Glossary

Repaying a loan through scheduled payments that include principal as well as interest, so that the balance reaches zero at the end of the term. In the program the mortgage amortizes only in years 16 to 30, which is why the payment is larger then.

The person or trust that receives the policy’s net death benefit when the insured dies. The owner of the policy names the beneficiary.

The highest rate of interest an indexed policy will credit for a period, whatever the index does. The carrier sets it and can change it within the limits of the contract.

The insurance company that issues the policy, credits its interest, deducts its charges and pays the death benefit. The carrier is identified for each case and is not named on this site.

The amount the owner would receive on giving up the policy, after surrender charges and after any loans against it are repaid.

A lender’s contractual claim on specified rights or proceeds of a policy, given as security for a loan. The premium-finance bank takes one. Where a mortgage lender also has rights in the policy, the order of the two has to be settled in the documents.

A lender’s demand for more security when the value of what it holds falls below what the loan agreement requires. It is met by pledging other assets or adding cash.

A mortgage small enough to be bought by Fannie Mae or Freddie Mac. The limit is set each year by the Federal Housing Finance Agency.

The charge the carrier deducts from the policy’s value for the life insurance itself. It depends on the insured’s age and underwriting class, and it generally rises as the insured grows older.

The amount the carrier pays when the insured dies. What the beneficiary actually receives is the net death benefit.

A private organization that manages the financial affairs of one family with substantial assets: investments, tax, estate planning and major purchases. The program is not a family office and does not require one.

The lowest rate of interest an indexed policy will credit for a period, often zero. A floor limits the credit, not the policy’s value: charges are still deducted in a year when nothing is credited.

The two sets of values in a carrier’s illustration. Guaranteed values are what the contract promises at the carrier’s minimum crediting and maximum charges. Non-guaranteed values assume that current crediting and charges continue.

Cash shown coming out of a policy in an illustration, under its stated assumptions. It is not necessarily a guaranteed benefit.

A carrier’s year-by-year projection of a policy’s premiums, values, loans and death benefit under stated assumptions. It is not a contract and not a forecast. On this site the word also marks any figure produced from assumptions rather than from a carrier’s ledger.

Permanent life insurance with a cash value that is credited interest by a formula linked to a market index, within a cap and a floor. The policy does not own the index, and its charges are deducted from the same value.

An updated illustration for a policy that has already been issued, starting from its actual values today. It is the basis of an annual review.

What the household commits at closing. In the program it is about half the purchase price: the down payment plus the policy contribution, or $2,000,000 on a $4,000,000 home. It is capital you commit, not a reduction in the price of the home.

The person whose life the policy covers and whose death triggers the death benefit. The insured may be a spouse or an adult child rather than the buyer.

The years in which a mortgage payment covers interest and no principal, so the balance does not fall. In the program it is the first 15 years.

A trust created to own a life insurance policy, commonly so that the death benefit is kept out of the insured’s taxable estate. Whether one suits a financed policy that also supports a mortgage is a question for your attorney.

A mortgage larger than the conforming limit, which Fannie Mae and Freddie Mac therefore will not buy. Each lender sets its own terms for jumbo loans.

The end of a policy whose value can no longer cover its charges and the interest on its loans. A managed plan is reviewed every year to keep the policy funded and well clear of it.

A life insurance policy that has been funded faster than federal tax law allows for ordinary treatment. Loans and withdrawals from one are taxed less favorably, so whether a policy is one, or could become one, is a question to settle before it is issued.

The amount payable to the beneficiary after policy loans, accrued interest and lenders’ claims are deducted from the death benefit.

Cash received less cash put in, added up over the years with no adjustment for inflation or the time value of money, and with no valuation of the assets or debts that remain.

The person or trust that controls the policy: it names the beneficiary and directs loans and withdrawals within the policy’s terms. The owner need not be the insured.

The share of an index’s change that is used to calculate the interest credited to an indexed policy. A participation rate below 100% credits only part of the index’s rise.

Cash the household supplies itself: the down payment, the policy contribution and every mortgage payment that is not funded by policy cash.

The value inside the policy after interest is credited and charges are deducted. Access to it is governed by the policy’s rules and by any lender’s assignment.

The household’s own payment into the policy at closing: about 30% of the purchase price, or $1,200,000 in the reference case. It is separate from the premiums the bank finances.

Borrowing from the carrier, secured by the policy’s own value. It carries interest, reduces the net death benefit, and can remain outstanding after the bank’s premium-finance loan has been repaid.

Money paid to the carrier for the policy. It is not the same as the policy’s cash value or its surrender value.

A bank loan used to pay part of a policy’s premiums. It allows a larger policy than the owner’s contribution alone would fund, and it brings interest and collateral requirements of its own. The program plans to repay the bank around year 15.

The cash a policy is illustrated to make available each year through policy loans or withdrawals. It is a projection under stated assumptions, not a guarantee.

Whether a lender can pursue the borrower’s other assets, beyond its collateral, if a loan is not repaid. It is set in the premium-finance loan agreement.

The example used across this site: a $4,000,000 home with 20% down, a $3,200,000 mortgage at an assumed 6.1%, and a $1,200,000 policy contribution. Its mortgage figures are calculated, and its policy figures are quoted projections.

The death benefit projected to remain at the end of the illustrated period. In the reference case it is about $2,600,000. Your carrier illustration states the figure for the person insured, year by year.

The payment the lender is owed under the loan, whoever makes it. From year 16 it is larger than in the first 15 years, and the policy is projected to pay it.

The Secured Overnight Financing Rate, a benchmark for US dollar borrowing published by the Federal Reserve Bank of New York. Bank loans are often priced at a benchmark such as SOFR plus a spread. The term sheet for a given case states the actual benchmark and spread.

The margin a lender adds to a benchmark rate to set the rate on a loan. In an indexed policy the word can also mean a deduction from the index’s change before interest is credited.

A charge the carrier deducts if a policy is given up in its early years.

The process of deciding whether to accept a risk, and on what terms. Three institutions underwrite: the mortgage lender, the carrier (medically and financially, for the person insured) and the premium-finance bank. Before any of them, our team underwrites the transaction as a whole.

The risk category a carrier assigns to the insured after medical underwriting. It sets the cost of insurance inside the policy.

A family-office service delivered by a coordinated network of independent specialists rather than by staff employed by one family.

Cash taken out of a policy’s value permanently, which reduces both the value and the death benefit. It differs from a policy loan, which is borrowed and accrues interest.