Accumulation Value: The account value or cash accumulation value of an universal life insurance policy, variable life insurance policy, whole life policy, or annuity. The accumulation value is a function of premiums received, withdrawals made, expenses charged, cost of insurance deducted, and interest credited.

Allocation Split (Split of Premium Allocation): The percentages of each premium payment to be invested in the various indexing or investment options that are available in the policy. The policyowner may at times change the indexing method or investment options in which future premiums will be applied. Your allocation for each option must be a whole percentage and sum of all allocations must equal 100%. Allocation splits generally only apply to Indexed Universal Life, Variable Universal Life, and Annuities (not traditional Universal Life or Term Life).

Annual Statement: Document provided by the insurance company to the policy owner every year detailing a policy’s performance. Figures reported may include: account values, premiums paid, etc. It is important to review your Annual Statement when it is received.

Annuitant: A specific individual in an annuity contract who is designated by the owner, it is the annuitant whose life expectancy is used to calculate the payout period of a life annuity.

Annuitization: The payout period of annuity, this is initiated by the owner and selected with a specified payout schedule.

Annuity: A legal contract issued by an insurance company which dictates guaranteed or non-guaranteed periodic payments to be paid to the Annuity policy owner at a specific period of time.

Annuity Contract: The written agreement between an individual and an insurance company that specifies the legal the terms of an annuity policy. The terms of the policy such as structure, withdrawal penalties, and provisions will be specified in the annuity contract. The annuity contract once signed and accepted by the individual becomes legally binding, and serves as protection for both the individual and the insurance carrier.

Annuity Starting Date: The date at which an annuity’s benefits begin to be received by the annuitant, and the first day of the annuity’s payout period.

Annuity Unit: A unit of accumulation in an individual’s total annuity portfolio. This unit is pre-determined and is a fixed ownership share of the individual’s total annuity portfolio.

Application: A written paper or electronic provided by an insurance company that is completed by the insurer’s agent, the insured, and in many cases also by the medical examiner. The completed application provides information about the health, occupation, lifestyle, and family history of the proposed insured. The policy application is signed by the policyowner, insured, and insurance agent. The completed and signed application is used by the insurance company to decide if a policy should be issued and at what price/cost.

Attained Age: The age of the insured the insurance company uses to calculate the required premiums for a policy.


Bailout Provision:A provision offered in certain annuities that allows the policy owner to withdraw the initial premium without penalty if the interest rate being credit falls below a specified rate.

Bank Draft: A premium payment method by which a policy owner allows his/her bank to withdraw a designated premium amount from his/her specified account on a periodic basis and transfer the money to the insurance company to be applied as payment for the policy premium. Also known as an Electronic Funds Transfer (EFT).

Beneficiary: The designated individuals or entities who receive the death benefits paid by a life insurance policy or annuity contract.

Beneficiary (Contingent): The designated individuals or entities who receive the death benefits paid by a life insurance policy or annuity contract, in the event the primary beneficiary(ies) is/are no longer living at the time the insured or annuitant dies.

Beneficiary (Primary): The beneficiary(ies) specially designated by the owner as the first in line to receive life insurance policy or annuity contract proceeds.

Bonus: An interest credited bonus applied to all premiums paid to an annuity during the specified premium bonus time frame.

Broker: An individual or company who acts as an intermediary between the insurance buyer and the insurance company. Brokers by nature, generally represent many different insurance companies and sell many insurance products. A broker’s typical role is to research the market in order to find the best possible options for the insured.

Broker-Dealer: A business entity licensed and registered with the Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (“FINRA”), www.finra.org. A broker-dealer has the legal authority to sell securities products to the general public. An agent or representative selling variable life, variable annuities, mutual funds, stock, bonds, and other securities must be registered with a broker-dealer. A Broker-Dealer’s role is to supervise its registered representatives to ensure product suitability and sales best practices.


Cap Rate: This is a maximum interest rate credited in an fixed indexed annuity. The cap rate is set by the annuity issuer on either an annual or monthly basis.

Cash Surrender Value: The amount available to a policyowner when a life insurance or annuity policy is surrendered or terminated for a reason other than the insured’s death. This feature is available to owners of Universal Life, Variable Universal Life, Whole Life, and Deferred Annuities (not Term Life).

Certificate of Deposit (CD): A short-term savings vehicle offered by a bank. A CD will have a specific interest rate and will be for a specific period of time. All CDs offered by the banks are FDIC insured and offer a fixed interest rate.

Contract (Policy): A legally binding, written agreement between the policy owner and the insurance company.

Critical Illness Rider: An additional form of insurance coverage that can be added as a Rider to certain types insurance policy which has a specified benefit to the policyowner if the insured is diagnosed with a critical illness or condition.


