Glossary

222 terms defined in plain English. Each one links to the latest coverage in the index, and to the tools and guides that use it.

By topic

A

Accelerated death benefit: A policy feature that pays part of the life insurance payout early if the insured is terminally, chronically or critically ill, reducing what heirs get.

Accidental death and dismemberment (AD&D): Coverage that pays only when an accident causes death or the loss of a limb, sight, speech or hearing; illness and most natural causes are not covered.

Accumulation phase: The years when money in a deferred annuity grows tax-deferred before payments begin, ending at annuitization or when withdrawals start.

Actuary: A specialist who uses statistics, mortality data and financial math to price policies, set reserves and measure an insurer's long-term risk.

Adverse selection: The tendency of people with higher-than-average risk to seek more coverage, which drives up costs if insurers cannot spot and price that risk.

Annuitant: The person whose life expectancy determines an annuity's payments; lifetime income is usually measured by that person's life.

Annuitization: Converting an annuity's account value into a stream of guaranteed payments for life or a set period, usually giving up access to the lump sum.

Annuity: A contract with a life insurer that grows savings tax-deferred, turns them into guaranteed income, or both, in exchange for one or more payments.

Assignment: A written transfer of some or all rights in a life insurance policy to another person or entity, either permanently or as collateral for a loan.

Attained age: The insured's current age on a given date, used to price renewals, conversions and the rising monthly charges inside universal life.

Attending physician statement (APS): A copy or summary of an applicant's medical records, requested from their doctor by an insurer during underwriting to confirm health details.

B

Backdating: Setting a policy's effective date earlier than its issue date so the premium is based on a younger age, in exchange for paying the back premiums.

Bank-owned life insurance (BOLI): Permanent life insurance a bank buys on its employees, owns and names itself beneficiary of, mainly to offset the cost of employee benefits.

Beneficiary: The person, trust, charity or estate named to receive a life insurance death benefit or an annuity's remaining value when the insured or owner dies.

Beneficiary designation: The signed instruction on file with an insurer naming who receives a policy's proceeds, in what shares and in what order.

Best interest standard: A conduct rule requiring agents and advisers to recommend products that serve the customer's needs without putting their own pay first.

Bonus annuity: An annuity that adds an extra percentage to the premium or the first-year rate, usually offset by longer surrender periods, vesting rules or lower caps.

Build chart: An insurer's table of height and weight ranges that maps an applicant's body size to the rate classes they can qualify for.

Burial insurance: A small whole life policy meant to cover funeral, burial and end-of-life bills, often sold to older adults with simplified or no underwriting.

Buy-sell agreement: A contract among business owners that sets who buys a departing or deceased owner's share and at what price, often funded with life insurance.

C

Cap rate: The maximum rate an indexed universal life policy or indexed annuity will credit for a period, no matter how much the linked index rises.

Captive agent: An insurance agent who sells mainly or only one company's policies, usually with training and support from that company in return.

Cash surrender value: What a permanent policy pays the owner on cancellation: the accumulated savings minus surrender charges and any outstanding loans.

Cash value: The savings component that builds inside whole life, universal life and other permanent policies, which the owner can borrow against or withdraw.

Chronic illness rider: A life insurance add-on that advances part of the payout if the insured can no longer perform basic daily activities or has severe cognitive impairment.

Churning: Replacing a client's policy or annuity with a new one, often from the same insurer, mainly to earn fresh commissions rather than to help the client.

Claimant: The person or entity that files for a policy's benefits, usually a named beneficiary, executor or assignee after the insured's death.

Comdex: A 1-to-100 composite that converts an insurer's ratings from several agencies into percentiles and averages them into one strength score.

Community property: A marital property system in which most assets and income acquired during marriage belong equally to both spouses, which can affect a policy and its payout.

Conditional receipt: A receipt given when the first premium is paid with an application that can provide coverage before the policy is issued, if the applicant qualifies.

Contingent beneficiary: The person or entity who receives life insurance proceeds only if every primary beneficiary has died or cannot accept the payment.

Conversion privilege: A term policy feature that lets the owner switch to permanent coverage with the same insurer without new medical underwriting, within set deadlines.

