Definitions

ACCIDENT-Event which results in bodily injury that happens suddenly, unexpectedly and without the insured’s intent. An unexpected event that causes injury.

AD&D (Accidental Death & Dismemberment)-Loss of life which results from bodily injury caused by an accident or limbs dismembered due to an accident. Note: Some policies are just Accidental Death only (no benefit for dismemberment)

ADVANCED INSURANCE and FINANCIAL INSTRUMENT- (Universal Life (UL), Variable Life (VUL), Annuities)-Are insurance policies and investment contracts that can be more complex than just a basic Whole or Term Life insurance because a part of the policy can be dependent on the financial index such as the stock market.

ANNUITY-An investment instrument where funds deposited and grown are tax-deferred until payout at a later date. Payout is a stream of payments to the individual yearly or for a specified period of time.  Typically Annuities are sold by insurance companies and are retirement investments.

ASSIGNMENT OF BENEFITS-The transfer of benefits or other rights of a life insurance policy to another person or business by a policy owner or beneficiary (if insured is deceased). **The most common assignment of benefits practice is the beneficiary of a life insurance policy assigning their portion of the benefits to a funeral home to pay or offset funeral expenses.**

BENEFICIARY (Primary Beneficiary)-The first person(s) in line to receive benefits from insurance policies, wills or trusts when the insured dies. *** Primary is first to receive benefits. Contingent (if named) is second, if primary is deceased then contingent becomes primary. If there is no distinction made between primary and contingent beneficiaries then the one named is considered primary. ***

CASH VALUE-The amount of money available accrued and earned during the life of the policy. Cash Value is only earned and available on certain types of insurance. Typically Whole Life policies accrue Cash Value.

CONSERVATORSHIP-A legal appointment by a judge to manage the financial affairs and/or daily life of someone because of old age, or mental or physical limitations. The conservator may be in charge of the “person also called the conservatee” where the conservator takes charge of overseeing the daily activities, such as living arrangements and daily activities. The conservator may also be in charge of financial matters or the “estate” of the conservatee. 

CONTESTABLE PERIOD-Period of time during which an insurer may contest (dispute or deny) the validity of the policy. The length of time is usually two years, the contestability provision in a life insurance is specified in the policy. Note: Generally if you take out an insurance policy and die within the first 2 years of the policy being active, the insurance company reviews the claim and most times the premiums are paid. Exception-If the death within the first two years was due to an ACCIDENT, then the policy face amount is generally paid.

CONTINGENT (Beneficiary)-A secondary beneficiary designated by the insured to receive the benefits of the policy if the named primary beneficiary is deceased when the proceeds become payable.

CROWDFUNDING (Donation Based)-Practice of funding a project, business or personal venture through funding from many different donors. Today crowdfunding is done through internet websites. Once funds are donated they are not generally paid back to the donors. There are many crowdfunding websites but the most popular is Go Fund Me.

DO NOT RESUSCITATE (DNR)-Legal order written either in the hospital or on a legal form to withhold cardiopulmonary resuscitation (CPR) or advanced cardiac life support, in respect of the wishes of a patient in case their heart were to stop or they were to stop breathing.

ESTATE-Everything comprising the net worth of an individual including all land, possessions and other assets. It also includes an individual’s liabilities.

EXECUTOR-Person who is responsible for finding and making sure a deceased persons assets and properties are managed and distributed properly to the heirs and beneficiaries. If there is a Will the Executor makes sure the Wills instructions are carried out.

FACE VALUE-Amount stated in the policy as payable at the death of the insured or at the maturity of the contract. Also known as Face Amount or Benefit Amount.

FINANCIAL ADVISOR-The role is to assess a person’s financial needs and help them with investments, insurance needs, plan for short and long term financial goals, such as retirement, business goals and education.

GUARDIANSHIP-A legal process of being responsible of someone who can is unable to be responsible for themselves. **SEE CONSERVATORSHIP DEFINITION**

INVESTMENTS-Asset or item purchased with the hope of generating income or have future appreciation. There are many different types of investments, however here are some of the most common: 401K’s, IRA’s, Stocks, Bonds, Equities, Annuities, Properties, Houses. ***Most investments are for long term wealth building and offer the opportunity for gains and equally for loss. ***

IRA (Individual Retirement Account)-Traditional IRA is a retirement investment account that allows one to set aside money yearly with pre-taxed earnings that are tax-deferred until withdrawal at retirement. IRA’s have many guidelines and stipulations and can be opened at some banks, financial institutions and brokerage firms. There are different types of IRA’s but Traditional and Roth IRA’s are the most common.

JUVENILE POLICY (Life)-A life insurance policy taken out where a minor is the insured person. Juvenile policies can convert into adult policies when the juvenile becomes a certain age.

