Equity Indexed Terms
A B C D E F G H I J K L M N O P Q R S T U V W X Y Z
Accumulated Value
Total premiums payment minus insurance
costs, expenses and other policy charges accumulated
in the policy with
interest.
Administrative Charges
An
amount deducted from the accumulated cash value each
month or upon an increase
in the policy’s face
amount.
Amount at Risk
The
net amount of insurance at risk is the amount by which
the life insurance death
benefit exceeds the policy’s
cash accumulation value. Actual insurance costs are determined
by multiplying the net amount of insurance at risk by
the insurance company’s costs factor based on the
age, gender and health of the insured.
Cash Surrender Value
The cash surrender value is the total accumulated cash
value reduced by any applicable surrender charge and
any policy loan debt.
Cost of Insurance Charge
An
amount deducted from the accumulated value each month
for the cost of providing
insurance, including insurance
related expenses and mortality. Actual insurance costs
are determined by multiplying the net amount of insurance
at risk by the insurance company’s costs factor
based on the age, gender and health of the insured.
Coverage Charge
An amount deducted from the accumulated cash value each
month. Coverage charges vary based on the insurance company.
Cumulative Guarantee
Depending
on the insurance company, at the end of indexed period
or segment term a cumulative
guaranteed interest
rate is credited if the policy’s index credits
do not equal r exceed the cumulative guarantee. For example,
one company’s cumulative guarantee states that
at the end of the 5-year segment term, the segment value
will be increased, if necessary, so that a guaranteed
effective annual interest rate of 2.0% applies over the
5-year segment term. Any amount transferred out of the
segment before the end of the 5-year term will not be
included in this calculation except for conforming deductions
and bailout transfers.
Fixed Account
Cash
value account that pays a fixed interest rate based on
the insurance company’s
investment returns and management expertise. The fixed
account usually earns
current interest at a rate not less than the fixed account
guaranteed interest rate. The current non-guaranteed
interest rate will vary based on the insurance company.
The minimum guaranteed rate is usually around 2- 3% annually.
Growth Cap
The growth cap establishes the maximum percentage index
interest credit for a given index period or index segment.
The cap is not guaranteed and may fluctuate based on
market conditions. Each company has a guaranteed minimum
growth cap.
Growth Floor
The growth floor is the minimum percentage index interest
credit for a given index period or index segment. With
all companies, the minimum index credit is 0% if the
index growth rate is negative for a segment year.
Guideline Minimum Death Benefit
The minimum required death benefit, as determined each
month, in order for the policy to qualify as life insurance
under the Internal Revenue Code if the Guideline Premium
death benefit qualifications test is chosen.
Index
An equity index
or stock index is designed to measure the performance
of a group of
companies in a specified
segment or market. The most common index used with equity
indexed insurance is the Standard & Poor's 500® Composite
Stock Price Index (“S&P 500 Index”),
excluding dividends. The NASDAQ-100 Index® and the
Dow Jones Industrial Average (DJIA) may also be available
index choices depending on the insurance company.
Index Credit
The index credit is the actual credited interest rate
for a given index period or index segment. Index credits
are calculated by multiplying the applicable participation
rate times the segment growth rate over the index period.
The index credit is subject to the current growth cap
rate and growth floor. Any index credits are applied
on segment anniversary. Index credits will never be less
than 0%.
Index Crediting Method
Index credit methods are the way an insurance company
measures the index performance over the year. There are
commonly used index crediting methods:
| 1. | Point-to-Point - Looks at only beginning and ending values |
| 2. | Averaging Method - Looks at average value throughout the year. |
Index Growth Rate
The index growth rate is the percentage increase in
the actual stock index over a specified earnings period.
Index Period or Segment Growth Period
The index period is length of time over which index
growth is measured. Index periods vary among insurance
companies. Some companies offer one year index periods
while others have 5 year segment growth periods.
