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paid-up additions
Additional life insurance purchased with policy dividends.
No additional premiums are needed for paid-up additions. Also
called dividend additions.
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paid-up policy
An insurance policy that will provide benefits in the future
but that requires no further premium payments.
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paramedical
report
A report based on a physical examination and a medical history
completed by a medical technician, a physician's assistant,
or a nurse, rather than a physician. A paramedical report
describes the health of a proposed insured and can serve as
part of an insurance application.
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.partial disability
A disability that prevents an insured from engaging in some
of the duties of his or her usual occupation or from engaging
in the occupation on a full-time basis.
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partial disability
benefit
A flat amount specified in a disability income insurance policy
that is payable when the insured suffers a partial disability.
Usually the partial disability benefit is half the full disability
benefit. See also residual disability benefit.
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partial plan
termination
The termination of a pension or employee-benefit plan for
one group of participants but not for another. Sponsors sometimes
do this to reclaim some of the assets of an overfunded plan.
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participating
policy
A type of life insurance policy or annuity under which policy
dividends may be paid to the policyowner. Also called a par
policy. See also dividend.
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partnership
insurance
A type of business insurance designed to provide funds so
the remaining partners in a business can buy the business
interest of a deceased or disabled partner. See also business-continuation
insurance.
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past service
The period of employment service rendered by an employee before
a pension plan was begun or amended or before the employee
enrolled in the pension plan. A plan sponsor must decide whether
pension benefits will be credited to an employee for the employee's
past service or only for current and future service. See also
future service.
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payee
The person to whom benefits are payable under a supplementary
contract. See also supplementary contract.
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payment of insurance
money into court
In the common law jurisdiction of Canada, an action that an
insurer takes when the insurer admits liability to pay policy
proceeds but cannot determine the proper recipient. Once the
insurer pays the money into court, the insurer is discharged
of any further liability under the policy. In Quebec, an insurer
in such a situation can obtain a valid discharge of liability
by paying the policy proceeds to the Minister of Finance.
In the United States, the process is called interpleader.
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payroll deduction
plan
(1) See salary-reduction plan. (2) A premium
payment method for individual insurance under which an individual's
employer deducts the employee's premium amount from his or
her paycheck and sends the premium to the insurer.
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peer review
group
A group of local physicians who help solve insurance claim
disputes and promote fair and ethical practices in the health-care
industry.
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pension
A life income payable to a person who has retired.
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Pension Benefit
Guaranty Corporation (PBGC)
In the United States, the organization which insures benefits
in defined benefit pension plans. Its purpose is to make sure
that all participants in qualified defined benefit pension
plans receive the vested benefits to which they are entitled,
even if their pension fund goes bankrupt.
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Pension Benefits
Guarantee Fund
In Canada, a fund established in the province of Ontario to
guarantee payment of benefits in the case of the insolvency
of a defined benefit pension plan.
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Pension Benefits
Standards Act (PBSA)
In Canada, federal legislation that governs the administration
of pension plans covering federal employees and those individuals
whose employment falls under the legislative authority of
the Canadian Parliament (including those working in the transportation
field, telecommunications workers, and bank workers).
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pension fund
(1) The assets used to pay the pensions of retirees. (2) An
investment institution established to manage the assets used
to pay the pensions of retirees.
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Pension Index
In Canada, the index used by the Canada Pension Plan and Quebec
Pension Plan to vary pension benefit payments to reflect the
effects of inflation. The Pension Index is based on the Consumer
Price Index.
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per capita beneficiary
designation
A class beneficiary designation under which life insurance
policy proceeds are shared only by those class members who
survive the insured. Contrast to per stirpes beneficiary designation.
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per-cause deductible
A deductible which must be satisfied for each separate accident
or illness before major medical benefits will be paid. Also
known as a per-disability deductible. Contrast with all-causes
deductible.
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per-cause maximum
For any individual, the maximum amount that a medical expense
policy will pay for medical expenses resulting from any particular
illness or injury.
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percentage contribution
The amount of the premium that a group member pays in a contributory
group insurance plan. Also known as employee contribution
or member contribution. See also contributory group insurance.
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percentage participation
See coinsurance.