Date of Issue: The date on which a policy or contract is issued by the insurance carrier. Note, this may be different from the policy “Effective Date”.

Deferred Annuity: An annuity in which the payout period does not begin until a specified time in the future.


Electronic Funds Transfer: A premium payment method by which a policy owner allows the insurance company to withdraw designated premiums directly from his/her bank account at a specified amount on a periodic basis and to transfer the money to the insurance company to be applied as payment for the policy premium. Also known as a Bank Draft.

Excess Interest: The difference between the rate of interest an insurance company is currently paying on a life insurance policy’s or annuity’s cash value account and the guaranteed amount to be paid (this amount is always greater than or equal to 0).

Expected Return: The amount of money an annuitant can expect to receive based on specified premiums and specified interest rates. This can be used to calculate federal income tax on the interest earned, but it does not always reflect the actual return on an annuity contract.


Fixed Annuity: An annuity that offers a guaranteed interest rate during the accumulation period of the annuity, and therefore provides guaranteed periodic payments at annuitization.

Fixed Index Annuity: An annuity that offers the policy owner the options of investing at both fixed or indexed interest rates. The indexed interest rates are generally higher but not guaranteed, while the fixed interest rates are lower but are always guaranteed.

Flexible Premium Deferred Annuity: An annuity that provides the owner with the option of paying additional premiums after the initial premium has started the policy. Annuitization will begin at a specific point in time in the future after any premiums have been paid.

Free-Look Provision: Most state Departments of Insurance require a provision in a life, annuity, long-term care, or disability policy that gives the policyowner or contract owner a specified amount of time to review a new policy or contract after issuance and receipt. This is a consumer friendly feature allowing the policy or contract to be returned to the insurance company and voided within the specified time limit for a refund of all premiums paid. A common specified Free Look Period is 60 days.


Guaranteed Interest: Every life insurance policy or annuity contract has a minimum guaranteed interest rate. The current interest rate paid by the insurance carrier may be greater than or equal to the guaranteed interest rate, but never lower. Interest paid over and above the guaranteed interest rate is referred to as the excess interest.

Guaranteed Minimum Withdrawal Benefit: A rider offered with some annuities that guarantees a minimum income benefit payment to the annuitant.


Immediate Annuity: A short term annuity that begins its’ annuitization or pay out phase within 12 months of the date of purchase. Pay out is in intervals of monthly, quarterly, semi-annually or annually and are generally paid out at the end of each period.

Immediate Payment Annuity: An immediate annuity in which the policy owner makes one single premium payment and begins to receive payouts from the annuity immediately. These annuities are generally purchased by individuals in retirement or close to retiring.

Independent Agent: An authorized representative of an insurance company who solicits and services insurance contracts. An Independent Agent is not an employee of the insurance company and typically represents many carriers.

Index Account: Indexing is method to measure the performance of a group of securities. Some life insurance and annuity policies allow for the cash accumulations growth to be tied to a selected index. Examples are: Dow Jones Industrial Average, S&P 500, NASDAQ-100.

Individual Retirement Annuity (IRA): A form of annuity that is offered by employers to the employees as a retirement account. An IRA typically serves as a tax-deferred savings and investment vehicle.

Interest Rate (Current): This is the current interest rate credited to the life insurance policy or annuity contract by the insurance carrier.

Interest Rate (Guaranteed): The stated minimum guaranteed annual interest rate to be credit by the insurance company to a life insurance policy of annuity contract.


Joint Annuity (Joint Life Annuity): An annuity payable to multiple annuitants until the first of the annuitants dies. After the death of the first annuititant the surviving annuitant generally is given the option of continued payments or reduced payments for the life of the surviving annuitant.


Lien: A third party creditor’s claim against property such as a life insurance policy or annuity. For example, a mortgage is a lien against a house; if the mortgage is not paid, the house can be repossessed to satisfy the lien. As soon as the debt is repaid, the lien must be removed. A lien is granted by the courts.

Life Annuity: An annuity that provides a fixed income benefit for the duration of the annuitant’s life. Payments will stop at the annuitant’s death regardless of how much the annuitant has received.

Life Expectancy: The average number of years a person is expected to live. Life expectancy will vary based on age, sex, health, and family history.

Lifetime Income with Period Certain: An annuity payout schedule that pays a specific payment for the life of the annuitant, while guaranteeing payments for a certain period of time if the annuitant does not survive. If the annuitant dies within that certain period of time the annuity’s beneficiary will receive payments for the remainder of the specified period of time.


Market Value Adjustment (MVA): A provision in an annuity that would either decrease or increase the accumulation value of the annuity if large amounts of money are withdrawn from the annuity during the surrender charge period.

Maturity Date: The maturity date is the end of the contract term of a life insurance or annuity policy. This may be dictated by a specified period or time or by age.

