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GLOSSARY

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401(k) plan.
A savings program that allows employees to set aside tax-deferred income for retirement, thereby reducing current federal taxes.
 
403(b) plan.
A retirement savings program similar to a 401(k) offered to employees of certain employer groups, such as public education institutions or nonprofit organizations.
 
457 plan.
A retirement savings program that allows state and local governments and their employees to set aside tax-deferred income for retirement.
 


Accelerated death benefit.
A life insurance policy benefit that allows policyholders to receive part of their death benefit in case they're diagnosed with a terminal illness. Also called terminal illness benefit.
 
Accumulated value.
The amount of an investment plus any interest earned by the money.
 
Accumulation period.
The period when contract owners are making contributions to their annuity and building up its value. 
 
After-tax dollars. 
The amount of money left after federal income taxes have been withheld.
 
Annuitant.
A person entitled to receive payments from an annuity.
 
Annuitization.
The conversion of money in an annuity into a stream of regular lifetime income payments.
 
Annuity.
A financial product designed to pay out a series of periodic payments in exchange for the owner's payment of a premium.


Beneficiary.
The person or legal entity named to receive a death benefit.
  


Cash surrender value. 
The amount the holder of a life insurance policy or annuity may receive if the policy or annuity is surrendered before the insured's death or before it matures. Also called cash value and surrender value.
 
Cash value.
See cash surrender value.
 
Convertible term insurance policy.
A term life insurance policy that policyholders can convert to permanent insurance.
 


Death benefit. 
The amount of money paid to a beneficiary when a person insured under a life insurance policy or the owner of an annuity contract dies.
 
Deferred annuity.
A type of annuity that delays payments until the contract owner chooses to receive them.
 
Disability income insurance (DI Insurance).
Insurance designed to compensate an insured person for a portion of income lost because of a disabling injury or illness. Benefit payments are made either weekly or monthly for a specific period during the insured's disability. 
 
Distributions
Payments made from deferred annuities during the accumulation period.
 
Dollar cost averaging.
An investment strategy that seeks to minimize risk by investing a fixed amount at regular intervals, regardless of the market's ups and downs.


Electronic funds transfer (EFT).
The transfer of funds between accounts by electronic means, such as wire transfer, ATM and computer.
 
Endorsement.
See rider.
 
Evidence of insurability.
Documentation of an insurance applicant's physical fitness.


Financial planner.
An investment professional who helps clients achieve their long-range financial goals.
 
Fiscal year.
A 12-month accounting period over which a company budgets its spending.
 
Fixed annuity.
An annuity that guarantees to pay a fixed amount of money for a specified period of time.
 
Flexible premium.
A premium payment method that allows the amount and frequency of payments to be varied at the payer's option.


Grace period.
The length of time following the premium due date that payment may be made without penalty.
 
Guaranteed death benefit.
The minimum amount that will be paid upon the insured's death regardless of the policy’s cash value at that time.


Immediate annuity.
See income annuity.
 
Income annuity.
An annuity purchased with a lump sum designed to provide a guaranteed income stream for a certain number of years or for life. Also called immediate annuity.
 
Individual retirement arrangement (IRA).
A tax-deferred savings plan used by individuals to earmark a portion of their income for retirement. 
 
Insured. 
The person or organization for which an insurance policy is issued.
 
Insurer.
The insurance company that promises to pay losses or benefits to the insured.
 
IRA.
See individual retirement arrangement.

 
Joint life insurance.
Insurance that covers the lives of two or more persons with the death benefit payable on the first death, the second death or upon each death.  
 

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Key person.
Any person who possesses a unique ability essential to the success of a business and whose death or disability would cause the business a significant financial loss.
 
Key-person insurance.
Insurance that a company purchases to protect itself from financial losses that occur when a key employee dies or becomes disabled.



Lapse.
The termination of an insurance policy because of nonpayment of premiums.

 
Level term life insurance.
Insurance that pays a death benefit that remains the same throughout the term of the policy.
 
Limited benefit medical insurance.
A medical plan that offers a limited or reduced set of benefits compared to major health plans.
 
Long-term disability income insurance.
Insurance that provides disability income benefits after short-term disability income benefits terminate. 
 
Longevity insurance.
Longevity insurance is a concept, not a product. It enables customers to use a small portion of their current savings to buy guaranteed income for their later retirement years.
 
Lump sum.
A single payment for the total amount due, as opposed to several smaller payments or installments.

 
Minimum distributions.
See required minimum distributions (RMDs).


Pension plan.
A plan under which an employer or employee organization makes regular contributions into an account to provide covered employees with income that begins at retirement.
 
Period certain annuity.
An annuity that guarantees benefit payments for a designated period of time, regardless of whether the annuitant lives or dies.
 
Permanent life insurance.
Live insurance that provides coverage throughout the insured’s lifetime, provided premiums are paid.
 
Policy term.
The period of time during which a term life insurance policy provides coverage.
 
Portability.
The ability of employees to retain insurance coverage or pension benefits when they leave the providing benefit plan.
 
Portfolio.
A collection of investments owned by an individual or organization designed to meet their financial goals.
 
Premature distributions.
Withdrawals from a deferred annuity made before the owner reaches age 59½.
 
Pre-tax contributions.
Contributions to a tax-advantaged account made with money on which income taxes haven't yet been paid.
 
Proceeds.
The amount an insurance company pays to settle an insurance policy.
 
Prospectus.
A legal document used by companies offering securities for sale that contains most of the information included in the issuer’s registration statement.


Qualified retirement plan.
A retirement plan established by employers for their employees that must meet complex legal requirements to be eligible for federal income tax benefits.
 
Required minimum distributions (RMDs).
The  minimum amount the IRS requires be withdrawn each year from qualified retirement plans and traditional individual retirement arrangements (IRAs) once the owner reaches age 70½. Also called minimum distributions.
 
Rider.
An amendment or addition made to a contract that expands or limits its benefits. Also called endorsement.
 
Risk tolerance.
The degree of financial risk that an investor is willing to handle.
 
Roth IRA.
An individual retirement arrangement (IRA) featuring nondeductible annual contributions and tax-free growth.

  
Single-premium policies.
A life insurance policy or annuity contract purchased by payment of a lump sum.
 
Stop-loss insurance.
Insurance purchased by employers with self-funded health plans that protects them against potentially catastrophic medical claims.
 
Surrender charge.
A charge imposed for prematurely withdrawing all or part of an annuity.
 
Surrender value.
See cash surrender value.
 
Systematic Withdrawal Program (SWP).
An arrangement allowing deferred annuity contract owners to make withdrawals at regular intervals from the annuity’s accumulated value.


Tax-deferred basis.
Investment income on which taxes aren't paid until money is withdrawn.
  
Terminal illness benefit.
See accelerated death benefit.
 
Term life insurance.
Life insurance that provides coverage for a specified number of years.
 
Third-party administrator (TPA).
An organization that administers group benefit plans for employers.

 
Universal life (UL) insurance.
A form of permanent life insurance that offers flexible premiums, adjustable death benefits and the ability to make withdrawals from the cash value.
 

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Variable annuity.
An annuity under which the accumulated value and periodic payments fluctuate according to the value of the underlying investments.

 
Variable life insurance.
Life insurance with payment amounts based on the performance of the underlying investments chosen by the policyholder.
 
Variable universal life (VUL) insurance.
Life insurance that combines aspects of variable life insurance and universal life insurance. The death benefit and cash value can fluctuate based on the performance of the underlying investments.
Withdrawal charge.
See surrender charge
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