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period certain
The specified time during which the insurer unconditionally
guarantees that benefit payments will continue under a settlement
option or annuity.
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permanent and
total disability
A condition that prevents an insured from returning to any
gainful employment.
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persistency
The retention of business that occurs when a policy remains
in force as a result of the continued payment of the policy's
renewal premiums.
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personal interview
report
A report that contains the same types of information as an
inspection report, except that the personal interview report
relies on the proposed insured as the only source of information.
See also inspection report.
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personal producing
general agency (PPGA) system
A personal selling distribution system that relies on the
use of PPGAs.
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personal producing
general agent (PPGA)
A type of general agent who more closely resembles a broker
than an agency manager. Most PPGAs are under contract to several
insurance companies and spend the majority of their time selling
insurance rather than building and managing an agency office.
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personal selling
distribution system
An insurance distribution system that uses commissioned or
salaried sales personnel to sell products through oral presentations
made to prospective purchasers.
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per stirpes
beneficiary designation
A class beneficiary designation under which the descendants
of a deceased class member receive the deceased class member's
share of the life insurance policy proceeds. Contrast to per
capita beneficiary designation.
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physical examination
provision
A health insurance policy provision that grants the insurer
the right to have an insured who has submitted a claim examined
by a doctor of the insurer's choice at the insurer's expense.
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plan document
A written document that is adopted by an employer and that
specifies the terms of a pension plan. A plan document identifies
the benefits the participants are to receive and the requirements
they must meet to become entitled to those benefits.
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plan participant
A person on whose behalf contributions are made or benefits
are accrued under a pension or employee-benefit plan.
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plan sponsor
An entity which has adopted and maintains a pension or employee-benefit
plan. The plan sponsor is often an employer, but may be a
union, a trade or professional association, or a committee
composed of representatives of a number of employers or associations.
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point-of-service
(POS) plan
A type of managed care plan combining features of health maintenance
organizations (HMOs) and preferred provider organizations
(PPOs), in which individuals decide whether to go to a network
provider and pay a flat dollar copayment (say $10 for a doctor's
visit), or to an out-of-network provider and pay a deductible
and/or a coinsurance charge.
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policy
A written document that serves as evidence of an insurance
contract and contains the pertinent facts about the policyowner,
the insurance coverage, the insured, and the insurer.
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policy acquisition
costs
Costs that are directly attributable to the production of
new business. Also called acquisition expenses.
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policy anniversary
The anniversary of the date on which a policy was issued.
Sometimes simply called the anniversary.
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policy charge
An amount that an insurer adds to the gross premium to help
cover the insurer's expenses. This amount is the same regardless
of the size of the policy. Also called a policy fee.
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policy filing
The process of obtaining legal permission to sell an insurance
product in a specific jurisdiction.
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policyholder
(1) The company or organization that owns a group insurance
contract (called the group policyholder in Canada). The policyholder
of a group insurance contract does not have the same ownership
rights under the contract that a policyowner has under an
individual contract. (2) In Quebec, the owner of an individual
life insurance policy (called the policyowner in the United
States and the insured in the rest of Canada). Also sometimes
called the owner in Quebec. (3) Often used interchangeably
with policyowner.
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policy loan
A loan that is made to a life insurance policyowner by an
insurer. A policy loan is secured by a policy's cash value
and cannot exceed the cash value. When the policy benefits
are paid, the amount of any outstanding policy loan made against
the policy is deducted from the benefits.
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policyowner
The person or party who owns an individual insurance policy.
The policyowner is not necessarily the person whose life is
insured. The terms policyowner and policyholder are frequently
used interchangeably.
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policy proceeds
The amount that the beneficiary actually receives from a life
insurance policy after adjustments have been made to the basic
death benefit for policy loans, dividends, paid-up additions,
late premium payments, and supplementary benefit riders. Compare
to basic death benefit and death benefit. Also called net
policy proceeds.
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policy provisions
The statements, following the face page of an insurance policy,
that describe the operation of the insurance contract.
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policy reserve
(1) A liability account that identifies the amount of assets
that, together with the future premiums to be received from
in-force policies, is expected to be sufficient to pay future
claims on those in-force policies. (2) The actual assets that
guarantee that the insurer will have sufficient funds to pay
future claims. See reserve for a list of reserves.
