Life Insurance Glossary

Indexed Universal Life

Indexed Universal Life (IUL) is a type of permanent life insurance that combines the death benefit protection of traditional life insurance with the potential for cash value accumulation based on the performance of a specific market index, often the S&P 500.

Indexed Whole Life

Indexed Whole Life insurance is a variation of traditional whole life insurance that combines the guaranteed death benefit and cash value accumulation features of whole life policies with the potential for additional returns based on the performance of a specific market index, often the S&P 500.

Indices

Indices (singular: "index") are tools or metrics that track and measure the performance of a specific group of assets, such as stocks, bonds, or commodities. Often used as benchmarks, indices provide a snapshot of the health and trends of particular market segments or the broader financial market as a whole.

Inflation

Inflation refers to the rate at which the general level of prices for goods and services rises, leading to a decrease in the purchasing power of money. In other words, when inflation is present, each unit of currency buys fewer goods and services than it did previously.

Insolvency

Insolvency is a financial state in which an individual or entity is unable to meet its financial obligations as they come due. This condition arises when one's liabilities or debts exceed the value of their assets.

Insurable Interest

Insurable Interest is a fundamental principle in the insurance industry, signifying that the person purchasing the insurance policy must have a legitimate and genuine stake in the well-being or continued existence of the subject being insured.

Insurance fees

Insurance Fees refer to the various charges and costs associated with purchasing and maintaining an insurance policy. These fees can encompass a range of expenses, from initial policy setup charges to administrative costs and premium loads.

Insured

Insured refers to the individual, group, or entity that is covered under an insurance policy and is protected against specific risks or losses as outlined in the policy terms. In essence, the insured is the party that stands to receive benefits or compensation from the insurance company in the event of a covered incident or claim.

Insurer Complaints Methodology

Insurer Complaints Methodology refers to the structured approach and procedures that insurance companies implement to address, resolve, and analyse complaints lodged by policyholders or claimants.

Interest Payments

Interest Payments refer to the periodic payments made by borrowers to lenders as compensation for the use of borrowed money. These payments are typically calculated based on an agreed-upon interest rate and represent the cost of borrowing.

Interest Rate Bonus

An "Interest Rate Bonus" refers to an additional interest percentage offered by financial institutions as an incentive or reward, typically to attract new customers or encourage specific behaviors.

Interest Rate Floor

Interest Rate Floor is a contractual provision that sets a minimum limit on the interest rate applicable to a financial product, such as a loan, mortgage, or derivative contract. Essentially, it ensures that the interest rate on the instrument will not fall below a predetermined level, regardless of market fluctuations.

Interest rates

Interest Rate Floor is a contractual provision that sets a minimum limit on the interest rate applicable to a financial product, such as a loan, mortgage, or derivative contract. Essentially, it ensures that the interest rate on the instrument will not fall below a predetermined level, regardless of market fluctuations.

Interest-Sensitive Whole Life

Interest-Sensitive Whole Life insurance is a type of permanent life insurance that combines the lifelong coverage of traditional whole life insurance with the added feature of a variable interest rate applied to the policy's cash value.

Internal Policy Expenses

Internal Policy Expenses refer to the various costs and charges associated with managing and maintaining an insurance policy. These expenses are typically deducted from the policy's value or premiums and are used by the insurance company to cover operational costs, administrative tasks, underwriting, claims processing, and other related services.

Investment Risk

Investment Risk refers to the potential for an investor to experience losses or lower-than-expected returns on their investments. It represents the uncertainty surrounding the actual return on an investment compared to the expected return.

Joint Annuitant

A Joint Annuitant is typically a spouse or partner linked to an annuity policy. Their life expectancy is crucial in shaping the payout structure of the annuity component within the policy. K

Joint Life Second Death

Joint Life Second Death, also known as Second-to-Die Life Insurance, refers to a type of life insurance policy that is designed to cover two individuals, usually spouses, under a single policy.

Joint Owner

Joint Ownership in a policy context means shared ownership among two or more individuals. Each joint owner holds equal rights and responsibilities:

Jumbo life insurance

Jumbo Life Insurance refers to an Indexed Universal Life insurance policy that provides a significantly higher death benefit, often exceeding the typical coverage limits.