LETTER OF ADMINISTRATION- Formal document issued by a court giving authority to an individual to administer the estate of someone who has died without a will. It allows the “administrator” to collect and settle the deceased person’s assets. Example: Banks accounts, Insurances, Properties, etc. What the Administrator of the Estate usually needs is the deceased person’s certified death certificate and the Letter of Administration.

LETTER OF TESTAMENTARY-(similar to the Letter of Administration) Formal document issued by a court or probate court giving authority to an individual as the executor of the estate of someone who has died with a will. A copy of the Last Will and Testament and a certified death certificate is needed to get the Letter of Testament. The Executor is then able to collect assets, pay expenses to settle the deceased’s estate.

LIFE INSURANCE-Type of insurance that provides the benefit amount specified in the contract if the insured dies while the policy is in effect. The benefit amount is paid to a beneficiary.

MISCELLANEOUS INSURANCES-Mortgage, Disability and Catastrophic Insurance(there are many other types of insurances available) are additional types of insurances that people can get to help financially if something unforeseen happens.

NATIONAL ASSOCIATION OF INSURANCE COMMISSIONERS (NAIC)–Formal definition-* the U.S. standard-setting and regulatory support organization created and governed by the chief insurance regulators from the 50 states, the District of Columbia and five U.S. territories. * It is an excellent insurance industry resource regarding insurance education, laws and other practices.  Example: If you had an old insurance policy and can’t locate the present insurance company name, the NAIC can help you find the current insurance company. Example: If you have questions or concerns regarding specific insurance practices NAIC may be able to assist you with having those questions answered. 

POWER OF ATTORNEY (POA)-Written authorization to represent or act on another’s behalf in private affairs, other legal matters or business. POA powers end when the person they represent dies. *** Authority to act for another person in specified or all legal or financial matters. ***

POLICY PROVISIONS (Succession Clause or Default)-When there is not a named beneficiary or the beneficiary is deceased, Life and AD&D policies have a default written into the policy as to how the benefits should be paid. One Example: If there is a spouse the beneficiary would be the spouse, if no spouse then the Estate.

*** There are other Policy Provision combinations as to how benefits would be paid if no beneficiary was named or alive. Wills are not needed to pay an insurance policy. ***

PROBATE (Estate)-The official proving in a court that a Will is invalid or valid. If there is no Will the courts can appoint a Personal Representative or Executor to distribute the deceased property, assets and handle debts. Overall, the probate process is gathering the deceased’s assets, liabilities, properties, paying outstanding taxes and distributing available assets to heirs and beneficiaries.

RIDER (Insurance)-An addition to an insurance policy that becomes a part of the contract and expands or limits the benefits otherwise payable. Example: A Life Insurance policy may have an Accidental Death Rider (addition) on it. Some policies may already have the rider included, others may allow a rider to be added later. It just means the policy is a Life policy, but there is an Accidental Death rider. If the insured’s death is due to an accident then a claim is filed on the life insurance benefit and another claim for the accidental death. If the death was due to natural causes, only the life benefit is paid.

SURRENDER (Cancel)-The act of terminating a life insurance policy or annuity. For policies that have a cash value when you surrender, which means cancel, you will get any available cash value back and the policy is canceled. Note: Some policies may have associated charges when surrendering.

TERM LIFE INSURANCE-Life insurance issued for a period (term) of years which normally does not build cash value and expires without value at the end of the term.

TRUST-A legal arrangement in which one party, known as a trustor, gives another party, the trustee, the right to hold title to assets and property for the benefit of a third party, the beneficiary.

*** The two basic types of trusts: 1) Living Trusts- A living trust is set up during the person's lifetime.  2) Testamentary Trusts- A Testamentary trust is set up in a will and established after the person's death when the will goes into effect.***

UNDERWRITING-Process done by banks and insurance companies to access the risk of a potential customer.

WILL (Also known as “the last will and testament”)-Wills are instructions someone sets up to tell the court how their assets and property should be distributed after their death. The person(s) named to manage the Estate is the Executor, who is tasked with making sure the instructions in the Will are carried out properly.

WHOLE LIFE INSURANCE-Life insurance which can also be called permanent insurance. Cash values are usually generated on Whole Life policies. Benefits and premiums remain level during the insured’s lifetime. Whole life policies are generally written to the age of 99 years old or 100 years old, if the insured lives to the age on the policy the benefit amount is then paid directly to the insured and the policy cancels.

712 FORM-A form typically filed by Executors of someone’s Estate for Life Insurance policies. As a part of an Estate the policy could be subject to taxes. 712 Forms are requested from the Life Insurance Company.

1099 FORM- A IRS tax form that reports distributions from annuities, IRAs, retirement plans, profit-sharing plans, pensions, and insurance contracts. The gross amount of the distribution, taxable amount, employee contributions, tax withholding, and the distribution code are reported to the contract owner and the IRS. This form is automatically sent by the insurance company or financial institution if earnings received applies to you.