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Financial Planning

GLOSSARY

Beneficiary
The person named by the policy owner to receive the proceeds of the life insurance after the death of the insured.
Cash Value
See Surrender Value.
Cash Surrender Value
See Surrender Value.
Convertible Term Insurance
Term insurance that can be exchanged at the option of the policy owner and without evidence of insurability (i.e. no medical exam) for a permanent insurance policy.
Face Amount
The amount stated on the face of the policy that will be paid in case of death.
Group Life
Policies, usually term, purchased through a group, normally an employer. To be sold in the life settlement market, a group policy must generally be converted to an individual policy.
Insurability
Life insurance companies require evidence that a life insurance applicant is an acceptable risk. This usually includes, but may not be limited to, a medical exam.
Insured
The person whose life is covered by the policy.
Level Premium Life Insurance
Life insurance for which the premium remains the same from year to year.
Life Expectancy
The number of months the individual insured under the life insurance policy can be expected to live as determined by expert analysis of the applicant's medical records.
Life Expectancy Evaluation Providers
Companies that specialize in providing life expectancy estimates so that a life settlement provider can calculate an offer.
Net Death Benefit
The amount of the life insurance policy less any outstanding debts or liens.
Paid-up Insurance
Insurance that will remain in force with no need to pay additional premiums.
Participating Policy
A life insurance policy that is eligible for the payment of dividends by the insurer.
Permanent Life Insurance
Any form of life insurance except term. Coverage can last a lifetime, and the insurance will usually build up a cash value.
Policy Issue Date
The original date of policy issuance.
Policy Loan
A loan made by a life insurance company from its general funds to a policy owner on the security of the cash value of a policy. Generally, loans reduce the policy's death benefit and cash value by the amount of the outstanding loan plus interest.
Policy Owner
The person who owns a life insurance policy. This is usually the insured person, but it may also be a relative of the insured, a trust, partnership or a corporation.
Premium
Payments to the insurance company to buy a policy and to keep it in force.
Premium Frequency
The schedule on which the premium is paid (e.g. monthly, quarterly, etc.)
Stranger-originated life insurance (STOLI)
When a speculator convinces a senior citizen to buy a life insurance policy for the sole purpose of transferring the policy to the speculator shortly after the sale. This type of strategy is not approved or accepted by any life insurance companies.
Surrender Value
The amount that is available in cash for loans and/or withdrawals. If the policy is surrendered, the cash surrender value is paid to the policy owner.
Term Insurance
Policies that pay a death benefit but do not build up cash value. These are normally guaranteed renewable for a specified period of time, or up to a certain age, although premiums can escalate sharply. Level term policies keep premiums fixed for specified periods such as 10, 20 or 30 years.
Terminally Ill
Having an illness or sickness that can reasonably be expected to result in death in 24 months or less.
Universal Life Insurance
A flexible life insurance policy under which the policy owner may change the death benefit from time to time and vary the amount or timing of premium payments. Premiums are credited to a policy account from which mortality charges are deducted and to which interest is credited at rates which may change from time to time.
Variable Life Insurance
A type of whole life insurance that allows the policy owner to invest premiums in stock, bond, and money market funds chosen from the insurance company's portfolio. The cash value and death benefit of this policy is determined by the success of those investments.
Whole Life Insurance
A basic type of permanent life insurance which can provide lifetime protection at a level premium. Premiums must generally be paid for as long as the policy is in force. Whole life insurance policies can build up cash value.