Glossary
Plain-English definitions for regulated products.
A working vocabulary for the life insurance, annuity, long-term care, and health instruments we work with. Educational only — not legal, tax, or investment advice.
5
- 529 Plan
- A tax-advantaged education savings account. Qualified withdrawals for education expenses are federal tax-free; non-qualified withdrawals face income tax plus a 10% penalty on earnings. Related →
A
- Accelerated Benefits Rider
- A rider that lets a policyholder access part of their life insurance death benefit early if diagnosed with a qualifying critical, chronic, or terminal illness. Related →
- Annuitization
- The process of converting an annuity's accumulated value into a stream of periodic income payments, typically for life or a set period. Once annuitized, most contracts cannot be reversed. Related →
- Annuity
- A contract issued by an insurance company that provides tax-deferred growth and the option to convert savings into guaranteed income. Guarantees are backed by the issuing carrier. Related →
- Assignment
- The transfer of policy ownership rights (or benefits) to another party, often used for business or estate planning purposes. Requires carrier approval.
B
- Beneficiary
- The person(s) or entity designated to receive the death benefit of a life insurance policy or annuity.
C
- Cap Rate (IUL)
- The maximum interest crediting rate an indexed universal life policy can earn on index-linked gains in a given period. Caps are set by the carrier and can change over time.
- Cash Value
- The savings component inside a permanent life insurance policy that grows tax-deferred and can typically be accessed via policy loans while the policy remains in force. Related →
- Convertibility
- A feature of certain term life insurance policies that allows conversion to a permanent policy without new medical underwriting, subject to the carrier's rules and conversion deadlines.
D
- Death Benefit
- The amount paid to beneficiaries when the insured person dies. Generally received income-tax-free when paid as a lump sum to a named individual.
- Deferred Annuity
- An annuity in which income payments begin at a future date, allowing the account to grow tax-deferred in the meantime. Related →
- Disability Income Insurance (DI)
- Insurance that replaces a portion of your earned income if you become unable to work due to sickness or injury. Definitions of disability vary by policy. Related →
- Dividend (Whole Life)
- A return of excess premium paid by a mutual life insurance carrier to policyholders. Dividends are not guaranteed. Related →
E
- Elimination Period
- The waiting period between the start of a disability or LTC claim and when benefits begin to pay. Longer elimination periods generally reduce premiums.
F
- Floor (IUL / FIA)
- The minimum credited interest rate — often 0% — guaranteed on indexed products regardless of index performance. Policy charges still apply, so cash value can decline in a 0% year.
G
- Group vs Individual Coverage
- Group coverage is sponsored by an employer; individual coverage is owned directly by the insured. Individual policies are typically portable across jobs.
- Guarantee (Backing)
- In insurance, product guarantees are backed by the financial strength and claims-paying ability of the issuing carrier. They are not FDIC-insured.
H
- HSA (Health Savings Account)
- A triple-tax-advantaged savings account paired with an HSA-qualified high-deductible health plan. Contributions are deductible, growth is tax-free, and qualified withdrawals are tax-free. Related →
I
- Illustration (Non-Guaranteed)
- A hypothetical projection of policy performance based on current assumed interest crediting, caps, or dividends. Non-guaranteed elements can change.
- Index Universal Life (IUL)
- Permanent life insurance whose cash value growth is tied to the movement of a market index, with a floor (often 0%) and a cap. Not a direct investment in the index. Related →
- Irrevocable Life Insurance Trust (ILIT)
- A trust that owns a life insurance policy outside of the insured's estate, used to remove the death benefit from estate-tax exposure. Requires coordination with an estate attorney. Related →
L
- Long-Term Care Insurance (LTC)
- Insurance that pays benefits when the insured can no longer perform a specified number of activities of daily living (ADLs) or suffers cognitive impairment. Related →
M
- MEC (Modified Endowment Contract)
- A life insurance policy funded faster than IRS 7-pay limits. Loans and withdrawals from MECs are taxed less favorably than non-MEC policies.
- Medicare Advantage (Part C)
- A private-plan alternative to Original Medicare that bundles hospital, medical, and often prescription drug coverage into one plan. Networks and benefits vary. Related →
- Medigap (Medicare Supplement)
- Private insurance designed to pay for costs Original Medicare does not fully cover, such as deductibles and coinsurance. Related →
O
- Own-Occupation Disability
- A DI definition that pays full benefits if you cannot perform the material duties of your specific occupation, even if you could work in a different field. Related →
P
- Participation Rate
- The percentage of an index's gain credited to an indexed annuity or IUL in a given period. Participation rates can be adjusted by the carrier.
- Policy Loan
- A loan taken against the cash value of a permanent life insurance policy. Loans reduce the death benefit if unpaid and can cause policy lapse if poorly managed.
- Premium
- The amount you pay — monthly, annually, or as a single payment — to keep an insurance contract or annuity in force.
R
- Rider
- An optional policy feature that adds or modifies benefits, often at additional cost. Examples: accelerated benefits, chronic illness, long-term care, waiver of premium.
S
- Section 7702
- The portion of the U.S. Internal Revenue Code that defines a life insurance contract for tax purposes, including the limits that preserve favorable tax treatment of cash value and death benefit.
- Surrender Charge
- A fee imposed when a policyholder withdraws more than the allowed free amount from an annuity or cash-value life insurance policy during the surrender period.
- Suitability (NAIC)
- A regulated standard requiring that insurance and annuity recommendations be appropriate for the client's financial situation, needs, and objectives at the time of sale.
T
- Term Life Insurance
- Life insurance that provides level coverage for a defined period (e.g., 10, 20, 30 years). No cash value unless specific riders are added. Related →
- TPMO (Medicare)
- Third-Party Marketing Organization. CMS requires specific disclosures when a licensed agent represents multiple Medicare Advantage or Part D plans. Related →
U
- Underwriting
- The process by which a carrier evaluates the risk presented by an applicant to determine coverage eligibility, pricing (health class), and policy terms.
W
- Whole Life Insurance
- Permanent life insurance with level premiums, a guaranteed death benefit, and a guaranteed-minimum cash value that grows throughout the policyholder's life. Related →
Definitions on this page are educational summaries, not legal definitions. Actual contract language varies by carrier, state, and policy. Please consult the policy itself and a licensed professional for authoritative detail.
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