Corporate-owned life insurance (COLI): Life insurance a business buys on its employees or executives, owns and is the beneficiary of, often to fund benefits or offset the loss of key people.

Corridor (death benefit corridor): The minimum gap the tax code requires between a universal life policy's death benefit and its cash value to keep the policy's tax advantages.

Cost basis: For life insurance and annuities, the after-tax money put in (premiums minus tax-free amounts taken out), which sets how much of a payout is taxed.

Cost of insurance (COI): The monthly charge a universal life policy deducts to pay for its death protection, based on the insured's age, rate class and the amount at risk.

Crediting rate: The interest rate an insurer applies to the cash value of a universal life policy or the balance of a fixed annuity for a given period.

Cross-purchase agreement: A buy-sell arrangement in which each business owner buys and owns life insurance on the others and uses the payout to buy a deceased owner's share.

Crummey letter: A written notice telling a trust beneficiary of a temporary right to withdraw a new contribution, so the gift qualifies for the annual gift tax exclusion.

CSO mortality table: The table of death rates state regulators adopt as the minimum standard for life insurance reserves, guaranteed values and tax-law tests.

D

Death benefit: The money a life insurance policy pays to the beneficiaries when the insured dies, usually the face amount adjusted for loans, riders and dividends.

Death certificate: The official government record of a person's death, listing the date, place and cause; insurers need a certified copy to process a claim.

Death Master File: The Social Security Administration's database of reported deaths, which insurers check to find deceased policyholders and unpaid benefits.

Decreasing term insurance: Term life coverage whose payout shrinks on a set schedule over the policy's term, often to track a mortgage or other loan balance.

Deferred annuity: An annuity that grows tax-deferred for years before income begins, used to build retirement savings or lock in future lifetime payments.

Dependent coverage: Life insurance on a spouse, domestic partner or children, added through an employer plan or a rider, that pays the employee if a covered dependent dies.

Dividend scale: The formula an insurer uses each year to set payouts on participating policies, based on its investment, mortality and expense experience.

E

Embedded insurance: Coverage offered inside another purchase or app — at checkout, during a loan application or on a benefits platform — rather than bought separately.

Endorsement: A written change attached to an insurance policy that adds, removes or modifies its terms, either when it is issued or later.

Endowment: A life policy that pays its face amount on a set maturity date if the insured is alive, or at death if sooner; also the point when whole life matures.

Entire contract clause: A required policy provision stating that the policy, the attached application and any riders or endorsements are the whole agreement.

Entity-redemption agreement: A buy-sell arrangement in which the business itself owns life insurance on each owner and uses the payout to buy back a deceased owner's share.

ERISA: The 1974 federal law governing most private employer benefit plans, including group life insurance, which sets claim procedures and overrides many state laws.

Escheatment: The legal process by which money owed but unclaimed, including unpaid life insurance proceeds, is turned over to a state after a dormancy period.

Estate: Everything a person owns at death, from property and accounts to some life insurance, which is settled and distributed to heirs and creditors.

Estate tax: A federal tax on the transfer of a deceased person's assets above an exemption amount, with a top rate of 40%; some states levy their own.

Evidence of insurability: Health and other information an insurer requires to approve coverage, such as medical questions, records or an exam, often for amounts above guaranteed issue.

Exclusion: A provision listing causes of death or circumstances a policy will not pay for, such as suicide in the first two years or certain aviation deaths.

Exclusion ratio: The fraction of each annuity payment treated as a tax-free return of the buyer's own money, found by dividing cost basis by expected total payments.

Executive bonus plan: An employer benefit in which a company pays a bonus to cover premiums on a life insurance policy the executive owns, deducting it as compensation.

Executor: The person named in a will, or appointed by a court, to settle a deceased person's estate: gather assets, pay debts and taxes, and distribute what remains.

Extended term insurance: A nonforfeiture option that uses a lapsed policy's cash surrender value to buy term coverage for the full face amount for as long as the money lasts.

F

Face amount: The dollar amount of coverage shown on a life insurance policy's specifications page, the base death benefit before loans, riders or dividends.

