401(k) plan: A defined contribution plan that offers a cash or deferred arrangement and meets the special requirements of IRC Section 401(k).
AARP: An organization intended for those over age 50 and up that currently offers a long-term care insurance program for their members.
accelerated death benefit: An option in a life insurance policy that will pay all or part of the policy face amount prior to death. This benefit can pay the cost associated with catastrophic medical conditions, which can include the need for nursing home confinement.
accidental death benefit: An optional provision that provides an additional payment for loss of life due to an accident that was the direct cause of death. If the additional amount equals the face amount of the policy, this provision is frequently called a "double indemnity" provision.
actuary: A professional highly educated in a number of fields such as mathematics, statistics, and accounting. An actuary must have superior knowledge as to the underlying principles of life insurance and annuities and are responsible for creating new life insurance products and their pricing, value, and profit structure.
adult day care facility: An institution designated to provide custodial and/or minimum health care assistance to individuals unable to remain alone, usually during working hours when the caregiver is employed.
agent: A person who solicits insurance or aids in the placing of risks, delivery of Policies, or collection of premiums on behalf of an insurer. Typically, a person placing products for a specific insurer is considered the insurer’s agent rather than an agent of the policyowner.
American Association for Long-Term Care Insurance (AALTCI): A national, independent organization dedicated to those who offer long-term care insurance and other planning solutions. http://www.aaltci.org/
American Association of Retired Persons (AARP): The largest senior organization and the largest voluntary organization in the United States; lobbies actively on behalf of senior issues.
American Counsel of Life Insurers: A Washington, DC-based trade association representing 340 life insurance companies before federal and state legislators, regulators, and courts. http://www.acli.com
annuitant: The "measuring life" of the annuity contract; similar to the "insured" in a life insurance policy. Every annuity contract must include an annuitant. The annuitant has no voice or control over the investment or its disposition The death of the annuitant may trigger certain insurance company guarantees if the money was invested in a variable annuity.
annuitization: The even distribution of both principal and interest over a period of time.
annuity: A series of substantially equal periodic payments, at least annually, over an individual’s life of life expectancy, or a fixed term. In some cases, the payments may vary somewhat to reflect factors such as investment experience, cost of living increases, or guarantees.
annuity-based LTC: A combination product whereby an individual buys both an annuity and long-term care rider and the policy can function as either or both, depending on the insured’s future needs.
annuity contract: A contract purchased from an insurance company that provides for substantially equal periodic payments beginning at a specified date and extending for a life (or lives) or a fixed period of time.
assisted living facility: A type of housing that includes assistance with daily activities and 24-hour oversight; caters to a more affluent clientele than board and care homes; usually provides private rooms and baths or small apartments, social and recreational facilities, and individualized care.
Association for Advanced Life Underwriting (AALU): An advocacy organization for life insurance advisors that encourages activity in the political process from its members. www.aalu.org
beneficiary: The person(s) entitled to receive the death benefit of a life insurance policy upon the insured’s death. Also, a beneficiary is the person(s) who hold(s) the beneficial title to a trust’s assets.
benefit period: The length of time for which benefits under a long-term care insurance contract will be paid.
board and care home: A facility that provides meals and assistance in basic activities of daily living; ranges from small, unlicensed rooms in a residential setting to hotel-like arrangements housing 200 or more residents.
broker: An agent who handles buy and sell orders for an investor.
capitalization: A payment system in which a health maintenance organization receives a flat monthly fee for each patient in the system regardless of what services are performed.
caregiver: A person providing assistance to a dependent person due to medical reasons or the inability to conduct routine activities of daily living.
cash LTC policies: Also called "indemnity" plans, these policies pay the stated daily benefit amount to the insured directly for qualified long-term care services, without regard to the actual expense. There is a per diem limit on the amount of benefit that can be paid tax-free without regard to the actual LTC expense.
cash surrender value: The amount available to the policyowner when a life insurance policy is surrendered. It is also the amount upon which policy loan is based. In the first 8 to 10 years after a policy is issued, the cash value is typically the insurer’s reserve to meet future liabilities reduced by a surrender charge that enables the insurer to recover expenses incurred in setting up the policy. If a policy is surrendered in later years, the cash surrender value usually equals or closely approximates the reserve value of the policy.
cognitive impairment: One of the measurements used to determine eligibility for long-term care benefits in a policy, it is the deterioration or loss of one’s intellectual capacity, confirmed by a clinical evidence and standardized tests, in the areas of: 1) short and long term memory; 2) orientation as to person, place, and time; and 3) deductive or abstract reasoning.
commissions: The percentage of the premium paid to an insurance agent or broker by the insurer as compensation.
continuing care retirement community (CCRC): A planned retirement community that provides a continuum of housing arrangements and services ranging from independent living to assisted living to skilled nursing care.
