Glossary
A | B | C | D | E | F | G | H | I | J | K | L | M | N | M | O | P | Q | R | S | T | U | V | W | X | Y | Z
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 government employees to set aside tax-deferred income for retirement.
A
Accelerated death benefit
A life insurance policy benefit that allows policyholders to receive part of their death benefit in advance if 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 make contributions to their annuity and build 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.
B
Beneficiary
The person or legal entity named to receive a death benefit.
C
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 can be converted to permanent insurance.
D
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 distribution 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.
E
Early withdrawals
Withdrawals from a deferred annuity made before the owner reaches age 591/2.
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.
F
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.
G
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.
I
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.
J
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.
K
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.
L
Lapse
The termination of an insurance policy because of nonpayment of premiums.
Level term life insurance
An insurance policy with a premium amount that remains the same throughout the term.
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.
Lump sum
A single payment for the total amount due, as opposed to several smaller payments or installments.
M
Minimum distributions
See required minimum distributions (RMDs).
P
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
Life 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 when they leave the previous employer's benefit plan.
Portfolio
A collection of investments owned by an individual or organization designed to meet their financial goals.
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.
Q
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.
R
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.
Rider
An amendment or addition made to a contract that expands or limits its benefits. Also called an 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.
S
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 or withdrawal charge
A charge imposed for prematurely withdrawing all or part of an annuity.
Surrender value
See cash surrender value.
T
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.
U
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.
V
Variable annuity
An annuity under which the accumulated value and periodic payments fluctuate according to the value of 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.
W
Withdrawal charge
See surrender charge.