LIFE INSURANCE - GLOSSARY
Absolute Assignment - If absolute Adjustable Life Insurance - a
assignment is done then there can be variety of insurance allowing the
no reversion of the assignment to the policyholder to change the type of
assignor or his estate. insurance, raise or lower the face
amount of the policy, increase or
Accident benefit - If you pay a small decrease the premium and lengthen or
additional premium, your nominee will shorten the protection period.
receive twice the sum assured upon
your death by accident. If you suffer a Adjuster - A trained individual who
permanent disability due to the acts in settling claims arising out of
accident, then the amount is paid to policy contracts.
you in installments, and subsequent
premiums under the policy are waived. Adverse Selection - The tendency of
persons who present a poorer-that-
Accident - An unforeseen, unintended average risk to apply for, or continue,
event, something unexpected, insurance to a greater extent than do
something which could not be persons with average or better-than-
considered as a foreseeable average expectations of loss.
occurrence and consequence of an
undertaking. Age Limits - Stipulated minimum and
maximum ages below and above which
Accident Insurance - A type of life the company will not accept proposals.
or health insurance providing a benefit
only as a result of death or accidental Age Proof (Standard Age Proof/
bodily injury by unforeseen, Non Standard Age Proof) - At the
unexpected or an unintended time of proposal the proposer is asked
happening. to furnish proof of the age as stated in
the proposal form. The age proof can
Accidental Death and be either Standard or Non Standard.
Dismemberment Benefit - A The Standard Age Proofs are based on
provision purchased in a life insurance certain definite sources of information
policy to provide an additional amount such as Birth Certificate, School
- usually equal to the policy face value Certificate, while Non-Standard Age
- if the insured is killed in an accident. Proofs are assumptions of the date of
Also know as "double indemnity." The birth – horoscopes, elder’s declarations
dismemberment benefit, if included, etc. Certain restrictions are imposed
pays a set percentage for the loss of on proposals with Non-Standard Age
eyesight, and loss of hands or feet at Proofs.
or above the wrist or ankle.
Agent - An insurance company
Actuary - A person professionally representative licensed by the
trained in the technical aspects of Company, who solicits, negotiates or
pensions, insurance and related fields. effects contracts of insurance, and
A specialist in the mathematics of risk, provides service to the policyholder.
especially as it relates to insurance
calculations such as expectancy, Amendment - The formal document
premiums, dividends, and annuity changing the provisions of an
rates. The actuary estimates how insurance policy.
much money must be contributed to
an insurance or pension fund in order Annuitant - An insured with a life
to provide for the future. annuity policy.
Annuity - A policy under which an insurance policy to another by means
insurance company promises to make of an assignment.
a series of periodic payments to a Assignee - The party to whom an
named individual in exchange for a assignment (a transfer of property or
premium or a series of premiums rights to property) has been granted
called the purchase price.
Assignment - Is the transfer of the
Annuity (retirement benefit) - It’s rights, titles and interest of the policy
a periodic payment (usually monthly) by the assignor to the assignee. The
payable by the insurer to the life assignor is the absolute owner of the
assured. Generally, it is used in policy. He/She could be the proposer,
context of retirement benefits. Under the life assured or the absolute
this type of insurance contracts, the assignee. Nomination is automatically
life assured pays a fixed premium cancelled by Assignment.
(which could be a lumpsum or a or
staggered payment) and the insurer, The act of transfer of rights on a life
in return, provides the life assured a insurance policy by the insured to
fixed amount of income throughout another person in return of some
his/her lifetime. valuable consideration.
Annuity certain (annual payments) Attending Physicians Statement
- These annuities are payable for a (APS) - A written statement from a
certain minimum period and if the physician who has treated, or is
policyholder dies during this period, currently treating the proposed
the remaining instalments are paid to insured. The statement provides the
the beneficiary of the policy. These insurance company with information
annuities operate as any normal relevant to underwriting a risk or
annuity after the end of the certain settling a claim.
period, i.e. payments will be made
throughout the life of the life assured. Authorization - A form signed by the
No payments are made to the proposed insured authorizing an
beneficiary after the death of the life insurance company to obtain and
assured, if he outlives the certain disclose information regarding
period. proposed life insurance coverage.
Anticipated Endowment - Unlike Automatic Premium Loan (APL) -
endowment plans, in money back An elective policy feature wherein the
policies, the policyholder gets periodic insurance company pays any premium
"survival payments" during the term of not paid by the end of the grace
the policy and a lump sum amount on period, by making a loan equal to the
surviving its term. In the event of premium from policy cash values.
death during the term of the policy,
the beneficiary gets the full sum Aviation Clause - A clause limiting
assured, without any deductions for the liability of the insurer if death is
the amounts paid till date, and no related to, to a specified degree, with
further premiums are required to be aviation.
paid. These type of policies are very
popular, since they can be tailored to Backdating - A procedure for making
get specific amounts at specific periods the effective date of a policy earlier
as per the needs of the policy holder. than the application date. Backdating
is often used to make the age of the
Assignor - The policy owner who consumer at issue lower than it
transfers his or her rights under an actually was, in order to get lower
premium. an agent of one or more insurers and
as a broker in dealing with one or
Bankers orders Bank is more other insurers.
instructed to pay premium on due date Business Insurance A policy which
on behalf of the insured. primarily provides coverage of benefits
to a business as contrasted to an
Beneficiary An individual individual. It is issued to indemnify a
designated in a will to receive an business for the loss of services of a
inheritance, or the individual key employee or a partner who
designated to receive the proceeds of becomes disabled.
an insurance policy, retirement
account, trust, or other asset. In an Captive Agent One who sells
insurance policy the person who is insurance for only one company as
nominated is normally the beneficiary. opposed to an agent who represents
Benefits The claim
amount payable by the insurance Captive Insurance Company A
company to a claimant. company owned by one or more non-
insurance Industry for the main
Bonus - The insurance company purpose of providing insurance covers
periodically values its assets and to the owner.
liabilities. The premium payments that
it receives from you are used for three Cash Refund Annuity A form of
purposes: to settle claims, to make annuity contract which provides that if
investments, and to pay expenses. If at the death of the annuitant
the insurance company makes profits, installments paid to him have not
it declares a bonus for a certain period totaled the amount of the premium
for its policyholders. It can disburse paid for the annuity, the difference will
this bonus to you in three ways: the be paid to a designated beneficiary in
bonus is added to the value of the a lump sum.
policy; the bonus is distributed to you
physically; or your future premium Cash Surrender Value
payments are reduced. In India, or Cash Value The amount
generally the first method is adopted that is available to the owner if a life
for with profit policies, and is paid to insurance policy is surrendered any
you upon maturity of the policy. time before the maturity date. The
amount represents the cash value
Broker One who minus surrender charges and any
represents an insured in the outstanding loans due upon
solicitation, negotiation or cancellation of the policy.
procurement of contracts of insurance,
and who may render services Childrens deferred assurance
incidental to those functions. By law plans Are schemes
the broker may also be an agent of the under which a minor child is the
insurer for certain purposes such as beneficiary. The parent proposes for
delivery of the policy or collection of insurance on the life of the minor and
the premium. pays premiums. The risk on life of
child begins at a specified age. The
Brokerage Business Business period before the specified age is
offered to an insurer by a broker. This attained is called Deferment Period.
is sometimes called excess or surplus
business. Claim A claim on the
Broker-Agent One acting as policy is the demand for performance
of the promise made by the insurer at expenses prior to death. Accelerated
the time of making the contract. The (or living) benefits paid reduce the
insurer is obliged to perform his part death benefit payable to the
of contract, if the insured has beneficiary(ies) upon death.