contract owner: The person or entity that owns the annuity. Most of the time, the contrast owner is the one who made the investment. The annuity contract is between the insurer (the issuer of the contract) and the contract owner.
cost-of-living adjustment: Automatic yearly increase in Social Security that is linked to inflation.
daily benefit amount: The specified amount of benefit payable for long-term care services. The dollar amount may vary by service such as $100 a day payable for a nursing home confinement and $75 a day payable for home health care.
deferred annuity: A series of payments that are not begun until the lapse of a specified period of time; until the annuitant reaches a specific age; until the owner or, possibly, the annuitant dies; or until specified by the owner.
defined contribution plan: A qualified retirement plan that provides an individual account for each participant, which is funded with specified contributions allocated to each account.
disability Insurance: A monthly benefit provided to disabled workers younger than age 65; to be eligible for DI, a worker must be insured by Social Security by having worked 10 years and be unable to engage in any substantial gainful activity because of a mental or physical impairment.
distribution: A disbursement of money or property to a participant or beneficiary from a retirement plan trust or an IRA, other than in the form of a plan loan. A distribution is usually made in the form of money, but it can also be made in the form of stock, or other property held by the plan.
early retirement incentive program (ERIP): Special pension provisions that allow workers to retire early even if they are ineligible for benefits under regular eligibility rules.
echo boomers: The generation of Americans born between 1977 and 1994.
elimination period: In a long-term care insurance policy, this is a period of time during which no benefits are payable and is sometimes referred to as a deductible. Examples of elimination periods are 15 and 100 days.
employer-sponsored plans: This is group long-term care insurance first introduced in 1987. These earlier plans were voluntary, portable products with benefits and premiums similar to individual long-term care coverage.
estate planning: The process of accumulation, management, conservation, and transfer of wealth considering legal, tax, and personal objectives.
estate tax: A tax on the value of a deceased individual’s assets.
executor: The estate representative designated in the will by the deceased person. An executor may serve without bond if the bond is waived by the decendent.
Family Limited Partnership (FLP): A limited partnership created under state law with the primary purpose of transferring assets to younger generations, utilizing discounts to create reduced gift tax valuations.
family office: A type of practice that serves very high-net-worth individuals and families. These family offices typically offer concierge-level planning and administrative services, from holistic financial planning and tax preparation through bill paying, arranging for domestic services such as home sitting, maintenance and cleaning, and booking travel.
fee-for-service: A system of reimbursement for health care costs in which physicians set the fees and payments are based on the treatment received; patients have an unrestricted choice of physicians.
fiduciary: Someone who is hired to act or advise on behalf of another. The duties of a fiduciary are to always keep the best interests of the client first and foremost in all decision making and advising.
financial intermediary: A financial institution, such as a commercial bank, that borrows from one group and lends to another.
fixed annuity: An annuity that provides fixed payments during the annuity period. For contrast, see: variable annuity.
General Agents and Managers Association (GAMA): An association dedicated to the professional development of leaders within the financial services industry. http://www.gamaweb.com/
gross estate: Consists of the fair market value of all a decendent’s interests owned at his or her date of death plus the fair market value of certain property interest that the decendent transferred during his or her life, in which he or she retained some rights, powers, use, or possession.
health insurance accounts: A tax-favored fund that can be taken out in conjunction with a high-deductible health insurance plan. From this fund, the insured can withdraw amounts up to the eligible LTC premium in a given year to help pay for a long-term care insurance policy.
holistic financial planning: Where any financial decisions are made after evaluating the impact on the person or family’s entire financial situation.
home care: This is a type of long-term care service, provided in the home, which generally consists of activities of daily living assistance and is rendered by a trained aide.
individual life insurance: Life insurance contract that covers only one insured, but that may sometimes cover several people, such as the members of a family, through the use of riders. The term "individual" is often used to distinguish this type of life insurance from group life insurance.
Individual Retirement Account (IRA): A retirement plan that is available to workers. Examples include standard, Roth IRAs, SEP and SIMPLE.
Insurance Marketplace Standards Association (IMSA): An association promoting ethical standards in the sale and service of life insurance, annuity and long-term care products by accepting companies as members who adopt and practice their standards. http://www.imsaethics.org/
Inter-Company Marketing Group (ICMG): A non-profit organization that encourages strategic alliances between insurance and financial services companies through networking opportunities, education and resources. http://www.icmg.org/
Insured Retirement Institute (IRI): Formerly known as the Association for Insured Retirement Solutions (NAVA), IRI is dedicated to providing reliable research and education on retirement products and planning for consumers and investors alike. www.irionline.org
joint and survivor annuities: Type of pension arrangement for married employees in which the worker takes a reduced pension for life and the spouse receives a 50 percent survivor’s pension; both husband and wife may agree, in writing, to waive the survivor pension.
life annuity: An annuity contract that pays only until the annuitant dies. Payments cease at that time even if the amount paid by the insurer does not equal the total premiums paid by the annuity owner. Payments foregone by those who die early, in effect, benefit those who live longer.
life insurance-based long term care insurance: This form of long term care coverage where benefits are wrapped inside a life insurance policy. Benefits can be provided for both long-term care insurance and death, with cash values also available to withdrawal.
