Bailout Provision

A provision in some annuity contracts whereby, if the interest rate being credited to the annuity fund ever falls below a specified rate, the policyholder may withdraw the initial premium amount paid without a surrender charge.

Bank Draft

An arrangement by which a policy owner allows a bank to withdraw money from his or her account on a scheduled basis and transfer the money to an insurance company to be applied as payment to a policy. Also known as an Electronic Funds Transfer.

Beneficiary

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

Broker

A business entity licensed and registered with the Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (“FINRA”).

Buy-Sell Agreement

An agreement in which either a business or its surviving shareholder owners (or both) will purchase the shares or interests owned by a deceased or retiring shareholder owner at a value or formula previously agreed upon by the parties and stipulated in the agreement.

Capitalization of Loan Interest

Activity related to loan interest charged or reversed for a policy loan. It is the interest charged for a new loan, or for the interest added to the loan for each policy anniversary. It is the unearned interest reversed whenever the loan is paid off or a loan payment is applied.

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.

Cash Value

The cash value of dividends earned that were used to purchase paid-up additional insurance.

Children’s Term Rider

An optional policy rider that provides level term insurance on children of the primary insured.

Collateral Assignment

The act of the owner of a life insurance policy or an annuity contract transferring certain rights to another party as security for a debt, usually a temporary assignment. Under a collateral assignment, the creditor is entitled to be reimbursed only to the extent that “his interest may appear,” i.e., policy or contract proceeds will be payable only for the amount owed by the policy owner to the creditor at that time. Any death benefit or cash surrender in excess of the debt owed by the policy owner to the creditor is paid to the policy’s or contract’s beneficiary. A collateral assignment may also place restrictions or limitations on life insurance policy loans.

Common Disaster

A situation in which the insured and the beneficiary appear to die simultaneously with no clear evidence of who died first.

Common Disaster Clause

A clause sometimes added to a life insurance policy that provides a means for the insurer to distribute the proceeds of the policy in the event of a COMMON DISASTER.

Contestable Clause / Period

A provision in a life insurance policy that states the time (called the contestable period) during which the 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, although some states may allow challenges later based on fraud.

Contingent Beneficiary

A person or entity designated to receive the policy proceeds if the Primary Beneficiary predeceases the Insured.

Contract (Policy)

The basic written agreement between the insurer and the policy owner or contract owner.

Conversion

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

Convertible

A term used to describe a policy that contains a conversion provision, typically the right under certain circumstances to convert a term life to a permanent life insurance policy.

Cost of Insurance

A universal life or variable life insurance policy contract provision; the “cost of insurance” is the amount deducted monthly from the accumulation value to cover the pure insurance protection provided by the policy. The amount deducted is calculated based on a number of factors such as age, premium class and net amount at risk.

Critical Illness Maximum Benefit Amount

Maximum amount payable for each Insured as stated in the Policy Schedule, subject to applicable policy limitations and reductions. Typically, coverage on an Insured terminates after 100% of the Critical Illness Maximum Benefit Amount has been paid for that Insured.

Children’s Term Rider

An optional policy rider that provides level term insurance on children of the primary insured.

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.

Death Benefit Option

The method by which the death benefit payable is calculated for a Universal Life or Variable Universal Life insurance policy. For level, the death benefit is the face amount of the policy reduced by the existing loan, if present. For increasing, the death benefit is the face amount plus the cash value, reduced by the existing loan, if present.

Death Claim

The notification to an insurance company of the insured’s death and request for payment of policy proceeds according to the terms of the policy.

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.

Dividend

The amount of an insurer’s surplus that is available for distribution to the owners of participating policies. The dividend results from actual mortality, interest and expenses that were more favorable than expected when premiums were set.

Electronic Funds Transfer

An arrangement by which a policy owner allows a bank to withdraw money from his or her account on a scheduled basis and transfer the money to an insurance company to be applied as payment to a policy. Also known as a Bank Draft.

Endow

The point in time when a life insurance policy’s cash value equals the face amount.

Evidence of Insurability

Proof of a person’s physical condition, occupation, or other factors, utilized by an insurance company to determine the acceptability of the applicant for insurance.

Excess Interest

The difference (always zero or positive) between the rate of interest an insurer actually pays and the guaranteed amount to be paid.

Expected Return

The amount expected to be received by an annuitant under an annuity contract, based on the periodic payment and the annuitant’s life expectancy or the guaranteed number of payments, as calculated when benefits begin. The expected return is utilized to calculate federal income tax of interest received in each annuity payment.

Expense Charge

A monthly charge paid to an insurance company based on various characteristics of the insured, such as age. Charges are defined for a specified period of time as provided in the life insurance policy.