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policy summary
A document, often in the form of a computer printout, that
contains certain legally required data regarding the specific
policy being considered by an applicant.
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policy year
The 12-month period between a policy's anniversaries.
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pooling
In group insurance, the practice of underwriting a number
of small groups as one large group.
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portability
The ability of an individual to transfer from one health insurer
to another health insurer without regard to preexisting conditions
or other risk factors.
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portfolio
(1) A group of investments managed or owned by an individual
or organization. (2) All of the products offered by an insurance
company.
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portfolio method
A method of accounting among insurers in which each customer
or policyowner receives a rate of interest equal to the average
rate of interest earned on the entire portfolio of assets
in the insurer's general account. Compare to the investment
year method (IYM).
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post-notice
As required by the Fair Credit Reporting Act, a form that
the insurer must send to an applicant in cases in which the
insurer has made an adverse decision based on information
contained in a report from a consumer reporting agency.
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power of agency
An agent's right to act for an insurer. The power of agency
is established through agency contracts between an insurer
and its agents.
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preadmission
review
A component of a utilization review program that requires
an insured person, or that person's physician, to obtain prior
authorization from an insurer before any non-emergency hospitalization.
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preauthorized
payment system
A cost containment feature of many group medical policies
whereby the insured must contact the insurer prior to a hospitalization
or surgery to receive authorization for the service.
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preauthorization
A cost containment feature of many group medical policies
whereby the insured must contact the insurer prior to a hospitalization
or surgery and receive authorization for the service.
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predetermination
of benefits provision
A provision often included in dental policies which specifies
that when dental treatments are expected to exceed a stated
level, such as $100, $150, or $200, the dentist should submit
to the insurer the proposed treatment plan for the patient
so that the insurer can determine the amount payable by the
dental plan. Also known as a preauthorization of benefits
provision, precertification of benefits provision, or pretreatment
review provision.
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preexisting
condition
A health problem that existed before the date your insurance
became effective. Many insurance plans will not cover preexisting
conditions. Some will cover them only after a waiting period.
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preexisting
conditions provision
A provision in most medical expense insurance policies stating
that until the insured has been covered under the policy for
a certain period, the insurer will not pay benefits for any
preexisting condition.
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preference beneficiary
clause
Life insurance policy wording which states that if no specific
beneficiary is named, the insurer will pay the policy proceeds
in a stated order according to a list of individuals included
in the policy.
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preferred beneficiary
In Canada, a class of beneficiaries applicable to policies
issued before June 20, 1962, and consisting of the spouse,
children, parents, and grandchildren of the insured. The policyowner
can change the beneficiary of a policy from a preferred beneficiary
to a beneficiary who is not a preferred beneficiary only with
the consent of the preferred beneficiary.
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preferred provider
organization (PPO)
A network of health-care providers with which a health insurer
has negotiated contracts for its insured population to receive
health services at discounted costs. Health-care decisions
generally remain with the patient as he or she selects providers
and determines his or her own need for services. Patients
have financial incentives to select providers within the PPO
network.
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preferred risk
class
In life insurance, a risk class that consists of individuals
whose anticipated mortality is lower than the norm established
for the standard risk class. Among other things, people in
the preferred risk class are in excellent physical condition,
have good family medical histories, and do not smoke. Sometimes
called the superstandard risk class.
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preliminary
inquiry form
A type of application form used when there is a high probability
that a policy either will not be issued or will be issued
with such a high substandard rating that the policy premium
will be unacceptable to the applicant. Using a preliminary
inquiry form usually brings a quick response from the underwriting
department. Also called a trial application.
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premium
The monthly amount you or your employer pays in exchange for
insurance coverage.
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premium deposits
Amounts that are left on deposit with the insurer for the
payment of future premiums.
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premium receipt
An acknowledgement of an insurer's receipt of an initial premium.
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premium receipt
book
A book given to the policyowner when a home service agent
makes a policy sale. The premium receipt book contains prenumbered
receipts that are signed by the agent when the agent collects
a premium.
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premium reduction
option
A life insurance policy dividend option under which policy
dividends are applied toward the payment of renewal premiums.
