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Veralytic Glossary of Terms

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Paid to Age X:  A policy funding strategy where premiums are paid until the policy holder attains a pre-determined age.

Paid for X years:  A policy funding strategy where premiums are paid for a pre-determined number of years.

Paid Over the Life of the Policy:  A policy funding strategy where premiums are paid throughout the life of the policy.

Peer Groups:  Peer groups are defined by the empirical characteristics common to each type of product such as A) individual life (products insuring only 1 life) versus survivorship life (products insuring 2 lives), B) the asset classes for invested assets underlying policy cash values, C) the level of guarantees upon which the client is relying, etc.  While some agents/brokers consider universal life (UL) and whole life (WL) to be 2 different peer-groups, both charge cost of insurance charges (COIs), both charge premium loads, and fixed administration expenses (FAEs), and both invest in the insurers General Account which is required by regulation (as a practical matter) to invest in high-grade corporate/government bonds and government-backed mortgages.  In other words, because there is little if any fundamental difference in either the way COIs and expenses are determined (other than that they are not disclosed in WL) or in the way earnings on invested assets underlying policy cash values are generated or in the way each is used by clients, then UL and WL are by empirical measures in the same peer group.  Of course, the individual and survivorship versions of each of these product types would also constitute their own peer groups, and those universal life products that are marketed for their secondary death benefit guarantees (UL-GDB) could also be a separate peer group since these products are fundamentally different from UL/WL in their pricing, marketing and operation (i.e., it is the only type of permanent insurance where death benefits can be maintained even when no further premiums may be due and cash values may be exhausted).  However, Veralytic does not currently have separate benchmarks for UL-GDB products, so they are currently treated as part of the UL/WL peer group.

Permanent Life Insurance:  Insurance intended to provide life insurance protection for the entire life of the insured.  Permanent insurance differs from term insurance in that its premium structure includes a savings component.  Permanent insurance policy premiums have two components, the insurance cost (mortality cost, administrative fees, sales loads, etc.) and the savings component.  The savings component typically is referred to as cash value.  The policyholder may use the cash value to make the minimum premium payments necessary to maintain the death benefit protection, may access the cash value by taking out loans or making partial surrenders, or may use any combination of these techniques.  If permanent insurance is surrendered before death, a surrender charge may be assessed against the cash value.  Generally, surrender charges are assessed if the policy is surrendered within the first 10 or 20 years. The amount of money a policyholder will receive upon surrendering a policy is referred to as the cash surrender value (Also see Cash Surrender Value).

Planned Premium:  The scheduled payments to the insurance company to buy a policy and keep it inforce.

Policy Expenses:  All life insurance policies are priced with policy expenses as to 1) cost of insurance charges (COIs), fixed administration expenses (FAEs), cash-value-based "wrap fees" (e.g., Mortality and Expense Risk Charges), and/or premium loads. Universal life policies generally disclose these charges.  While whole life products are priced based on these same pricing principals, whole life products generally do NOT disclose these charges.

Policy Interest: Universal Life (UL) and Whole Life (WL) policies are credited with a declared interest rate, much like Certificates of Deposit (CDs) offered by banks.  UL products fully disclose this net interest amount credited to policy cash values, net of deductions for investment expenses and management fees.  On the other hand, WL products include this interest inside the policy dividend, and do not disclose the amount of interest, and neither UL nor WL policies disclose investment expenses and management fees.

 Preferred:  A risk class designation for policy buyers whose health profiles are likely to result in better than average mortality risks. (Also see Risk Class and Health Profile.)

Preferred Plus:  A risk class designation for policy buyers whose superior health profiles are likely to result in lower than average mortality risks. (Also see Risk Class and Health Profile.)

Premium Duration:  The period during which premiums are scheduled to be paid. (Also see Planned Premium above.)