The definitions appearing in this Glossary are provided solely for general informational purposes. They are not intended to be complete descriptions of all terms, conditions and exclusions applicable to the products and services defined. Also, in the case of any inconsistency between the definitions in this Glossary and the definitions appearing in the actual insurance policy, the definitions contained in the actual policy shall govern.
Beneficiary
The person who receives the policy's death benefit upon the death of the insured; the insured designates the beneficiary.
Benefit Period
By choosing a benefit term, you will elect benefits that are payable for one year, two years, five years, to age 65, or for a lifetime. Since disability benefits are deigned to replace the income you would otherwise earn by working, most people do not need benefits extending beyond the working years. Electing shorter benefit periods can save premium dollars, but bear in mind that if you need this insurance at all, you probably need it more to cover a disability that permanently removes you for the workforce. A lengthy disability threatens your financial security much more than a short-term diasability.
Cash Value
The cash value of a policy is the total of premiums paid to date, less all expense, administrative, and mortality charges, plus any accumulated investment interest.
Face Amount
The face amount of the policy is the stated amount of the benefit (at issue) that is payable upon death.
Grace Period
A provision that permits premium payments to be paid for up to 31 days after the premium due date without the policy lapsing. The length of the grace period will vary from company to company and by product type.
“Residual” Benefits
If you are able to work but your income is reduced because you cannot fulfill all of your job responsibilities, residual benefits can help to make a difference in your income. A standard feature in some policies (added with a rider to others), a residual benefit allows partial payment based on a loss of income generally without prior total disability.
Term Insurance
A type of life insurance policy that covers only a specified period of time, rather than the whole or remainder of the insured's life. Often that period of time is a set number of years, such as 1, 10, or 20 years. At other times, the policy is written for a term that expires at a specified age, for example when the insured turns 65.
Universal Life Insurance
A combination of monthly term life insurance, plus possible savings in an arrangement that provides limited flexibility as to death benefits and premium payment.
Variable Annuities*
Variable annuities are often used both as savings and retirement vehicles. The reasons for their popularity include the fact that their earnings grow on a tax-deferred basis, they offer a guaranteed death benefit, they benefit from professional management, and they have the added potential for income during retirement years.
Variable Life Insurance*
Many life insurance-based products are recognized as savings and investment alternatives for people in all stages of life. In addition to their competitive returns, tax deferral on cash-value earnings, and tax-free death benefit, many life insurance-based products can also be used to satisfy educational and retirement planning needs.
Waiting Period
Today's policies allow you to decide when benefit payments begin. You can choose a waiting period at the time of application; these range any where from the 31st day to six months or more after the onset of the disability. Depending on how much money you have saved, and your other resources you can reduce your premiums by electing to wait 60 days, 90 days, or even six months before you start to receive benefit payments. Remember though, that the first check is usually not paid until 30 days after the waiting period.
Whole Life Insurance
A common type of life insurance coverage that provides a face value death benefit for the entire or whole life of the insured, unless the insured should cancel or not pay premiums.
*Annuities are a long-term investment option since they are subject to a 10% IRS penalty for withdrawals prior to 59½ and a contingent deferred sales charge for the first 7 to 8 years of the contract. They also involve mortality and insurance expenses. Variable annuities principal and interest of variable account portfolios fluctuates with market conditions. Variable Life offers account values which can increase or decrease depending on the performance of the underlying investment portfolio selected by the investor. Accessing cash value of your variable life policy may result in surrender fees and charges and it may reduce death benefit.
