The time period after the policy's delivery during which the insured can return the contract and receive a full refund of premiums paid. The policy is then void from the beginning. This provision is mandated by many states and in some cases is longer than 10 days.

An Internal Revenue Code provision which allows the tax-free exchange of one insurance contract for another. The exchange is not taxable and the tax cost basis of the old contract is carried over to the new one. However, the exchanged contracts must be similar products and the insured and owner may not change.

The percent of a mutual fund's assets used to defray marketing and distribution expenses, such as advertising and commissions paid to dealers. 12b-1 fees are named for the corresponding SEC rule, passed in 1980. A fund's prospectus outlines 12b-1 fees, if applicable. A true "no load" fund has neither a sales charge nor a 12b-1 fee.

Effective July 7, 1993, NASD placed two caps on the level of 12b-1 fees:

(a) An annual limit of 0.75 percent of a fund's assets. A 0.25 percent service fee may be paid to brokers or other sales professionals in return for providing ongoing information and assistance to investors.

(b) A rolling cap on total sales charges, to be calculated at 6.25 percent of new sales plus interest for funds that pay a service fee, and 7.25 percent plus interest for funds that do not pay a service fee.

Tax and Miscellaneous Revenue Act of 1988. It is within this act that modified endowment contracts and their tax treatment are defined.

The corridor between the death benefit and the cash value which must be maintained for the contract to enjoy its life insurance (versus annuity) tax treatment. The corridor is a percentage of cash value and decreases with the attained age.

The "dual" life rate table used for measuring the value of the economic benefit on split dollar second-to-die policies. After the first death, the measurement changes to the "single" life PS 58 table or the insurer's equivalent. Table 38 rates are based on joint probabilities and are therefore much lower than PS 58 rates. There is no formal IRS ruling on use of this table.

The annual payment on a universal life contract which, based on non-guaranteed elements, endows the contract at its maturity date (usually age 95). The premium is calculated by the insurer and may be more conservative than the minimum premium that could be illustrated under the product's current assumptions. The target premium may change from year to year as the insurance company's actual experience fluctuates.

On a life insurance policy, the total premiums paid (less costs for additional benefits). The total premiums less dividends and cash surrenders received determines the policy's gain. On a non-modified endowment contract, the tax basis is recovered before the policy's gain is taxed as income.

Postponing the payment of income taxes until some point in the future, often at retirement. Generally, the cash value growth inside life insurance is eligible for deferral, unless the amount of cash received through surrender exceeds the policy's tax basis. Any additional surrenders beyond the basis must be reported as taxable income. Taxes may be deferred on modified endowment and annuity contracts until the owner takes possession of the cash benefits.

Legislation that changed the way life insurance companies are taxed and also changed the taxation of withdrawals from annuity contracts to a gain-out-first basis.

Legislation that refined the definition of what qualifies as a life insurance company, raised taxes on life insurance companies beyond TEFRA, and defined requirements which a life insurance product must meet in order to receive favorable tax treatment.

Legislation that eliminated nearly all tax shelters and many income tax deductions in exchange for lower tax rates for both individuals and corporations.

Annuities available for purchase by employees of certain non-profit and public education institutions as described in IRC §501(c)(3). Money used to purchase the annuity is not taxable as income until annuity payments begin, usually at retirement. Also known as a Tax-Sheltered Annuity (TSA).

A retirement plan arrangement that allows an employee and/or employer to make contributions, often on a pre-tax basis, to an annuity. Certain requirements and contribution limits must be met to qualify. Examples include Pension/ Profit-Sharing, 401(k), Simplified Employee Pension, Tax-Deferred Annuity, and Individual Retirement Annuity plans.

A transfer from a trust to a skip person. This term is associated with the generation-skipping transfer tax.

The termination of a trust's interest in property. This term is associated with the generation-skipping transfer tax.

The policyowner's Social Security number. The insurer must have a certified TIN to avoid backup withholding when there is taxable gain.

