Glossary of Terms: Life Settlements
Accelerated Death Benefits
Also known as "living benefits," accelerated death benefits provide payments to policy holders who have a long-term, catastrophic, or terminal illness-payments that ordinarily would not be available prior to the policy holder's death. Rules concerning accelerated death benefits vary from company to company and from policy to policy. In some cases, depending on the term of the policy or contract, the beneficiaries of the policy may be entitled to a reduced death benefit.
Cash Surrender Value
The cash surrender value of a life insurance policy is the amount you can collect if you cancel (or "surrender") the policy before it matures or before you die. The amount is typically based on the cash you've built up in the policy over time (your tax-deferred savings) minus any surrender charges or outstanding loan balances.
Lapse refers to the termination of an insurance policy when an individual fails to pay his or her premiums on time. If you allow a policy to lapse, you typically cannot collect any cash surrender value that would otherwise be available.
Net Death Benefit
A death benefit is the amount an insurance company pays to a policy holder's beneficiary when the policy holder dies. Not all life insurance policies or annuity contracts provide for this sort of benefit, and not all death benefits are calculated the same way. The net death benefit is the amount specified in the insurance policy or annuity contract, minus any unpaid premiums that are due and outstanding loan balances or other withdrawals. In the case of variable life insurance or variable annuities, investment gains and losses can impact the amount of the death benefit.