Glossary of terms

1035 Exchange. An exchange of one life insurance contract for another life insurance contract or annuity under Section 1035 of the Internal Revenue Code (IRC). The benefits of exchanging a contract under Section 1035 include the carryover of cost basis and the postponement of any taxable gain. Customers should contact a tax advisor or legal counsel to determine how our guidelines affect their situation.

Accelerated benefit. A life insurance contract feature that provides for the accelerated payment of the death benefit if the insured has a terminal condition, as defined in the policy.  Different plans specify different life expectancy) terms for eligibility.

Accidental death and dismemberment (AD&D). A life insurance contract rider that provides an additional death benefit if the insured dies or suffers dismemberment as a result of an accidental injury. An additional premium is charged for this agreement. Please refer to the contract for specific information regarding what qualifies as accidental injury.

Assignment (absolute). An assignment under which the contract holder transfers all ownership rights to the assignee and has no further rights under the contract. This is considered a "transfer or ownership."  If a contract holder absolutely assigns a contract without receiving any payment in exchange, it is considered a gift. For example, parents who purchase a contract insuring their minor child often transfer ownership to the child when he/she reaches the age of majority. This is generally accomplished by means of an absolute assignment. By contrast, if financial compensation is received, the absolute assignment is considered to be sale of the contract. For example, a company that owns a contract insuring a key person may sell the contract to the employee in exchange for the contract’s cash value when the employee leaves the company. This sale/transfer of ownership is also accomplished by means of an absolute assignment.

Assignment (collateral). A temporary assignment of the monetary value of a contract as collateral--or security--for a loan. The assignee’s rights are limited to those ownership rights that directly concern the monetary value of the contract. The contract holder retains the right to change such things as the beneficiary and sub-account elections, but is not permitted to take a loan or surrender the contract without the consent of the assignee.

Continuation. A contract provision that allows a contract holder’s group coverage to continue after their eligibility under the group policy ends. For example, after termination of employment, a contract holder may retain their current contract and be billed directly for any premiums due. This allows the customer to retain the insurance coverage and any accumulated value, though he/she is no longer a part of the group. The customer keeps the individual contract and benefits from the lower rates associated with group coverage. Please refer to the policy specifications and/or the contract for specific information on requirements, eligibility, and continuation rates.

See also PORTABILITY.

Conversion. A group life insurance provision that allows a group insured whose coverage terminates for specified reasons to convert his/her group coverage to an individual life insurance policy without presenting evidence of insurability. In most cases, group certificates are converted to individual life policies.

Cost of insurance (COI). The cost of insurance (COI) is a monthly charge which is deducted from the net cash value of the owner's policy to cover the insurer’s cost of providing the insurance coverage. In addition, the COI may be intended to cover expenses to the extent they are not covered by the other policy charges (i.e., administration fees, premium charges, etc.).

The cost of insurance is calculated by multiplying the COI rate based on the insured's attainted age and rate class (i.e., tobacco, non-tobacco) by the net amount at risk. The net amount at risk for a policy month is the difference between the death benefit and the account value.

COI rates are are determined based on a variety of factors related to group mortality including gender mix, average amount of insurance, age distribution, occupations, industry, geographic location, participation, level of medical underwriting required, prior mortality experience of the group, number of actual or anticipated owners electing the continuation option and other factors which may affect expected mortality experience.

Death benefit. The amount payable to the beneficiary at the time of the insured’s death. It includes the face amount of the contract, plus any additional insurance provided by any other benefits, riders, or agreements, minus any outstanding policy loans and accrued loan interest. Please refer to the contract for specific information on how the death benefit is calculated.

Dollar cost averaging. An investment strategy that involves investing a fixed dollar amount at regular intervals in one or more financial instruments. Dollar Cost Averaging does not assure a profit and does not protect against loss in declining markets. Also, since such a program involves regular investment purchases regardless of fluctuating price levels of the investment, consider your financial ability to continue purchases through periods of low price levels.

Evidence of insurability (EOI). The proof that an insurance underwriter requires during the underwriting process  to determine that a proposed applicant meets the insurer's health and lifestyle requirements and is an insurable risk.

FINRA (Financial Industry Regulatory Authority).The largest non-governmental regulator for all securities firms doing business with the United States public.

General (Guaranteed) Account. All assets of the insurer, other than those held in  separate accounts. The General Account  makes certain guarantees with regard to principal and interest.

Group insurance. Provides life insurance coverage through a contract issued to an organization on behalf of its members, such as employees of a company.