A subsidiary of Templeton Worldwide, Inc., a wholly-owned subsidiary of Franklin Resources, Inc. It is contracted as a sub-advisor to Northwestern Mutual Investment Services, Inc. to manage the International Equity portfolio offered through Northwestern Mutual's line of variable products.

A special form of joint tenancy with the right of survivorship that exists only between spouses. There can only be two co-owners (the spouses) and each one owns 50%. The tenancy cannot be severed during lifetime without the consent of both parties.

Two or more individuals have ownership rights. There is no limit to the number of co-owners (co-tenants.) Each co-owner owns an undivided fractional interest in the property. The co-owners' interests may be equal or unequal in amount.

One of Northwestern Mutual's annually renewable term insurance policies that provides protection for ten years or until age 70, whichever comes first.

One of Northwestern Mutual's annually renewable term insurance policies that provides protection until age 70.

Many term policies come with conversion rights guaranteeing that, for a specified period of time, the policy can be converted to a permanent plan for the equivalent amount of coverage, without having to provide additional evidence of insurability. In some cases, the premium on the new policy will be based on the insured's age at the time of the original purchase. At Northwestern Mutual, the client may be eligible for a one-time conversion credit on the new premium.

Insurance which provides a death benefit only. Premiums increase each year, or, in the case of level premium renewable term, at the end of each renewal period (typically 5,10,15 or 20 years). Level premium decreasing term has a level premium, but the insurance benefit decreases on each policy anniversary. Since term insurance can become quite expensive at older ages, it is often used to cover protection needs of a shorter duration or to cover a specific need such as an outstanding loan balance. It may be convertible to some form of permanent life insurance.

A rider attached to a basic policy to provide additional coverage in the form of term insurance. Dividends earned on the basic plan may be designated to replace the term insurance with permanent paid-up additions.

On CompLife plans, a component that consists of term insurance and any inside paid-up additions that replace the term insurance.

A dividend paid by company practice at the death of the insured or the maturity or surrender of the policy. It does not enhance the policy's loan value (nor can it be placed under the dividend options). Usually, it is not illustrated to be paid until after the 10th year.

A will.

A trust established at death under the decedent's will.

Died leaving a will.

This refers to the effect of time and compounding interest on a sum of money which substantiates the fact that a dollar invested today is worth more than a dollar received a year from now.

On life insurance sales illustrations, the combination of the guaranteed and non-guaranteed portion of the cash value. The term refers to the cash value after the deduction of any surrender charges.

A retirement savings plan which allows individuals to contribute toward an account on a tax-deferred basis. The contributions and earnings are taxable as income only when withdrawn or paid out after retirement.

The transfer of ownership for less than full and adequate consideration.

An exchange of property for cash and /or promissory note. It is a way to convey ownership that does not decrease the value of the estate.

Transfer of the ownership of a life insurance contract for valuable consideration. At the death of the insured, this results in reportable ordinary income to the extent that the death benefit exceeds the new owner's tax basis. There are certain exceptions to this rule: transfers to the insured, a corporation to which the insured is an officer or shareholder, to the insured's partner or partnership, a transfer by gift, and a transfer where the transferee's basis is determined in whole or in part by reference to the transferor's basis. IRC §101(a).

The person receiving the property.

The person transferring property.

In disability insurance, a benefit which, under specified conditions, provides a proportionate benefit for up to 12 months following the insured's recovery from a total or partial disability.

A short-term obligation of the U.S. government issued for periods of one year or less. They are issued at a discount and mature at par.

United States government obligations issued for long periods, typically 10 to 30 years.

A three-party arrangement involving a grantor (the person who establishes the trust), a trustee (the person who the grantor trusts to hold the property for the beneficiary), and the beneficiary (the person or persons who will benefit from the trust).

The document which creates a trust and establishes the provisions that control the trust's management.

The individual or institution with the responsibility of managing assets placed in a trust.

The practice of inducing a policyowner to replace a policy by providing inaccurate, incomplete, or misleading information.