Navigating life insurance, wealth transfer, and business protection can be complex. We've decoded the industry jargon so you can make informed decisions with clarity and confidence.
The total amount of money that has built up in a permanent life insurance policy or annuity over time, including premiums paid and interest or dividends earned, before any fees or surrender charges are deducted.
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The actual amount of money you will receive if you cancel (surrender) your permanent life insurance policy or annuity. It is equal to the Accumulated Value minus any applicable surrender charges or outstanding policy loans.
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A type of permanent life insurance that offers a death benefit and a cash value component. The cash value grows based on the performance of a stock market index (like the S&P 500), but with a floor that protects against market downturns, providing tax-advantaged growth potential without direct market risk.
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An optional add-on to an annuity contract that guarantees a specific stream of income for the rest of your life, regardless of how the underlying investments perform or how long you live. It acts as a personal pension to ensure you never outlive your money.
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Whole life insurance offers lifetime protection that builds cash value at a guaranteed interest rate. Permanent life insurance can help cover long-term needs, such as paying for final expenses, supplementing income, or paying off debts.
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Term life insurance offers temporary coverage for a set number of years and affordable, level premium payments. Term life insurance can help your loved ones cover short-term needs, such as paying off a mortgage, outstanding debts or education expenses.
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The savings component of permanent life insurance policies (like IUL or Whole Life). A portion of your premium payments goes into this account, which grows over time on a tax-deferred basis. You can borrow against or withdraw from the cash value while you are living.
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The tax-free lump sum of money paid to your designated beneficiaries upon your passing. This is the primary protection element of any life insurance policy.
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A strategy used by high-net-worth individuals to fund large life insurance policies. Instead of paying premiums out-of-pocket, the policyholder borrows the funds from a third-party lender, allowing them to keep their capital invested in other higher-yielding assets.
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A life insurance policy purchased by a business on the life of an owner, top executive, or crucial employee whose sudden absence would cause significant financial strain to the company. The business pays the premiums and is the beneficiary.
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A legally binding contract between business co-owners that dictates what happens if an owner dies, becomes disabled, or leaves the business. It is often funded by life insurance to ensure the remaining owners have the capital to buy out the departing owner's share.
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A financial contract between you and an insurance company designed to provide a steady stream of income, typically during retirement. You fund the annuity with either a lump sum or series of payments, and the insurer guarantees payouts over a specified period or for life.
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A type of annuity that provides returns based on the performance of a specified market index, while protecting your principal against market losses. It offers a balance of growth potential and safety.
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Features or riders on a life insurance policy that allow you to access a portion of your death benefit while you are still living, typically in the event of a terminal, chronic, or critical illness.
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The portion of a permanent life insurance premium that goes toward the actual mortality risk and administrative fees of the policy, separate from the portion that goes into the cash value account.
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A loan taken by a policyholder from the insurance company, using the cash value of their permanent life insurance policy as collateral. These loans are typically tax-free and do not require a credit check.
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The amount of money your life insurance company pays to the beneficiaries of the policyholder when they die. Also known as a death benefit.
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The policyholder is the person who “owns” the policy. They pay the premiums and choose the beneficiaries who will receive the payout on the policy when they die.
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Also known as the insured, it’s the person who owns the life insurance policy. It may also be a relative of the insured, a partnership or a corporation.
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Contributing more premium than the minimum required, up to the IRS limits, to maximize cash value accumulation rather than buying more death benefit.
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This is the amount you pay to your insurance company, typically each month, for your life insurance policy. Your life insurance premium is the cost of your coverage.
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This is the risk that an insurance company’s underwriting standards considers common or normal. Therefore, it would qualify for standard premium rates without special restrictions.
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Insurance underwriters connect actuaries and customers and apply the tables developed by actuaries to the real world by inputting a customer’s specific information into their programs and spreadsheets to determine risk. Underwriters determine the risk of taking on specific individuals under an insurance policy.
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Universal life insurance offers lifelong protection with the unique flexibility to adjust your coverage and premium amounts. The policy’s cash value accumulates tax-deferred and can be used for any purpose to meet your financial goals.
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An insurance policy clause that waives premium payments if the policyholder becomes critically ill, seriously injured, or physically impaired.
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Understanding the terms is just the first step. Let's discuss how these concepts apply to your specific family, business, and legacy goals.