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No insurance resource would be complete without a helpful menu of terms and concepts. This information-rich list will help you make sense of the solutions you are considering.
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A rider available with Disability insurance policies. Provides a monthly benefit in addition to monthly disability benefit if insured becomes catastrophically disabled solely due to an injury or illness and loses the ability to perform two or more activities of daily living (ADLs) without assistance, or becomes cognitively impaired, or becomes presumptively disabled.
An optional benefit that provides life insurance coverage on additional insureds; in this case, children. Most children's riders cover all children (including children born after the policy issue date) up to age 18 or 21 for one premium.
A partial, temporary transfer of policy ownership rights to another, often used as collateral for loans. Not all policy rights are transferred, and they revert back to the policy owner upon repayment of the debt and release of the assignment. If death occurs while a policy is collaterally assigned, the assignee is the first to receive payment as their interest applies at time of death. It is possible to have multiple collateral assignees on one policy, with written authorization of the first assignee. At death claim payment, the first assignment holder gets paid first.
Fee paid to an agent or insurance marketing organization, calculated as a percentage of policy premium. This percentage varies depending on coverage, insurance company, and marketing methods. LLIS employees are salaried, non-commissioned agents, which allows us to be more objective.
A rider available with Long Term Care insurance policies. Increases the monthly or daily benefit and total pool of money each year on the policy anniversary by 3% or 5% of the previous year's amount.
Provides temporary insurance coverage upon receipt of an application and first premium payment. Ensures a claim would be paid if the proposed insured dies before policy documents are issued, assuming the applicant meets all requirements. Rules vary among insurance companies.
A rider available with Disability insurance policies. During a period of disability, COLA increases the monthly benefit once a year to offset inflationary effects. Adjustments are made only after the insured has become disabled.
Named after the litigant who fought for this kind of trust and won the battle with the IRS, Crummey Trusts allow a limited amount of cash withdrawals by the trust's beneficiary. The window for these transactions is usually 30-60 days, after which point, if the beneficiary does not make a withdrawal, the gift becomes final and is locked in the trust until its termination. The right to withdraw the contribution converts it into present interest, ensuring it qualifies for gift tax exclusion. The trustee can use these gifts to pay premiums on a life insurance policy for the donor and the policy death proceeds would not be included in the donor's gross estate upon his/her death, thereby avoiding both gift and estate tax liabilities.