Date of commencement The date
Collateral A temporary on which cover begins, following
assignment of the monetary value of a acceptance of the risk by the insurer.
life insurance policy as security for a
loan. In the event of default, the Dating Back
creditor would receive proceeds or Backdating Dating Back or
values only to the extent of his Back Dating is an option to the life
interest. assured to get the advantage of lower
age wherein the policy is commenced
Conditional assignment The rights from a date earlier than the date of
of the policy revert to the assignor in signing of proposal form. However
case a specified event occurs. For back dating is limited to within the
instance, if the assignee dies before same financial year.
the assignor, then the policy would
revert to the assignor Death Benefit or Death Claims
Convertible term assurance policy payable, as stated in a life insurance
Is an ideal plan policy, to the designated
for people who can afford to pay large beneficiary(ies) upon the death of the
premiums in their later years. These insured. The amount paid is the face
types of policies permit the conversion value, plus any riders that are
of term assurance policy into an applicable, less any outstanding loans.
endowment contract. Deferment period Deferment
Convertible Whole Life Policy A period is the period from the date of
mix of "whole life policy" and commencement of the policy to the
"endowment policy", it provides for date of commencement of risk on the
very low insurance premiums with child's life under a Children's Deferred
maximum risk cover while the life Endowment Assurance policy.
assured is just beginning his working Deferred Annuity An annuity
career, and the possibility of contract under which periodic benefits
converting the policy to an are scheduled to begin at some
"endowment" policy after five years of designated future date after the date
commencement. on which the annuity was purchased.
Coverage Another word Deferred Compensation
for insurance. Insurance companies Arrangements
use the term coverage to mean the by which compensation to employees
Rupee amount of insurance purchased for past or current services is
Credit Life Insurance A group life postponed until some future date.
insurance contract whereby a creditor Deferred Group Annuity A type of
is protected in the event of death of group annuity providing for the
the insured prior to the indebtedness purchase each year of a paid-up
being paid in full. deferred annuity for each member of
Critical Illness Rider A rider added the group, the total amount received
to a life insurance policy to protect the by the member at retirement being
insured against financial loss in the the sum of these deferred annuities.
event of a terminal illness. A critical Defined Benefit Plan A pension plan
illness rider makes living benefits stating either (1) the benefits to be
payable to the insured for medical received by employees after
retirement or (2) the method of fully insured and have at least twenty
determining such benefits. The quarters of coverage out of the last
employer's contributions under such a forty, ending quarter in which the
plan are actuarially determined. disability occurs. Fewer quarters are
Defined contribution Plan A plan required for persons under age thirty.
under which the contribution rate is Double Accident Benefit See
fixed and benefits to be received by Accident Benefit
employees after retirement depend to Double/Triple Cover Plans
some extent upon the contributions These offer to
and their earnings. the beneficiaries double/triple the sum
Deposit Administration Group assured on death of life assured during
Annuity A type of group the term of the policy. On survival to
annuity providing for the accumulation the date of maturity, the basic sum
of contributions in an undivided fund assured is paid to the assured. These
out of which annuities are purchased are low-premium plans, most useful
as the individual members of the for situations such as housing.
group retire. Endorsements Endorsements
Deposit Premium The premium are used normally when the terms of
deposit paid by a policy holder when an insurance contract are to be varied.
an application is made for an Endorsements are attached to the
insurance policy.and is applied toward policy document and the two together
the actual premium when asked to constitute the evidence of the
pay. insurance contract. Endorsements may
Disability A physical be issued during the currency of the
impairment that substantially limits policy e.g. when alterations in the
major life activities of an individual. It risks are to be recorded. They could
may be partial or total. also be issued at the time of the issue
Disability Benefit of the policy to provide specific
Extended Disability Benefit exclusion from the cover or specific
The Disability extension to include an additional
Benefit under a policy provides for the peril. Endorsements are issued on
waiver of future premium and/or standard forms, or are separately
payment of a stipulated additional typed, or are written on the policy
amount by installments in the event itself.
the life assured becomes subject to Endowment Policy The assured
disability. The disability should be has to pay an annual premium which
total and permanent and occuring out is determined on the basis of the
of an accident. Intentional self-injury, assured's age at entry and the term of
attempted suicide, injuries from riots, the policy. The insured amount is
breach of law, from service in armed payable either at the end of specified
forces, aviation, circus etc are number of years or upon the death of
excluded from it. the insured person, whichever is
Disability Income Insurance A earlier.
form of health insurance that provides EPDB Extended
periodic payments to replace income Permanent Disability Benefit
when an insured person is unable to Exclusions Specific
work as a result of illness, injury, or hazards listed in a policy for which
disease. benefits will not be paid.
Disability Insured Status of an Experience rating This is a form
individual who is insured for disability of adjustment of premium found in the
benefits under that Old-Age, group Insurance schemes. The initial
Survivors, and Disability Insurance rates of premium are charged based
program. The covered person must be on certain mortality assumptions. At
the end of the year, the actual due premium is not paid that date
experience of the group is taken into becomes the date of FUP.
account and the surplus (or deficit) in Flat Schedule A type of
premium, after adjusting the schedule in group insurance under
administrative experience is shared which everyone is insured for the
with the policyholder. same benefits regardeless of salary,
Extended Term Insurance A position, or other circumstances.
provision in some policies which Free Cover Limit
provides the option of continuing the No Evidence Limit Under Group
insurance for a particular insured Insurance, the objective is to cover a
amount as per the policy condition as cross section of able-bodied persons
term insurance. who are able to perform their daily
Face Amount The amount of duties (and thus avoid the 'death-bed'
insurance provided by the terms of an cases). For this purpose, generally,
insurance contract, usually found on insurance cover is granted up to a limit
the first page of the policy. In a life known as "Free Cover Limit" or "no
insurance policy, the death benefit. evidence limit" subject to their
Facultative Reinsurance A type of presence on the job as on the date of
reinsurance in which the reinsurer can commencement of the scheme.
