Glossary

Adjusted Cost Basis

The policy tax basis used to determine gain for certain policy transactions.

Annuity

A contract typically used to support accumulation or income payments over time, often in retirement planning.

Beneficiary

The person or entity designated to receive policy proceeds.

Cash Value

Accumulated value within certain permanent policies that may be accessed during life.

Contestability Period

Initial period where claim review may focus heavily on application accuracy and disclosure.

Death Benefit

Amount paid to beneficiaries when the insured dies, subject to policy terms.

Estate

The property, assets, and obligations left behind at death and administered under legal rules.

Evidence of Insurability

Current proof of acceptable risk that an insurer may require before issuing or increasing coverage.

Face Amount

The stated amount of coverage shown in the policy before adjustments or riders.

Guarantee Period

A minimum period during which annuity payments continue even if death occurs before the period ends.

Guaranteed Insurability

Rider allowing future coverage increases at specified events without full medical requalification.

Incontestability

A rule that limits when an insurer can challenge the validity of a policy after a specified period, subject to exceptions.

Insurable Interest

A legally recognized financial interest in the continued life of the insured.

Irrevocable Beneficiary

Beneficiary designation that generally restricts owner changes without beneficiary consent.

Key Person Insurance

Coverage used by a business to offset financial impact after loss of a critical individual.

Lapse

Loss of coverage after policy requirements such as premium payment are not maintained.

Longevity Risk

The risk of living longer than expected and needing income or assets to last for more years than planned.

Material Misrepresentation

An incorrect or omitted fact that would have affected underwriting or policy issuance.

Permanent Insurance

Life insurance designed for long-duration or lifetime coverage, often with cash value features.

Policy Loan

Borrowing against policy value that can affect long-term policy performance and obligations.

Policy Owner

Person or entity with contractual control rights over the policy.

Premium

The amount paid to keep an insurance policy in force.

Replacement

A transaction where one policy is being replaced by another, often requiring extra disclosure and care.

Rider

Optional policy add-on that modifies benefits, conditions, or flexibility.

Suitability

Alignment between policy recommendation and client needs, capacity, and objectives.

Term Life Insurance

Coverage for a specified period, focused on temporary risk protection.

Underwriting

Risk assessment process used by insurers to determine eligibility, pricing, and terms.

Waiver of Premium

Rider that may waive premiums if the insured meets qualifying disability conditions.

Withdrawal

Removal of policy value that can impact coverage, future values, and tax treatment.