Blackout period

the period during which Social Security benefits are not paid to a surviving spouse-between the time the youngest child reaches age 16 and the surviving spouse’s 60^th birthday.

Cash surrender value

amount payable to the owner of a cash-value life insurance policy if he or she decides the insurance is no longer wanted.  Calculated separately from the legal reserve.

Contingent beneficiary

- beneficiary of a life insurance policy who is entitled to receive the policy proceeds on the insured’s death if the primary beneficiary dies before the insured; or the beneficiary who receives the remaining payments if the primary beneficiary dies before receiving the guaranteed number of payments.

Dependency period

period of time following the readjustment period during which the surviving spouse’s children are under 18- and therefore dependent on the parent.

 Endowment insurance

type of life insurance that pays the face amount of insurance to the beneficiary if the insured dies within a specified period or to the policy-owner if the insured survives to the end of the period.

Grace period

period of time during which a policy-owner may pay an overdue life insurance premium without causing the policy to lapse.

Human life value

for purposes of life insurance, the present value of the family’s share of the deceased breadwinner’s future earnings.

Incontestable clause

contractual provision in a life insurance policy stating that the insurer cannot contest the policy after it has been in force for two years during the insured’s lifetime.

Irrevocable beneficiary

beneficiary designation allowing no change to be made in the beneficiary of an insurance policy without the beneficiary’s consent.

Needs approach

method for estimating amount of insurance appropriate for a family by analyzing various family needs that must be met if the family head should die and converting them into specific amounts of life insurance.  Financial assets are considered in determining the amount of life insurance needed.

Preferred risks

individuals whose mortality rate is expected to be lower than average.

Participating policy

life insurance policy that pays dividends to the policy-owners.

Primary beneficiary

beneficiary of a life insurance policy who is first entitled to receive the policy proceeds on the insured’s death

Revocable beneficiary

beneficiary designation allowing the policy-owner the right to change the beneficiary without consent to the beneficiary.

Suicide clause

-contractual provision in a life insurance policy stating that if the insured commits suicide within two years after the policy is issued, the face amount of the insurance will not be paid; only premiums paid will be refunded

Term insurance

type of life insurance that provides temporary protection for a specified number of years.  It is usually renewable and convertible.

Universal life insurance

a flexible-premium whole life policy that provides lifetime protection under a contract that separates the protection and saving components. The contact is an interest-sensitive product that unbundles the protection, savings, and expense components.

Waiver of premium provision

benefit that can be added to a life insurance policy providing for a waiver of all premiums coming due during a period of total disability of the insured.

Variable life insurance

life insurance policy in which the death benefit and cash surrender values vary according to the investment experience of a separate account maintained by the same insurer.

Blue Cross Plans

typically nonprofit, community oriented prepayment plans that provide health insurance coverage primarily for hospital services.

Blue Shield Plans

typically nonprofit prepayment plans that provide health insurance coverage mainly for physicians’ services.

Coinsurance Provision

common provision in property insurance contracts that requires the insured to maintain insurance on the property at a stated percentage of its actual cash value or its replacement cost.  Payment for a loss is determined by multiplying the amount of the loss by the fraction derived from the amount of insurance required.  If the coinsurance requirement is not met at the time of loss, the insured will be penalized.  In health insurance, coinsurance is a provision that requires the insured to pay a specified percentage of covered medical expenses in excess of the deductible.

Defined Benefit Plan

type of pension plan in which the retirement benefit is known in advance but the contributions vary depending on the amount necessary to fund the desired benefit.

Defined Contribution Plan

type of pension plan in which the contribution rate is fixed but the retirement benefit is variable.

Flexible Spending Account

an arrangement by which the employee agrees to a salary reduction, which can be used to pay for plan benefits, unreimbursed medical and dental expenses, and other expenses permitted by the Internal Revenue Code

Health Maintenance Organization (HMO)

organized system of healthcare that provides comprehensive health services to its members for a fixed prepaid fee. HMOs may also have cost-sharing provisions.

Major Medical Insurance

health insurance designed to pay a large portion of the covered expenses of a catastrophic illness or injury.

Point of Service Plan (POS)-

establishes a network of preferred providers.  If patients see a preferred provider, they pay little or nothing.  Outside provider care is covered, but at a substantially higher deductible and coinsurance rate.

Roth IRA

an IRA in which the contributions are not income-tax deductible but distributions are received income-tax free if certain conditions are met.

Stop-loss Limit

modification of the coinsurance provision in major medical plans that places a dollar limit on the maximum amount that an individual must pay out of pocket.

Vesting

 characteristic of pension plans guaranteeing the employee’s right to part or all of the employer’s contributions if employment terminates prior to retirement.