accept or reject any risk presented by Fully Paid-up Insurance Insurance
an insurance company. on which all required premiums have
Family insurance A life insurance been paid.
policy providing insurance on all or Graded commission Scale A
several family members in one commission scale providing for
contract, generally whole life insurance payment of high first-year commission
on the principal breadwinner and small and lower renewal commissions to the
amounts of term insurance on the insurance brokers and agents.
other spouse and children, including Graded Premium Policy A type of
those born after the policy is issued. Whole Life policy designed for the
Financial reinsurance It is a people who want more life coverage
mixture of banking and reinsurance than they can currently afford. They
products. It is among the new, non- pay a lower premium rate that
traditional solutions of alternative risk increases gradually over the first three
transfer (ART). In financial to five years and then remains
reinsurance, for example, the client constant over the life of the policy.
pays a higher premium, which - in Gross estate All of the
addition to the customary reinsurance assets and liabilities owned at death.
procedure - is invested and earns Gross Insurance Value Element
interest for the client. Thus, the client (GIVE) Gross
has an extended cover that finances Insurance value element is the amount
itself over the course of time. payable on death of a policy holder
First Premium The first under a Deferred Annuity plan of
installment of the premium paid by the insurance.
proposer. The payment of the first Gross Premium The premium
premium signifies the commencement paid by the policyholder.
of the contract. Group Contract A contract of
First Unpaid Premium(FUP) insurance made with an employer or
First unpaid other entity that covers a group of
premium refers to the first default in persons identified as individuals by
paying premium by the policy holder. reference to their relationship to the
On payment of the due premium a entity.
receipt is issued and this receipt Group Insurance Granting of
indicates the date of next due. If this insurance cover to a homogenous
group of individuals under a single contest the statements contained in
policy (called Master Policy). the application.
Guaranteed Addition Guaranteed Increasing Term Insurance
additions are calculated at a rate per Term Life
every thousand of sum assured. They Insurance in which the death benefit
are added to the basic sum assured increases periodically over the policy's
and are payable on admittance of term.
claim. This benefit is allowed only for Indemnity Legal principle
each year for which premiums are that specifies an insured should not
paid. collect more than the actual cash value
Guaranteed Insurability of a loss but should be restored to
Arrangement, approximately the same financial
usually provided by riders, whereby position as existed before the loss.
additional insurance may be purchased Independent Agency System
at various times without evidence of Type of
insurability. property and liability insurance
Guaranteed Insurance Sum (GIS) marketing system, sometimes called
A lump sum the American agency system, in which
purchase price is given to purchase the agent is an independent business
future pensions under Immediate person representing several
Annuity Plan. This amount is referred companies. The agency owns the
to as GIS. And the monthly pension expirations or renewal rights to the
that is payable one month after business, and the agent is
payment of first premium is calculated compensated by commissions that
on the basis of age at entry. vary by line of insurance.
Guaranteed Insurance Sum (GIS) Independent Agent An
Guaranteed independent business person who
Insurance Sum is equal to purchase usually represents two or more
price paid for a pension along with insurance companies in a sales and
final Immediate Annuity Bonus. service capacity and who is paid on a
Guaranteed Term A form of commission basis.
renewable term insurance that Individual Insurance Policies which
remains in force as long as the provide protection to the policyholder
premiums are paid on time. With and/or his/her family. Sometimes
guaranteed term insurance, the called Personal Insurance as distinct
insurance company cannot terminate from group and blanket insurance.
the policy during the term. Insurable Risk The conditions
Hazard A situation that that make a risk insurable are (a) the
increases the chance of loss. peril insured against must produce a
Immediate Annuity A life annuity definite loss not under the control of
policy under which the first benefit the insured, (b) there must be a large
payment starts immediately from the number of homogeneous exposures
date of purchase of the policy. This subject to the same perils, (c) the loss
type of annuity must always be must be calculable and the cost of
purchased with a single premium. The insuring it must be economically
annuity is payable either for the life of feasible, (d) the peril must be unlikely
the annuitant or for a certain period to affect all insured simultaneously,
and thereafter till the annuitant is and (e) the loss produced by a risk
alive. must be definite and have a potential
Incontestability clause A clause to be financially serious.
in the policy providing that if a policy Insurance Insurance is a
has been in effect for a given length of policy a person buys and upon that
time, the insurer shall not be able to person's death, the family will be able
to get a certain sum of money. days of grace, the policy is said to be
Joint Life Endowment Assurance in lapsed condition. The insurer does
Plans The sum not cover the risk of lapsed policies, or
assured (plus any accrued bonuses) covers only partial risk (to the extent
under this type of policy is payable on of the paid-up value) of the policy
the end of the endowment term or on during lapsation.
the first death of the two lives Level Term Insurance Term
assured, whichever is earlier. Typically coverage on which the face value and
(though not a necessity) taken out by premium remain unchanged from the
a couple, a variation is available for date the policy comes into force to the
couples only. In this case, the sum date of expiry of policy.
assured will be payable on first death Lien In some cases
and then again on the second death extra risk is expected to decrease over
(along with all vested bonuses) if both a period of time. In such cases
deaths occur during the term of the proposal is considered and accepted
policy. If one or both lives survive to with lien. Lien operates through out
the maturity date, the sum assured the period, on a decreasing basis. In
along with all vested bonuses will be the event of death during the lien
payable on maturity date. Premiums period full sum assured is not payable.
during this plan cease on the first Eg: If 25% decreasing lien is imposed
death or the expiry of the selected for 5 years. It is understood that in
term, whichever is earlier. Another first year risk cover(sum assured
variation provides for annuity to payable) is only up to 75%,second
both/surviving spouse, or a lump sum year-80%, third year-85%,fourth year
amount to the legal heirs. 90%,fifth year 95%, and from sixth
Key Employee or Key Person Any year onwards lien is not operative.
person or employee whose continued Life Annuity An annuity that
participation in a business is necessary makes regular (e.g., monthly,
to the success of the business and quarterly, etc.) income payments for
whose death would cause the business the life of a person (the annuitant).
a significant financial loss. The annuitant cannot outlive the
Keyman Insurance This is a form payments. Upon his/her death,
of reinsurance which seeks to however, all income payments cease
indemnify a business firm for the loss and there are no beneficiary benefits.
of earning resulting from the death of Life Assured A person
a valuable and important employee. whose life is covered under a life
The loss can be through two ways: insurance policy.
first, loss of earning may occur as Life Expectancy The number of
there may not be any replacement years a person is expected to live as
available for the Key Man nor can one determined by actuaries using
be suitably trained to perform similar mortality (actuarial) tables This
functions. Second, the loss may occur information is used to calculate
not because the man is irreplaceable, annuity payments, life insurance
but because he is replaceable at a premiums, and annual minimum
considerable cost to the firm, either in distributions from IRAs.
terms of high salary or cost of training Life Expectancy Tables Mortality
and replacement. The loss of earning tables that are used to calculate life
would include the cost of training and expectancy figures.
reduced income of the firm during the Limited payment life policy
period of training. Premiums need
Lapse / to be paid only for a certain number of
Lapsation If the premium years or until death if it occurs within
under a policy is not paid within the this period. Proceeds of the policy are
granted to the beneficiaries whenever companies, directly or through
death of the policyholder occurs. reinsurance, after payments made for
Again, this policy can also be of the reinsurance.
