C – F
Capital
The amount paid into a stock, or non-mutual, company for shareholders’ interest.
Capital Gain/Loss
Difference between an asset’s purchase price and the price at which it is sold. If the difference is positive it is a capital gain; if negative it is a capital Loss.
Carrier
The underwriting insurance company.
Cash Value
The amount of cash available to the owner when a policy is surrendered to the life insurance company. Most of the cash value is also available to policy owners in the form of policy loans.
Change of Beneficiary Provision
A contract provision that allows the owner of the insurance policy to change the beneficiary whenever desired, unless the beneficiary has been designated as irrevocable. In which case, the beneficiary’s written permission would be required before a change could take place.
Claim
A demand presented for payment of the benefit due under the terms of an insurance contract.
Clause
An article or added provision in a life insurance contract such as the Suicide Clause or the Incontestability Clause.
Commissions
A fee or percentage of premium allowed to a salesperson or Financial Representative for services rendered.
Contingent Beneficiary
A secondary beneficiary who will receive any policy proceeds remaining unpaid upon the death of the direct beneficiary.
Death Benefit
The policy proceeds, or benefit that is promised to the designated beneficiary of a life insurance contract upon the insured individual’s death.
Direct Beneficiary
The named beneficiary, to whom death proceeds will be paid directly upon the insured’s death.
Disability Insurance
A form of insurance coverage that provides a portion of income lost as the result of a total or partial disability caused by either an accident or an illness.
Disability Key Person Insurance
Disability insurance that protects a business in the event of a key employee’s disability.
Disbursements
Cash taken from a life insurance contract in the form of loans and/or surrenders.
Discretionary Trust
A trust that allows the trustee to distribute or withhold distribution of the trust’s income and/or principal to beneficiaries at his or her discretion.
Diversification
Spreading of risk by placing assets in several categories of investments (stocks, bonds, cash and short-term investments, mortgage loans, and real estate).
Dividend
A dividend is a distribution of the Company’s surplus to a policy owner. This surplus can be created when the Company’s investment income, claims, expenses, and lapse rates are more favorable than what was assumed in setting the premiums.
Escheat
The transfer of property to the state because there are no beneficiaries or distributees to inherit the assets.
Estate Planning
Planning for the orderly handling and administration of an estate upon the death of the owner. This usually involves drawing up a will and setting up trusts and insurance, with the intention of minimizing loss to the estate value incurred by estate taxes and administrative expenses.
Estate Tax
A tax imposed on the right of a person to transfer property at death. This is a federal tax, but can also be imposed as a state tax and is paid out of the estate’s assets.
Evidence of Insurability
Statements and representation regarding an insured’s or prospective insured’s state of health, avocations and financial condition, that might affect insurance acceptability.
Exclusion
Provision that indicates a circumstance or event, such as an act of war that would cause the benefit to be denied.
Exclusion Ratio
The principal amount invested in the annuity contract, divided by the expected return, and expressed as a fraction or a percentage. It is applied to each annuity payment to determine the portion of payment that may be excluded from the annuitant’s gross income. The balance is included as gross income the year payment is received.
Exclusion Rider
In disability insurance, a policy amendment waiving the liability of the company for certain conditions that were in existence before the date of the policy. Other companies may use the term “waiver” rather than Exclusion Rider.
Exclusions
Disabilities not covered by a disability insurance contract. For example, benefits will not be paid for undisclosed or misrepresented disabilities in the application, those caused or contributed to by an act or incident of war (declared or undeclared), those excluded by an agreement for limitation of coverage, and those disabilities or losses during any period the insured is incarcerated.
FDIC
Federal Deposit Insurance Corporation. An independent deposit insurance agency, created by Congress as part of the Banking Act of 1933, to maintain stability and public confidence in the US banking system. FDIC insures deposits in banks and savings associations so that customers’ funds, within certain limits, would be safe and available to them on demand in the event of a bank or savings association failure. The current insurance limit is $100,000 per owner. FDIC is also responsible for identifying, monitoring, and addressing risks to deposit insurance funds.
Face Amount
The original death benefit on a life insurance policy. On whole life policies, dividends are often used to purchase paid-up additions, thereby increasing the death benefit.
Fiduciary
An individual, company, or association holding assets in trust for a beneficiary. The fiduciary has the responsibility of managing the money for the benefit of the beneficiary.
Fixed Rate
A fixed loan interest rate option for variable and increasing whole life plans