LUTCF key terms

Permanent coverage that remains in force for the insured's entire lifetime, builds cash value on a tax-deferred basis, and pays a death benefit whenever death occurs, provided required premiums are paid.

Temporary coverage bought for a set number of years that pays a death benefit only if the insured dies during that period; it accumulates no cash value and expires without refund.

Flexible permanent coverage that separates the death benefit from a cash account; the owner may adjust premium amounts and benefit levels, and the insurer credits interest at declared or indexed rates.

The savings component inside a permanent life policy that grows tax-deferred, belongs to the policyowner, and can be borrowed against, withdrawn, or received upon surrender of the contract.

A requirement that the person buying a policy on another's life would suffer a genuine financial loss if that person died; it must exist when the policy is issued.

Money borrowed from a life insurer using the contract's cash value as collateral; interest accrues, and any unpaid balance plus interest is subtracted from the death benefit when the insured dies.

A life policy that fails the seven-pay test because it was funded too quickly; it loses favorable tax treatment, so loans and withdrawals are taxed much like annuity distributions.

A contract with an insurer that turns a lump sum into a stream of payments, starting immediately or at a future date, commonly used to create retirement income that cannot be outlived.

The usually irrevocable process of converting an annuity's accumulated value into periodic payments, chosen from options such as life only, life with a period certain, or joint and survivor.

A tax-free transfer of value from one life insurance policy or annuity to another of the same or a comparable type, permitted under Section 1035 of the Internal Revenue Code.

The amount an insured pays out of pocket for covered services before the health plan begins paying its share, usually calculated on a calendar-year or per-condition basis.

The percentage split of covered costs shared between the insurer and the insured after the deductible is satisfied, for example a plan paying 80 percent while the member pays 20 percent.

A yearly cap on the deductibles, copayments, and coinsurance a member pays for covered in-network care; once the cap is reached, the plan generally pays all covered benefits.

A managed care plan that generally limits members to a provider network and requires a primary care physician's referral before specialist care; services outside the network are usually not covered.

A managed care plan that contracts with network providers at discounted rates; members may use out-of-network providers at higher cost, and referrals to specialists are generally not required.

A tax-advantaged account available to people enrolled in a qualifying high-deductible health plan; contributions are deductible, growth is tax-free, and withdrawals for medical expenses are untaxed.

A federal law that lets employees and their dependents keep group health coverage for a limited period after a qualifying event such as job loss, provided they pay the full premium themselves.

An employer-sponsored arrangement that lets employees pay for certain benefits, such as health premiums, with pre-tax dollars, reducing both income tax and payroll tax withholding.

Group or individual coverage that replaces a portion of earnings, often 50 to 60 percent, when a worker cannot perform their job for an extended period, usually after short-term benefits end.

Rules that determine which of two or more health plans pays first when a person is covered by more than one plan, preventing duplicate payment for the same medical expense.

State-mandated coverage that pays medical costs and replaces wages for employees injured on the job, regardless of fault, in exchange for limits on the employee's right to sue the employer.

A contract among business owners, or between owners and the business, stating how a departing owner's interest is valued and purchased on death, disability, or retirement, often funded with life insurance.

Life or disability coverage a business buys on a valuable employee with the business as beneficiary, designed to offset lost revenue and replacement costs if that person dies or becomes disabled.

An arrangement in which an employer and an employee share the cost and benefit of a life policy, often used to provide executive benefits; tax results depend on who owns the cash value.

A simple executive benefit in which the employer pays a bonus that the executive uses to buy a life policy they own; the premium is deductible to the business and taxable to the executive.

An arrangement that postpones part of an employee's pay until a later date, often retirement, providing tax deferral and retention incentives; nonqualified plans expose the executive to employer credit risk.

A trust that owns a life policy and is its beneficiary, so the death benefit escapes the insured's taxable estate; the grantor permanently gives up ownership and control of the policy.

The court-supervised process of validating a will and distributing a deceased person's assets; life insurance paid to a named beneficiary generally passes outside probate and avoids that delay.

The amount one person may give another in a single year without filing a gift tax return or using lifetime exemption; present-interest gifts qualify, including trust contributions with withdrawal rights.

A method of estimating how much life insurance a family requires by totaling obligations such as income replacement, debts, education, and final expenses, then subtracting resources already available.

An employer-sponsored retirement plan funded largely by employee salary deferrals, often matched by the employer; contributions grow tax-deferred and are taxed as ordinary income when withdrawn.

The legal obligation to act solely in another party's best interest with loyalty and care when handling their money or advice, a higher standard than merely making suitable recommendations.

The requirement that a recommended product or strategy fit the client's financial situation, goals, needs, and risk tolerance, based on information the producer reasonably gathers before advising.

A false or misleading statement about a policy's terms, benefits, or an insurer's standing that misleads a client; it is an unfair trade practice whether made intentionally or negligently.

An unfair trade practice of inducing a policyholder to drop existing coverage through misleading or incomplete comparisons, usually so the producer can sell a replacement policy.

Offering a client part of the producer's commission, or anything of value not stated in the policy, as an inducement to buy; it is illegal in most states and can cost a license.

Surrendering, lapsing, or using the value of existing life insurance or an annuity to buy new coverage; most states require a disclosure notice comparing the old and new contracts.

Professional liability coverage that protects an agent or advisor against claims of negligence, mistakes, or failure to perform professional duties, and pays related defense costs.

State-mandated coursework that licensed producers must complete on a recurring schedule to keep a license active and stay current on products, regulations, and ethical standards.