Life Insurance Glossary

Rider (A.K.A. Endorsement)

A rider, also known as an endorsement, in the context of insurance, is an amendment or addition to an existing insurance policy that changes the terms or scope of the original coverage. Riders allow policyholders to customise their insurance policies to fit their specific needs without having to purchase a new policy.

Riders

Riders in the insurance industry are optional add-ons to an insurance policy that allow consumers to tailor their coverage to their specific needs. These contractual amendments provide additional benefits or amend the terms of the policy's coverage, often for an extra fee. Riders can be attached to many types of insurance policies, including life, health, and property insurance.

Rolling Surrender Charge

A rolling surrender charge is a fee structure commonly associated with annuities and some types of life insurance policies. It refers to a period during which the policyholder is subject to a charge if they surrender the policy, typically decreasing annually until it reaches zero.

Rolling Target Premiums

Rolling target premiums are a feature found in some flexible premium insurance policies, particularly in universal life insurance. This concept refers to the adjustable premiums that a policyholder can pay, which are not fixed but have a target amount set by the insurer based on the policy's anticipated costs and the desired value of the death benefit.

Rollup

In financial terms, a "rollup" refers to a process where smaller companies are merged into larger entities, often within the same industry or sector. This strategy is typically employed by a larger company or a private equity firm that aims to consolidate market share, reduce competition, or achieve economies of scale.

Rollup Period

In the realm of annuities, the term "rollup period" refers to a specific phase within certain types of deferred annuity contracts during which the value of the annuity's income account is guaranteed to increase at a predetermined rate.

Rollup Period Reset

The "rollup period reset" is a feature found in some annuity contracts, particularly in fixed indexed annuities with an income rider. This feature allows the annuity's guaranteed income value, or the benefit base used to calculate lifetime withdrawal amounts, to reset to a higher value if the underlying index performs well.

Sales Fees

Sales fees, often referred to as sales charges or loads, are fees charged by mutual funds and some other investment products when an investor buys or sells shares. These fees are typically a percentage of the total investment amount and can be categorised mainly into two types: front-end loads and back-end loads.

Second-To-Die Insurance

Second-to-die insurance, also known as survivorship life insurance, is a type of life insurance policy that insures the lives of two people, typically a married couple, and pays out the death benefit only after the second person has passed away.

Secured Overnight Financing Rate (SOFR)

Some Index Universal Life insurance policies link interest credited to the cash value and premium financing rates to SOFR. Changes in SOFR can, therefore, impact the growth of your policy's cash value and the cost of borrowing if you are using premium financing to fund your IUL policy.

Separate Account

A separate account is a private investment account that is maintained by an investment management firm for institutional or individual investors.

Set or "Target" Premium

Target premium refers to the amount of premium that the insurance company has determined will keep the policy in force for a certain period, typically to a specified age such as 100.

Small Face Value

Small face value refers to a life insurance policy with a relatively low death benefit compared to typical life insurance policies. These policies are designed to meet specific needs, such as covering final expenses or providing a modest inheritance to beneficiaries, rather than offering extensive financial support or income replacement.

Solvency

Solvency refers to the financial capability of an insurance company to meet its long-term obligations, particularly the ability to pay out claims and benefits associated with Indexed Universal Life insurance policies.

Specified Account Charge

A specified account charge in an IUL policy refers to the charge the insurance company uses to cover the costs associated with the policy's guaranteed minimum interest rate and the potential for indexed interest credits.

Spousal Continuation

Spousal Continuation refers to a feature that allows the surviving spouse to continue the deceased policyholder's IUL policy without having to undergo new underwriting or medical examinations.

Spread Rate (a.k.a. Asset Fee, Margin)

Spread Rate, also known as Asset Fee or Margin, refers to the percentage difference between the return on the index linked to the policy and the interest credited to the policy's cash value. Insurance companies use the spread rate as a means to cover their costs and ensure profitability.

Stability and Consistency

Stability in the context of Indexed Universal Life (IUL) insurance refers to the reliability and steadiness of the policy's cash value growth.

Stacking Rollup

Stacking Rollup refers to the cumulative addition of guaranteed interest or bonus credits to the policy's cash value or income base over a specified period, often during the policy's early years or the initial phase of the policy.

Standard Policy Form State Approval

A "Standard Policy Form" in Indexed Universal Life (IUL) insurance is a standardised document outlining the policy's terms and conditions, while "State Approval" refers to the authorisation from a state's regulatory body allowing the sale of that IUL policy, ensuring compliance with local laws and consumer protection.

Structured Premium

Structured Premium refers to a predetermined and systematic payment plan that a policyholder adheres to in order to fund their policy.

Sub-Accounts

Sub-accounts refer to the distinct divisions within the policy's cash value component where the policyholder can allocate their premium payments for investment.

Suitability Review

Suitability Review refers to the process through which an insurance professional assesses whether an IUL policy is appropriate for a prospective policyholder based on their unique financial situation, needs, goals, and risk tolerance.

Surrender Charge

A Surrender Charge is a fee imposed by the insurance company if the policyholder decides to terminate or partially withdraw from the policy before a specified period, typically within the first 10 to 15 years of the policy.

Surrender Charge Waiver

Surrender Charge Waiver is a provision that allows the policyholder to withdraw or surrender a portion or the entirety of the policy's cash value without incurring the usual surrender charges.

Target Premium

Target Premium refers to the suggested amount of premium that a policyholder should pay to ensure that the policy remains active and adequately funded over its intended duration.

Tax-Advantaged Growth

Tax-Advantaged Growth refers to the increase in the cash value of the policy that accumulates on a tax-deferred basis.

Tax-Deferral

Tax-Deferral refers to the advantage that allows policyholders to accumulate cash value gains without paying taxes on the earnings immediately.

Variable Loan Interest (VLI)

Variable Loan Interest (VLI) refers to the fluctuating interest rate applied to policy loans that a policyholder may take against the cash value of their policy.

Vesting Schedule

A Vesting Schedule typically refers to the predetermined timeline that outlines when policyholders gain full ownership or rights to the accumulated cash value or additional benefits within their policy.

Weighting Multiple Index Crediting Method

Weighting Multiple Index Crediting Method refers to a strategy used to determine the interest credited to the policy's cash value based on the performance of multiple indices. This method allocates a specific percentage or "weight" to each index, and the overall credited interest rate is a combination of the returns from all the indices, each contributing proportionally according to its assigned weight.