A – B
10 Day Free Look
The time period after the policy’s delivery during which the insured can return the contract and receive a full refund of premiums paid. The policy is then void from the beginning. This provision is mandated by many states and in some cases is longer than 10 days.
1035 Exchange
An Internal Revenue Code provision which allows the tax-free exchange of one insurance contract for another. The exchange is not taxable and the tax cost basis of the old contract is carried over to the new one. However, the exchanged contracts must be similar products and the insured and owner may not change.
Accumulation Phase
The period of the policy during which cash value is accumulated through premium payments and investment return.
Actuary
A mathematician nerd employed by an insurance company to calculate premiums, reserves, dividends, and insurance, pension, and annuity rates, using risk factors obtained from experience tables.
Accumulation Phase
The period of the policy during which cash value is accumulated through premium payments and investment return.
Actuary
A mathematician nerd employed by an insurance company to calculate premiums, reserves, dividends, and insurance, pension, and annuity rates, using risk factors obtained from experience tables.
Adjustable Life Insurance
Life insurance which allows the policy owner to change protection from term to whole life and back, raise or lower the amount of the coverage, and increase or decrease the premium.
Administrator
Individual appointed by the court to manage the estate of a person who dies without a will.
Adverse Selection
The tendency of persons with poorer-than-average health expectations (higher risk) to apply for or continue insurance coverage to a greater extent than persons with average or better-than-average health expectations (lesser risk).
Age Change
The midpoint between birthdays. Most insurance companies premium rate changes according to the age at the next birthday.
Agent
A life insurance salesperson who represents an insurance company.
American Council of Life Insurance (ACLI)
Amortization
An accounting procedure that accounts for depreciation by gradually reducing the cost value of an asset through periodic charges to income.
Annuitant
The person on whose life the annuity values are based.
Annuitization Period
The period of the policy when the amount built-up or accumulated during the accumulation phase is paid out to the annuitant in the form of systematic payments.
Annuitize
To get payments from an annuity. This term also refers to the settlement of a life insurance policy under the contract’s annuity options.
Annuity
A contract sold by a life insurance company that provides fixed or variable payments to an annuitant, either immediately or at a future date, usually to supplement retirement income.
Applicant
The person applying for the insurance policy. The applicant is not necessarily the owner or the insured.
Assignee
The person who gains certain rights to an insurance policy under an absolute or collateral assignment.
Assignment
Generally, a transfer of a property, or right therein, to a separate entity. In life insurance, it is the transfer of a policy’s ownership rights to a third-party.
Attained Age
This refers to the insured’s age, at any given point, which is rounded up to the next age six months after each birthday.
Attending Physician’s Statement (APS)
Information from a proposed insured’s physician covering medical history and results of medical examinations. It is used to determine the appropriate underwriting classification for the proposed insured.
Authorization
Permission from the policy owner which allows release of information to a named party.
Beneficiary
An individual designated in a will to receive an inheritance, or the individual designated to receive the proceeds of an insurance policy, retirement account, trust, or other asset.
Benefit Period
The period of time that benefits are normally payable for a disability.
Benefits
The sum of money specified in a life insurance contract to be paid to the beneficiary when a loss occurs.
Bond
A debt obligation that represents a promise the issuer makes to the buyer to pay a specified amount at a future date, along with interest for the interim. Examples include government treasury bonds and corporate debt security bonds which obligate the issuer to pay a specified sum of money, usually at specific intervals, and repayment of the principal amount of the loan to the bondholder at maturity.
Buy-Out Agreement
Similar to the Buy-Sell Agreement but this term refers specifically to a plan used to buy the interest of a partner or stockholder who becomes disabled for a long period of time.
Buy-Sell Agreement
An agreement for transfer (sale) of business ownership to the remaining owners (partners/stockholders, etc.) at the death, disability or retirement of an owner. The transaction may be funded through life insurance and disability insurance policies, typically carried on the lives of each individual owner.