"with profits " or "without profits" Nomination The process by
type. which a policy holders gives the right
Loyalty additions The loyalty to a person who can give valid
addition is given upon the maturity of discharge to the insurer in case policy
the policy, and not before. It's a small monies become payable due to death
percentage of the sum assured. of the life assured.
Broadly speaking, loyalty addition is Nominee Nominee is the
the difference between the person who is nominated to receive
performance of the insurance company the amount under a policy and to give
and the guaranteed additions. It is an a valid discharge to the insurer on
insurer’s effort to further share its settlement of claim under a life
surplus after valuation with the policy insurance policy.
holders. Non Medical Business Proposals
Master Policy The single accepted without subjecting the
policy issued to a party with which the proposer through a medical
insurer has entered into a contract for examination is termed as Non-medical
group cover under the Group Business.
Insurance. The master policyholder Noncontributory A term applied
can either be an employer, a labor to employee benefit plans under which
union or a voluntary association. the employer bears the full cost of the
However the group should not be benefits for the employees.
formed for the purpose of taking Non-disabling Injury Benefit A
insurance cover alone. benefit in some disability income
Maturity Claim This is a claim policies providing payment for medical
by the life assured for payment of expense due to injury when medical
maturity proceeds of an endowment care is necessary but the insured is
type of policy, after the completion of not totally disabled.
the term of the policy. Under such Non-forfeiture Benefit Benefit
type of claim, the insurer usually which prevents a life insurance policy
anticipates them in advance and sends that has built up a cash value from
out intimations to the policyholders so lapsing due to non-payment of
that they can receive the maturity premiums by the policy-owner.
proceeds on the due date itself. Non-participating policy Non-
Mortality Rate The number of participating policy is also known as a
deaths in a group of people, usually without-profit or non-par policy. The
expressed as deaths per thousand. policy owner does not share in any
Mortality Table Tables showing divisible surplus made by the life
the mortality rates of all the factors insurance company. No bonus is paid
affecting mortality. The mortality on this policy.
tables not just show the rates of Non-Standard Life Any individual,
mortality but also the probability of who cannot be granted a policy under
survival and the life expectation. normal rates of premiums but can be
Mortality tables are used to calculate granted with an extra premium over
premium rates for life assurance. normal rates of premium, is
Net Premium The portion of considered as a Non-Standard Life.
the premium rate which is designed to Occupational Hazard The hazards
cover benefits of the policy, but not relating to the occupation that a
expenses, contingencies, or profit. person is pursuing constitute
Net written premiums Premiums occupational hazards. Some
income retained by insurance occupations may be more hazardous
than others, such as mining, deep sea Generally, there are two types of
exploration, aviation, armed forces, bonuses for insurance policies.
etc. Reversionary bonus is a guaranteed
Occurrence policy A liability addition to your insured amount and is
insurance policy that covers claims paid when the policy matures (i.e.
arising out of occurrences that take when the sum assured becomes
place during the policy period, payable) or when the life assured dies.
regardless of when the claim is filed. Cash Bonuses are paid out at
Package Policy A combination periodical intervals.
of two or more individual polices or Policy Loan Some of the
coverage into a single policy. A non-investment-linked whole life and
householders policy, for example, is a endowment plans have a loan option.
package combining property, liability It allows the policyholders to take a
and theft coverage for the individual loan up to 90% of the surrender value
homeowner. of the policy without the need of a
Paidup Value Paid up value guarantor or security. Interest is
is the reduced amount of sum assured charged on the loan amount and
paid by the insurer in case of compounded on a half yearly basis.
discontinuation of the payment of Policy reserves The funds that
premiums after paying the full an insurance company holds
premiums for the first three years. specifically for the fulfillment of its
Paramedical Examination Physical Policy obligations. Reserves are so
examination of an applicant by a calculated that, together with the
trained person other than a physician. future premiums and interest
Partial Disability The result of earnings, they will enable the company
an illness or injury which prevents an to pay all future claims.
insured from performing one or more Policy Term The period of
of the functions of his/her regular job. coverage provided by an insurance
Participating Policy A participating policy.
policy is also known as a with-profits Policy year(Life) Period between
or par policy. This type of policy is a Policies anniversary dates.
entitled for bonus in the claims Premium A specified
proceeds. A participating policy amount of money that the insurer
charges a higher premium than a non- receives in exchange for its promise to
participating policy. provide the policy proceeds when a
Partnership Insurance A form of specific loss occurs.
Business Insurance taken by the Premium Back Term Insurance
partners of a company seeking Plans These provide
indemnification of the loss on account for refund of all the premiums paid, in
of exit. the event of the life assured surviving
Physical Hazard The hazards to the end of the policy term. The total
relating to the person himself sum assured is paid to the
constitute the physical hazards. They beneficiaries in the event death occurs
are age, sex, build, physical during the policy term.
conditions, physical impairments, Premium Discount Plan A Plan
personal history of life assured and available in some rating jurisdictions
family history. providing a percentage reduction on
Policy The contract of premium dependent upon the size of
life insurance the premium.
Policy Bonuses In participating Premium Flexibility The policy
policies the company gives the holder's right to vary the amount of
policyholders a share in the profits of premium paid each month towards a
the company in the form of bonuses. life policy.
Premium Notice Notice of a is payable only in the event of survival
premium due, sent out by the to a fixed term. Pure Endowment has
company or one of its agencies to an two variants: (a) with return of
insured. Synonym for " Renewal premium on death, and (b) without
Notice" return of premium on death.
Premium single The amount Rated Policy an insurance
that constitutes payment in full for a policy issued at a higher-than-
contract at its inception. standard premium rate to cover the
Premium Waiver Benefit(PWB) extra risk where, for example, an
Premium insured has impaired health or a
waiver benefits are the benefits which hazardous occupation.
can be availed under children's Rebating Giving a
policies, wherein the future premiums consideration, usually all or part of the
payable upto vesting date are waived commission, to the prospect or insured
in the event of death of the proposer. as an inducement to by or renew.
