In business, an executive perk whereby the income of an employee (or owner-employee) is continued upon his or her death or disability.
Planned premiums as set out in the policy at the time of issue.
(See "Beneficiary, Secondary.")
A life insurance policy that insures two lives (often husband and wife), with the benefit payable upon the death of the second. These policies are often used as estate planning tools to help reduce the burden of estate taxes upon the second spouse's death.
Section 79 Plan
Section 79 of the Internal Revenue Code refers to term life insurance provided by an employer to employees. Under Section 79, the employer can provide up to $50,000 of life insurance to an employee and deduct the cost, with no tax consequences to the employee. Amounts over that amount, however, are treated as a taxable benefit to the employee.
Under this section of the Internal Revenue Code, an estate can sell stock in a family corporation back to the corporation on a tax-free basis, provided the proceeds are used to pay taxes and other costs of estate administration.
Section 401(k) Plan
Section 401(k) of the Internal Revenue Code provides for the establishment of employer-sponsored, salary-reduction retirement savings plans. The employee defers a percentage of income on a tax-deferred basis. The employer often matches all or part of the employee's amount. All earnings are also tax-deferred.
Section 403(b) Plan
Referring to Section 403(b) of the Internal Revenue Code, this is a retirement plan offered to employees of tax-exempt organizations, such as public schools, and religious and charitable organizations described in Internal Revenue Section 501(c)(3). Contributions are generally made via payroll deduction, and the contributions are excluded from the employees' income. These plans are often called tax-sheltered annuities (TSAs.)
Section 408(k) Plan
(See "Simplified Employee Pension.")
In financial services and investment terminology, this generally refers to a regulated investment product (including stocks, mutual funds and variable insurance products.) Only FINRA licensed Registered Representatives can sell securities products.
Selection (of Risk)
In insurance, the process of determining on what terms coverage will be issued. This is sometimes referred to as "underwriting." (See also "Underwriting.")
(See "Simplified Employee Pension.")
Referring to variable products which offer investment portfolios within the insurance policy or annuity, the insurance company is required to keep these assets separate from its general assets.
With flexible premium life insurance products, this is the maximum annual premium that can be paid during the first seven policy years. If this amount is exceeded, the policy may be classified as a Modified Endowment Contract, losing many of the tax advantages offered by life insurance. (See also "Modified Endowment Contract.")
Shared Care Benefit Rider
The Shared Care Benefit Rider provides spouses with a third pool of money that either spouse may draw from when their individual Lifetime Maximum Benefit amount has been exhausted.
An investor owning shares in a mutual fund.
Shareholder/participant's ownership interest in the fund.
Simple Automatic Increase Options
The Simple Automatic Increase options apply a fixed rate of growth to the policy benefits each year at the policy anniversary date. Premiums do not increase and benefit increases are equal to a percentage of the original benefit. Simple Automatic Annual Increase options are available at benefit increase rates of: 1%, 2%, 3%, 4%, 5%, and 6%. For example, a 5% Simple rider on a $200 maximum daily benefit would result in subsequent annual benefit increases of $10 per year (5% of the original $200), thus $210, $220, $230, $240, etc.
Simplified Employee Pension Plan
Simplified Employee Pension Plans (SEPs) are tax favored plans that permit an employer to make contributions on behalf of employees to an employee's SEP-IRA account. It can be established by sole proprietorships, partnerships & corporations. SEPs are especially attractive to small business owners because they are simple to set up & maintain.
An underwriting process, generally used in group coverage or insurance for smaller amounts, that uses less strict analysis of risk factors, often requiring no medical exam.
Single Premium Policy
With life insurance and annuities, a contract in which the entire premium is paid in a lump sum at the beginning of the contract period. No additional premiums are required.
Generally used in business situations, a life insurance arrangement whereby the business pays a portion of the premiums and the employee pays the rest. The business is reimbursed for its share out of cash value or death proceeds, while the employee's beneficiaries receive the rest of the proceeds. (See also "Reverse Split Dollar.")
Spouses Paid-up Insurance Purchase Option Rider
Upon the insured’s death, this rider allows a spouse who is the named beneficiary to purchase a new paid-up whole life insurance policy on his or her own life without evidence of insurability. There is no charge for this rider.
In life insurance, an underwriting classification for coverage written on a basis of the regular mortality and underwriting assumptions used by an insurer. (See also "Preferred Risk," "Rated" and "Declined.")
Statutory Accounting Principles ("SAP") are accounting principles prescribed or permitted by an insurer's domiciliary state. Statutory accounting practices are interspersed in the insurance laws, regulations, and administrative rulings of each state and are usually based on the National Association of Insurance Commissioners ("NAIC") Accounting Practices and Procedures manual.
The objectives of GAAP reporting differ from the objectives of SAP. SAP is designed to address the concerns of regulators, who are the primary users of statutory financial statements. GAAP stresses measurement of emerging earnings of a business from period to period, (i.e., matching revenue to expense), while SAP stresses measurement of ability to pay claims in the future.
In insurance, a company owned and controlled by stockholders. This contrasts with a mutual company, in which policyowners own rights in the company. (See also, "Mutual Insurance Company.")
Subchapter S Corporation
A business that, by meeting certain requirements, can elect to have income passed (and in turn, taxed) directly to individual stockholders rather than having to first go through the corporation.
A standard policy provision in most states stating that, if the insured dies by suicide within a specified period of time (generally two years), the insurance company's liability will be limited to a return of premiums paid. The purpose of this provision is to discourage individuals from purchasing life insurance with the intent of taking their own lives.
Supplementary Term Rider
This rider provides a Term Insurance Benefit that is payable when the Insured dies while this rider was in effect. It insures the same individual covered by the base policy. On the Issue Date, the Term Insurance Benefit is the amount specified in the application. The initial Term Insurance Benefit is shown on the Policy Data page. The initial Term Insurance Benefit, when added to the initial Face Amount of the base policy equals the initial Target Face Amount, which is also shown on the Policy Data Page.
With insurance companies, this is the total of all assets minus the sum of all liabilities.
An amount of money deducted from a policy's Total Accumulation Value to arrive at the policy's Cash Surrender Value.
Surrender Charge for Deferred Annuity Products
An amount deducted by NYLIAC if a partial withdrawal of the Cash Value is made or the policy is surrendered for its Cash Value during the policy's surrender charge period.
The return of a policy to the insurer for cancellation.
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