Federal estate tax exemption: The amount a person can pass at death or give during life before federal estate and gift tax applies: $15 million per person for 2026, per the IRS.

Fiduciary: A person or firm legally bound to act in someone else's best interest with loyalty and care, such as a trustee, executor or registered investment adviser.

Financial strength rating: An independent agency's letter-grade opinion of an insurer's ability to pay claims and meet its policy obligations over time.

Fixed annuity: An annuity that credits a rate set by the insurer, with principal protected from market losses, either deferring growth or paying fixed income.

Flat extra: An added premium charged per $1,000 of coverage for a specific risk, such as a dangerous job, hobby or recent cancer, on top of the base rate.

Floor: The minimum rate an indexed universal life policy or indexed annuity credits for a period, often 0%, so index losses don't reduce the credited interest.

Fraternal benefit society: A nonprofit membership organization, often built around a faith, heritage or civic mission, that sells life insurance and annuities to its members.

Free withdrawal provision: An annuity clause that lets you take out a set share of the contract value each year, often 10%, without paying a surrender charge.

Free-look period: A window after a policy is delivered when the owner can cancel it and get a refund of premiums paid, set by state law and printed on the policy.

G

General agent and BGA: A firm or person holding direct insurer contracts that supplies agents with products, case help and commission processing, earning an override.

Gift tax annual exclusion: The amount you can give any one person each year without filing a gift tax return or using lifetime exemption: $19,000 per recipient in 2026, per the IRS.

Grace period: The window after a missed premium due date, usually 30 or 31 days, when life insurance stays in force and the overdue premium can still be paid.

Graded benefit: A death benefit limited during a policy's first two or three years, often to premiums paid plus interest, unless the death is accidental.

Group life insurance: Coverage issued under one master contract to members of a group, usually employees, often at one or two times salary with little or no underwriting.

Guaranteed insurability option: A rider that lets you buy more coverage on set dates or after life events such as marriage or a birth, without new medical underwriting.

Guaranteed interest rate: The lowest rate an insurer promises to credit on cash value or annuity funds for the life of the contract, no matter how far market rates fall.

Guaranteed issue: Coverage an insurer must approve regardless of health, with no exam or health questions, usually for small amounts and with a waiting period.

Guaranteed lifetime withdrawal benefit (GLWB): An annuity rider that lets you withdraw a set percentage of a benefit base every year for life, even if the account value runs out.

Guaranteed minimum death benefit: A variable annuity feature that pays heirs at least a set floor, such as premiums paid minus withdrawals, even if the account has lost value.

Guaranteed renewable: A provision giving you the right to renew coverage at the end of each term without new medical underwriting, at a higher age-based premium.

Guaranteed values: The cash values, death benefits and premiums a permanent policy promises in writing, which the insurer can't reduce whatever its results.

Guaranty association: A state safety net, funded by assessments on insurers, that continues coverage or pays claims up to set limits when a life or annuity insurer fails.

I

Immediate annuity: An annuity bought with a lump sum that starts paying income within about a year, for life or a set period, in exchange for giving up access to the money.

Imputed income: The taxable value the IRS assigns to employer-paid group-term life insurance above $50,000, added to your W-2 wages though you receive no cash.

Incontestability clause: A provision that bars the insurer from voiding coverage over application misstatements once it has been in force for two years during the insured's life.

Increasing death benefit (option B): A universal life setting in which beneficiaries receive the face amount plus the accumulated cash value, so the payout grows as cash value builds.

Independent agent: A licensed agent who holds contracts with several insurers and can compare their products, rather than selling for a single company.

Index crediting method: The formula an indexed annuity or IUL policy uses to turn an index's movement into interest, such as annual point-to-point or monthly average.

Indexed annuity: A fixed annuity whose interest is tied to a market index's gains, limited by caps or participation rates, with a floor that shields it from index losses.

Industrial life insurance: Small policies once sold door to door, with premiums of cents or a few dollars collected weekly or monthly by an agent at the customer's home.

Insurability: Whether, and on what terms, an insurer will cover a person, based on health, age, habits, occupation and other risks reviewed in underwriting.

Insurance broker: A licensed insurance professional who can shop policies from many insurers on a buyer's behalf, typically paid by commission from the chosen insurer.

