policies.
N
National Association of Securities Dealers (NASD)
This is the largest securities-industry self-regulatory organization in the United States. Through its subsidiaries, NASD Regulation, Inc., and The Nasdaq Stock Market, Inc., the NASD develops rules and regulations, conducts regulatory reviews of members' business activities, disciplines violators, and designs, operates, and regulates securities markets and services.
Non-forfeiture options
A way to continue some sort of life insurance using the policy's cash value when premiums can no longer be paid. Options include:
Reduced Paid-up: Provides the policyholder with a reduced life insurance amount, purchased with existing guaranteed cash values plus dividends, and less any advances. The reduced amount of coverage is then considered paid for in full, with no further premiums due.
Extended Term: Allows the policy owner to use the policy's net cash surrender value to purchase term insurance equal to the current death benefit. The length of the term is dependent on amount of coverage, size of the net cash value, and attained age.
Automatic Premium Loan: Uses the net cash surrender value as loan collateral to pay the premiums as they come due. The policy owners will be billed for the loan interest.
Continued Insurance: Uses account value as a single premium to purchase term insurance for as long as the account value will support it. The account value must exceed the surrender charges plus current monthly term charges for this non-forfeiture option to remain in effect. Continued insurance is available for Current Assumption Whole Life policies only.
If there is no cash value, then the policy would terminate and the life insurance coverage would end.
Non-Participating Policy
A policy that does not pay dividends.
O
One year term enhanced rider death benefit
A portion of a life insurance policy's total death benefit, made up of a combination of one-year term insurance and Paid-up Additions. Using this combination to achieve a certain death benefit, the cost can be lowered, since term insurance is generally less expensive.
Open enrollment period
The period of time, usually once or twice a year, in which individuals can enroll in employee benefits plans, such as group insurance, or change their options in the plans.
Outstanding premium amount
The difference between the life insurance premium that is due and what has actually been paid.
P
Paid-to date
The date that life insurance premiums are paid up to; this does not include the next premium due on this date.
Paid-up life insurance
Life insurance on which all premiums have been paid.
Paid-up additions
An amount of permanent life insurance the policyholder can elect to purchase through policy dividends or additional premiums. The insurance has cash values and earns dividends.
Partial disability
A person who is partially disabled can work but can not perform all the important duties of his or her regular occupation. In these cases, the insured person receives a disability income payment but the payment is less than that for total disability. .
Participating policy
A life insurance policy that entitles the policyholder to participate (receive) any policy dividends declared by the insurance company's board of directors. Dividends are not guaranteed because they are based on the company's performance and experience over a given year.
Participating policyholder
The owner of a policy that participates in dividend earnings.
Payment frequency
The number of times per year a policy premium is paid; for example, monthly, semi-annually or annually.
Permanent life insurance
A life insurance policy that provides "permanent" coverage (i.e. for the life of the insured person) provided that premiums are paid, as opposed to term life insurance which expires unless renewed at the end of each term.
Plan
The type of life insurance policy coverage purchased.
Policy or policy contract
The document issued to a policy holder by an insurance company stating the terms and conditions of the insurance or annuity coverage.
Policy dividend
Policy dividends are a refund to participating policyholders of a portion of the premiums they've paid, based on the company's mortality experience, investment earnings, expenses and other factors. These dividends are paid out of assets specifically set aside to support obligations to
participating life insurance policyholders. Policy dividends are not guaranteed.
Policy loan
A loan made by an insurance company to a policyholder on the security of the cash value of a policy. The interest rate on the loan is usually established in the life insurance policy. If interest is not paid when due, it is deducted from any remaining cash value. At the death of the insured person, any outstanding policy loans and interest due are subtracted from the death benefit.
Policyholder/policyowner
The person who owns an insurance or annuity policy. In most cases, the policyholder is the insured person. However, in the case of group insurance the policyholder is usually the employer rather than the employees or members of the group.
Power of attorney
A legal document under which one individual appoints another individual to act on his or her behalf, either completely or only in limited circumstances.
Pre-existing condition
An illness or medical condition a person was treated for or told about within a specified period of time before applying for a life or health insurance policy. If a preexisting condition is not disclosed on a life insurance application, the insurance company may cancel the policy.
Premium
The amount of money required by the insurer to provide insurance protection on the life of the insured(s). Premiums can be paid annually, semi-annually, or monthly.
Q
Qualified Personal Residence Trust
A trust used for transferring a personal residence to family members, the property is discounted for gift tax purposes. A QPRT provides that a grantor and/or grantor's spouse retain an interest in the residence for a period (term) of years. If the grantor survives the term of years, the trust residence may be distributed to his/her beneficiaries free of any additional gift or estate tax. While the grantor may be subject to a gift tax on the value of the assets transferred to the trust, the tax may be significantly discounted based on term of years of the QPRT.
Qualified plan
Retirement savings plans approved by the IRS for favorable tax treatment (such as tax deductible contributions or tax-deferred earnings). 401(k)s and IRAs are qualified plans.
R
Rated policy
A life insurance policy for which the insured person pays a higher premium than for a standard policy because he or she has a greater risk of death due to a physical impairment, past medical condition, hazardous occupation, or a hazardous hobby.
Reduced paid-up insurance
An option offered by some life insurance companies to protect policies from lapsing. It provides the policyholder with a reduced life insurance amount, purchased with existing guaranteed cash values plus dividends, and less any advances. The reduced amount of coverage is then considered paid for in full, with no further premiums due.
Reinstatement
Restoration of a lapsed policy by paying all outstanding premiums, any other amounts owing under the policy and interest on those amounts. A policy may only be reinstated in accordance with its terms or the relevant statutes. (There are other conditions that may need to be satisfied, such as providing evidence of insurability. A policy which has been surrendered may not be reinstated).
