LIFE SETTLEMENT GLOSSARY EXAMPLE

B

back-dating

An insurance company practice allowing a policy to be dated up to six months prior to the date of the application so the premium will be lower.

balance sheet

An insurance company's assets such as investments and reinsurance, and liabilities like reserves to pay future claims. Based on a certain date, it also states policyholder surplus which can be one indicator of an insurance company's financial condition.

bank owned life insurance - (BOLI)

Typically high cash value life insurance covering a bank's officers for the purpose of accumulating tax deferred earnings for the bank.

basic death benefit

The death benefit of a policy without including supplementary riders such as an accidental death benefit.

basis point

.01% which represents the lowest measurement used to express the yield of a financial instrument.

beneficial interest

Distribution rights to interest or principle from a trust.

beneficiary

The individual(s) or entity chosen by the policy owner to receive the death benefit upon the insured's death.

Bernstein Research

A well recognized Wall Street research firm that published a 2005 white paper about the future of life settlements.

best life settlement

The life settlement option that best matches the policy owners prioritized concerns and objectives.

Best's ratings

Financial soundness ratings assigned to insurance companies by A.M. Best Co. These ratings can effect whether or not a life insurance policy will qualify for a life settlement.

beneficial interest trade

A technique designed to hide the underlying ownership of a life insurance policy from an insurance company, often done to facilitate a life settlement.

binding premium receipt

A premium receipt that provides temporary insurance to an applicant from the time period beginning when the receipt is executed and ending when the policy applied for is either declined, placed, or non-taken.

bond

For life insurance, a surety required by some states to guarantee payment or reimbursement of financial losses that result from an insurance producers dishonesty or other covered acts.

bond rating

A financial strength rating of a bond provided by an established rating agency such as Standard & Poor's or Moody's Investors Service.

book of business

The amount of insurance an insurer or agency has in force at a certain point in time.

borrowing

For life insurance, loan taken against a policy's cash value.

broker

For life settlements, an individual or entity whose primary responsibility is to negotiate the sale of a life insurance policy by the policy owner to the buyer. Brokers owe a fiduciary responsibility to the policy owner.

broker-dealer

An individual or entity that purchases, sells, or manages securities under SEC regulations and subject to NASD licensure requirements.

bundled insurance product

A life insurance product (typically whole life) where the factors used to compute premium rates and cash values are not specifically identified in the policy.

business life insurance

Business owned life insurance policies purchased for purposes such as buy-sell agreements, key man protection, salary continuation, and debt cancellation.

buyer

For life settlements, buyers are most often referred to as funders, purchasers, or investors. Ultimately buyers are the entities (typically institutional) that assume ownership of a policy after is has been settled.

buyer's guide

An informational brochure state insurance departments require insurance companies to give life insurance applicants to assist them in making informed decisions.

buy-sell agreement

A legal agreement between business partners regarding what happens to a party's shares in the event of death, disability, or departure.