Variable Unit-Linked / Unit-Linked Product Licensing

GLOSSARY

Actuary
An individual employed by an insurance company to calculate premium rates, reserves,
dividends and other important figures using risk factors obtained from experience tables.

Agent
An authorized and licensed representative of an insurance company who sells and services
insurance policies. Agents represent the insurance company and typically only sell policies from
that company.

Allocation of Premiums
The periodic distribution of premiums to insurance and units.

Antiselection
The tendency of individuals, who believe they have a greater than average likelihood of loss, to
seek insurance protection to a greater extent than those who believe they have an average or a
less than average likelihood of loss.

Applicant
The person applying for the insurance policy. The applicant may be different from the proposed
insured or the policyowner.

Application
Forms required by the insurance company which the proposed insured completes when
requesting coverage from an insurer.

Assignment
The transfer of the ownership rights of a life insurance policy from one person to another. The
assignment may be Absolute or Collateral, where Absolute is the transfer of all ownership rights
are permanent and Collateral being the transfer of some policy rights, to a bank or other lender
to provide security for a loan.

Attained Age
The age of an individual on a given date. Some insurance companies use attained age as a
method of calculating insurance premiums.

Beneficiary
A person(s) designated by the policyowner to receive the proceeds of an insurance policy upon
the death of the insured.

Benefit
For life insurance, it is the amount of money specified in a life insurance contract to be paid to
the beneficiary upon the death of the insured. It is commonly referred to as the Death Benefit.
For health insurance, it is the amount of money payable by a health plan for the cost of covered
services, as defined in the insurance policy.
Bid Price/Buying Price
The price which the insurer will give for the units if the policyowner wishes to cash in or claim
under the policy.

Cash Value
The savings element in some types or life insurance policies, which represents the
policyowner’s interest in the policy. The cash value typically grows over time and often earns a
rate of interest, depending on the type of policy. It can be borrowed by the insured or withdrawn
when the policy is surrendered.

Change of Beneficiary
A contract provision that allows the policyowner to change the beneficiary whenever desired,
unless the beneficiary has been designated as irrevocable. Changes to an irrevocable
beneficiary require written permission of the beneficiary.

Claim
Notification to an insurance company that payment of the benefit is due under the terms of the
policy.

Clause
An article or added provision in a life insurance contract.

Commission
Refers to the Insurance Commission.

Commissions
A fee or percentage of premium allowed to a salesperson or agent for services rendered.

Contestability Period
The time period during which the insurer can deny a claim if it finds that material
misrepresentations were made in the application. This period usually covers the first two years a
policy is in force. A policy becomes "incontestable" when the contestability period is over.

Contingent Beneficiary
A person(s) designated by the policyowner to receive policy proceeds if the Primary Beneficiary
is deceased at the time benefits become payable. He is often referred to as a secondary
beneficiary.

Death Benefit
The amount of coverage that is paid to the designated beneficiary(s) of a life insurance policy
upon the insured's death.

Dependent
An individual other than a health plan subscriber who is eligible to receive health care services
under the subscriber's contract. Generally, dependents are limited to the subscriber's spouse
and minor children.

Effective Date
The date an insurance policy goes into effect. This is sometimes referred to as the Policy Date.
Endorsement
Used to clarify or make revisions to particular provisions of a health or life insurance policy.

Estate
The estate becomes the beneficiary if there are no persons named as beneficiaries or if there
are no more living primary nor contingent beneficiaries.

Estate Planning
The planning for the administration of an estate upon the death of an individual. Estate planning
typically involves establishing wills and/or trusts to minimize the loss of estate value due to
estate taxes and is often funded with life insurance.

Estate Tax
Imposed on the transfer of properties to another upon death of the estate owner.

Evidence/Proof of Insurability
Factual information used by insurance companies to determine an applicant's qualification for
insurance. Examples of information used may include paramedical exams, medical records,
application statements, and motor vehicle reports among others.

Exclusions
Specific conditions or circumstances listed in an insurance policy for which the policy will not
provide benefit payments.

Expiration Date
The date on which an insurance policy ceases to provide coverage on the insured.

Face Amount
The amount of coverage provided by a life insurance policy. This is also referred to as Coverage
Amount or Insurance Coverage.

Final Expenses
Expenses incurred at the time of a person's death including funeral costs, probate costs, current
liabilities and taxes.

Fixed Benefit
An insurance policy benefit that remains the same and does not change.

Forward Pricing
A pricing structure wherein the buying and selling prices of units are determined at the next
valuation date.

Free Look Period

The period of time in which a policyowner has the legal right to examine a newly issued policy
and return it for a full refund of premium if not satisfied for any reason. The period of time varies
by state and is usually between 10 and 30 days with 10 being the most common.

General Account
All assets of the insurer other than assets in separate variable account(s) established pursuant
to Section 232 of the Insurance Code.
Grace Period
The period of time between a premium's due date and the date the policy will lapse if the
premium remains unpaid. This period is usually 30 days. If the insured dies during the grace
period, the unpaid premium is deducted from the policy proceeds.

