Financial Glossary

Accelerated Death Benefit (ADB)

A rider that allows a terminally ill policyholder to access a portion of their life insurance death benefit while still alive. The funds are typically tax-free and can be used for medical expenses or end-of-life care.

Cash Value

A savings component in permanent life insurance policies (whole life, IUL, universal life) that grows over time on a tax-deferred basis. Policyholders can borrow against or withdraw the cash value while the policy is active.

Conversion Privilege

The right to convert a term life insurance policy to a permanent life insurance policy without a medical exam, regardless of health changes. Most term policies include this option.

Death Benefit

The amount of money paid to the beneficiaries when the insured person dies. Death benefits from life insurance are generally paid tax-free to beneficiaries.

Final Expense Insurance

A type of whole life insurance with lower face amounts (typically $5,000-$50,000) designed to cover funeral costs, burial expenses, and end-of-life medical bills. Also called burial insurance, it is easier to qualify for than traditional life insurance.

Guaranteed Issue Life Insurance

A type of life insurance that does not require a medical exam or health questions. Coverage is guaranteed regardless of health history, but face amounts are typically limited ($5,000-$50,000) and premiums are higher.

Index Universal Life Insurance (IUL)

A type of permanent life insurance that combines flexible premiums and a death benefit with cash value growth tied to a stock market index (like the S&P 500). IUL offers upside potential with downside protection — your cash value earns interest when the index rises and is protected when it falls.

Rider

An optional add-on to an insurance policy that provides additional benefits or modifies coverage. Common riders include accelerated death benefit, waiver of premium, and guaranteed insurability.

Term Life Insurance

A type of life insurance that provides coverage for a specific period (typically 10, 20, or 30 years). If the insured dies during the term, beneficiaries receive the death benefit. Term life is the most affordable type of life insurance.

Viatical Settlement

The sale of a life insurance policy by a terminally ill person to a third party for a lump-sum cash payment. The payment is typically less than the full death benefit but more than the cash surrender value.

Waiver of Premium

A rider that waives insurance premiums if the policyholder becomes totally disabled and unable to work. The policy remains in force with all benefits intact.

Annuitization

The process of converting an annuitys accumulated value into a stream of guaranteed periodic payments, typically for life or a specified period. Once annuitized, payments are locked in.

Fixed Index Annuity (FIA)

A tax-deferred retirement savings product that offers growth potential tied to a market index (like the S&P 500) while guaranteeing your principal is protected from market losses. FIAs are popular for conservative investors seeking guaranteed lifetime income in retirement.

Guaranteed Lifetime Income

An annuity feature that guarantees regular payments for life, regardless of how long you live or how markets perform. This protects against outliving your savings (longevity risk).

Lifetime Benefit

An insurance or annuity feature that provides payments for as long as you live, regardless of how long that is. This protects against outliving your income — a key concern in retirement planning.

Surrender Charge

A fee charged if you withdraw more than the allowed amount from an annuity or life insurance policy during the surrender period (typically 5-10 years). Surrender charges decrease annually until they reach zero.

401(k) Rollover

The transfer of funds from a 401(k) retirement account to another qualified retirement account, such as an IRA or a new employers 401(k) plan. Done correctly, rollovers avoid taxes and penalties.

Full Retirement Age (FRA)

The age at which you become eligible for full (100%) Social Security retirement benefits. For those born in 1960 or later, FRA is 67. You can start benefits at 62 (reduced) or delay until 70 (increased).

IRA (Individual Retirement Account)

A tax-advantaged retirement savings account that individuals can open independently of their employer. Traditional IRA contributions may be tax-deductible; Roth IRA contributions are made with after-tax dollars but withdrawals are tax-free.

Inflation

The rate at which the general level of prices for goods and services rises, eroding purchasing power. The Federal Reserve targets a 2% annual inflation rate. Inflation is a key consideration in retirement planning.

Required Minimum Distribution (RMD)

The minimum amount you must withdraw from traditional retirement accounts (401(k)s, traditional IRAs) starting at age 73 (age 75 for those born after 1960). RMDs are taxed as ordinary income.

