Key Concepts
1035 Exchange - Section 1035 of the Tax Code allows policyowners to exchange their policy for another to avoid tax on gains.
Accelerated Benefits - The early payment of some portion of the policy's face amount should the insured suffer from a terminal illness or injury.
Cash Value - The equity of "savings" accumulation in a whole life policy.
Level Premium Funding - The insurance plan (used by all regular life insurance companies) under which, instead of an annually increasing premium that reflects the increasing chance of death, an equivalent level premium is paid. Reserves that accumulate from more than adequate premiums paid in the early years supplement inadequate premiums in later years.
Policy Reserves - Funds held by the company to help fulfill future claims.
Premium Factors - The three primary factors considered when computing the basic premium for insurance: Mortality, expense, and interest.
Settlement Options - Optional modes of settlement provided by most life insurance policies in lieu of lump sum payment. Usual options are lump sum cash, interest only, fixed period, fixed amount, and life income.
Viatical Settlement - An agreement under which the owner of a life insurance policy sells the policy to another person in exchange for a bargained-for payment, which is generally less than the expected death benefit under the policy.