Face Amount

The amount stated on the insurance policy that will be paid in the event of the death of the insured or at the policy’s maturity, whichever occurs first. The face amount 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 Period

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.

Grace Period

As provided for under a policy, the time period following a monthly anniversary during which a life insurance policy will continue in force while the net cash surrender value is not sufficient to cover the monthly expense charge then due.

Guaranteed Insurability Option

A rider to a life insurance policy that gives the policy owner the right to purchase additional insurance on the insured of the same type as provided in the original policy. The additional insurance amount, based on terms outlined in the rider, can be purchased at specified ages and face amounts without providing new evidence of insurability.

Guaranteed Interest

Each policy or contract contains a minimum guaranteed interest rate. The current interest rate may be greater than or equal to the guaranteed interest rate. Interest earned over and above the guaranteed interest rate is the excess interest. The total amount of interest earned on a policy or contract is the sum of the guaranteed and excess interest amounts.

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, semiannually or annually.

Individual Retirement Annuity (IRA)

An annuity, available as a retirement account, to 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.

Insurable Interest

A reasonable economic expectation held by an individual or entity in the continuance of another person’s life, or a reasonable expectation of economic loss by an individual or entity resulting from a person’s death. The beneficiary must have a reasonable expectation of economic loss by an individual or entity resulting from a person’s death. If there is no insurable interest, a policy cannot be written.

Insured

The person whose life is covered by an insurance policy.

Interest Rate (Current)

This is the current interest rate credited to the policy or contract.

Interest Rate (Guaranteed)

The guaranteed minimum annual interest rate used in calculating items such as policy reserves from year to year. Also the guaranteed factor used to calculate interest payable on proceeds held under a settlement option. This term also refers to the minimum rate credited each year to any cash values.

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

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.

Lapse

The termination of an insurance policy resulting from 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.

Life Expectancy

The average number of years a person is expected to live. Life expectancy is projected from a mortality table and is used to calculate benefit payouts.

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.

Loan (Outstanding)

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

Loan Provision

A policy provision that grants the owner of a life insurance policy the right to take a loan from the insurance company secured by the policy’s cash surrender value.

Maturity Date

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

Maximum Loan Amount

Your Policy’s cash surrender value less the loan interest that will be payable on your loan to your next Policy anniversary.

Medical Information Bureau (MIB)

An independent entity that collects and stores medical data on life and health insurance applicants. The information is exchanged among member insurance companies upon written authorization from the insured. Its purpose is to guard against fraud and concealment by helping insurers discover pertinent, yet undisclosed, health facts.

Misstatement of Age

The act of giving the wrong age for oneself on an insurance application or for a beneficiary who is to receive benefits on a basis involving a life contingency. In most life insurance policies, the policy sets forth the action to be taken if a misstatement of age is discovered after the policy has been issued. Typically, the Face Amount is adjusted to reflect the amount of coverage (face amount) that would have been purchased if the correct age had been used on an issue date.

Monthly Anniversary

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

Net Amount at Risk

The difference between the face amount of a life insurance policy and the policy’s accumulation or cash value.

Net Cash Surrender Value

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

Nonforfeiture Values

The values or benefits in a life insurance policy that the policy owner does not forfeit, even if he or she chooses to discontinue payment of premiums. They usually include cash value, reduced paid-up insurance and extended term insurance values.

Other Insured Rider

An optional policy rider that provides convertible term insurance to a spouse or an immediate family member of the primary insured. You may be charged an additional premium.

Owner (Policy/Contract owner)

An individual or entity that owns an insurance policy or contract. The owner might be the insured on the policy or contract, the beneficiary or another party. Generally, the policy/contract owner pays the policy’s premium and is the only one who is permitted to make changes to a policy or contract.

Paid-Up Additions

Paid up Additions uses any declared policy dividend as a single premium to purchase paid up additional insurance on the insured’s life. The face amount of the paid up additional insurance will be the amount that the dividend can purchase at the insured’s attained age.

Participating Policy

A life insurance policy in which the policy can be created with a dividend payable from the life insurance company’s surplus (profits). Other policy provisions are substantially similar to whole life insurance. Dividend payments are not guaranteed and will depend on whether the insurance company declares a dividend.

Payee

The person named to receive annuity payments from an annuity contract.

Payer

The person making premium payments on a policy or contract. If the payor is not also the owner, he or she may not be entitled to exercise the rights and provisions of the policy or contract.

Per Capita

Designation that property is divided equally among the beneficiaries who survive the insured. For example, if the policy specifies two beneficiaries, but only one is surviving at the time of the insured’s death, then the remaining beneficiary receives the entire policy benefit. Contrast with Per Stirpes.

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.