Life Insurance Settlement Association (LISA): A national organization dedicated to the development, integrity and reputation of the life settlement industry by promoting responsible legislation and regulation within the industry. http://www.thevoiceoftheindustry.com/
Life Office Management Association (LOMA): An international association for insurance and financial services companies committed to improving management and operations through employee development, research, information sharing, and related services. www.loma.org
life planning: The process of using a client’s life dreams and vision as the centerpiece for the financial plan. All financial decisions are made based upon their contribution to the life goals of the client(s).
life settlements: The purchase, on a reduced basis, of a life insurance policy owned by an individual willing to sell the policy. This person need not be terminally ill. It may help to provide necessary cash during retirement that may carry a higher priority than the policy face amount at death.
limited liability company (LLC): A form of business that combines attributes from traditional corporate structures with those of partnerships. This is the most common ownership form for new entities today.
LIMRA International: An international research, consulting and professional development organization that assists insurance and financial services companies increase marketing and distribution. www.limra.com
liquidity: The ability to get back all, or most all of your investment at any time. Money market funds, certificates of a deposit, passbook savings accounts, and U.S. Treasury bills have a great deal of liquidity. Whereas long-term bonds, real estate, collectibles, and stocks may be quite marketable, their liquidity can range from excellent to poor (since value can fluctuate quite a bit in a relatively short period of time).
long-term care insurance: A specific type of insurance policy designed to offer financial support in paying for necessary long-term care services rendered in a variety of settings.
long-term care rider: This is an optional benefit that can be added to a life insurance, annuity or disability policy to provide benefits for long-term care.
managed care: A form of health care organization; decisions are made by a financial officer.
market risk: Systematic risk; the risk associated with the tendency of a stock’s price to fluctuate with the market.
maturity date: The time at which a debt issue becomes due and the principle must be repaid.
Medicaid: The joint federal and state welfare program administered by the states to provide payment for health care service, including long-term care, for those meeting minimum asset and income requirements.
Medicare: Federal program organized under the Health Insurance for the Aged Act, Title XVIII of the Social Security Administration of 1965, it provides hospital and medical expense benefits, including long-term care services, for those individuals over age 65 or those meeting specific disability standards.
Medicare Part A: Hospital insurance paid for through payroll taxes.
Medicare Part B: An optional program that pays for 80 percent of the cost of physician office visits.
Million Dollar Round Table (MDRT): An independent, international member-only association of the world’s life top insurance and financial services professionals. http://www.mdrt.org/
mutual fund: A diversified portfolio of securities owned and managed by a regulated investment company.
National Association for Fixed Annuities (NAFA): A non-profit organization created to promote and provide education of fixed annuities and related topics. http://www.nafa.us/
National Association of Health Underwriters (NAHU): A national organization dedicated to helping its members meet the health, financial and retirement security needs of their clients through education, advocacy and professional development. www.nahu.org
National Association of Independent Life Brokerage Agencies (NAILBA): A non-profit trade association representing independent wholesale life brokerage agencies across North America. www.nailba.org
National Association of Insurance and Financial Advisors (NAIFA): A nation-wide organization committed to advocating for a positive legislative and regulatory environment, enhancing business and professional skills, and promoting the ethical conduct of its members. www.naifa.org
National Association of Insurance Commissioners (NAIC): An association of state insurance commissioners attempting to solve insurance regulatory problems, create uniform legislation and regulations, and promote life insurance company solvency and responsibility. www.naic.org
National Association of Personal Finance Advisors (NAPFA): A national association of fee-only financial planning professionals committed to the promoting NAPFA’s core values as NAPFA-registered advisors. www.napfa.org
National Association of Securities Dealers Automatic Quotation (NASDAQ): The quotation system for over-the-counter securities.
National Committee to Preserve Social Security and Medicare: A senior organization founded in 1982; has diverse membership of more than five million members.
National Ethics Bureau: A membership-based organization advocating for business ethics in the financial services industry. http://www.ethicscheck.com/
New York Stock Exchange (NYSE): New York Stock Exchange index; an index of prices of all the stocks listed on the New York Stock Exchange.
non-qualified plans: This term refers to all long-term care insurance policies being sold that do not meet the required definitions under HIPAA federal legislation.
nursing home: An institutional setting where long-term care to the frail and disabled elderly is provided.