Insurance commissioner: The official who heads a state's insurance department, licensing insurers and agents, reviewing policy forms, monitoring solvency and handling complaints.

Insured: The person whose life a policy covers, whose death triggers the payout, whether or not that person also owns the policy or pays its premiums.

Insurer liquidation: A court-ordered process that closes a failed insurer, sells its assets and pays claims, with guaranty associations protecting policyholders up to limits.

Insurer rehabilitation: A court-supervised receivership in which a state regulator takes control of a troubled insurer to restore it to health rather than shut it down.

Insurtech: Technology companies and tools that change how insurance is sold, underwritten or serviced, such as online applications and data-driven instant decisions.

Interest-only settlement option: A payout choice in which the insurer holds the death benefit and pays the beneficiary only the interest it earns, leaving the principal for later.

Interpleader: A lawsuit in which an insurer facing competing claims deposits the death benefit with a court and asks the judge to decide who should receive it.

Irrevocable beneficiary designation: A beneficiary choice the policy owner can't change or undo without that beneficiary's written consent, giving the beneficiary a vested interest.

Irrevocable life insurance trust (ILIT): A trust that owns life insurance and can't be changed or revoked by its creator, keeping the death benefit out of the insured's taxable estate.

Issue age: The age an insurer assigns you on the policy date to set your premium, counted from your nearest or your last birthday depending on the company.

J

Joint and survivor annuity: An annuity that pays income for as long as either of two people lives, often at a reduced amount after the first death, such as 50% or 100%.

Joint life insurance: One policy covering two people that pays its death benefit either at the first death (first-to-die) or only after both have died (second-to-die).

K

Key person insurance: A policy a business buys on an owner or essential employee, naming itself beneficiary, to cover losses and replacement costs if that person dies.

L

Lapse: The end of coverage because a premium went unpaid past the grace period or, in universal life, because cash value could no longer cover the charges.

Lapse-supported pricing: Pricing that counts on many owners dropping coverage before it pays out, letting the insurer charge less than if everyone kept the policy.

Level death benefit (option A): A universal life setting in which beneficiaries receive a fixed specified amount; cash value growth lowers the insurer's risk instead of adding to the payout.

Level premium: A premium that stays the same each year for a set period or for life, with early overpayments offsetting the rising cost of coverage at older ages.

Level term insurance: Term life coverage whose death benefit and premium both stay fixed for a set period, such as 10, 20 or 30 years.

Life expectancy: The average number of additional years people of a given age are expected to live, calculated from mortality tables for a population or group.

Life income settlement option: A payout choice that turns a death benefit into guaranteed payments for the rest of the beneficiary's life, sometimes with a minimum number of years.

Life insurance application: The form a prospective buyer completes with personal, financial and health details that the insurer uses to underwrite and price coverage.

Life-only annuity: An annuity that pays income for one person's lifetime and stops at death, with no refund or payments to heirs, in exchange for the highest payout.

Lump-sum payment: Receiving an entire life insurance death benefit at once in a single payment, the most common way beneficiaries choose to be paid.

M

Market value adjustment (MVA): A change to an annuity's surrender value on early withdrawal, up if interest rates have fallen since purchase and down if they have risen.

MIB (Medical Information Bureau): A member-owned data exchange where life and health insurers share coded underwriting information to catch errors or omissions in applications.

Minimum premium: The lowest payment a universal life policy requires to stay in force, or to keep a no-lapse guarantee active, during a stated period.

Misstatement of age clause: A provision that adjusts the death benefit to what the premiums paid would have bought at the correct age or sex, instead of voiding coverage.

Modal premium: The amount due per installment when you pay monthly, quarterly or semiannually instead of yearly, which usually costs more in total over a year.

Morbidity: The rate of illness, injury or disability in a population, used to price coverage that pays while someone is alive, such as disability or long-term care.

Mortality and expense (M&E) charge: An annual variable annuity fee, charged as a percentage of account value, that pays for the insurer's guarantees, sales costs and administration.

Mortality improvement: The long-term decline in death rates at each age over time, which actuaries project forward when pricing life insurance, annuities and pensions.