Rider
A provision attached to a life insurance policy that provides benefits not found in the original policy or that changes the original policy.
Roth IRA
A type of tax-deferred retirement savings account for individuals in which no tax is paid on investment income in the account or on withdrawals from the fund (after age 59 ½). Unlike traditional IRAs, however, contributions to a Roth IRA are not tax-deductible.
S
Second-to-die life insurance
A type of life insurance policy that covers two lives (generally a married couple) and provides a benefit on the death of either the second person or a specified person.
Securities and Exchange Commission (SEC)
The Securities and Exchange Commission (SEC) is the federal body that regulates the securities industry in the United States.
Self-Insure
Generally used to describe the practice in which a company or organization pays medical or life insurance benefits directly to its own employees, rather than purchasing an insurance policy.
Share dividend
An amount declared by a company's board of directors and distributed out of a company's profits to its shareholders in proportion to the number of shares they own. Dividends are generally paid quarterly.
Short-term disability (STD) insurance
An insurance policy that protects an insured person against financial loss because of injury or illness over a limited period of time (usually 26 weeks or one year) by providing monthly income payments if the person becomes disabled.
Single PUA cash value
Earned on a Single Plus Paid-up Additions (PUA) rider on a whole life policy. It provides additional death benefit as well as a cash surrender value.
Special maturity dividend
A one-time dividend payable only when life insurance coverage is terminated by surrender or death; based upon a pre-defined schedule of percents, which depend on the completed policy years.
On surrender, the amount payable is a percentage of the guaranteed cash value and Paid-up Additions rider cash value. On death, the amount payable is a percentage of the base policy face amount, plus a percentage of the Paid-up Additions.
Split dollar life insurance
A life insurance policy that provides a way for companies to provide additional compensation for employees. In this policy, the premiums, ownership rights, and death benefit proceeds are split between the employer and the employee.
Stock
A share of ownership (equity) in a corporation.
Stockbroker
An investment professional licensed by the Securities and Exchange Commission (SEC) to sell securities (stocks, mutual funds, etc.) and provide financial advice.
Sub-account
The investment options available within variable annuities. Sub-accounts are similar to mutual funds.
Supplemental benefit
An enhancement to life insurance coverage that is only awarded if certain conditions are met. For example, with a Waiver of Premium benefit, total disability would have to take place before premiums can be waived.
Surrender
To voluntarily terminate a life insurance policy before it has paid any benefits. When a policyholder surrenders a policy, he or she generally receives a payment from the insurance company for the cash value of the policy.
Surrender charge
A fee that may be charged when someone surrenders a life insurance policy or annuity.
Survivorship life insurance
See "Second-to-die life insurance."
T
Taxable estate
The value of a person's estate after all allowable exclusions, exemptions, and deductions have been taken.
Taxable gift
A transfers of property that exceeds the annual gift tax exclusion of $10,000 per recipient per year (indexed for inflation).
Term life insurance
A life insurance policy that provides protection for a specific period (term) of time selected by the policyholder. Once the term has expired benefits are no longer payable under the policy.
Total Paid-up Additions of base policy and riders
Represents the total amount of death benefit earned through Paid-up Additions that were purchased by dividends earned and premiums paid.
Trust
A legal entity in which a person, called a trustee, holds title to and manages property for the benefit of another person, called the grantor. If the trust is created during the trustor's lifetime, it is a "living" or "inter vivos" trust, and if it is created by a will, it is called a "testamentary" trust.
Trustee
The legal owner and manager of the property within a trust. Trustees must act in accordance with the terms and conditions of the trust deed for the benefit of the beneficiaries of the trust.
U
Underwriting
The process used by insurance companies to evaluate risks and calculate premiums.
Unified Credit
A federal tax credit available to offset the federal gift tax or federal estate tax. The unified credit can be used to offset gift taxes if you give gifts larger than the gift transfer limit of $10,000. However, if you use the unified credit in this way, it lowers the amount you can use for estate tax exemption (currently available for the $650,000 of an estate, gradually rising to $1 million by 2006).
Unit trust
A mutual fund invested only in bonds that pays principal and interest.
Universal life insurance
A type of permanent life insurance that provides both life insurance protection and a savings component. These policies usually offer a guaranteed minimum rate of return, plus an additional return if the company's investments perform well. They also generally feature flexible premium payments, allowing you to adjust the amount of insurance coverage.
Unlimited marital deduction
A federal gift and estate tax deduction that allows for the transfer of property from one spouse to another without tax.
V
Variable annuity
A type of annuity that offers a variety of investment options (sub-accounts) to choose from. The returns you receive will depend on the performance of the sub-accounts you choose.
Variable life insurance
A type of permanent life insurance that provides both life insurance protection and a savings component. The return on the savings portion generally varies because it depends on the performance of the underlying investment options (sub-accounts), which are similar to mutual funds.
Variable universal life insurance
A type of permanent life insurance that combines features of both variable life and universal life insurance. As with universal life, you have flexibility with both premium payments and death benefit coverage. As with variable life, the rate of return on the savings portion of the policy varies depending on the performance of the underlying investments (sub-accounts) selected.
W
Waiver of premium
A rider on a life or disability insurance policy that allows the insured person to stop paying premiums if he or she is disabled longer than a certain time period (usually six months) and continues to be disabled. The policy remains in force even though the insured is no longer paying premiums.
Will
A legal document that specifies how your estate will be distributed after your death, as well as providing for guardianship for children who are minors.
X
Y
Z