Old Age Assistance: Part of the Social Security Act of 1935; jointly funded and administered by the states and the federal government; converted to SSI in 1972; provided income for the aged poor who had not earned the right to Social Security benefits.
Older Americans Act: Passed in 1965; provides a number of services intended to enhance independent living, including congregate meals, personal care and nursing services, day care, chore services, and meals-on-wheels.
power of attorney: A legal document that authorizes an agent to act on a principle’s behalf.
pre-existing condition: A diagnosed injury or sickness for which medical advice or treatment was sought prior to the effective date of the long-term care insurance contract.
qualified retirement plan: Retirement plans that meet a certain statutory requirement. Individuals who recognize gain on the sale of qualified small business stock may be eligible to exclude 50 percent of the gain from income.
rate of return: The annual percentage return realized on an investment.
registered representative: A person who buys and sells securities for customers; a broker.
reverse mortgage: A way to utilize the equity in one’s own home to create an income stream for an individual whose substantial assets may be tied up in his or her residence.
rider: An attachment to a life insurance policy that modifies the policy by expanding or restricting the benefits or excluding certain conditions of coverage.
Roth IRA: An investment account through which individuals that have compensation or earned income can save for retirement on a tax-exempt basis.
Section 401(k) plan: A defined contribution plan under which employees elect to contribute a portion of current year compensation to an employer-provided retirement plan.
Securities and Exchange Commission (SEC): The government agency that enforces federal securities laws.
single premium: A lump sum of money that is used to purchase an annuity. Most fixed-rate annuities have a single premium since the contract owner is locking in a set rate of return for a specific period, similar to a bank CD.
single-premium variable life: A type of whole-life insurance wherein the policy owner can select how the cash value of the policy is to be invested. Investment choices are similar to those found in a mutual fund family and range from conservative (money market) to aggressive (small-company growth stocks). "Single-premium" means that a lump sum is invested, a single investment.
Social Security: Old age insurance; public pension system for retired workers who have made payroll tax contributions; also includes benefits for the disabled, widows, and spouses.
Society of Actuaries (SOA): A professional organization dedicated to helping actuaries be leading professionals in the measurement and management of financial risk through providing its member with reliable research and education. www.soa.org
surrender charge: In a variable or universal life policy, or a variable annuity, a special charge that is levied on the available cash value to reimburse the insurer for the unrecovered costs of issuing the policy.
survivor’s benefit: A Social Security benefit payable to the widow or widower or deceased worker; equal to 100 percent of the worker’s benefit.
term insurance: Life insurance with coverage for a specified time and excluding a savings plan.
term insurance rider: A form providing term life insurance that is attached to a permanent life insurance policy, with the purpose of increasing the total amount of protection during the term period.
The American College: A non-profit educational institution specializing in the financial services industry. http://www.theamericancollege.edu/
The Financial Planning Association (FPA): A Colorado-based advocacy and leadership organization that works in conjunction with academic leaders, legislative and regulatory bodies, financial services firms, and consumer interest organizations to serve the financial planning profession. http://www.fpanet.org/
trader: An investor who frequently buys and sells.
trust: A structure that vests legal title (the legal interest) to assets in one party, the trustee, who manages those assets for the benefit of the beneficiaries (who hold the equitable title) of the trust.
trustee: The individual or entity responsible for managing trust assets and carrying out the directions of the grantor that are formally expressed in the trust instrument.
universal life insurance: A term insurance policy with a cash accumulation account attached to it.
variable annuity: An annuity contract under which the annuity holder has the ability to allocate the annuity premiums among several available investment choices. The annuity holder, not the company issuing the contract, assumes the investment risk associated with the investment decisions.
variable universal life insurance: A universal life insurance policy with investment options available for the cash accumulation account.
waiver of premium: A policy provision of a long-term care insurance contract that suspends premium payment after a specified period of time during which the insured is receiving policy benefits for long-term care services. The suspension continues until recovery at which resumption of premium payment is expected.
wealth accumulation: The process of creating and building assets and income for retirement.
wealth distribution: The process of taking money out of various funding vehicles in the most efficient and effective manner to avoid attrition of dollars.
wealth protection: The process of protecting assets and income from the costs of an illness or injury.
wealth transfer: The process of moving assets around to take advantage of tax-favorability and protection from creditors. This process can occur both before and after death occurs.
whole life insurance: A permanent insurance policy guaranteeing that the policy will remain in force as long as the premium is paid. The policy has a cash account attached to it, which grows tax-deferred.
will: A legal document that provides the will-maker the opportunity to control the distribution of the property, appoint an executor, and avoid the state’s intestacy law distribution.