Glossary of Terms

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National health insurance
Any system of socialized health insurance benefits covering all or nearly all citizens, established by federal law, administered by the federal government, and supported or subsidized by taxation. Medicare and Medicaid are examples of national health insurance programs.

OSHA
A federal law, originally enacted in 1971 that mandates specific health and safety standards in places of employment. Inspections revealing violations can result in fines and corrective measures.

140 percent rule
In employee retirement plans, a rule stating that, when an individual is a participant in both a defined benefit plan and a defined contribution plan maintained by the same employer, the sum of the defined benefit plan fraction and the defined contribution plan fraction for any one year may not exceed 1.4 (which translates into 140 percent). This fractional amount was revised by TEFRA in 1982, which sets the aggregate limit at 1.0 or 100 percent.

Open certificate
In insurance, a policy under which the rates and policy provisions may be changed. Fraternal benefit societies are required by law to issue this type of certificate.

Paid-up policy
Insurance on which the policyowner has completed payments, but that has not yet matured. This may be either (1) reduced paid-up insurance provided under the nonforfeiture provision; (2) a limited payment policy under which all premiums have been paid; or (3) a policy on which accumulated dividends are applied to pay the net single premium required to pay up the difference between the policy's reduced paid-up insurance and its face amount.

Payroll deduction
In insurance, an arrangement whereby premiums on employees' insurance are deducted directly from the workers' wages and forwarded to the insurance company by the employer. Also used to indicate similar handling of employee contributions to an employee benefit plan.

Pension
An income paid by an employer and/or the government (say, Social Security) to a worker who has retired because of age or disability.

Pension trust fund
A fund consisting of money contributed by the employer and, in some cases, the employees to provide pension benefits. Contributions are paid to a trustee (either corporate or individual) who invests the money, collects the interest and earnings, and disburses the benefits under the terms of the trust agreement. A pension trust may be wholly self-administered, or the plan may be partially insured, with benefits purchased from an insurance company by the trustee, often as each participant retires.

Personal life insurance trust
A trust arrangement whereby proceeds of the insured's life insurance policies go into a trust, with the trustee designated as beneficiary of the policies. Upon the death of the insured, the proceeds are paid to the trustee, who manages and disburses the funds according to the terms of the trust instrument. This is often useful in estate planning.

Portfolio
The securities in which the assets of an individual, a company (including an insurer), or a plan are invested; this term also applies to the reinsurance held by an insurance company. In a variable universal life policy, refers to the investments within a given cash value investment account.

PPO
In contrast to HMOs, PPOs health insurance plans permit you to use primary care providers outside the PPO network. You are given financial incentives to use doctors registered in the preferred group, however. These PPOs health insurance plans include small or no deductibles and lower coinsurance payments.

Premium
The periodic payment required to keep a specific insurance policy in force. Though ``premium'' and ``rate'' are sometimes used interchangeably, technically, rate is the amount charged for a given unit of coverage and premium is the total of the unit rates for a given policy.

Principal
The applicant for or subject of insurance. An individual or company charged with the performance of certain obligations. The money due under a policy. The party to a transaction, as distinguished from a broker or agent. The person who designates another as his or her agent. A sum lent or employed as a fund or investment, as distinguished from its income or profits. The capital sum as distinguished from interest or profits. The original amount (as of a loan) of the total due and payable at a certain date. The capital sum of a mortgage loan.

Profit-sharing plan
Any plan whereby a portion of the profits of a company is set aside for distribution to employees who qualify under the plan. The plan may provide for immediate, quarterly, or annual distribution of the profits to employees as an incentive to more efficient production. Profit-sharing distributions may also be set aside in a trust fund for eventual distribution to employees usually upon death, disability, termination, or attainment of a specified retirement age. Such plans are known as profit-sharing trusts and are subject to special tax exemptions if certain qualifications, set down in the Internal Revenue Code, are met.

Prorating
In insurance, the proportionate reduction in the amount of benefits payable as provided in the contract; for example, because the insured has changed to a more hazardous occupation since the issuance of medical policy, or because benefits payable by all the insured's disability insurance exceed his or her current or average earnings over the preceding two years, or because he or she is actually older than stated in a life insurance application, etc.

Prospectus
A registered, two-part document describing both the insurance portion and the investment portion of a variable life insurance product. A copy of the prospectus must be provided to the prospect at some time during the selling process.

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