Key Man Cover

Key Man Cover refers to an IUL policy taken out by a business on the life of a key employee, executive, or owner whose contributions are critical to the ongoing success and profitability of the company.

Key Person Cover

Key Person Cover refers to an Indexed Universal Life insurance policy that is purchased by a business to protect against the financial loss that may occur due to the sudden death, disability, or incapacitation of a crucial employee, often a top executive or a specialist whose contributions are vital to the company's success.

Lapse

A Lapse in insurance terms refers to the termination of a policy due to non-payment of premiums within the allotted grace period.

Level Death Benefit

Level Death Benefit is an option in life insurance policies where the payout to beneficiaries remains unchanged for the policy's duration.

Level Premiums

Level Premiums in insurance terms mean fixed, uniform payments made by the policyholder at regular intervals (monthly or annually) to maintain the policy's active status.

Life Insurance Payout

A Life Insurance Payout refers to the sum given to beneficiaries after the policyholder's demise.

Limited Premium

In an Indexed Universal Life (IUL) Insurance Policy, a Limited Premium Payment Structure signifies a pre-set, shorter period for premium payments, rather than paying throughout the policy's life.

Linked Benefit Products

Linked Benefit Products in the insurance world combine life insurance with additional benefits, like long-term care coverage.

Loan Interest Rate

The interest you pay on money borrowed from your IUL policy. This rate is based on the Moody's Seasoned Aaa Corporate Bond Yield benchmark.

Loan Interest Reduction

Loan Interest Reduction in the realm of insurance policies, particularly Indexed Universal Life (IUL), refers to methods aimed at decreasing the interest on policy loans.

Loan Reduction

Loan Reduction, in the context of Indexed Universal Life (IUL) insurance policies, refers to the diminution of a policy's cash value caused by loans taken against it.

Lombard Loan

A Lombard loan refers to a loan that an Indexed Universal Life (IUL) insurance policyholder can take against the IUL policy's cash value.

Long Term Care (LTC) Kicker

In Indexed Universal Life (IUL) insurance, the Long Term Care (LTC) Kicker is an added feature, typically as an optional rider.

MEC

For IUL policyholders, vigilant monitoring of premium payments is crucial to prevent the policy from transforming into a MEC, thus preserving its tax advantages.

Market Index

A Market Index in the realm of Indexed Universal Life (IUL) insurance policies, refers to a stock market index used as a benchmark for crediting interest to the policy's cash value.

Market Value Adjustment (MVA)

Market Value Adjustment (MVA) in an Indexed Universal Life (IUL) insurance policy is a financial mechanism that comes into play under certain circumstances.

Maturity Date

The Maturity Date in an Indexed Universal Life (IUL) insurance policy represents the designated end point of the policy, where certain financial events occur.

Maximum Rollup Period

In Indexed Universal Life (IUL) insurance policies, the Maximum Rollup Period is a key element that shapes the policy's financial growth.

Minimum Guaranteed Surrender Value (MGSV)

The Minimum Guaranteed Surrender Value (MGSV) is a fundamental aspect of insurance policies, especially in the context of Indexed Universal Life (IUL) policies.

Modified Endowment Contract

A Modified Endowment Contract (MEC) is a particular classification of life insurance policy, relevant under the U.S. tax code.

Monthly Expense Charge (PER 1,000)

The Monthly Expense Charge in the context of insurance policies, such as Indexed Universal Life (IUL) policies, is a key financial component.

Monthly Point-to-Point Method

In insurance, especially within Indexed Universal Life (IUL) policies, the Monthly Point-to-Point method is a notable strategy for interest crediting.

Mortality And Expense (M&E) Risks Charge

The Mortality and Expense (M&E) Risks Charge in the realm of insurance, particularly in policies like Indexed Universal Life (IUL), is a crucial fee.

Mortality Charges

Understanding mortality charges is essential for policyholders to grasp how their policy's cash value and premium contributions are utilised to maintain the policy's insurance benefit.

Multi-Year Guaranteed Annuity (MYGA)

Multi-Year Guaranteed Annuity (MYGA) is a financial product distinct from, but complementary to, Indexed Universal Life (IUL) policies.