Presumption of Death If a Rebating is prohibited by law.
person is missing for seven years and Reduced Paid-up Insurance A
has not been heard of or has not form of insurance available as a non-
contacted any person whom he would forfeiture option. It provides for
have done under ordinary continuation of the original insurance
circumstances, the claimant can apply plan, but for a reduced amount.
to the court of law for "presumption of Reinstatement / Revival The
Death" certificate, which is submitted process by which an insurer puts back
to the insurer instead of Death into force a life insurance policy that
Certificate. has been terminated for non-payment
Prohibited risk The exposure of premiums or a life insurance policy
or hazards which an insurer has that has been continued as an
decided not to insure under any extended term or reduced paid-up
Proportional Reinsurance In Reinsurance Reinsurance
proportional reinsurance, the reinsurer involves a contract made between two
assumes a percentage of the liability parties, called the ceding insurance
which the direct insurer accepted from company on the one hand and the re-
the insured and, for this service, insuring company on the other. The
receives a corresponding percentage ceding insurance company agrees to
of the premium. In the event of a cede or give away and the re-insuring
claim, the reinsurer is proportionately company agrees to accept a certain
liable, that is to say it must pay the fixed share of risk upon terms as set
same percentage of the claim as it out in the reinsurance contract.
received in the premium. Renewable Term Insurance
Proposal Form A pre-designed Term insurance
form in which a person desiring to take which can be renewed at the end of
a policy fills in the details such as his the term, at the option of the
name, address, occupation, age, policyholder and without evidence of
family history, health and habits to the insurability, for a limited number of
insurer. The insurer assesses the risk successive terms. The rates increase
based on the facts provided to him in at each renewal as the age of the
the proposal form. insured increases.
Proposer Proposer is a Renewal Commission All
person who proposes the insurance commissions paid to the agent for the
policy. renewal premium are called renewal
Pure Endowment Policy Under this commission.
form of life insurance the sum assured Renewal Premium All the
premiums other than the first premium Target Pension Target pension is
are called renewal premiums. the amount of pension which one
Revival A lapsed policy wishes to receive under a pension
can be reinforced by the process of policy.
revival. Revival is the reassessment of
risk at the time of revival, as if a new Term Term is the
policy is being taken by the life period for which insurance coverage is
assured. At the time of revival the given.
insurer has the option to renew the Term Insurance Under a Term
terms and conditions of the policy. Insurance Plan sum assured is payable
Riders Riders are only if the death occurs during the
additional benefits that one can add on specific pre-determined term. If death
to the policy. The rider can be opted does not take place during such term
for at the time of taking the basic the amount of premium is forfeited.
policy or they can be added at the This contract provides pure life
policy anniversary. Additional premium insurance cover.
is charged for each rider. No Bonuses Term Insurance Rider An
are paid under the rider. Some endorsement or attachment to a life
examples of riders are: Premium insurance policy that provides
Waiver Benefit, Critical Illness Rider, additional term coverage for the
Level Term Premium Rider. amount specified. If the insured dies
Short-Term Disability Income during this time, the designated
Insurance The provision beneficiary(ies) can receive death
to pay benefits to a covered disabled benefit proceeds..
person as long as he/she remains Term Life Insurance A form of life
disabled up to a specified period not insurance which provides coverage for
exceeding two years. a specified period of time and does not
Sum Assured Sum assured is build cash value.
the amount that an insurer agrees to Total Disability An illness or
pay on the occurrence of an event. injury which prevents an insured
Surrender person from continuously performing
Surrender Value every duty pertaining to his/her
Cash value occupation or engaging in any other
Guaranteed Surrender Value type of work. (This wording varies
Special Surrender Value The among insurance companies.)
Insurance Laws provides for accrual of Underwriter a company
certain benefits to policyholders, even that receives the premiums and
if they are unable to keep their policies accepts responsibility for the
in force by payment of further fulfillment of the policy contract
premium. In India, if at least three Underwriting The process of
years' premium has been paid within a selecting risks for insurance and
policy, the policy acquires a determining in what amounts and on
guaranteed surrender value (GSV). what terms the insurance company will
The GSV is usually equal to 30% of the accept the risk.
premium paid, less the first years' Underwriting Profit or Loss
premium and any extra premium The amount of
under the policy. However, individual money which an insurance company
insurer may offer a liberal value, called gains or loses as a result of its
Special Surrender Value (SSV). insurance operations. It excludes
Surrender Charge Fee charged to investment transactions and income
a policyholder when a life insurance taxes paid to govt.
policy or annuity is surrendered for its Unearned Premium The portion of
cash value. a premium that a company has
collected but has yet to earn because Under deferred annuity policies, the
the policy still has unexpired time to expiry of the deferment period is the
run. vesting date of the policy.
Variable Annuity A deferred Waiting Period (Children
annuity contract which is investment Assurance) For the policies
sensitive. Under this the premiums on the life of a minor, the risk
(Called 'deposits') during the coverage may begin from a particular
deferment period are utilised to age, say from the age of 10 years.
purchase units which are valued every The period between the date of
month to reflect market fluctuations. commencement of the policy and the
Dividends are utilised to purchase date of commencement of risk is called
additional units. After the deferment the waiting period.
period, the accumulated units are Waiting Period (Disability Benefit)
exchanged for annuity units which are A specific time
valued every year. The amount of that must pass following the onset of a
annuity is equal to the product of covered disability before any benefits
number of units with current value of will be paid under a disability income
each unit. policy.
Vesting Bonus It is the Bonus, Whole Life Insurance Whole Life
which the insurer declares after Insurance provides for the payment of
evaluating its assets and liabilities, and face value upon the death of the
that is added to the sum assured insured, regardless of when it may
under a policy. occur. The premium is payable
Vesting date The date on throughout the life of the policyholder
which the policyholder becomes the and the death claim is paid to the
owner of a policy. In cases of policy beneficiary as mentioned in the policy.
issued on the life of minors, the date
on which the life assured attains
majority is called the vesting date.
Account Value Sum total of Anniversary Value The value equal
payments and earnings within the to the Contract Value as of a Contract
account. Anniversary, increased by the dollar
Accumulation (Life Products) Any amount of any Premium Payments
increase in cash value of a life made since that anniversary and
insurance policy. reduced by the dollar amount of any
Accumulation Phase The time partial Surrenders since that
during which assets accumulate inside anniversary.
the annuity contract on a tax-deferred Annual Maintenance Fee (AMF) An
basis prior to receiving annuity annual charge deducted from annuities
payments. on the most recent Contract
Accumulation Unit Value The daily Anniversary or when an annuity
price of Accumulation Units on any contract is Surrendered in full. The
Valuation Day. charge is deducted proportionately
Accumulation Units In a variable from the sub-accounts in use at the
annuity contract, if you allocate your time.
