Glossary

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A

Absolute Assignment

An irrevocable transfer of complete ownership of a life policy from one party to another.

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Accelerated Benefits

A rider that allows a policy owner to receive all or parts of the policy’s death benefit before the insured’s death if certain conditions are met.

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Accidental Death and Dismemberment

A supplementary benefit rider or endorsement that provides for an amount of money in addition to the basic death benefit of a life insurance policy. This additional amount is payable only if the insured dies or loses any two limbs or the sight of both eyes as the result of an accident. Some Accidental Death and Dismemberment Riders pay one half the benefit amount if the insured loses one limb or sight in one eye.

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Accidental Death Benefit

An optional benefit that pays an additional death benefit if the insured dies because of accidental bodily injury.

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Accidental Death Benefit Rider

This benefit provides an additional benefit if the insured dies within 90 days of an accidental injury, and while the rider is inforce. The amount of the Accidental Death Benefit is normally, (but not always) the same as the amount of the base policy. There may be a maximum limit allowed for this benefit which varies by product.

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Accumulated Value

The gross account value of an annuity, universal life or interest sensitive whole life product. This is also referred to as the account value.

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Accumulation Period

On a deferred annuity policy, the period of time where the accumulated value is growing through a combination of premium payments and/or interest earnings.

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Additional Insured Rider

Covers additional insured. Issue ages and minimum amounts are the same as the base plan of a policy/contract. This benefit is automatically renewable and may be converted without evidence of insurability prior to a specific age (which may vary by contract). The maximum amount on the additional insured is one time the base policy.

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Administration Fee

The fee is charged annually and is automatically deducted from the accumulated value on the anniversary date, regardless of any premium payments made by the policyowner. Some products have no administration fee.

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Age Limit

The minimum and maximum ages through which a policy will be issued, for example, ages 15 days through 65 years.

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Age of Majority

The age at which a person has the legal capacity to enter into and be bound by a contract.

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Amendment

A formal document changing either the provisions of an insurance policy or the answers recorded on its application. The amendment is signed by the policyowner and the company, generally through a facsimile signature.

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Anniversary Date

The date each year corresponding to the policy effective date. For example, a policy issued effective June 1, 1991 will have an anniversary date on each following June 1.

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Annuitant

The person upon whose life an annuity is payable. The annuitant is generally, but not always, the owner of the annuity.

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Annuity

A contract issued by an insurance company that can be used to accumulate money for retirement or to generate a stream of income that is guaranteed for life or for a specific period of time.

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Applicant

The party applying for an insurance policy.

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Application

The form that must be completed by an individual or other party who is seeking to apply for a policy. The form provides the insurance company with much of the information it will need to decide whether to accept or reject the risk. This form is used by the applicant to purchase a life, disability or annuity policy.

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Assignee

The party to whom all or certain contractual rights are transferred under an absolute or collateral assignment.

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Assignment

The transfer of ownership rights in a life insurance policy or other type of contract from one party to another. The document that causes the transfer of ownership rights to go into effect.

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Assignment of Benefits

An authorization directing an insurer to make payment directly to a provider of benefits, such as a physician or a dentist, rather than to the insured.

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Assignor

The person or party who transfers certain contractual rights under an absolute or collateral assignment.

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Attained Age

The current age of the insured. The age of the insured at the time the insured’s policy was issued plus the number of years elapsed since the policy was issued.

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Attained Age Conversion

The changing of a life insurance policy from one form of insurance to another (such as from term life insurance to whole life insurance) at a premium rate that is based on the age the insured person has reached at the time the change takes place.

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Automatic Premium Loan

A type of policy loan where the loan proceeds are used to pay a missed premium on the same policy. The owner does not have to request an Automatic Premium loan for each missed premium, the loan is made automatically as long as the owner has previously requested the Automatic Premium loan provision.

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Automatic Premium Payment from Annuity

Premiums paid by processing a withdrawal from the annuity rider for the premium amount due. Requested on application or by special request.

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Aviation Exclusion

A life insurance contract provision which specifies that the death benefit is not payable if the insured dies as a result of certain aviation activities.

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B

Base Insured Rider

Issue ages and minimum amounts are the same as the base plan of a policy/contract. This benefit is automatically renewable and may be converted without evidence of insurability prior to a specific age (which may vary by contract). The maximum amount of this benefit is 5 times the base policy/contract.