Mortality rate: The share of people of a given age expected to die within a year, often shown as deaths per 1,000; it is the foundation of life insurance pricing.

Mortality table: A chart showing, for each age, the probability of dying within a year and often the expected remaining lifetime, used to price and reserve for life insurance.

Mortgage life insurance: Coverage marketed alongside a home loan that pays off the remaining mortgage balance if the borrower dies, traditionally paying the lender directly.

Multi-year guaranteed annuity (MYGA): A fixed deferred annuity that locks in one interest rate for a set term, often three to 10 years, much like a bank CD but issued by an insurer.

Mutual holding company: A structure in which a policyholder-owned mutual parent controls a stock insurer, letting it raise outside capital without fully demutualizing.

Mutual insurance company: An insurer owned by its policyholders rather than shareholders, which may return surplus earnings to them as dividends on participating policies.

N

NAIC (National Association of Insurance Commissioners): The standard-setting body of the chief insurance regulators of all 50 states, D.C. and five territories, which writes model laws and coordinates oversight.

Needs analysis: A structured estimate of how much coverage a family would need, adding debts, income replacement and future goals, then subtracting existing assets.

Net amount at risk: The part of a death benefit the insurer would pay from its own funds: the total death benefit minus the policy's cash value or reserve.

Non-guaranteed elements: Policy features an insurer can change after issue, such as dividends, credited rates and current cost-of-insurance charges, within contract limits.

Non-participating policy: A policy that pays no dividends, so its premiums and values are either fixed in the contract or adjusted through other non-guaranteed features.

Non-qualified annuity: An annuity bought with after-tax money outside an IRA or employer plan; earnings grow tax-deferred, and only the gains are taxed when withdrawn.

O

Overfunding a policy: Paying more into a permanent policy than its coverage requires to build cash value faster, while staying under federal limits that protect its tax benefits.

P

Paid-up policy: A permanent life policy that needs no more premiums yet stays in force for life, because past premiums or its cash value have fully funded it.

Paramedical exam: A short health screening, done at home or an office by a trained examiner, that collects measurements, blood and urine for life insurance underwriting.

Participating policy: A policy, usually whole life from a mutual insurer, that can share in the company's surplus through yearly dividends, which are not guaranteed.

Participation rate: The percentage of an index's gain that an indexed annuity or IUL policy credits as interest, such as 80% of a 10% rise, or 8%.

Payor: The person or entity that pays a policy's premiums, who may be someone other than the owner, the insured or the beneficiary.

Per capita: A way of dividing proceeds equally among the named beneficiaries still living at the insured's death, so a deceased one's share goes to the survivors.

Per stirpes: A way of splitting proceeds by family branch, so if a beneficiary dies before the insured, that person's share passes to their own descendants.

Period certain: An annuity payout feature that guarantees payments for a set number of years, paying a beneficiary if the annuitant dies before that time is up.

Permanent life insurance: Life coverage designed to last for the insured's whole life as long as it is funded, usually with a cash value account that grows over time.

Persistency: The share of policies that stay in force over time instead of lapsing or being surrendered, tracked by insurers to price products and judge sales quality.

Planned premium: The premium amount and frequency a universal life owner chooses to pay, which can differ from the minimum needed to keep the policy in force.

Policy anniversary: The yearly return of a policy's starting date, when many contract features, such as dividends, rate changes and options, take effect.

Policy date: The date printed in a life insurance contract from which premium due dates, anniversaries and usually the insured's rating age are measured.

Policy dividend: A non-guaranteed annual payment a participating whole life policy may receive when the insurer's mortality, investment and expense results beat its assumptions.

Policy illustration: A year-by-year projection of a policy's premiums, cash value and death benefit, showing guaranteed figures beside non-guaranteed current assumptions.

Policy loan: Money borrowed from an insurer using a permanent policy's cash value as collateral, with no credit check and no required repayment schedule.

Policy loan interest: What an insurer charges on money borrowed against a policy's cash value, at a fixed or variable rate, and added to the loan balance if left unpaid.

Policy owner: The person or entity that controls a life insurance contract: it names beneficiaries, pays premiums and can borrow against, assign or surrender it.