Incidental Insurance Benefit

All insurance benefits in a variable life insurance contract, other than the variable death benefit
and the minimum death benefit, including but not limited to, accidental death, and
dismemberment benefits, disability benefits, guaranteed insurability options, family income or
term riders.

Incontestability Clause
A life insurance policy provision that states that after the policy has been in force for a specified
period of time, the company cannot deny a claim based on a material misrepresentation made
in the application. The typical period of time for the clause is two years.

Income Tax
In the case of maturity proceeds, the amount taxable as income is the difference between the
amount of proceeds received as endowment and the total premiums paid.

Insurance
A system for reducing risk by transferring the risks of several individual entities to one entity,
such as an insurance company. Each individual entity contributes monetarily (premiums) to
cover the risk assumed by the insurance company.

Insurability
General acceptability by an insurance company of an applicant for insurance based on an
underwriting review, which may include items such as the applicant's current health status,
medical history and driving record among others.

Insurable Interest
The existence of a potential financial loss on the part of the policyowner and/or beneficiary(s) in
the event of the death of the insured. The policyowner and his beneficiaries must have an
insurable interest.

Insurance Broker
Any person who for any compensation, commission, or other thing of value acts or aids in any
manner in soliciting, negotiating or procuring the making of any insurance contract in placing
risks or taking of insurance on behalf of an insured other than himself or herself.

Insurance Company
A company that provides insurance coverage through the issuance of insurance policies. This is
also referred to as the Insurer.

Insurance Policy
The physical, written document issued by an insurance company to the policyowner. The
insurance policy represents the written contract between the insurance company and the
policyowner.

Insured
The individual covered by an insurance policy.
Irrevocable Beneficiary
A type of beneficiary designation that cannot be changed without the written consent of the
beneficiary.

Issue Date
The actual date an insurance policy is issued. This may also be the effective date of the policy.

Lapse
The termination of an insurance policy due to non-payment of premium.

Lapse Notice
The notice provided in writing to the policyowner that the policy has lapsed.

Length of Coverage
The length of time you will be covered by an insurance policy. Length of coverage is typically
applied to term life insurance products.

Life Expectancy
The average number of years of life remaining for persons of a given age according to a
particular mortality table.

Lump Sum
The primary method of the settlement of a life insurance policy. The policy proceeds are paid to
the beneficiary(s) all at once rather than in installment payments.

Material Misrepresentation
A statement made by an applicant or proposed insured in the policy's application which is not
factually correct. If the truth had been disclosed, the insurance company would not have issued
the policy, would have issued it differently, or would have issued it with limited benefits or a
higher premium.

Maturity Benefit
It is what the insured gets at the end of the maturity period of the policy.

Medical Examination
An exam completed by a physician. The exam may be required as a part of medical
underwriting.

Member
An individual or dependent who is enrolled in and covered by a managed health care plan. Also
referred to as an Enrollee, Beneficiary, Participant, Covered Person, Subscriber, and Eligible
Individual.

Minimum Death Benefit

Amount of the guaranteed death benefit, other than incidental insurance benefits, payable under
a variable life insurance contract regardless of the investment performance of the separate
account(s).
Misrepresentation
The act of making, issuing, circulating, or causing to be issued or circulated any written or verbal
statement that does not accurately represent the correct policy terms.

Mode of Payment
The term of premium payments for an insurance policy. Typical modes include monthly,
quarterly, semi-annual and annual.

Mortality
The frequency of deaths in proportion to a specific population.

Mortality Rate
The number of deaths in a group of people, usually expressed as deaths per thousand.

Mortality Table
A table or chart listing the probabilities of death occurring at various ages. This is often used by
insurance companies to establish rating and underwriting guidelines.

Net Amount at Risk

Defined as any excess of the minimum death benefit over the value of the policyowner’s
separate variable account.

Net Investment Return

The rate of investment return in a separate account(s).

Offer Price/Selling Price

The price which the insurer uses to allocate units to a policy when premiums are paid.

Over-The-Counter Market
A market which trades all kinds of stocks and bonds which are not listed in the local securities
exchanges and where there is no centralized place for trading, there are no listing requirement
for issues traded and all registered brokers and dealers are entitled to participate.

Partial Withdrawal
Refers to the redemption of some units owned by the policyowner.

Payment Mode
Most insurance companies allow you to choose from the following payment modes:
 Annually
 Semi-annually
 Quarterly
 Monthly

Payor
The person making premium payments on a policy.
Permanent Life Insurance
The type of life insurance that may provide coverage for the insured's entire lifetime. Permanent
life insurance policies may include cash value accounts, policy loans, surrender options/fees,
etc. Examples are Whole Life Insurance and Universal Life Insurance. Most term life insurance
policies can be converted to permanent life insurance policies.

Policy
The written document issued by an insurance company to a policyowner. The policy represents
the insurance contract between the insurance company and the policy owner.

Policy Date
The date the insurance policy becomes effective.

Policy Fee
A charge for policy administration expenses incurred by the insurance company. The policy fee
is usually included in the premium.

