Glossary

Is a life insurance policy that covers the lives of two insureds and that pays the death benefit upon the death of the second insured.

Is a retirement plan funded through a fiduciary, which would typically be a bank but could also be a collective number of individuals that directly invests the accumulated funds. Pension payments are made from the funds as they fall due. Can also be known as a Trusteed Plan or a Directly Invested Plan.

Is an asset account managed independently from an insurer’s general investment account. It is used primarily for retirement plans and variable life products. This arrangement allows for a wider range of investment options, especially with regard to equities.

Are the various ways, other than an immediate payment in cash, that a policyholder or beneficiary may elect to have policy benefits paid.

This is the maximum annual premium that can be paid during the first seven policy years of a flexible premium life insurance contract. If the specified amount is exceeded, the policy could be classified as a Modified Endowment Contract, which would result in the loss of the tax advantages afforded by life insurance rules.

Is the face value of a life insurance policy. In a level death benefit product, it is limited to the death benefit amount.

Is a method of dividing premium payments, cash values and death benefits of a life insurance policy. Typically, the split dollar agreement is between an employer and employee and can be beneficial to both parties.

Is the classification of an individual who fulfills the physical, occupational, and other requirements on which most of a life insurance company’s policies are issued. An individual whose characteristics are more favorable would typically be classified as a Preferred Risk. If the individual’s characteristics are less favorable, the applicant would typically be classified as a Rated Risk or even refused coverage altogether.

Is an underwriting classification for insurance applicants with an average likelihood of loss.

A life insurance company owned by stockholders (as opposed to a Mutual Company, which is owned by policyholders) who elect a board to govern the company’s management. Stock companies typically issue Non-Participating Insurance products.

Is an annuity, the periodic pay-outs of which cease when the annuitant dies.

Is a Whole Life Insurance for a fixed amount on which a defined annual premium is payable for the lifetime of the insured.

Is an agreement allowing a person or entity who is responsible for making periodic payments to a claimant to assign the obligation of making those payments to a third party. An annuity contract is generally utilized to make the payments.

See Investment Options.

See Change of Insured Rider.

See Impaired Risk.

Is an additional feature that provides the right to substitute a new insured in place of the current insured under a policy by issuing a new policy on the life of a new insured. Also known as Change of Insured.

Is a policy provision which reduces or eliminates the amount of death benefit to be paid should the insured commit suicide. It is usually only enforceable within the first two policy years.

Is optional additional coverage that supplements the provisions specified in a basic life insurance policy. These are usually in the form of riders.

Is an agreement between a life insurance company and a policyholder or beneficiary, under the terms of which the company retains the cash sum payable under an insurance policy and makes payments in accordance with the policyholder’s selected settlement option.

Is the balance that remains after an insurer’s liabilities are deducted from its assets. It serves as a financial buffer protecting policyholders against instances of unexpectedly high claims.

To voluntarily terminate or cancel a policy in return for its cash surrender value or any other Non-Forfeiture Options.

Is a declining charge that’s applied if a policy is surrendered during the primary years of the policy. The length of the surrender charge period can vary depending on the age of the insured as at the date of policy issue or date of an increase in the specified amount. The surrender charge itself takes into account the initial specified amount, age, gender and duration.

Is an amount equal to the net cash value less any applicable surrender charge, which is taken from the table of Surrender Charges specified in the life insurance contract.

See Second to Die Life Insurance.