Per Stirpes

Literally “by branches.” Distribution of property between or among two or more beneficiaries with the provision that if one dies before the insured, the beneficiary’s heirs shall have the beneficiary’s full share distributed among them. Contrast with Per Capita.

Planned Periodic Payment

The premium designated at the time of application as the amount planned 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 / Contract Number

The contract number assigned to the policy displayed. Generally, this policy number will appear on the data page of your insurance contract.

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.

Policy Year

The year commencing with the policy date and ending on the day before the first policy anniversary, or any following year commencing with a policy anniversary and ending on the day before the next policy anniversary.

Premium

Payments to the insurance company to purchase a life insurance policy and to keep it in force or Payments into an Annuity Contract.

Premium

Payments to the insurance company to purchase a life insurance policy and to keep it in force or Payments into an Annuity Contract.

Premium Mode

The frequency with which the payments are made, as selected by the policy owner. Typical premium modes available are annual, semiannual, quarterly or monthly.

Primary Beneficiary

A person or entity designated to receive the policy proceeds in the event of the insured’s death.

Primary Insured Rider

An optional policy rider that provides level term insurance on the primary insured. When the primary insured rider is combined with base coverage, it can reduce premium costs for the amount of coverage as compared to the cost of permanent plan of the same face amount. For the same premium, it can improve policy performance on universal life or variable life insurance policies.

Rated

A rated policy is one issued on a substandard risk with higher-than-standard premiums.

Reinstatement Provision

A policy provision defining a life insurance policy owner’s right to reinstate a lapsed policy within a certain time after lapse, as well as the conditions necessary for reinstatement which may include evidence of insurability and/or payment of back premiums and interest. The right is usually forfeited once a policy has been surrendered for its cash surrender value.

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. Examples of riders include:

• Accelerated death benefit – An optional provision in a life insurance policy that provides for a specified percentage of the death benefit to be paid prior to the insured’s death in the event a doctor certifies that the insured’s life expectancy is limited (usually 12 months or less).
• Accidental death benefit – A benefit that provides coverage for loss of life due to an accident that was the direct cause of death and for a death that results within a certain period of time following the accident.
• Automatic increase rider – An optional policy rider in a universal life insurance policy that provides scheduled increases in face amount based on a designated percentage, beginning in a designated policy year. This option must be applied for at the time of issue of the base policy.
• Children’s term rider (or children’s insurance benefit) – An optional policy rider that provides level term insurance on children or the lives of the primary insured.
• Guaranteed insurability option – An amendment to a life insurance policy that gives the policy owner the right to purchase additional insurance of the same type as provided in the original policy. The additional insurance amount, based on terms outlined in the policy, can be purchased at specified ages and rates without providing new evidence of insurability.
• Other insured rider – An optional policy rider that provides convertible term insurance for a spouse or immediate family member of the primary insured.
• Primary insured rider – An optional policy rider that provides level term insurance on the primary insured. When the Primary Insured Rider is combined with base coverage, it can reduce premium costs for the amount of coverage as compared to the cost of a permanent life insurance plan of the same face amount. For the same premium, it can improve policy performance on universal life or variable life insurance policies.
• Waiver of monthly deduction – An optional life insurance policy rider that waives the monthly Cost of Insurance charges on a universal life or variable universal life policy for the length of a qualified disability as outlined in the policy contract.
• Waiver of Specified Premium -An optional life insurance policy rider that waives a specified premium on a traditional product for the length of a qualified disability as outlined in the policy.

Single Premium Deferred Annuity

An annuity purchased with a single, lump-sum payment that earns interest for a period of years before the payment period begins, and which is taxed only when distributions are taken.

Suicide Provision

A life insurance policy provision whereby if the insured commits suicide within a specified period, usually one or two years after date of issue, the company is not liable to pay the face amount of coverage; instead, liability is limited to a return of premiums paid.

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.

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.

Total Collected

The total amount of all premium payments applied to the policy or contract, less any payments reversed.

Underwriting Class / Rating

The risk class for a life insurance policy, as determined at the time policy is issued, or after subsequent underwriting approval.

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.

Valuation Date

A date in which the New York Stock Exchange is open for business when a value or credit is given for funds.

Valuation Period

A period in which unit values are determined for each variable investment option at the close of each business day, usually 3:00 PM Central Time. A business day is any day that the company and the New York Stock Exchange are open for business.

Variable Universal 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.

Waiver of Monthly Deduction

An optional life insurance policy rider that waives the monthly cost of insurance charges on a universal life or variable life policy for the length of a qualified disability as outlined in the policy.

Waiver of Specified Premium

An optional life insurance policy rider that waives a specified premium on a traditional product for the length of a qualified disability as outlined in the policy.

Whole Life Insurance

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