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Basic Death Benefit

The death benefit according to the terms of the original, basic contract of a life insurance policy. The basic death benefit does not include the benefit for any supplementary riders, such as an accidental death benefit rider. For policies whose death benefit remains constant, the basic death benefit is equal to the face amount.

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Basic Group Life

A benefit policy that provides employees with a term life insurance benefit. The policy is generally paid for by the employer, with little or no tax cost to the employee.

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Beneficiary

The person or other party designated to receive the death benefit from an insurance policy or accumulated values from an annuity.

Contingent

The person or entity that is to receive the proceeds only if the primary beneficiary has died before the insured.

Irrevocable

A beneficiary designation that cannot be changed by the policyowner unless the change is approved by the irrevocable beneficiary.

Primary

The first person who will receive the proceeds if alive on the date the insured or annuitant dies.

Revocable

A beneficiary designation that can be changed by the policyowner without the approval of the current beneficiary.

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Benefit

The amount of money paid when an insurance claim is approved.

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Benefit Period

The benefit period is the maximum number of years that a policy will pay disability benefits to the policyowner for a covered disability.

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Billed-to Date

The date through which premiums have been billed. For example, assume that the policy is paid to June 1 and the mode is semi-annual. Twenty days prior to June 1, we will send a premium notice for the premium due on June 1. Once June 1 premium is billed, the policy is billed to December 1.

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Billing Form

The method through which a premium is billed.

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Billing Mode

The frequency at which a premium is paid.

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Buyer's Guide

In the United States, a publication that many states require insurance companies to give to an applicant for life insurance. The buyer’s guide helps the applicant make an informed choice among the policies.

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C

Cash Surrender Value

The amount payable to the policy owner upon surrender of the policy. It is equal to the cash value less any surrender charges, any monthly contract charges and any policy debt.

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Cash Value

In a cash value life insurance policy, this is the money that can accumulate in the policy. This money usually accumulates on a tax-deferred basis.

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Certificate of Insurance

A document given to each person insured by a group insurance policy. This document shows the type and amount of coverage to which the group member is entitled and the beneficiary of the coverage. The certificate may also contain a summary of the contract terms as they affect individual group members.

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Claim

A request for payment under the terms of an insurance policy.

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Claimant

The person or party making a formal request for payment of benefits due under the terms of an insurance contract.

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Collateral Assignment

A transfer of some benefit rights in a contract from one party to another, generally for a temporary period. Insurance policies are often assigned as collateral for a loan, in which case all transferred rights revert to assignor when the loan is repaid.

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Community Property

Property that is owned in common by a husband and wife. This includes all property obtained by either spouse during the marriage, other than by gift or inheritance. A small number of states require this form of property ownership. Community Property states: AZ, CA, ID, LA, NV, NM, TX, WA & WI & Puerto Rico.

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Conservator

An individual, also known as a guardian, who has the legal care of another person and/or of the estate who, because of age or disability, is unable to manage his or her own affairs. The authority of the conservator or guardian to act without a court order is determined by statute.

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Contestable Period

The period of time (usually two years) during which an insurer may challenge the validity of a life insurance policy.

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Contract Provision

A life insurance policy provision which states that the policy itself, along with a copy of the application for insurance, if attached, constitutes the entire agreement between the insurer and policyowner.

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Conversion

The process through which the policyowner replaces his or her policy with a new one, per the terms of the Conversion Provision in the original policy. This is usually done as the replacement of a term policy with a permanent policy. As the conversion is processed without evidence of insurability, the permanent policy will be issued regardless of the insured's current health.

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Conversion Period

The period of time during which a term policy or rider can be converted without evidence of insurability. This period differs between products, but generally runs through a stated age (for example age 70) or for a stated number of policy years.

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Co-Owner

If a life or annuity policy is owned jointly by more than one individual, each individual is a co-owner also known as a joint owner.

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Cost Basis

The monthly cost of insurance as defined by specification page.

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Cost of Insurance

On a Universal Life policy, the charge to the accumulated value each month for the cost of the insurance provided.

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D

Death Benefit

The amount of money paid or due to be paid when a person insured under a life insurance policy dies. This amount is prior to any adjustments for outstanding policy loans, dividends, paid-up additions or late premium payments.

