Commonly Used Terms

Annuities

A type of product used to fund prepaid funeral contracts that provides one dollar of death benefit insurance coverage for every premium dollar paid-in on the policy.

Contract Beneficiary

The person for whom the prepaid funeral contract is purchased.

Cash Surrender Value

The sum of money an insurance company will pay to the policyholder or annuity holder in the event his or her policy is voluntarily terminated before its maturity or the insured event occurs. This cash value is the savings component of most permanent life insurance policies, particularly whole life insurance policies. However, during the early years of a whole life insurance policy, the savings portion brings very little return compared to the premiums paid.

Full Benefit Insurance Policies

A type of product used to fund prepaid funeral contracts where the policy beneficiary will be paid the full death benefit amount regardless of when death occurs provided premiums are current as stipulated by the policy terms.

Graded Benefit Insurance Policy

A type of product used to fund prepaid funeral contracts where the death benefits are not level. Policy beneficiaries will be paid a certain amount or percentage of the death benefit as stipulated by the policy terms if death should occur in year one, a larger amount or percentage if death occurs in year two, and so on. Generally, graded benefit insurance policies funding prepaid funeral contracts fully vest at 100% of the death benefit in three years.  However, policy holders should review the vesting schedule in the policy’s terms to fully understand their future benefits.

Insurance Company

The insurance company that will issue the Insurance Policy to fund this contract. The Texas Department of Insurance has licensed this company to sell insurance policies in Texas.

Insurance Policy

An annuity contract or insurance policy or certificate covering the life of the Contract Beneficiary funded by the Premiums. The Texas Department of Insurance has approved the insurance policy issued to fund this contract.

Limited Benefit Insurance Policy

See graded benefit and monthly increasing benefit policy.

Monthly Increasing Benefit (MIB) Policy

A type of product used to fund prepaid funeral contracts where the death benefits are not level. Policy beneficiaries will be paid a certain amount or percentage of the death benefit as stipulated by the policy terms which increases on a monthly basis. Generally, these types of policies are written for longer terms and may have longer premium payment schedules to reach full face value, i.e. 3 pay, 5 pay, 10 pay, 20 pay, etc., meaning the number of years that it will take to pay required premiums due under the policy to fully vest and pay the policy’s death benefit.  Similar to annuities, the current death benefit of MIBs generally provides one dollar of death benefit for every dollar paid-in.

Premiums

Payments you make on the Insurance Policy issued to fund a prepaid funeral contract.

Provider

The person that signs this contract and agrees to deliver the funeral goods and services selected. The Seller and Provider may be the same company. (Section 154.161 of the Texas Finance Code defines the responsibilities of the Provider.)

Responsible Person

The responsible person is the person legally responsible for the disposition of the Contract Beneficiary’s remains. (Section 711.002 of the Texas Health and Safety Code defines who has the right to control the disposition of the remains.)

Restricted Trust Account

The Department of Banking’s approved interest bearing bank account or trust fund used to hold prepaid funeral contract payments until the contract has either been cancelled by the purchaser or the beneficiary had died and the services have been performed.