Life Settlement Glossary

E

early warning system

A system established by insurance regulators to recognize insurers who might need interventional regulatory attention.

earned premium

The portion of an insurance premium that applies to the expired part of the policy period. Even though premiums are paid at the beginning of a policy period they are not completely earned by the company until the end of the period. For some life insurance policies, however, unearned premiums are still retained by the insurer even if a policy is cancelled mid-term.

earnings rate

For a life settlement, the rate of return expected by the buyer on outlays to purchase a policy and keep it in force until the end of the insured's life expectancy.

economic loss

For life insurance, the anticipated financial loss resulting from the death of a person proposed for coverage. Among other factors, this amount is used to calculate the insured's maximum insurance capacity.

endorsement

An amendment or rider to a policy that is used to either add or exclude coverage.

endow

The condition whereby the cash value of a life insurance policy is equal to the death benefit when the policy matures. For most policies maturity is at the insured's age 95 or 100.

endowment insurance

Life insurance that pays the face amount to the insured's beneficiary upon the death of insured or in cash to the insured if still living on the endowment date.

enhanced death benefit guarantee

A rider or policy provision that guarantees to keep a policy in force under circumstances where it would otherwise lapse due to insufficient premiums.

errors and omissions

(E&O) Insurance Liability insurance carried by an agent, producer, or broker to protect a policyholder from the negative consequences of neglectful acts and/or omissions caused by the agent, producer, or broker.

escrow

A financial condition where property is held until it can be until it can be conveyed to another upon the fulfillment of an agreement. For life settlements, the buyer normally deposits the proceeds into an escrow account where it remains until the escrow agent releases it to the seller according to the terms of the purchase agreement.

escrow agent

For life settlements, a regulated financial institution responsible for accepting investor funds, transferring funds to purchase policies, paying insurance premiums and receiving death benefits.

escrow companies

A neutral third party that according to a legal contract receives money to be held in a trust pending fulfillment of conditions in the contract such as the transfer of life insurance policy ownership in a life settlement transaction.

estate

Everything a person owns at the time of death minus all outstanding debts or other financial liabilities.

estate plan

A plan normally completed with the assistance of an attorney to address the best possible method of transferring assets to heirs when an individual dies. When there is a lack of liquidity, life insurance is often part of the plan.

estate tax

Taxes on wealth transfer imposed by State and Federal Governments.

evidence of insurability

For life insurance, proof that a proposed insured meets the standards required for the insurance company to issue a policy.

excess interest

Pertaining to life insurance, the difference between the interest rate an insurance company actually pays and the minimum rate guaranteed by the policy.

exchange of insured provision

A provision within the minority of life insurance contracts that allows a policy owner to change insured's under a policy to avoid expense loads, assuming the new insured meets the underwriting standards required for acceptance.

exclusion

Specific situations (such as suicide during the first two years of a policy) where the insurance company has the right not to pay a claim that would otherwise be owed.

exclusive agent

Normally an agent who by contractual agreement owes their exclusive allegiance to one insurance company for any risks it is able to insure.

exclusive marketing arrangement (see q&a)

Pertaining to life insurance, typically the sole right granted by an insurance company to a marketing organization granting sole rights to represent a particular product and/or concept to the public, often through an exclusive agency force selected by the marketing organization.

expected mortality

The actuarial number of deaths expected to occur within a given group of lives at a given point in time.

expense charge

Pertaining to life insurance, the regularly scheduled administrative costs payable by the policy owner to the insurance company in conjunction with an inforce life insurance policy, most commonly universal life.

extended term insurance option

Normally the default nonforfeiture option for whole life insurance policies, whereby upon lapse the cash value purchases term life insurance equal to the face amount of the policy but payable only for a limited amount of time.

extra-percentage tables method

For life insurance, the method an insurance company uses to assess additional premiums for substandard risks. These assessments are expressed in progressively increasing tables based on additional percentages of the standard rate.