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Death Claim

A request for payment under the terms of a life insurance policy.

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Decreasing Term

A type of life insurance in which the amount of coverage decreases during the term of coverage.

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Decreasing Term Rider

This is a rider that decreases over a period of time. Death benefit may remain level or decrease to zero depending on the product. The benefit may remain level once a certain age is reached.

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Deferred Annuity Rider

This is an extra benefit rider, which is attached to and made part of the policy and provides annuity benefit to the annuitant or beneficiary. This benefit is issued in consideration of the application and payment of additional premiums for the rider. The purpose of the rider is to accumulate Annuity purchase payments.

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Disability Benefit

Benefits that are payable periodically while an insured continues to be disabled. "Being disabled" is generally defined in terms of inability to work ones own or any occupation.

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Dividend

A return of part of the premium on a participating policy to reflect the difference between the premium charged and the combination of actual mortality, expense and investment experience. Such premiums are usually calculated to provide some margin over the anticipated cost of the insurance protection.

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Dividends at Interest

A fund attached to a participating policy that contains dividends plus interest earned on the fund.

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Due Date

The date a required premium is payable-also known as the paid-to date.

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E

Effective Date

The beginning date of an insurance policy or rider; this is the date the premiums start.

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Endorsement

A document issued by the home office that amends an in force life or annuity policy.

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Endowment Insurance

A plan of insurance providing for payment of a definite sum of money to the policyowner after a specified number of years if he or she is then living. If the policyowner dies during the endowment period, payment is made to a beneficiary. An endowment policy should not be confused with a Modified Endowment Contract.

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Estate

The possessions of a deceased or incompetent person.

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Evidence of Insurability

Proof that the person is an insurable risk. Documentation including statements made by an applicant or insured, regarding his or her health. Also known as proof, evidence of insurability is generally used in conjunction with a request to issue or reinstate a policy or increase the coverage of an in force policy. The term can also apply to owners/beneficiary's insurable interest and financial eligibility as well.

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Exclusions

Losses for which an insurance policy does not provide benefits. For accidental death benefit coverage, exclusions describe causes of death that do not qualify as accidental. In health insurance policies, exclusion describe losses not covered, such as those relating to pre-existing conditions, cosmetic surgery, or self-inflicted injury.

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Executor

The person, also known as a personal representative, named in a will and appointed by the court to dispose of the deceased person's property in accordance with the terms of the will. If the deceased died intestate, i.e., without a will, no executor is appointed. Instead, the property is disposed of through a court appointed administrator.

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Expense Charges

The amount deducted from premium collected and/or value as defined by the specification page.

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Expiry Date

The date upon which an insurance policy terminates unless renewed by an additional premium payment, or specified in contract.

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Extended Term Insurance

A non-forfeiture option in which the cash value of a policy is applied as a net single premium to purchase paid-up term insurance. The amount of term insurance is equal to the death benefit of the policy being surrendered less any outstanding policy loans. The insured maintains the same amount of coverage but usually for a shorter period of time than the original coverage.

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F

Face Amount

In a life insurance policy whose benefit is not variable, the amount stated as payable at the death of the insured. It is generally shown on the first page of the policy. Also called face value.

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Family Plan Rider

When the main insured passes away this option allows the spouse to continue coverage for the same benefit amount without providing evidence of insurability. Payment must be received from the spouse by a specific date, which is stated in a letter that is sent to the client. If no payment is received this option expires.

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Fixed Premium Policy

A life or annuity policy that requires the policyowner to pay certain predetermined premiums, for example, $500 per year. If any fixed premium is missed, the policy's non-forfeiture option will take effect.

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Flexible Premium Policy

A life or annuity policy that is funded by premium payments which within limits are determined by the policyowner's discretion.

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Flexible Premium Retirement Annuity

An annuity policy funded by flexible premium payments during the accumulation period. At retirement the accumulation value can be used to supplement retirement income.

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Free Look Period

The owner’s right to examine a policy for a specified time period and to return it within that time period for a full refund of not satisfied.

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Free Look Surrender

Termination of a policy per the free look period provision. Through a free look surrender, all parties are restored to the position they were in before the policy was issued, the gross premium is returned, commissions are charged back, reinsurance is canceled and the insurance terminated.