Social Security

A federal program that provides retirement, disability, and survivor benefits to eligible workers and their families. Benefits are based on your 35 highest-earning years of work.

Compound Interest

Interest earned on both the initial principal and the accumulated interest from previous periods. Albert Einstein reportedly called it the eighth wonder of the world because of its powerful long-term growth effect.

Diversification

An investment strategy of spreading money across different asset types (stocks, bonds, real estate, annuities) to reduce risk. The goal is that poor performance in one area is offset by better performance in another.

Risk Tolerance

An investors ability and willingness to endure market volatility and potential losses. Risk tolerance ranges from conservative (preferring principal protection) to aggressive (seeking higher returns with more risk).

S&P 500 Index

A stock market index that measures the performance of 500 large U.S. companies. It is widely considered the best single gauge of the overall U.S. stock market and is commonly used as the index for IUL and FIA crediting.

Tax-Deferred Growth

Investment earnings that are not taxed until withdrawn. Annuities, IRAs, 401(k)s, and permanent life insurance cash values grow tax-deferred, allowing your money to compound without annual tax drag.

Living Trust

A legal document that places your assets into a trust during your lifetime, allowing your beneficiaries to avoid the probate process after your death. A revocable living trust can be changed while you are alive.

Power of Attorney

A legal document that gives someone else authority to make financial or medical decisions on your behalf if you become incapacitated. Essential for estate planning and elder care situations.

Probate

The legal process of administering a deceased persons estate, including validating the will, paying debts, and distributing assets to beneficiaries. Probate can be time-consuming and expensive, which is why many people use living trusts.

COBRA

A federal law that allows workers and their families to continue employer-sponsored health insurance for a limited period after job loss or other qualifying events. You pay the full premium plus 2% administration fee.

Disability Income Insurance

Insurance that replaces a portion of your income (typically 60-70%) if you become unable to work due to illness or injury. Short-term disability covers 3-6 months, while long-term disability can pay until retirement age.

Elimination Period

The waiting period between when a disability or long-term care event occurs and when insurance benefits begin. Common elimination periods are 30, 60, 90, or 180 days. Longer elimination periods result in lower premiums.

Long-Term Care Insurance

Insurance that covers the cost of long-term care services, including assisted living, nursing home care, in-home care, and adult day care. LTC insurance helps protect your savings from the high cost of extended care, which Medicare does not cover.

Medicaid

A joint federal and state program that provides health coverage to people with limited income and assets. Medicaid covers long-term care costs that Medicare does not, making it a critical resource for nursing home care.

Medicare

The federal health insurance program for people 65 and older, and for certain younger people with disabilities. It includes Part A (hospital), Part B (medical), Part C (Medicare Advantage), and Part D (prescription drugs).

Own Occupation vs Any Occupation

Two types of disability insurance definitions. Own-occupation means you qualify for benefits if you cannot perform your specific job. Any-occupation means you only qualify if you cannot perform any job for which you are reasonably suited. Own-occupation provides stronger protection.

Beneficiary

The person or entity named in a life insurance policy, retirement account, or will who receives the proceeds or assets when the policyholder or account owner dies.

Fiduciary

A professional legally required to act in your best interest, putting your needs ahead of their own. Financial advisors and insurance agents operating as fiduciaries must recommend products that best serve you, not those that pay them the most.

Liquidity

How easily an asset can be converted to cash without significant loss of value. Cash and checking accounts are highly liquid. Real estate and annuities in the surrender period are less liquid.

Net Worth

The total value of your assets minus your liabilities. A positive net worth means you own more than you owe. Tracking net worth over time is a key measure of financial health.

Premium

The amount paid for an insurance policy, typically monthly, quarterly, or annually. Premiums are based on factors like age, health, coverage amount, and policy type.

Underwriting

The process insurance companies use to evaluate an applicants risk profile, including health history, lifestyle factors, and occupation, to determine eligibility and premium rates.