Life Settlement Glossary

F

face amount

The basic policy death benefit on the date a life insurance policy is issued.

face page

The cover page of a life insurance policy that normally includes the insured's name along with the policy number and the date the policy was issued, all normally attested to by an officer or officers of the issuing company.

facultative reinsurance

Pertaining to life insurance, a type of reinsurance for larger risks that aren't covered in the insurance company's reinsurance treaties which set "automatic" reinsurance limits. Facultative risks typical require manual underwriting by the reinsurance company before they can be accepted and insured..

fair market value

Pertaining to life insurance settlements, the likely value of a policy based on current market conditions, the insured's life expectancy, as well as the death benefit and premiums payable under the policy valued.

family insurance policy

Usually a whole life insurance policy that also provides term life insurance on the insured's spouse and children.

fiduciary

A person or company who has a professional responsibility to act in the best interest of another

fiduciary bond

A surety bond that guarantees the performance of a fiduciary's responsibilities.

fiduciary duty

The professional responsibility duty an advisor has to inform and advise their clients.

fiduciary liability

The legal responsibility a fiduciary has to perform its duties.

financial guarantee insurance

Covers losses connected with specific financial transactions by guaranteeing investors timely payment in the event of default.

financing entity

Otherwise referred to as a buyer, investor, or funder - a company or other business or legal entity that provides capital to a viatical or life settlement provider for the purpose of purchasing life insurance policies through viatical or life settlement transactions. Also known as a life settlement financing entity. (See also Investor, Institutional Investor)

financing transaction

A transaction in which a licensed life settlement provider obtains financing from a life settlement financing entity including secured or unsecured financing, a securitization transaction, or any registered or unregistered (exempt) securities offering.

FINRA

A self-regulatory body within the security industries set up under the 1934 Securities Exchange Act.

first beneficiary

Otherwise known as the primary beneficiary, the party or parties who are named to first receive the death benefit proceeds from a life insurance policy upon the death of the insured.

first to die life insurance

A life insurance policy that insures two people and pays out on the death of the first.

fixed amount option

A life insurance policy settlement option that pays the beneficiary a set amount in a series of equal installments until the total proceeds of a life insurance death benefit are exhausted.

fixed period option

A life insurance policy settlement option that pays the beneficiary a set amount in a series of equal installments for a set period of time.

flat extra premium method

A method used for rating substandard life insurance risks whereby an extra premium is charged per $1,000 of insurance and last for a constant period of time equal to the expected duration of the extra risk it is charged for.

flexible premium

A life insurance premium payment method that allows the policy owner to change the amount and frequency of payments based on the limitations set within the policy. Policies with this feature are typically more valuable for a life settlement than policies without it.

flexible premium adjustable life insurance

Otherwise known as universal life insurance, a policy consisting of the three unbundled elements of mortality costs, interest earnings, and expenses. Death benefits can be adjusted up or down and premium amounts can be altered in amount and frequency - all subject to limitations within the policy.

foreign insurance company

A life insurance company that does business in one state while domiciled in another.

fraternal benefit society / fraternal insurance company

A nonprofit organization operated for the sole benefit of its members so it can provide social and insurance benefits.

fraud

The intentional lying or concealing of facts by applicants for life insurance, current policy holders, insurance agents, employees, managers, brokers for financial gain. Unlike material misstatements which are only contestable for two years under most policies, fraud has no time limit.

fraudulent claim

A claim based on the submission of intentionally false information in order to collect policy proceeds.

fraudulent misrepresentation

A false statement knowingly made to another party that results in their entering into a contract that results in a loss.

free look or free examination provision

The 10 to 30 day review right given to policy holders that allows them to exit a life insurance policy for a full refund rendering the policy void from its inception.

full recourse premium finance

A life insurance premium financing loan arrangement where the borrower is personally responsible for repaying the loan and posts collateral in addition to the life insurance policy that is being financed.

funder

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

funding life settlement

The act of a buyer rendering payment for the purchase of a life insurance policy under a life settlement transaction. Funding typically occurs to an escrow agent who in turn disburses the funds when certain conditions of the life settlement agreement have been completed.

funding premium

Most typically, the payment of a lender to a borrower or insurer under the terms of a premiums financing agreement.