New Money

Understanding the concept and utilisation of new money is crucial for policyholders to effectively manage and maximise the potential of their insurance policies.

New Money Rates

Understanding new money rates is vital for IUL policyholders, as these rates significantly influence their policy's cash value growth trajectory.

Non-Direct Recognition

Non-Direct Recognition refers to a feature where the insurance company does not directly recognise or adjust the policyholder's loan interest rate when determining the credited interest on the policy's cash value.

Non-Forfeiture Options

Non-Forfeiture Options in Indexed Universal Life (IUL) insurance policies offer safeguards for policyholders who can't maintain premium payments.

Non-Forfeiture Provision

In Indexed Universal Life (IUL) policies, the Non-Forfeiture Provision is a vital clause designed to protect policyholders' investments.

Non-Participating

In life insurance, a "Non-Participating" policy is a type of contract where the policyholder does not receive profits or surplus from the insurance company.

Non-Rolling Surrender Charge

A Non-Rolling Surrender Charge in life insurance policies, particularly in Indexed Universal Life (IUL) policies, is a fee applied for early withdrawals or surrenders.

One-Year Term Insurance

In Indexed Universal Life (IUL) policies, One-Year Term Insurance represents the Cost of Insurance (COI) component.

Paid-Up Additional Insurance (PUA)

Paid-Up Additional Insurance (PUA) in Indexed Universal Life (IUL) policies is a significant feature.

Partial Surrender

Partial Surrender is a significant decision, affecting the policy's value and future benefits, and requires careful consideration of the terms and potential repercussions.

Participation Rate

Understanding the Participation Rate is vital for policyholders to gauge potential returns and the growth trajectory of their IUL policy.

Payor

Payor refers to the individual, entity, or trust responsible for making premium payments to keep the policy active.

Penalty-Free Withdrawals

Penalty-Free Withdrawals in life insurance policies, like Indexed Universal Life (IUL), refer to the policyholder's ability to withdraw a part of the policy's accumulated cash value without incurring penalties or surrender charges.

Per 1,000 Charges

Understanding "Per 1,000 Charges" is crucial for policyholders to comprehend the cost structure of their IUL policy and its impact on the cash value.

Percent (%) Of Fund Charge

Percent Of Fund Charge refers to a fee that is deducted as a percentage of the policy's accumulated cash value. This charge is often associated with the management and maintenance of the investment component of the policy.

Period Certain

Period Certain is a feature in annuity options within Indexed Universal Life (IUL) policies that guarantees a set period during which income payments are made to the policyholder or beneficiaries, regardless of the policyholder's survival.

Permanent Coverage

Permanent Coverage in life insurance refers to policies designed to provide lifelong death benefit protection, in contrast to term life insurance which covers a specific period.

Permanent Death Benefit

Permanent Death Benefit in life insurance, particularly in Indexed Universal Life (IUL) policies, is the guaranteed payout to beneficiaries upon the policyholder's demise, independent of the performance of the underlying index-linked investments.

Permanent Life Insurance

Permanent Life Insurance is a life insurance category offering the insured lifetime coverage, contingent on premium payments.

Permanent iisurance

Permanent Death Benefit in life insurance, particularly in Indexed Universal Life (IUL) policies, is the guaranteed payout to beneficiaries upon the policyholder's demise, independent of the performance of the underlying index-linked investments.

Policy Fee

In life insurance, particularly in Indexed Universal Life (IUL) policies, the Policy Fee is a regular charge applied by insurance companies.

Policy Illustration

A Policy Illustration for an Indexed Universal Life (IUL) insurance policy is a comprehensive document that offers a forecast of the policy's expected performance over time.

Policyowner

In Indexed Universal Life (IUL) insurance, the Policyowner is the individual or entity with ownership rights of the policy.

Portfolio-Based Rates

Portfolio-Based Rates in Indexed Universal Life (IUL) insurance policies refer to interest rates credited to the cash value account based on the collective performance of an investment portfolio.

Premature Withdrawal

Understanding the implications of Premature Withdrawal is crucial for policyholders to make informed decisions about their IUL policy's finances.

