Glossary

Endorsement
An amendment to a life insurance or annuity policy, which alters the provisions of the initial contract.

Endow
With a life insurance policy, that point when the policy's guaranteed cash value equals the initial death benefit. At that time, the policy is said to mature or endow and the policyowner may receive the full face amount, often in cash. With whole life policies, policies often endow at age 100.

Entity Purchase Agreement
In business transfer plans, a buy-sell agreement whereby the business, rather than an individual owner, assumes the obligation to purchase a deceased or disabled owner's interest in the business. Additionally, the business entity also purchases (and is the beneficiary of) any life insurance used to fund the plan.

Equity
As a principle of insurance, equity refers to fair and impartial treatment, a standard of fairness applied in establishing premiums, dividends, and policy values. It is based on the premise that all insureds with similar characteristics will be categorized under the same underwriting classification, pay the same premium, and receive the same dividends and policy values. Additionally, in connection with a policy's cash values and policy loan indebtedness, the policyowner's equity is the portion of cash value remaining to the policyowner after deduction of all indebtedness from loans or liens secured by the policy.

Estate
The assets owned by an individual at the time of his death.

Estate Planning
A process addressing the orderly handling, administration and distribution of your estate upon your death. Depending on the size of your estate and your objectives, estate planning may involve estate creation and conservation for heirs; the limiting of estate shrinkage; and the creation of adequate liquidity to pay estate settlement costs (including probate, debt repayment and estate taxes). Life insurance can be used to help provide money to meet estate planning objectives.

Estate Settlement
The process of distributing a deceased's estate, first paying all existing debts and taxes and transferring the remainder to one's heirs.

Estate Shrinkage
The amount by which the value of an estate can be depleted during the estate settlement process due to probate costs, estate taxes and other expenses.

Estate Transfer
The process of distributing the assets of an estate, either during an individual's lifetime or after death.

Evidence of Insurability
Proof that you are insurable. Such evidence is generally obtained through statements on your application regarding your health, avocations and financial condition. In most cases, a medical examination is required.

Exclusion
A policy provision indicating a circumstance or event, such as an act of war, that would cause the benefit to be denied.

Exclusion Ratio
The exclusion ratio is the ratio of the total investment in the contract (normally the gross premium cost) to the total expected return under the contract. If the annuity is a life annuity with a refund or period-certain guarantee, a special adjustment must be made to the investment in the contract. The exclusion ratio is applied to each annuity payment to find the portion of the payment that is excludable from gross income. If the annuity starting date is after December 31, 1986, the exclusion ratio is applied to the payments received until the investment in the contract is fully recovered; thereafter, any payments received are fully includable in income.

Executor
That person or entity appointed to carry out or "execute" the provisions of a will. The executor has a number of responsibilities and bears a degree of legal liability.

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