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G

Grace Period

The length of time (usually 31 days) after a premium is due and unpaid during which the policy, including all riders, remains in force. If a premium is paid during the grace period, the premium is considered to have been paid on time.

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Group Insurance

Insurance that provides coverage for several people under one contract, called a master contract.

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Guaranteed Insurability Option

An optional benefit that allows the policyowner to purchase additional life insurance at specified future dates without evidence of insurability.

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Guardian

An individual, also known as a conservator, who has the legal care of another person who, because of age or disability, is unable to manage his or her own affairs.

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H

There are no terms available for this letter at this time.

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I

Income Replacement Benefit

Upon the death of the insured this extra benefit rider will provide a monthly benefit to the beneficiary for a period of 20 years. At the end of the 20 years, we will pay a lump sum death benefit of 100 times the monthly benefit. The rider will expire on the policy anniversary following the insured’s 95th birthday.

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Incontestable Clause

Life insurance policy clause that provides a time limit (usually two years) on the insurer's right to dispute a policy's validity based on material misstatements made in the application.

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Increasing Term Insurance

A type of insurance in which the death benefit of the policy increases during the term of the coverage. The death benefit may increase at stated intervals by some stated amount or percentage, or it may increase according to increases in the cost of living.

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Individual Insurance

Insurance that is issued to an individual person, as contrasted with group insurance.

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Illustration

An illustration of projected values for a life or annuity policy. Also known as a projection or re-proposal.

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Insurable Interest

The likelihood of experiencing a financial loss upon the untimely death of an individual.

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Insured

The person or organization which is protected by insurance.

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Insurer

The party in an insurance contract that promises to pay a benefit if a specified loss occurs.

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Interest Rate Guarantee Period

The period of time on a life or annuity policy for which the current interest rate is guaranteed-for example, one year.

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Interet Rate, Current

The current rate of interest credited to life or annuity policies.

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Interest Rate, Guaranteed

The minimum interest rate that can be credited to any policyowner fund-such as the accumulation value.

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Interest Rate, Policy Loan

The interest rate charged on a policy loan.

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Interest Sensitive Life

Life insurance that provides a death benefit until a specified date noted in the contract, generally 100, in exchange for a premium, also required until a specified date in the contract.

Policy value earns a credited interest rate determined by market conditions.

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J

Joint Insured

One of two or more persons who are insured under one life insurance policy.

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Joint Owner

If a life or annuity policy is owned jointly by more than one individual, each individual is a joint owner (also known as co-owner).

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K

There are no terms available for this letter at this time.

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L

Lapse

An insurance policy termination caused by the failure of the policy holder to pay premiums.

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Level Premims

Premiums that remain the same each year that the life insurance policy is in force.

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Level Term Insurance

A type of term insurance that the death benefit remains the same during the period specified. Premiums for level term insurance policies usually remain the same throughout the term of the coverage.

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Loan

A method to receive cash from a life or annuity policy through which the cash received is an advance against values that would otherwise be payable upon termination of the policy.

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Loan Interest

The process of adding interest to a policy loan. Interest is capitalized on the effective date of the loan and each following policy anniversary.

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Lump Sum

A one time payment equal to the present value of a participant's benefits.

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M

Maturity Date

The date at which a life or annuity policy matures and the policyowner must either take the cash surrender value in cash, purchase a supplementary contract, or defer the maturity.

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Maximum Loan

The form of cash loan used when the owner requests the maximum cash available from his or her policy.

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Minimum Premium

Minimum premium applies to Universal Life insurance. It is the premium amount that when paid by the customer, can prevent a policy from lapsing during the No-Lapse Period when surrender value is zero.

The minimum monthly premium can vary by contract benefits and will be shown on the Specifications Page of the contract.  

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Minor

A person under the legal age of majority. The age of majority varies by state.

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Monthly Expense Charge

A charge that is assessed each month on a Universal Life policy.

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N  

No-Lapse Guarantee

A provision on a Universal Life policy that guarantees that death benefit will remain in force as long as the policyowner pays a minimum stated premium (the no-lapse guarantee premium) for a specified number of years. For example, a UL policy may require a no-lapse premium of $1,000 annually for the first 5 years. At the end of the no-lapse guarantee period, the policy will remain in force as long as the accumulated value is sufficient to cover the monthly deduction.