Premium Payments to any of the sub Annual Withdrawal Amount The
accounts, we will convert those amount which can be withdrawn in any
payments into Accumulation Units in Contract Year without contingent
the selected sub accounts. deferred sales charges.
Accumulation units are valued at the Annuitization Phase The annuity
end of each Valuation Day and are contract phase when we begin to make
used to calculate the value of your periodic payout to you in your
Contract prior to Annuitization. contract.
Administrator (Employee Benefit Annuity Calculation Date The date
Plan) Under ERISA, the person we calculate your first annuity
designated as such by the instrument payment.
under which the plan is operated. If Annuity Commencement Date The
the administrator is not designated date we start to make annuity
and the plan sponsor cannot be payments to you.
identified, the administrator may be Annuity Payout Option Any of the
such person as is prescribed by options available for Payout after the
regulation of the Secretary of Labor. Annuity Commencement Date or date
Acts solely in the interest of plan of the Contract Owner or Annuitant.
participants and beneficiaries and for Annuity Unit An accounting unit of
the exclusive purpose of providing measure used to calculate the value of
benefits and defraying reasonable Annuity payments.
administrative expenses. Manages the Annuity Unit Value Please refer to
plan's assets to minimize the risk of Accumulation Units and
large loses. Acts in accordance with Accumulation Unit Value.
the documents governing the plan. Application, Annuity A form
Allocated Plan A type of retirement completed by someone wishing to
plan in which an individual account is purchase an annuity contract. It must
set up for each employee in the plan. be signed by the prospective owner
Allocation The distribution of the and the financial professional who sold
employer's contribution to the account the product.
of each participant. In a profit sharing Asset Allocation An investment
plan, it also refers to the distribution strategy where your investments are
of earnings and forfeitures for the spread across a variety of asset
various accounts. classes so that a portion of your assets
has the opportunity to benefit from the
market’s “best performers.” promissory notes issued to raise short-
Assumed Investment Return (AIR) term funds. The notes can be sold at a
The investment return upon which discount with full payment on demand
variable annuity payments will be at maturity.
based. Depending on the product type, Common Stock A security
the annual rate of return may be representing ownership rights in a
selected by the client or a default rate corporation.
may be assigned. Contingent Annuitant The person
Automated Clearing House (ACH) you may designate to become the
The national computer system, linked Annuitant if the original Annuitant dies
to the Federal Reserve Banking before we begin making payments.
system, that allows participants to Contingent Beneficiary The person
electronically transfer money. or persons who are named as the
Bond An IOU (debt security) issued contingent beneficiary/ies will receive
by company, municipality, government the proceeds of the contract or policy
and its agency. The bond issuer only if the primary beneficary/ies have
promises to pay the bond holder a died previous to the onset of the
stated rate of interest up to the date payout to the primary beneficiary/ies.
of maturity, when the issuer promises Contingent Deferred Sales Charge
to repay the principal. (Variable Annuity) The deferred
Breakpoint See Sales Charge sales charge that may apply when you
Breakpoint. make a full or partial Surrender.
Broker (Broker of Record) A NASD Contract Anniversary The annual
registered individual representing a anniversary of the date the contract
broker/dealer or issuer when buying or we issued your annuity. If the
selling a security for a client. anniversary falls on a date that is not
Broker Dealer A general term for a a Valuation Day, then the next
securities firm that buys and sells Valuation Day will be your Contract
securities on behalf of its customers as Anniversary for that year.
well as its own inventory. Contract Owner The owner or holder
Business Continuation Planning A of the Contract.
planning process used to distribute or Contract Value (Variable
dispose of a business interest at Annuities) The total value of your
disability, retirement, or death. Annuity that we get by adding up the
Buy-Sell Agreement An agreement value of each of your Sub-Accounts
in which one party agrees to purchase and Fixed Accumulation Features on
the financial interest that a second any Valuation Day.
party has in a business following the Conversion Privilege A policy
second party’s death. The second provision that permits the policy owner
party agrees to direct his or her estate to change from one type of policy to
to sell the business interest to the another without having to provide
purchasing party. evidence of insurability (typically from
Capital Gain/Loss Financial gain or a term insurance policy to a
loss when an investor sells an asset. permanent insurance policy.
Capital Gains Distributions Coupon The annual rate of interest
Payments a mutual fund makes to on the face value of a bond that a
shareholders. These can be dividend bond's issue promised to pay the
distributions, consisting of dividends bondholder.
and interest earned by the fund, or Cross Purchase Plan A business
capital gains distributions resulting continuation agreement in which the
from profit made on the sale of business owners agree among
securities from the portfolio. themselves to purchase the business
Commercial Paper Corporate interest of a deceased owner. To
create the liquidity necessary to do court of competent jurisdiction, or any
this, each owner purchases, owns and other proof acceptable to the
is the beneficiary of the life insurance Company.
policies insuring the lives of each of Early Distribution Taxable
the other owners. distributions (and certain deemed
Current Yield The ratio of annual distributions) are subject to ordinary
interest to the current market price. income tax and if taken prior to age 59
Death Benefit (Annuity Products) ½ , may also be subject to a 10 %
The amount payable after the Contract federal income tax penalty. Typically,
Owner or the Annuitant Dies. early distributions are penalized unless
Destination Fund The fund(s) the distribution is on account of death,
money is being transferred to. disability or is part of a series of
Direct Rollover Qualified plan equivalent payments. An early
money, other than IRA money, that distribution is also called a Premature
moves directly from one financial Distribution.
institution to another financial Earned Income Under federal
institution. The client never receives income tax laws, the income of an
the qualified plan money. The individual from services he or she has
transaction occurs between two performed, thus excluding, e.g.,
financial institutions. income from the sale or rental of
Direct Transfer Money moves property and interest income.
directly from one IRA to another IRA. Effective Yield The performance
The client never receives the IRA yield of a money market fund or
money or the money moves from a subaccount is based upon the income
non-IRA qualified plan to the same earned by the fund/subaccount over a
type of plan at another institution. seven-day period and then annualized.
Diversification Spreading When the Effective Yield is calculated,
investments among many different the income earned by the investment
securities or sectors to help reduce the is assumed to be reinvested in sub
risk of market downturn. account units and thus compounded in
Dividend The proportion of net the course of a 52-week period.
earnings a corporation pays to it's Equity Ownership. Also, ownership
stockholders when declared. interest in a corporation in the form of
Dollar Cost Averaging Dollar Cost common stock or preferred stock.