Policy replacement: Buying a new life policy or annuity while dropping, surrendering or borrowing heavily against an existing one, a sale states regulate closely.

Postponement: An underwriting decision that neither approves nor declines an applicant but asks them to reapply after a set time, often following recent treatment.

Preferred plus: Typically the lowest-priced underwriting class, reserved for applicants in excellent health with a clean family history and no high-risk habits.

Premium: The amount a policy owner pays an insurer, monthly, quarterly, yearly or in one sum, to keep life insurance coverage in force.

Prescription database check: An underwriting search of pharmacy records that shows insurers which medications an applicant has filled, used to verify or flag health history.

Primary beneficiary: The person, trust, charity or estate first in line to receive a life insurance death benefit when the insured dies.

Probate: The court-supervised process of validating a will, paying a deceased person's debts and distributing what's left, which life insurance usually avoids.

Producer: The legal term for a person licensed by a state to sell, solicit or negotiate insurance, covering agents and brokers alike.

Proof of death: The documents a life insurer requires before paying a claim, usually a certified death certificate plus a completed claimant's statement.

Q

Qualified annuity: An annuity bought with pre-tax retirement money, such as inside an IRA or 401(k), so withdrawals are taxed as income and minimum distribution rules apply.

R

Rate class: The underwriting category, such as preferred plus, standard or substandard, that sets the price an insurer charges for a given age and coverage.

Rebating: Giving a customer part of an agent's commission or anything of value as an inducement to buy insurance, a practice most states prohibit.

Receivership: A court-ordered process in which a state insurance regulator takes control of a financially troubled insurer to rehabilitate or liquidate it.

Reduced paid-up insurance: A nonforfeiture option that uses a policy's cash value to buy a smaller, fully paid permanent policy so no more premiums are due.

Reinstatement: Restoring a lapsed life insurance policy to force, usually by paying overdue premiums with interest and proving the insured is still insurable.

Reinsurance: Insurance that insurance companies buy, passing part of the risk on policies they've sold to another company called a reinsurer.

Required minimum distribution (RMD): The minimum amount the IRS requires you to withdraw each year from traditional IRAs and most workplace retirement plans once you reach a set age.

Reserves: Liabilities a life insurer must hold on its balance sheet, as required by state law, to cover future claims and benefits owed on policies in force.

Retention limit: The most an insurer will keep at risk on a single life before passing the excess to reinsurers.

Return of premium rider: An add-on to a term policy that refunds the premiums paid if the insured is still living when the level term ends.

Revocable beneficiary: A beneficiary the policy owner can change or remove at any time without that person's consent, the default for most life policies.

Revocable living trust: A trust you create and control during your life that can hold assets or receive life insurance, then distribute them after death without probate.

Revocation-on-divorce statute: A state law that automatically cancels an ex-spouse's designation as beneficiary when a marriage ends, unless the owner names them again.

Rider: An optional provision attached to a life insurance policy that adds, limits or changes benefits, usually for an extra charge.

RILA: A deferred annuity, registered as a security, whose returns track a market index with partial downside protection and capped upside.

S

Secondary guarantee: A universal life feature that keeps coverage in force for a set period or for life, even if account value hits zero, as long as required premiums are paid.

Section 101(j) notice and consent: Federal tax rules requiring employers to notify employees and get written consent before insuring them, or lose most of the tax-free death benefit.

Section 7702: The federal tax code section that defines which contracts count as life insurance, limiting how much cash value a policy can hold for its death benefit.

Settlement options: The ways a beneficiary or policy owner can receive life insurance proceeds: lump sum, installments, interest only or lifetime income.

Seven-pay test: The IRS test that flags a policy as a modified endowment contract if premiums in its first seven years exceed what would pay it up in seven level payments.

Simplified issue: Life insurance underwritten from health questions and database checks, without a medical exam, usually at higher prices or lower coverage limits.

Social Security lump-sum death payment: A one-time $255 payment from Social Security to an eligible surviving spouse or child when an insured worker dies.

Special needs trust: A trust that holds money for a person with a disability without disqualifying them from means-tested benefits such as SSI and Medicaid.