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Nonforfeiture Option

A provision in a life insurance policy which determines the benefits that will be provided if a fixed premium is not paid prior to the expiration of the grace period. The usual NFO options are:

  Reduced Paid-Up Insurance
  Extended Term Insurance
  Automatic Premium Loan

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O

Other Insured Rider

Issue ages and minimum amounts are the same as the base policy. This benefit is automatically renewable and may be converted without evidence of insurability prior to a specific age (which may vary by contract). The maximum amount on the additional insured is one time the base policy.

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Overloaned

A policy where the loan balance exceeds the cash surrender value. Unless the owner makes a loan repayment sufficient to create a positive cash value, the overloaned policy will lapse without value.

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Owner

The individual or entity that has rights in an insurance policy. The owner is also known as the policyholder or policyowner. The owner's signature is required to make any changes to a policy.

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P

Paid-To Date

The date through which premiums have been paid. For example, a quarterly premium paid on January 1 will pay the policy to April 1. This is also known as the due date.

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Paid-Up Additional Insurance

On a participating traditional policy, additional death benefit that is purchased and fully paid for through the use of dividends.

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Paid-up Policy

An insurance policy that will provide benefits in the future but that requires no further premium payments.

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Participating Policy

A type of life insurance policy or annuity under which policy dividends may be paid to the policyowner.

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Permanent Insurance

Any life insurance policy-other than term --that develops cash values.

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Policy

A written document that serves as evidence of an insurance contract and contains the pertinent facts about the policyowner, the insurance coverage, the insured, and the insurer.

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Policy Anniversary

The anniversary of the date on which a policy was issued. Sometimes simply called the anniversary.

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Policy Poceeds

The amount that the beneficiary actually receives from a life insurance policy after adjustments have been made to the basic death benefit for policy loans, dividends, paid-up addition, late premium payments, and supplementary benefit riders.

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Policy Charge

An amount that an insurer adds to the gross premium to help cover the insurer’s expenses. Also called a policy fee.

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Policy year

The twelve month period between a policy’s anniversaries.

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Policyowner

The person or party who owns an individual insurance policy. The policyowner is not necessarily the person whose life is insured. The terms policyowner and policyholder are frequently used interchangeably.

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Power of Attorney

A document authorizing a third party (the Attorney-in-Fact) to act on behalf of the first person. The POA may or may not authorize the Attorney-in-Fact to request changes to an in force life or annuity policy.

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Pre-Authorized Payment Plan - Bank Draft

A form of premium payment through which we automatically withdraw the monthly premium from the payer's checking or savings account and apply it as a premium payment or loan repayment.

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Premium

The payment, or one of a series of payments, required by the insurer to put an insurance policy in force and keep it in force.

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Proceeds

The amount of money that an insurance company is obligated to pay for the settlement of a life insurance policy, endowment insurance policy, or annuity.

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Projection

An illustration of projected values for an in force life or annuity policy. Also known as an in force illustration or forecast.

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Provisions

The terms or conditions of an insurance or annuity policy.

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Q  

Qualified Plan

A life or annuity policy through which the policyowner is allowed to treat the premium payments as a tax deduction. Qualified plans are typically either an IRA, TSA, Keogh, SEP or corporate pension or profit sharing plan.

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R  

Rate Class

The underwriting class used to determine the rates charged to an insured person. Common rate classes include Standard, Tobacco, Non-tobacco, Special Class and Preferred.

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Rated Policy

A policy issued to insure a person classified as having a greater-than-average likelihood of loss. The policy may be issued: a) with special exclusions, b) with a premium rate higher than the rate for a standard policy, or c) with exclusions and a higher than standard premium rate.

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Reduced Paid-Up Insurance

A non-forfeiture option under which the net cash value of a life insurance policy is used as a net single premium to purchase a smaller amount of fully paid insurance of the same kind and for the same period as the policy being surrendered.

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Reinstatement

The process by which a life insurance company puts back in force a policy that had lapsed because of non-payment of premiums.

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Renewable Term Insurance

A type of term insurance which includes a renewal provision that gives the policyowner the right to renew coverage at the end of a specified term without submitting evidence of insurability. Premiums may increase when policy renews based on age.

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Replacement

The act of surrendering an insurance policy or part of the coverage of an insurance policy in order to buy another policy.