Monthly Anniversary: The same day as the policy date for each succeeding month (i.e. the 15th of every month).


National Association of Insurance Commissioners (NAIC): A membership organization of the appropriate state insurance commissioners. Its goals are to promote the uniformity of state regulation and legislation related to insurance and to ensure insurance sales best practices.

Net Cash Surrender Value: The cash accumulation value less any surrender charges and/or outstanding loans in a life insurance policy or annuity contract.

New Deposit Interest Rate: This is the current interest rate determined by the insurance company that will be credited to new premium payments received.


Owner (Policy Owner): The stated individual or entity who owns a life, annuity, long-term care, or disability insurance policy. The owner could be the insured on the policy, the beneficiary, or another third party. Normally, the policy owner pays the premiums on the policy and is the only one who is allowed to make changes to a policy, such as: a change of beneficiary, withdraw cash values, or taking loans on the policy.


Payee: The designated recipient of payments in an annuity contract.

Per Stirpes: Literally mean “by branches” in Latin. Per Stirpes is a beneficiary designation calling for the distribution of benefits or property between or among two or more beneficiaries, with the provision that if one beneficiary dies before the insured, the dead beneficiary’s heirs shall be entitled to the beneficiary’s full share distributed equally amongst them.

Planned Periodic Premium or Payment: The chosen premium amount and schedule of annuity premium.

Policy # /Contract #: A policy or contract specific alpha numeric code assigned to each individual policy by an insurance company.

Policy / Contract: The written agreement between the insurance company and the policy owner or contract owner. The contract will state coverage amount, premium amount, length of coverage, beneficiaries, and additional information pertinent to your contract.

Policy Anniversary: The annual anniversary of the policy issue date.

Policy Date: The date on which coverage or a contract becomes effective. This is shown on the policy or contract specification page

Policy Number / Contract Number: A unique alpha numeric code assigned to the policy by the insurance company for identification and tracking purposes.

Policy Owner / Contract Owner: The stated individual or entity who owns the insurance policy. The owner could be the insured on the policy, the beneficiary, or another third party. Normally, the policy owner pays the premiums on the policy and is the only one who is allowed to make changes to a policy, such as: a change of beneficiary, withdraw of cash values, or taking loans on the policy.

Premium: Payments made to the insurance company to purchase a an insurance policy and to keep the policy in force/active.

Premium Bonus: An interest credited bonus applied to all premiums paid to an annuity during the specified premium bonus time frame.

Premium Mode: The frequency with which premium payments are made. This is determined by the policy owner. The Premium Mode options are: Annual, Semi-Annual, Quarterly, Monthly or Single Pay.

Primary Beneficiary(ies): The beneficiary(ies) specially designated by the owner as the first in line to receive life insurance policy or annuity contract proceeds.


Roth IRA: Is an “Individual Retirement Account” which has attractive tax advantages allowed under United States tax law.


Single Premium Deferred Annuity: A tax deferred annuity paid with a single payment (premium) that will accumulate interest over a specified period of time until the payout period begins.

Single Premium Immediate Annuity: An annuity which requires only one premium/deposit. Pays an immediate income of a fixed amount for a predetermined period of time or for life.

Surrender Charge: Is a fee or penalty applied by the insurance company in the event a life insurance or annuity policy owner surrenders or cancels a policy prior to the end of the surrender charge period.

Surrender Value: The amount of money payable to the policy owner should the contract be canceled pre-maturely.


Tax Deferred: An annuity serves as tax deferral investment vehicle meaning that tax is not paid on the contributions or growth of the annuity until money is withdrawn. During the accumulation phase of the annuity the premiums and the interest accumulate tax free until the annuitant begins to receive income payments. Upon receipt of the benefits the annuitant pays either a state or federal tax on the earnings.

Tax-Deferred Annuity: There are basically two parts to an annuity contract. That is, the accumulation phase (when deposit(s) are made) and the pay-out phase (when the annuitant receives income). During the accumulation phase of an annuity contract the capital accumulates on a tax-deferred basis. This accumulation is not taxed until it is withdrawn (at a later date, usually retirement). Withdrawals taken prior to age 59 1/2 may incur a 10 percent federal income tax penalty.

TSA Annuities: This is a particular tax-deferred or tax-sheltered annuity. To qualify for a TSA/403(b) annuity you must work for a public school, certain non-profit organizations or certain religious ministries. It is often referred to as a TSA (Tax Sheltered Annuity) and is available as annuity contract, a custodial account, or a retirement fund for employees.


Variable Annuity: An annuity that earns interest based on a particular investment fund’s performance. Variable annuities require a license with the SEC to sell and generally have additional costs and fees associated with them. Variable annuities generally have high risks and much lower guaranteed interest rates and values.