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Permanent Life terms
Whole, universal and indexed policies that last for life and build cash value.
Burial insuranceA small whole life policy meant to cover funeral, burial and end-of-life bills, often sold to older adults with simplified or no underwriting.Cap rateThe maximum rate an indexed universal life policy or indexed annuity will credit for a period, no matter how much the linked index rises.Cash surrender valueWhat a permanent policy pays the owner on cancellation: the accumulated savings minus surrender charges and any outstanding loans.Cash valueThe savings component that builds inside whole life, universal life and other permanent policies, which the owner can borrow against or withdraw.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 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 rateThe 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.Dividend scaleThe formula an insurer uses each year to set payouts on participating policies, based on its investment, mortality and expense experience.EndowmentA 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.Extended term insuranceA 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.FloorThe 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.Guaranteed insurability optionA 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 rateThe 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 valuesThe cash values, death benefits and premiums a permanent policy promises in writing, which the insurer can't reduce whatever its results.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.Index crediting methodThe 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.Industrial life insuranceSmall 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.Joint life insuranceOne 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).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.Minimum premiumThe lowest payment a universal life policy requires to stay in force, or to keep a no-lapse guarantee active, during a stated period.Net amount at riskThe 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 elementsPolicy features an insurer can change after issue, such as dividends, credited rates and current cost-of-insurance charges, within contract limits.Non-participating policyA policy that pays no dividends, so its premiums and values are either fixed in the contract or adjusted through other non-guaranteed features.Overfunding a policyPaying more into a permanent policy than its coverage requires to build cash value faster, while staying under federal limits that protect its tax benefits.Paid-up policyA 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.Participating policyA policy, usually whole life from a mutual insurer, that can share in the company's surplus through yearly dividends, which are not guaranteed.Participation rateThe 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%.Permanent life insuranceLife 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.Planned premiumThe 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 dividendA non-guaranteed annual payment a participating whole life policy may receive when the insurer's mortality, investment and expense results beat its assumptions.Policy illustrationA year-by-year projection of a policy's premiums, cash value and death benefit, showing guaranteed figures beside non-guaranteed current assumptions.Policy loanMoney borrowed from an insurer using a permanent policy's cash value as collateral, with no credit check and no required repayment schedule.Policy loan interestWhat 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.Reduced paid-up insuranceA nonforfeiture option that uses a policy's cash value to buy a smaller, fully paid permanent policy so no more premiums are due.Secondary guaranteeA 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.SubaccountAn investment option inside a variable annuity or variable life policy, similar to a mutual fund, whose value rises and falls with its holdings.Target premiumAn insurer-set premium level for a universal life policy that determines the agent's full commission rate and often anchors funding plans.Universal life insurancePermanent life insurance with flexible premiums and an adjustable death benefit, built on an account credited with interest and charged monthly costs.Variable life insurancePermanent life insurance whose cash value is invested in market subaccounts, so values and sometimes the death benefit rise or fall with performance.Whole life insurancePermanent life insurance with fixed premiums, a guaranteed death benefit and guaranteed cash value growth, sometimes boosted by dividends.