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pre-notice
As required by the Fair Credit Reporting Act, advance notice
to an insurance applicant from an insurer that an investigative
consumer report may be made on the applicant.
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preretirement
survivor annuity
A pension plan provision which specifies a benefit for the
surviving spouse of a vested plan participant if the participant
dies before retirement. In the United States, qualified plans
are required to include this provision, as are registered
plans in Canada.
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prescribed annuity
contract (PAC)
In Canada, a kind of annuity that meets the criteria established
by the Income Tax Regulations to qualify as exempt from accrual
taxation.
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present value
The amount of money that must be invested on a certain day,
sometimes called the evaluation date, in order to accumulate
to a specified amount at a later date.
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present value
factor
The number by which an amount of money to be paid later is
multiplied in order to derive the present value of that money.
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presumptive
disability
A condition that, if present, automatically causes an insured
to be considered totally disabled. Examples of presumptive
disabilities are total and permanent blindness or loss of
two limbs.
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prima facie
rate
In group creditor insurance in the United States, the standard
premium rate recommended by state government regulators for
a contributory policy. An insurer can not charge more than
the prima facie rate when a contributory group creditor insurance
policy is first issued. Contrast with deviated rate.
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primary beneficiary
The party or parties who have first rights to receive policy
benefits when the benefits of an insurance policy become payable.
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primary care
physician
Usually your first contact for health care under a health
maintenance organization (HMO) or point-of-service (POS) plan.
This is often a family physician, internist, or pediatrician.
A primary care physician monitors your health, treats most
health problems, and authorizes referrals to specialists,
if necessary.
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primary provider
of benefits
In a coordination of benefits situation, the medical expense
plan that pays the full benefits provided by its plan before
any benefits are paid by another medical expense plan.
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principal
A party who authorizes another party, the agent, to act on
the principal's behalf in contractual dealings with third
parties. Called the mandator in Quebec.
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probability
The likelihood of some event occurring. In mathematics, probability
is the number of times that something is likely to occur out
of a number of possible occurrences. Probability theory is
an essential aspect of the mathematical foundations of insurance.
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probationary
period
See waiting period
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proceeds
The amount of money that the insurance company is obligated
to pay for the settlement of a life insurance policy, endowment
insurance policy, or annuity.
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professional
reinsurer
An insurance company whose only or major line of business
is reinsurance.
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profit sharing
pension plan
In Canada, a money purchase pension plan in which employer
contributions are linked to company profits. Employers must
make a minimum contribution of 1% of employee earnings, regardless
of whether they make a profit, and the plan is subject to
the same legal requirements as pension plans.
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profit sharing
plan
An employee-benefit plan whereby the employer pays a portion
of the company's profits to the employees. The employer's
contributions are discretionary and may be (1) paid in cash
or stock when profits are determined, (2) deferred to individual
accounts for each employee, or (3) distributed by a combination
of the two methods. Profit-sharing plans can be used as a
source of retirement income or as a more short-term savings/investment
vehicle.
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property insurance
A type of insurance that provides a benefit if insured items
are damaged or lost because of fire, theft, accident, or other
cause described in the policy.
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proposal form
In Canada, a document that is given to a prospective purchaser
of an insurance policy and that contains personalized information
about the policy and policy values.
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prototype plan
A standardized form of pension or other employee-benefit plan
developed to simplify plan drafting for plan sponsors. Similar
to a master plan.
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provider
Any person (doctor, nurse) or institution (hospital, clinic,
laboratory) that provides medical care.
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provider fraud
A type of medical insurance fraud that is initiated by a medical
care provider on patients' claims in order to increase the
provider's own income. Contrast with individual fraud.
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proximate cause
of death
An event that is directly responsible for a death or an event
that initiates an unbroken chain of events that lead to death.
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prudent expert
rule
The legal requirement that the sponsor or manager of a pension
plan exhibit certain standards of competence and prudence
in accounting for assets in a pension plan and investing the
pension plan's funds.
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pure endowment
An amount payable only to those people who survive for a certain
period of time; those who do not survive that period of time
receive nothing. Unless they are combined with some form of
life insurance, pure endowments are generally illegal.
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