BENEFICIARY – The person or legal entity the owner of an insurance policy names to receive the policy benefit if the event insured against occurs.
CASH SURRENDER VALUE – The amount, before adjustments for factors such as policy loans, that the owner of a permanent life insurance policy is entitled to receive if the policy does not remain in force until the insured’s death.
TAX-DEFERRED BASIS – Accumulation of investment income on which income taxes are not payable until the money is withdrawn from the investment vehicle.
DEATH BENEFIT – For a life insurance contract, the amount of money paid by an insurer to a beneficiary when a person insured under the life insurance policy dies.
DIVIDEND – Money returned to policyholders from an insurance company’s earnings. Considered a partial premium refund rather than a taxable distribution, reflecting the difference between the premium charged and actual losses. Many life insurance policies dividends to their owners. Life insurance policies that pay dividends are called participating policies.
EARNED PREMIUM – The portion of premium that applies to the expired part of the policy period. Insurance premiums are payable in advance but the insurance company does not fully earn them until the policy period expires.
FACE AMOUNT – For a fixed-amount whole life insurance policy, the amount of the death benefit payable if the insured person dies while the policy is in force.
LAPSE – The termination of an insurance policy because a renewal premium is not paid by the end of the grace period.
POLICY – A written contract for insurance between an insurance company and policyholder stating details of coverage.
PREMIUM – The price of an insurance policy, typically charged annually or semiannually