GLOSSARY

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A legal contract between two parties (insurer and policy holder), where the beneficiary is paid a lump sum in the event of the policy holder's death. In exchange for monthly premium payments, the death benefit is paid out on a tax-free basis. Primary goal is to replace income !

A person or entity who has legal standing to receive benefits, in the form of assets with value. This definition extends beyond just life insurance, to include retirement plans, checking/savings accts, brokerage accts, etc. 

The "back-up" person or entity, named in the policy; to receive the benefit in the event the primary beneficiary is no longer eligible to receive it. 

The lump sum of money paid out to a beneficiary after the death of the insured person. 

The investment side of a permanent life insurance policy, and all variations of permanent insurance (ex: whole-life, universal life, indexed universal life0 that accumulates interest and grows tax deferred over time. It is available for withdrawal, as a loan at interest. (why would you borrow your own money at interest ?)

In the case of a company or organization, its' employees and/or members can be covered by a single policy.. Offered at a low cost to its' members, it is an attractive benefit. (Be careful relying on such a policy to cover all remaining financial needs, in the event of a premature death. The policies, although low cost, offer low death benefits in return. They are highly contestable in court and not transferable in the event you change employers.) 

Sold as permanent life insurance, that offers a death benefit and cash value component, the cash value portion is invested in the stock market. These are  dangerous products ! (Refer to my blog for an in-depth explanation of how these plans work)

Provides coverage for a set period of time (The Term). In most cases these terms extend anywhere from 10-30 years and at a fixed monthly premium. In the event of the policy holder's death, the beneficiary receives a lump sum, called the death benefit. These policies are "pure" insurance, because there is no cash value attached. AKA Income Protection

Sold as permanent life insurance, these policies are customizable, with the ability to adjust premiums and coverage levels, during the life of the policy. Payment plans can be set up for a designated number of years or when the policy holder reaches a pre-determined age. As a form of permanent insurance, these are still "cash value" policies. (This is a critical point to understand: ALL  permanent insurance requires the beneficiary to choose between the death benefit and the cash value. In most cases the death benefit is chosen, because it is a greater amount and the remaining CV is retained by the insurer.)

Sold as a form of permanent life insurance. They offer lifelong coverage, with no expiration date (as long as premiums remain current) and the death benefit is guaranteed. (If you are considering this product, as with any permanent insurance, you need to ask the Q: Is the cash value guaranteed as well ? The answer is NO !) The growth of the cash value at a fixed interest rate is pointless, if the beneficiary does not get it in the end. 

A way of structuring a business entity, with at least one general partner and one or more limited partners. All partners maintain some ownership in the business, but the general partner has unlimited liability for the debts of the business. You will find this type of arrangement, when the GP needs capital funding and the LP's do not want involvement in day-to-day operations. 

The ease in which an asset may be converted to cash, without adversely effecting the market price or suffer fees/penalties for withdrawal. The affect of capital gains tax should always be considered in this circumstance.