Spendthrift clause: A policy or trust provision that keeps a beneficiary's future payments from being assigned, sold or seized by their creditors before they're paid.

SPIA: An annuity bought with one lump sum that starts paying guaranteed income within a year, often for life, in exchange for giving up access to the money.

Split-dollar arrangement: An agreement in which two parties, often an employer and an executive, share the premiums, cash value and death benefit of a permanent life policy.

Standard rate class: The underwriting class for applicants of average health and risk, priced at an insurer's baseline rather than a discounted preferred rate.

Statutory accounting: The conservative accounting rules state regulators require insurers to use in filings, built to show whether a company can pay its policyholders.

Stock insurance company: An insurer owned by shareholders, who receive its profits, rather than by its policyholders as in a mutual company.

STOLI: A scheme in which investors with no insurable interest induce someone to buy life insurance so they can acquire the policy and profit from the death.

Subaccount: An investment option inside a variable annuity or variable life policy, similar to a mutual fund, whose value rises and falls with its holdings.

Substandard rate class: An underwriting class for applicants with higher-than-average mortality risk, who are offered coverage at an extra charge above standard rates.

Suicide clause: A life insurance provision that limits the payout to a refund of premiums if the insured dies by suicide within an early period, usually two years.

Suitability: The requirement that an agent recommend an annuity or other product only after gathering enough information to judge that it fits the buyer.

Surrender charge: A fee deducted from a policy's or annuity's value if you cancel or withdraw too much in its early years, usually shrinking each year.

Surrender period: The years after purchase during which cancelling or over-withdrawing from an annuity or permanent policy triggers a surrender charge.

T

Table rating: An extra charge for higher-risk applicants expressed in numbered or lettered tables, each typically adding 25 percent to the standard premium.

Target premium: An insurer-set premium level for a universal life policy that determines the agent's full commission rate and often anchors funding plans.

Temporary insurance agreement: Short-term coverage some insurers provide while a life insurance application is in underwriting, if the first premium is paid and conditions are met.

Term life insurance: Life coverage for a set number of years, such as 10, 20 or 30, that pays a death benefit only if the insured dies within that period.

Testamentary trust: A trust written into a will that comes into existence only after death and probate, often to manage money for minor children.

Tobacco rate class: The higher-priced underwriting class for applicants who use tobacco or nicotine products, which can include vaping, chew and nicotine gum.

Trustee: The person or institution that holds legal title to trust assets and manages them for the beneficiaries under the trust's terms and fiduciary duties.

Twisting: Persuading someone to drop or replace an existing policy by misrepresenting or leaving out key facts, an unfair trade practice under state law.

U

Unclaimed property: Money, including unpaid life insurance benefits, that a company couldn't deliver to its owner and must turn over to a state to hold until claimed.

Underwriter: The insurance company professional who evaluates an application's risk and decides whether to approve it, in which rate class, or to decline it.

Underwriting: The process an insurer uses to evaluate an applicant's risk, from health and lifestyle to finances, and decide whether and at what price to offer coverage.

Universal life insurance: Permanent life insurance with flexible premiums and an adjustable death benefit, built on an account credited with interest and charged monthly costs.

UTMA custodian: An adult who manages money, such as life insurance proceeds, for a minor under a state's Uniform Transfers to Minors Act until the child comes of age.

V

Variable annuity: An annuity whose value is invested in market subaccounts, so it can grow or lose money, with optional riders that guarantee income or a death benefit.

Variable life insurance: Permanent life insurance whose cash value is invested in market subaccounts, so values and sometimes the death benefit rise or fall with performance.

Viatical and life settlement providers: Licensed companies that buy life insurance policies from their owners for a lump sum, then pay the premiums and collect the death benefit later.

Voluntary life insurance: Group life coverage offered through an employer that employees choose to buy and pay for themselves, usually by payroll deduction.

W

Waiver of premium: A rider that keeps a policy in force without further payments if the insured becomes totally disabled, usually after a waiting period.

Whole life insurance: Permanent life insurance with fixed premiums, a guaranteed death benefit and guaranteed cash value growth, sometimes boosted by dividends.