Premium

In Indexed Universal Life (IUL) insurance, the Premium is the payment made by the policyholder to the insurance company for maintaining coverage.

Premium Bonus

Understanding the mechanics and conditions of the Premium Bonus is essential for policyholders to fully leverage its benefits in their IUL policy.

Premium Charge

Understanding Premium Charges is crucial for policyholders to comprehend their premiums' allocation and potential growth in IUL policies.

Premium Expense Charges

Premium Expense Charges in Indexed Universal Life (IUL) insurance are fees subtracted by the insurer from the policyholder's premiums before allocation to the policy's cash value.

Premium Flexibility

Premium Flexibility in Indexed Universal Life (IUL) insurance policies is a feature that allows policyholders to adjust their premium payments in terms of amount and frequency within set limits, ensuring the policy remains active.

Premium Load

Premium Load refers to a percentage of the premium that is deducted before the remaining amount is allocated to the policy's cash value account.

Premium Mode

Premium Mode refers to the frequency at which the policyholder is required to pay the premiums. Different premium modes can include monthly, quarterly, semi-annually, or annually.

Premium Payment Options

Premium Payment Options refer to the different ways a policyholder can choose to pay their premiums.

Premium Reduction

Premium Reduction refers to the decrease in the amount of premium payments that a policyholder is required to pay while still maintaining the desired level of death benefit coverage.

Premium Tax

Premium Tax refers to a state-imposed tax on insurance premiums, including those paid for Indexed Universal Life (IUL) policies.

Premium Type

Premium Type in Indexed Universal Life (IUL) insurance refers to how payments are structured by the policyholder.

Principal

Principal refers to the initial amount of money invested or paid into the policy, excluding any interest, dividends, or other earnings. This is the base amount that is used to calculate the potential growth of the policy's cash value, which can be influenced by the performance of a chosen stock market index.

Projections

Projections refer to the estimated future values of various aspects of the policy, such as the cash value, death benefit, and potential returns based on the performance of the chosen index or indices.

Prospectus

A prospectus is a formal legal document that companies and investment funds use to describe the main features of financial security for potential buyers. It is a detailed document that must be filed with regulatory bodies, such as the Securities and Exchange Commission (SEC) in the United States, before securities can be offered to the public.

Rainbow Crediting Method

The Rainbow Crediting Method is a concept used in the insurance industry, particularly in the context of indexed universal life insurance policies (IULs). This method involves using multiple indexes to determine the interest credited to an insurance policy rather than relying on a single index.

Recapture Charge

A recapture charge is a fee that is assessed when certain conditions are not met in financial agreements, particularly in insurance policies and leases.

Reduced Paid-Up (RPU) Insurance

Reduced Paid-Up (RPU) insurance is an option available in some whole life insurance policies that allows a policyholder to cease paying premiums while still maintaining a portion of the coverage for life. This non-forfeiture option can be exercised if the policyholder decides they no longer wish to, or are unable to continue paying the policy's premiums.

Registered Indexed Annuity

A Registered Indexed Annuity (RIA) is a type of annuity product that combines features of fixed and variable annuities, offering a balance between potential growth and protection against market downturns.

Renewal Rates

Renewal rates refer to the percentage of customers or subscribers who choose to renew their contracts or subscriptions after their initial term has expired. This metric is particularly important for businesses with a subscription-based model, such as software as a service (SaaS) companies, magasines, and membership clubs.

Required Minimum Distribution (RMD)

The Required Minimum Distribution (RMD) is a mandatory, annual withdrawal that individuals must take from their retirement savings accounts, such as a traditional IRA, 401(k), or other tax-deferred retirement plans, starting at a certain age.

Return of Premium Death Benefit

The Return of Premium Death Benefit is a feature in some life insurance policies that provides an additional benefit to the beneficiaries beyond the standard death benefit.

Return-Of-Premium (ROP) Option

The Return-of-Premium (ROP) option in insurance is a feature that allows policyholders to receive a refund of all or part of their premiums paid if certain conditions are met. This option is commonly found in term life insurance policies, where the policyholder pays a fixed premium for coverage over a specified period, such as 10, 20, or 30 years.