Understanding Insurance & Retirement Planning Terms
Insurance and retirement planning often involve terminology that can feel complex or unfamiliar. This glossary is designed to provide clear, plain-language explanations of commonly used insurance and retirement terms so you can make informed decisions with confidence.
These definitions are for educational purposes only and may vary by product, carrier, and individual circumstances.
A
Annuity
A financial product issued by an insurance company that can provide income, typically used for retirement planning. Annuities may offer guaranteed income, tax-deferred growth, or both, depending on the product type.
Annuity Due
An annuity where payments or contributions are made at the beginning of each period rather than the end.
Annual Premium
The amount paid each year to keep an insurance policy active.
B
Beneficiary
The person or entity designated to receive benefits from an insurance policy or annuity upon the policyholder’s death.
Buy-Sell Agreement
A business arrangement that outlines how ownership interests are transferred if an owner dies, retires, or exits the business, often funded with life insurance.
C
Cash Value
The savings component of certain permanent life insurance policies that may grow over time and can often be accessed through loans or withdrawals.
Crediting Rate
The rate used to calculate interest credited to certain annuities or cash-value life insurance policies.
D
Death Benefit
The amount paid to beneficiaries upon the death of the insured person.
Deferred Annuity
An annuity designed to grow funds over time before income payments begin at a future date.
E
Executive Bonus Plan
A business strategy where an employer provides life insurance as a bonus to key employees, often used for retention and benefit planning.
F
Final Expense Insurance
A type of life insurance designed to cover funeral costs and other end-of-life expenses.
Fixed Annuity
An annuity that provides a guaranteed interest rate for a specified period.
G
Guaranteed Income
Income that is contractually promised by an insurance company, subject to the terms of the policy or annuity.
I
Indexed Universal Life (IUL)
A type of permanent life insurance that offers cash-value growth tied to a market index, subject to caps, floors, and participation rates.
Inflation Risk
The risk that rising prices reduce the purchasing power of money over time.
L
Life Insurance Retirement Plan (LIRP)
A strategy that uses certain life insurance policies to supplement retirement income through tax-advantaged cash-value access.
Liquidity
How easily an asset can be converted into cash without significant loss of value.
M
Maturity Date
The date when an annuity contract ends or when payments begin, depending on the product structure.
N
Non-Qualified Annuity
An annuity purchased with after-tax dollars, typically not held within a retirement account like an IRA or 401(k).
O
Ordinary Annuity
An annuity where payments or contributions are made at the end of each period.
P
Permanent Life Insurance
Life insurance designed to last a lifetime, often including a cash-value component.
Premium
The amount paid to maintain an insurance policy.
R
Rider
An optional feature added to an insurance policy that provides additional benefits or customization.
Required Minimum Distribution (RMD)
The minimum amount that must be withdrawn annually from certain retirement accounts once a specified age is reached.
S
Surrender Charge
A fee charged for withdrawing funds from an annuity or life insurance policy during an early period.
Suitability
A standard requiring financial products to align with a client’s financial situation and objectives.
T
Tax-Deferred Growth
Earnings that grow without being taxed until funds are withdrawn.
Term Life Insurance
Life insurance that provides coverage for a specific period of time.
U
Underwriting
The process insurance companies use to evaluate risk and determine eligibility, pricing, and coverage terms.
W
Whole Life Insurance
A type of permanent life insurance offering guaranteed death benefits and cash-value growth.
Understanding insurance and retirement terms is an important first step. If you’d like help reviewing how these concepts apply to your personal situation, our team at B.B. Financial Group is here to help.