Index Participation Rate
The percentage of the index growth rate that is available
to be credited subject to the growth cap and growth floor.
The participation rate is 100% with most EIUL policies.
Index Cap
The maximum indexed interest rate that is credited to
the policy for a given index period. The index cap or
growth cap varies among insurance companies.
Index Floor
The minimum indexed interest rate that is credited to
the policy for a given index period. The index floor
is guaranteed never to be lower than 0%.
Index Number
The published value of the underlying equities index
which is generally the value as of the close of business
the day prior to the date it is used.
Indexed Account
The indexed account earns interest credits based on
the percentage change in value of the underlying stock
index subject to a growth floor and growth cap. The Indexed
Account consists of indexed account segments or index
periods.
Indexed Account Segment
Each time a transfer is made to the index
account, an indexed account segment is created. Each
segment has
its own growth cap, participation rate and index period
or index segment.
Indexed Account Value
The indexed account value is the sum of the values of
all index segments. The value of a segment on any day
after the segment date is equal to the value of the segment
as of the prior day minus the amount of any deductions
or transfers from the segment since the prior day plus
any index credits earned on the Segment since the prior
day.
Net Amount of Insurance at Risk
The
net amount of insurance at risk is the amount by which
the life insurance death
benefit exceeds the policy’s
cash accumulation value. Actual insurance costs are determined
by multiplying the net amount of insurance at risk by
the insurance company’s costs factor based on the
age, gender and health of the insured.
Partial Surrender or Partial Withdrawal
A partial surrender is the distribution of a portion
of the cash surrender value to the policy owner.
Participation Rate
The participation rate is the percentage factor used
in calculating the index credit for each index period
or segment. The participation rate is non guaranteed
and subject to change at the beginning of any index segment
period. Participation rates vary among insurance companies.
Planned Periodic Premium
The amount billed to the policy owner each premium due
date. Premium payments can be made annually, semi-annually,
quarterly or by monthly electronic funds transfer.
Segment Anniversary
The segment anniversary is the date on which
an index segment year is completed. Each index
segment has its
own segment anniversary at the end of each segment
year. It is common for segment anniversaries
not to fall on
Policy Anniversaries.
Segment Date
The segment date is the date a segment is created. Each
segment has its own segment date.
Segment Growth Rate
The segment growth rate is the percentage change in
the underlying index over the index period multiplied
by the participation rate and then applied to the growth
cap and growth floor. The segment growth rate will never
be higher than the segment growth cap and will never
be lower than the growth floor.
Segment Maturity
Each indexed account segment matures at the end of its
segment term. The value in the segment at such time,
including any index credits, is applied to a new segment,
unless you transfer a portion, or all, of the value to
the fixed account or if available another indexed account.
Once a segment matures a new segment begins immediately.
Segment/Segment Term
Each time cash is transferred from the fixed account
to the indexed account, a new indexed account segment,
or segment is created. The indexed segment or index period
will vary among competiting insurance companies. At the
end of each year is the segment anniversary. Index credits
are calculated and applied at the segment anniversary.
Seven-Pay Premium Limitation
The 7-pay premium is the maximum total premiums that
can be paid within the cumulative seven-pay limit so
that the policy will not be considered a modified endowment
contract. The distributions for a modified endowment
contract will be taxed on an income first basis.
Surrender Charge
The policy surrender charge is the amount deducted from
the accumulated cash value upon full surrender of the
policy. The surrender charge varies with each company
but is usually at least 10 years from the initial policy
date.
Transfers
A reallocation of cash values from either the fixed
account to the indexed account or from the indexed account
to the fixed account. Transfers between fixed and indexed
accounts may be automatic or by written request and are
subject to policy limitations set forth by the insurance
company.
Transfer Date
The date of a transfer between the fixed account and
the indexed account may occur. A transfer can only occur
on a transfer date. Transfer dates will occur not less
frequently than once per calendar quarter.