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Rider

An amendment to an insurance policy that becomes a part of the insurance contract and expands or limits the benefits payable.

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Rider Premiums and Expense Charges

Premium load taken from premiums received to cover expenses.

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Risk Premiums and Administration Fees

Cost of insurance for coverage provided.

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S  

Scheduled Premium Payment

A premium payment for specific times when premium is expected to be paid.

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Settlement Option

Choices given to the policyowner, annuitant or the beneficiary of a life insurance policy or annuity regarding the method by which the insurer will pay policy proceeds.

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Spouse Insured Rider

Issue ages and minimum amounts are the same as the base policy. This benefit is automatically renewable and may be converted without evidence of insurability prior to a specific age (which may vary by contract). The maximum amount on the additional insured is one time the base policy.

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State Insurance Department

The state agency charged with regulation of the insurance industry in its state.

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Statement of Account

A statement mailed to the policyowner on the policy anniversary describing all policy transactions for the previous twelve months, including premium payments, policy charges, coverages, values etc.

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Suicide Clause

Life insurance policy wording which specifies that the proceeds of a policy will not be paid if the insured takes his or her own life within a specified period of time (usually two years) after the policy's issue date.

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Surrender Charge

An amount of money deducted from a policy’s reserve to arrive at the policy’s cash surrender value.  

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Surrender Charge Period

The number of years following the policy effective date, or date of a specified amount increase, during which a surrender charge is assessed.

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T  

Taxable Event

Any financial transaction which will likely result in taxes being paid by the client. We are required to notify the Internal Revenue Service and state tax offices each year of all such transactions.

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Term Insurance

Term Life insurance is insurance under which the benefit is payable only if the insured dies during a specified time period and premiums are paid as specified by the policy.   Term Life insurance does not accumulate Cash Value.

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Traditional Policy

A term or whole life insurance policy.

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U  

Underwriting

The process of assessing and classifying the potential degree of risk that a proposed insured represents.

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Universal Life Insurance

Universal life insurance is a permanent life insurance product in which the internal policy charges and interest crediting components are specifically broken out separately in the policy.   A universal life insurance policy accumulates cash value at an interest crediting rate declared by the company.   Within certain limits, the policyowner can choose the premium he or she wishes to pay and this affects the policy’s cash value.   Each month, a monthly deduction to cover the cost of the insurance protection provided by the policy is deducted from the policy cash surrender value.

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V

There are no terms available for this letter at this time.

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W  

Waiver of Monthly Deductions

Waiver of Monthly Deduction waives the monthly deduction on the policy in the event of total and permanent disability of the insured.   Interest is still credited on the policy during the time waiver is in effect.   The policy does not freeze or suspend during waiver.

Monthly deduction is withdrawn from the policy value. It consists of:

  • cost of insurance
  • administrative charge
  • premium for additional benefits provided by riders
  • substandard rating charges

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Waiver of Premium Rider

Waives initial planned premium and the monthly amount that can be used to complete the investment objective after six months of total disability. This benefit is normally issued between the ages of 15 years and 55 years. There is also a maximum amount of this benefit allowed which differs by contract/policy. In the event of qualifying disability, the premium is waived. The cash value of the policy continues to grow at the current interest rate and the death benefit is maintained.

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Whole Life Insurance

Whole Life insurance is insurance that remains in force during the insured’s lifetime provided premiums are paid as specified by the policy.   Whole life insurance also builds a cash value as a result of the level premium approach to funding the death benefit.

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Withdrawal

A means to take cash out of a universal life or annuity policy through which a portion of the cash value is surrendered. The death benefit is reduced by the amount of the cash withdrawn.

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Withholding

The procedure through which any financial institution, retains a portion of the taxes payable on a financial transaction. The withheld funds are then distributed to either the federal or state government.

The standard federal withholding rate is 10% of the taxable gain. The state withholding rates vary by state.

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W-9 Form

A form signed by the taxpayer certifying his or her Social Security Number, and whether the taxpayer is subject to backup withholding.

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X

There are no terms available for this letter at this time.

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Y

Yearly Renewable Term (YRT) Insurance

Term insurance that gives that policyowner the right to continue the coverage at the end of each year. The renewal right continues for a specified number of years or until the insured reaches the age specified in the contract.

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Z  

There are no terms available for this letter at this time.

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