Glossary

A B C D E F G I P R S T U W

Agent A representative of an insurance company who is authorized to sell the company's products and services. Laws of all states require all insurance agents to be licensed in each state where they conduct business in and appointed with each carrier in order to sell insurance. Agents may be categorized as: (1) An exclusive agent is a sales employee or a sales representative of one and only one insurance company or its affiliated group of companies who seeks and services business exclusively for the company or group. (2) An independent agent usually represents two or more insurance companies or groups in a sales and service capacity as an independent businessperson.

Absolute assignment A method of transferring the ownership of a life insurance policy or annuity to an assignee. See also assignment and collateral assignment.

Accelerated Benefit Rider for Terminal Illness At Beneficial Financial Group, this benefit allows the policyowner to receive, under certain circumstances, the payment of a discoutned death benefit when the insured is certified as chronically ill as defined in the benefit. This benefit is available to policyowners of whole life, most universal life policies.

Accidental Death Benefit (ADB) Rider A provision under a life insurance policy for payment of an additional amount, usually equal to the face amount of insurance—if the insured is killed in an accident.

Accumulation period The period between the purchase of a deferred annuity and when the contract owner begins receiving funds.

Accumulation value The net amount paid by the contract owner for a deferred annuity plus interest earned, less the amount of any withdrawals and fees.

Actuary A highly specialized mathematician professionally trained in the risk aspects of insurance, whose functions include the calculations involved in determining proper insurance rates, evaluating reserves, and various aspects of insurance research.

Administrative fees These fees cover the costs involved in operating and maintaining a financial product. Examples include the transaction costs of each investment decision, preparing and mailing statements and other communications, and customer service.

Anniversary date The anniversary of your annuity contract’s or life insurance policy’s official starting date.

Annuity A contract between you and an insurance company which states that in exchange for your payment, the company agrees to pay you an income now or in the future.

Annuitant The person on whose life the annuity income payments will be based. The contract owner decides who this person will be. Once named, the annuitant cannot generally be changed.

Annuitization When you annuitize your contract, you trade the value of your contract for the issuing company's guarantee to make payments to you for a certain period, or for your lifetime.

Annuity date The date when income payments begin. (It appears in your contract.) You may be able to change this date, with limitations, before you reach it.

Assignment An agreement under which one party, the assignor, transfers some or all of his ownership rights in a particular property to another party the assignee. See also absolute assignment and collateral assignment.

Beneficiary The person or party who will receive the proceeds from a life insurance policy or an annuity contract.

Bequest That which is left to specified persons under a deceased person's will.

Cash-value life insurance Some life insurance policies develop a cash value, usually after the first or second year the policy has been in force. It is available when the policy is surrendered or may be borrowed against as a policy loan. (See policy loan.)

Collateral assignment A transfer of some ownership 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 the assignor when the loan is repaid. (See also assignment.)

Contingent beneficiary The second person or party named in a contract to receive life insurance policy proceeds if the primary beneficiary preceeds the insured in death.

Contract owner The person or party who purchases an individual life or annuity contract and controls the rights in the policy. (See also annuitant.)

Death benefit The value paid to the beneficiary at the death of the insured or annuitant.

Deferral A postponement or delay.

Deferred annuity Any annuity that requires at least a one year waiting period prior to paying an income is a deferred annuity. A deferred annuity can be either fixed or variable.

Endorsement An additional piece of paper, not part of the original contract, which cites certain terms and which becomes a legal addition to and part of the insurance or annuity contract.

Fixed annuity Offers a guaranteed interest rate for a certain "fixed" period of time.

Fixed annuitization The annuitant receives approximately the same amount of money with each periodic payment (monthly, quarterly, etc.), with no chance of the amount decreasing.

Free-look period All states require a free-look period during which you can cancel your insurance policy or annuity contract and obtain a full refund. States' rules vary, so check with your financial professional for details.

Group insurance Insurance written on a group of people under a single master policy that is issued to their employer or to an association with which they are affiliated.

Guaranteed or fixed amount You can specify how much annuity income to receive and how often. The length of time over which you'll receive payments will depend on how much money you've accumulated and the interest rate it's earning. In other words, it determines how long your money will last.

Guaranteed fixed period You can specify the length of time you want to receive payments. If you die before the end of the period, your beneficiary will receive the remainder of the payments.

Income or payout options Different ways by which you can receive income from an annuity. These include lump-sum payment, annuitization, and withdrawal.

Income phase The period during which the issuing company pays you an income according to your choice of options.

Permanent life insurance The type of life insurance that develops cash value and includes whole life, universal life, and variable life insurance.

Persistency Refers to whether insurance remains in force.

Policyholder One who owns an insurance policy.

Policy loan The borrowing against a life insurance policy's cash value.

Policyowner See policyholder.

Pre-existing condition A physical condition that existed prior to the issuance of an insurance policy.

Premium The amount of money charged a policyowner for an insurance policy.

Premium taxes Some states charge a tax on the contributions made to an annuity or life policy. The issuing company generally charges the annuity contract or life policy for any premium tax it pays to the state.

Primary beneficiary The party or parties who have first rights to receive the benefits of a life insurance policy following the death of the insured. Also called the first beneficiary. Compare to contingent beneficiary.

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

Protection amount The initial face amount of a life insurance policy or the amount of money that will be paid to a beneficiary upon the death of an insured, depending upon the policy. This amount will be reduced by the amount of any outstanding loan.

Rider An additional provision added to a policy by issuance of an amending document. (See endorsement.)

Systematic withdrawal Instead of annuitizing your annuity, you can simply choose to withdraw a certain percentage of the value of your annuity each year. There may be charges associated with withdrawals.

Surrender value The amount you will receive if, at some point, you choose to terminate (surrender) your contract and withdraw all the cash available.

Surrender charges (1) Charges applied to a life policy when a policyowner surrenders a life policy. (2) Charges applied to an annuity if the contract owner surrenders a deferred annuity policy before the period stated within the policy.

Tax deferral A postponement (deferment) of reporting taxable income on earnings.

Total return and net return Total return is the amount an investment earns before deductions for fees and other expenses. Net return is the amount an investment earns after those fees and expenses are deducted.

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

War exclusion provision A life insurance policy provision that limits an insurer's liability to pay a death benefit if the insured's death is connected with war or military service.

Withdrawals You can withdraw all or part of your money from an annuity or insurance cash value (although you may need the issuing company's approval). In some cases a fee may be charged. (See withdrawal charges.)

Withdrawal charges If you withdraw more than the permitted charge-free amount during the first several years (depending on the annuity or life insurance contract you own), there may be a withdrawal or surrender charge.

Withdrawals without charge The amount you can withdraw from your annuity or life insurance contract without being assessed a penalty by the insurance company.