Guaranteed issue (GI).The insurance offered under a group policy that requires no evidence of the insurability of a particular insured.

Health insurance portability and accountability act (HIPAA). A U.S. federal law that imposes a number of requirements on group and individual health insurance plans, health insurers, and health maintenance organizations (HMOs) and that is designed to improve the availability and portability of health insurance benefits. HIPAA establishes federal standards for the continuation of health care benefits for people who change jobs, are self-employed, or who have preexisting medical conditions.

Life insurance. Insurance that provides a specific payment to a beneficiary when the insured dies. Some policies may also provide benefits to an insured while living.

Modified endowment contract (MEC). Part of the  Internal Revenue Code (TAMRA Section 7702A), the MEC rules were created to prevent policyholders from using cash-value policies such as  universal or whole life, solely as a source of tax-favorable loans. A life insurance contract becomes a MEC when, during the first seven years or when any material change is made, a policyholder's premiums exceed a specified limit known as the "7-Pay Limit." The limitations of a MEC include taxation of loans or withdrawals, and an additional 10% penalty tax for withdrawals made by the policyholder prior to age 59½.

Mortality and expense risk charge (M&E charge). A  fee designed to cover various risks and expenses assumed by the insurer, including the risk involved in providing the death benefit and certain other guarantees. Generally, the M&E charge is calculated as a percentage of the assets held by the investment funds underlying the various subaccounts.

Partial surrender (cash withdrawal). A cash withdrawal from a contract’s account value that is made without giving up ownership of the contract. Withdrawals are generally subject  to certain limitations. The master group policy specifies these limitations, such as the minimum withdrawal available, any waiting period, any transaction charge, etc. Depending on the product and death benefit option, the face amount may be decreased by the amount of the withdrawal. Please refer to the specific contract for information on its provisions.

Portability. A feature that allows a contract holder’s group coverage to continue after eligibility under the group policy ends and take advantage of group rates that are generally lower than for individual policies. For example, after termination of employment, a contract holder may take the contract with him/her and be billed directly for any premiums due. This allows the customer to retain the insurance coverage and any accumulated value, even though he/she is no longer a part of the group. Please refer to the policy specifications and/or the contract for specific information on requirements, eligibility, and continuation rates.

See also CONTINUATION.

Premium. A payment to an insurance company in exchange for insurance coverage.

Prospectus. A document filed with the Securities Exchange Commission (SEC) that contains important information about the variable group universal life product (VGUL) and is required to be presented to a potential customer at or before any sale. The prospectus contains explanations of the expense charges, the investment options, and the objectives of each option.

Registered Representative. Any individual who solicits or conducts business in securities products. The individual must be registered with FINRA.

Rider. A document that amends an insurance contract.

Sales charge. A load or commission paid for an investment instrument.

Term insurance. Insurance that pays benefits when the insured dies within a certain time period.

Trust. A legal entity in which one person has the right to manage property or assets for another person.

Underwriting. The process of identifying and classifying the degree of risk represented by a proposed insured or group of insureds. Underwriting is concerned with assessing anticipated mortality. the likelihood that an individual’s death will occur earlier, at, or later than the average for a similar group of people. Two types of underwriting are involved with group insurance:

Underwriting (case). Focuses on the characteristics of the group and does not underwrite each individual involved. The goal is to determine whether the group presents an average risk and whether the group’s loss experience will be predictable and acceptable. Some characteristics considered are the size of the group, the activities of the group, the age of the group, flow of new members into the group, etc. If available, the underwriters will also examine past experience of the group. All of the information obtained will be used to help determine the appropriate premium rates for the  group of insureds as a whole.

Underwriting (medical/individual).  Focuses on identifying and classifying the degree of risk represented by an individual proposed insured. Some considerations are the insured’s current heath, medical history, occupation, hobbies, and family medical history. .

Universal life insurance – A form of permanent life insurance that features a savings component in addition to life insurance protection.

Variable group universal life insurance. A group life insurance product that combines life insurance protection with an investment option. The investment option allows the contract holder to contribute premium beyond the cost of the insurance and potentially earn  higher rate of return on the contract’s accumulated value than a fixed return product.

Waiver of premium (WOP). A  life insurance contract rider that provides for the waiving of premiums if the insured, while under an age specified in the contract, suffers "total and permanent" disability while the agreement is in force. Insurance under the group policy  continues while the insured is totally and permanently disabled, subject to certain provisions.

Please refer to the contract for information regarding length of continuation,  proof of disability, the definition of  total and permanent disability, etc.