Averaging gives the potential for the Also, total assets minus total liabilities.
stock market’s ups and downs to work Also, the value of a property minus the
for you, because you are purchasing owner's outstanding mortgage
more shares when prices are low and balance.
fewer shares when prices are high. Estate Liquidity The capability of a
This results in the opportunity to buy person or entity to readily convert
more shares at a lower average unit assets into cash.
price. Continuous or periodic Estate Planning A plan for the
investment plans neither assure a disposition of a person’s assets and
profit nor protect against loss in debts at the time of death and for the
declining markets. Because Dollar Cost preservation of those assets to pass on
Averaging involves continuous to the individual’s heirs as desired.
investing regardless of fluctuating Estate Transfer Conveyance of the
price levels, you should carefully title to property from an estate to
consider your financial ability to another person.
continue investing through periods of Ex-Dividend The period of time
fluctuating prices. between the announcement of the
Due Proof of Death A certified copy dividend and the payment. A security
of a death certificate, an order of a becomes ex-dividend on the ex-
dividend date set by the SEC, which is by the payment of periodic premiums
usually two business days before the that can vary between set minimum
record date (set by the company and maximum amounts.
issuing the dividend). Forward Pricing The process used
Exchange Privilege Allows mutual by mutual funds to determine the net
fund shareholders to transfer their asset value of shares purchased and
investment from one fund to another redeemed. The value, computed each
within the same family of funds, day at the close of business of the New
usually for a very low or no sales York Stock exchange, applies to all
charge. purchases and redemptions made
Face Value The value of a bond that during that day.
appears on the face of the bond, Fractional Share A portion of a
unless the value is otherwise specified whole share if stock. Fractional shares
by the issuing company. Face value is used to be generated when
ordinarily the amount the issuing corporations declared stock dividends,
company promises to pay at maturity. merged or voted to split stock. These
Face value is not as indication of days it is more common for
market value. corporations to issue the cash
Fair Market Value The hypothetical equivalent of fractional shares to
point at which property would change investors. Mutual fund shares are
hands between a willing buyer and a frequently issued in fractional
willing seller, neither being under a amounts.
compulsion to buy or sell and both Front End Sales Charge A charge,
having knowledge of the relevant usually deducted from your purchase
facts. It is the value in which the payments.
property (including a business Fund (Sub Account) An investment
interest) is included in the gross estate option within the variable annuity. The
for federal estate tax purposes. objectives of each sub account have
Federal Estate Tax Federal tax unique long-term goals and
imposed on the right to transfer investment strategies. These
property by death. differences can affect the return and
Fiduciary An individual, corporation, the degree of market and financial risk
or association entrusted with the of each fund.
management, investment, or Fund Exchange (Sub-Account
disposition of another's property. Transfers) The ability to move a
Fixed Account Part of the issuing sub-account value by $ or % from one
company's general account to which all sub-account to another sub-account.
or a portion of the Account Value may Sub-account transfers can be
be allocated. processed by whole dollar or whole
Fixed Annuity An annuity that percentage amounts.
guarantees a specific interest rate for Future Payment Allocations
a specified period of time. An annuity Indicates the allocation selection for
contract in which the issuing company future investments in the variable
makes fixed (or guaranteed) dollar annuity contract.
payments to the annuitant for the Government Bonds Debt securities
terms of the contract. issued by the U.S. Treasury or a
Fixed Annuity Payout An annuity federal agency.
providing guaranteed payments which Guarantee Period For some fixed or
remain fixed throughout the payout guaranteed annuity products, the
period and are not subject to market period of time for which the initial or
fluctuations. subsequent guarantee rate is
Flexible Premium Life Insurance A applicable; the length of time the
life insurance policy that is purchased
guarantee rate applies (1,3, 5, 6, 7, 8, Life Annuity with Cash Refund
9, 10 years). Payments are made for the lifetime of
Immediate Annuity An annuity the annuitant. If the annuitant dies
contract purchased as a distribution before the cash refund period ends the
vehicle with payout beginning beneficiary receives payments until the
immediately. end of the period.
Individual Annuity A Contract Life Insurance Policy A policy
issued by us that provides, in under which the insurance company
exchange for premium payments, a promises to pay a benefit upon the
series of annuity payments. death of the person who is insured.
Individual Retirement Account Life Insurance Trust A type of trust
(IRA) A tax-deferred retirement that consists of life insurance policies
account for an individual that qualifies owned by the trustees and payable to
for special tax treatment under the the trust on the death of the insured.
Internal Revenue Code. Lump Sum Distribution A payout
Inflation A period of rising prices option by which a contract owner or
characterized by loss in the purchasing policy owner receives the balance of
power of the dollar. his or her contract value in a single
Insured The person(s) or party(ies) payment.
protected by an insurance policy. Management Fee A fee paid by a
Interest The amount a borrower pays mutual fund to the investment adviser
to a lender for the use of its money. for its services.
Interest is paid by a corporation to its Market Value Adjustment A
bondholders for the use of their formula used to adjust the contract
money. value of a modified guaranteed
Internal Revenue Code (IRC) The annuity to reflect current interest rates
Internal Revenue Code of 1986, as at the time of surrender.
amended. Mortality Risk and Expense Charge
Investment Adviser's Act of 1940 Charges for assuming Mortality and
Federal legislation requiring that any Expense Risks under the Contract.
individual who charges a fee for Generally, the charges are deducted
investment advice must be registered daily, at an annual rate specified in the
as an investment adviser. As amended product’s prospectus.
in 1960, a law that established a Mutual Fund A professionally
pattern of regulation of investment managed portfolio of securities
advisers and is similar in many invested on behalf of individuals who
respects to Securities Exchange Act share a common investment objective
provisions governing the conduct of or financial goal. Benefits include
brokers and dealers. It requires, with diversification and professional money
certain exceptions, that persons or management.
firms engaging for compensation in Net Asset Value (NAV) The value of
the business of advising others with a mutual fund share determined by
respect to their securities transactions deducting the fund's liabilities from the
shall register with the commission and total assets of the portfolio and
conform their activities to statutory dividing this amount by the number of
standards designed to protect the shares outstanding. This is calculated
interests of investors. once a day, based on the closing
Investment Earnings Investment market price for each security in the
income on contributions. fund's portfolio. For purposes of
Level Premium A life insurance SMART529, Net Asset Value (NAV) is
premium whereby the policy owner the value of one unit of the investment
intends to pay the same premium option excluding any sales charges.
amount each year the policy is active. New York Stock Exchange (NYSE)
The oldest and largest stock exchange Pre-Tax Employee Contribution A
in the U.S., located on Wall Street in contribution to a retirement plan which
New York City. Responsible for setting is made by a participant, and which is
policy, supervising member activities, excluded from the participants taxable
listing securities, overseeing the income for federal tax purposes
transfer of member seats, and Preferred Stock An issue of stock
evaluating applicants. entitling the holder to preferential
Non-Diversified Management treatment over common stockholders
Company Any management on dividends and/or liquidation. It
company that is not diversified as usually carriers a stated rate of return.