Policy Loan
A loan from the insurance company to the policyowner secured by the policy's cash value.

Policyowner
The individual who owns an insurance policy and who has all contractual rights related to the
insurance policy. The policyowner may or may not be the same person as the insured, payor or
beneficiary.

Pool
A method of distributing insurance risk in which the individual participants share overall risk with
the other participants.

Pre-Existing Condition
A physical and/or mental condition of an insured person that existed prior to the issuance of his
or her insurance policy or that existed prior to issuance and for which treatment was received.

Premium
The amount of money to be paid by the policyowner to the insurance company for the benefits
provided under an insurance policy.

Premium Holiday
Refers to the cessation of premium payments on a variable life insurance contract for a period,
with a view to continue it later on.

Premium Mode
The frequency of premium payments elected by the policyowner. Typical premium modes
include monthly, quarterly, semi-annual and annual.

Primary Beneficiary
The person(s) designated by the policyowner to which the proceeds of a life insurance policy
will be paid upon the death of the insured.
Proceeds
The amount payable under the terms of a life insurance policy upon the insured's death or upon
the maturity of an endowment.

Proposed Insured
The person named in a life insurance application as the person whose life is to be covered by
the insurance.

Provision
A statement or clause, found in an insurance policy, to establish some term of the contract.

Quote
The estimated premium amount for an applicant based on several factors including type of
insurance, coverage amount, length of coverage, age, gender, health and medical history,
family history, build and approximate rating class. All quotes are preliminary estimates with final
rates determined by the insurance company’s underwriting.

Rebating
The act of giving something of value to an applicant by the agent/broker in return for purchasing
a life insurance policy (e.g. sharing commissions). Rebating is illegal in most states.

Reinstatement
A policy provision that allows a policy to be restored from a lapsed status. This is usually
allowed during the 31 days following the expiration of an insurance policy's grace period.

Renewable Term Insurance

Term life insurance that may be renewed for another term without evidence of Insurability.

Renewal
The process of continuing a policy by paying the premium due.

Revocable Beneficiary
A type of beneficiary designation that can be changed without the beneficiary's consent.

Risk
The probability of injury, illness or death associated with an insured.

Risk Classification
The process by which underwriting determines the risk associated with an applicant and assigns
an appropriate rating class to the policy.

Secondary Beneficiary
A person(s) designated by the policyowner to receive policy proceeds if the Primary Beneficiary
is deceased at the time benefits become payable. This is often referred to as a contingent
beneficiary.

Separate Variable Account

A separate account(s) established pursuant to Section 237 of the Insurance Code.

Settlement
The process of receiving the proceeds from a life insurance policy.
Standard Rating Class
The premium rate class available on life insurance policies for applicants that are determined by
underwriting to be of average health.

Standard Risk
An average risk as determined by underwriting.

Sub-Standard Risk
A below average risk as determined by underwriting. Insurance policies can be issued to
individuals with sub-standard risk and are referred to as table rated or modified.

Suicide Clause
A life insurance policy provision that states if the insured dies by suicide within a certain period
of time from the date of issue (usually two years) the amount payable would be limited to the
total premiums paid minus any policy loans or outstanding premiums.

Surrender
The cancellation of a life insurance policy.

Term Conversion
A policy provision that allows a term life insurance policy to be converted to a permanent life
policy offered by the company for a specified period of time. Usually the insured can convert to
a permanent policy at the same amount of coverage without providing evidence of insurability.

Term Life Insurance

A life insurance product that provides death benefit protection for a specified period of time. The
policy pays benefits only if the insured dies during the term.

Top-Ups
Single premium injections which can be used to buy additional units.

Twisting
The illegal practice of inducing a policyowner to replace a policy by providing inaccurate,
incomplete or misleading information.

Unit Pricing
The process whereby the unit price of units is set. The unit price of units is basically the value of
the underlying assets of the separate account(s) divided by the number of units issued.

Universal Life Insurance

A type of permanent life insurance that combines term life insurance and an investment feature
into one contract. Universal Life insurance policies generally offer flexible premium payments.

Variable Contract Agent

Any person who sells or offers for sale variable contracts, as defined in Section 232(2) of the
Insurance Code, or does or performs any act of thing in the sale, negotiation, making or
consummating of any such contract other tan for himself or herself.
Variable Life Insurance
A variation of permanent life insurance that offers cash values that fluctuate based on the
performance of the underlying mutual funds in the investment account.

Variable Life Insurance Contract

Refers to the variable contract as defined in Section 232(2) of the Insurance Code.

Whole Life Insurance

A type of permanent life insurance which provides a level death benefit upon the insured's
death, or a cash endowment upon policy maturity that is equal to the death benefit. Whole life
insurance policies also accumulate cash values.

Withdrawal Value
Total amount available to the policyowner in cash upon redemption of all units.

Yearly Renewable Term (YRT)

A type of term life insurance policy that provides a level death benefit with premiums that
increase each year with the insured's age. YRT is also referred to as Annually Renewable Term.