defined by the regulations of the Primary Beneficiary The primary
Investment Company Act of 1940. beneficiary is the person or persons
Non-Resident Alien A person who is entitled to receive the death proceeds.
not a citizen of the United States or a If the primary beneficiary dies the
resident alien proceeds will go to the contingent
Partnership A business entity beneficiary or to the estate of the
"owned" by individuals called partners, owner if a contingent beneficiary is not
although no shares of stock are named.
actually issued. Any income from the Prospectus The disclosure document
business passes through to the required by the Securities Act of 1933.
individual partners. It must be given to purchasers of
Permanent Life Insurance Life securities registered with the SEC.
insurance that provides coverage Public Offering Price The price at
throughout the insured’s lifetime and which mutual fund shares are sold to
also provides an accumulation/cash the public. It is the net asset value
value feature. plus any sales charge. For purposes of
Plan A voluntary retirement plan of SMART529, Public Offering Price (POP)
an employer which qualifies for special is the price of one unit of an
tax treatment under a Section of the investment option plus any applicable
Internal Revenue Code. front-end sales charges
Plan Sponsor The business or Qualified Retirement Plan A
employer sponsoring a retirement retirement plan which meets the
plan. qualification requirements set forth in
Policy Rider An amendment to an the Internal Revenue Code and the
insurance policy that becomes part of regulations. Qualified plans are eligible
the insurance contract and that either for tax-favored treatment.
expands or limits the benefits payable Redemption The process of turning
under the contract. in mutual fund shares to the issuer in
Policy Value Also called Account return for their current net asset
Value. With a variable life insurance value.
policy there is no minimum Policy Required Minimum Distribution
Value. The Policy Value equals the (RMD) The minimum annual required
policy’s value in all of the sub accounts distribution amount for an IRA holder
and any amounts in the Fixed who reaches age 70 1/2; also called
Accumulation Feature (Fixed Account). mandatory minimum distribution. The
Policy Year (Annuity) The year first minimum distribution is due by
commencing with the effective date of April 1 of the calendar year following
a policy or with the renewal date of the year the participant attains age 70
that policy, to be distinguished from 1/2. Distributions in subsequent years
the calendar year, which always starts must be made by December 31.
from January 1. Right to Cancel/Right to Examine
Policyowner The person or entity that The ability of the contract owner to
owns an insurance policy. cancel their contract within a certain
period of time without incurring retirement.
contingent deferred sales charge. The Social Security The government
time period and amount refunded is program which provides medical
determined by each state. benefits, disability benefits, death
Rollover Qualified money moved by benefits and retirement benefits to
the individual from one company to most workers. Both an employer and
another within 60 days of the date the an employee contribute a percentage
owner receives the money of the employee's salary to Social
(constructive receipt). This allows Security. Social Security often appears
continued tax-deferred status while on an employee's pay stub and form
avoiding the 10% Federal Income Tax W-2 under the heading FICA.
penalty for premature withdrawal. Source Fund The fund money is
Sales Charge (Annuities) The transferred from.
amount charged on the purchase or Spousal IRA An IRA established by
redemption of an annuity contract. an individual for his/her non-working
Sales Charge (Mutual Funds) The spouse.
amount charged on the purchase or Statement of Additional
redemption of mutual fund shares. Information A document available
Sales Charge Breakpoint The dollar on request from a mutual fund which
amount at which a front-end sales provides additional detail from the
charge may be reduced. fund's registration statement beyond
Security An investment instrument, the basic information that must be
other than an insurance policy or fixed provided in the fund's prospectus.
annuity, issued by a corporation, Stock Redemption Plan A business
government or other organization that continuation plan in which the
offers evidence of debt or equity. business entity itself agrees to
Separate Account An account purchase the deceased owner’s
established by an insurance company interest in the business. To create the
solely for the investment of amounts liquidity necessary to do this, the
deposited into owners of variable business purchases, owns, and is the
annuity contracts or variable life beneficiary of life insurance policies
insurance policies. The account is insuring the lives of each of the
maintained separately from the owners.
insurance company's general assets. Surrender-Annuity A complete or
Short Term Capital Gain/Loss partial withdrawal from an annuity
Capital gain or loss from assets held contract.
for 12 months or less. Surrender Charge Adjustment-
Signature Guarantee A financial Annuity A formula used to adjust
institution guarantees that the the account value of certain Fixed
signature is not a forgery. A signature Annuity contracts to reflect interest
guarantee may be executed by an rate at the time of surrender.
'eligible' guarantor. Eligible guarantors Surrender Value (Cash Value)-
include Commercial Banks, Trust Annuity The amount we pay you if
Companies, Savings Associations and you terminate your contract before the
credit unions as defined by the Federal Annuity Commencement Date. The
Deposit Insurance Act. Also included Surrender Value is equal to the
are member firms of a domestic stock Contract Value minus any applicable
Simplified Employee Pension (SEP) Survivorship Life Insurance: Also
IRA A retirement program for self- called second-to-die insurance. A form
employed people or owners of small of insurance which pays a death
companies allowing them to defer benefit only upon the death of the last
taxes on investments intended for
surviving insured person. Often used dividend amount bears to either the
by a married couple in estate planning. original cost or the current market
Transfer Privilege The ability to value of the stock. If a mutual fund
transfer assets among variable annuity mentions yield in its sales literature, it
investment options at no charge and must report its total return for the last
without being subject to current 1, 5 and 10 years. See related terms:
income tax since the transfer is 7-Day Yield, 30-Day Yield, Current
occurring within a tax-deferred Yield and Effective Yield.
Treasury Bonds These very liquid
government-guaranteed issues have
maturities from five to 30 years, are
limited by statute to a 4 <% coupon
interest rate except for $10 billion,
which may be issued without regard to
any interest rate ceiling.
Trust A legal arrangement that is
created when a person or organization
transfers assets to a trustee for the
benefit of the recipients designated by
Trustee A person, firm, or
corporation which is responsible for
managing the trust's assets.
Uniform Transfers/Gifts to Minors
Act A law adopted in most states,
which permits a direct gift to a minor
without a trust or guardianship. The
donor appoints a custodian to manage
the gift until the minor reaches the
age of majority.
Unit Price The daily price per unit.
This price fluctuates based on the
performance of the underlying funds.
Universal Life Insurance
Permanent life insurance that is
characterized by its flexible premiums,
face amounts, and death benefit
Variable Annuity Payout An
annuity providing payments which
vary in amount based on the
investment performance of the
Variable Universal Life Insurance
A type of permanent life insurance that
combines the premium and death
benefit flexibility of universal life
insurance with the ability to invest the
policy’s cash value in investment
Yield An Investment return. In
stocks, the percentage the annual