Definition of Living Benefit

Living Benefit

Some insurance companies include this benefit option at no cost to their policy holders. The insurer considers on a case to case basis, the need for insurance funds before death. If the insured can demonstrate a shortened life of less than two years and with some insurers one year, the insurer will consider releasing up to 50% or a maximum of $100,000 of the life insurance coverage held by the insured. Not all insurers offer this benefit for free. The need has resulted in specific stand alone living benefit/critical illness policies coming into existence. Look under "Different types of Life Insurance" for further information. You might have heard of "Viatical Settlements", the practice of seriously ill people selling the rights to their life insurance policies to third parties. This practice is common in the United States but has not caught on in Canada.

Accumulated Benefit Obligation (ABO)

An approximate measure of the liability of a plan in the event of a
termination at the date the calculation is performed. Related: projected benefit obligation.

Cost-benefit ratio

The net present value of an investment divided by the investment's initial cost. Also called
the profitability index.

Defined benefit plan

A pension plan in which the sponsor agrees to make specified dollar payments to
qualifying employees. The pension obligations are effectively the debt obligation of the plan sponsor.
Related: defined contribution plan

Equivalent annual benefit

The equivalent annual annuity for the net present value of an investment project.

Flat benefit formula

Method used to determine a participant's benefits in a defined benefit plan by
multiplying months of service by a flat monthly benefit.

Incremental costs and benefits

Costs and benefits that would occur if a particular course of action were
taken compared to those that would occur if that course of action were not taken.

Net benefit to leverage factor

A linear approximation of a factor, T*, that enables one to operationalize the
total impact of leverage on firm value in the capital market imperfections view of capital structure.

Pension Benefit Guaranty Corporation (PBGC)

A federal agency that insures the vested benefits of
pension plan participants (established in 1974 by the ERISA legislation).

Unit benefit formula

Method used to determine a participant's benefits in a defined benefit plan by
multiplying years of service by the percentage of salary.

benefits-provided ranking

a listing of service departments in an order that begins with the one providing the most service
to all other corporate areas; the ranking ends with the
service department providing service primarily to revenueproducing
areas

cafeteria plan a “menu” of fringe benefit options that include

cash or nontaxable benefits

cost-benefit analysis the analytical process of comparing the

relative costs and benefits that result from a specific course
of action (such as providing information or investing in a
project)

tax benefit (of depreciation)

the amount of depreciation deductible for tax purposes multiplied by the tax rate;
the reduction in taxes caused by the deductibility of depreciation

Cost-Benefit Analysis

The calculation and comparison of the costs and benefits of a policy or project.

Benefit Ratio Method

The proportion of unemployment benefits paid to a company’s
former employees during the measurement period, divided by the total
payroll during the period. This calculation is used by states to determine the unemployment
contribution rate to charge employers.

Benefit Wage Ratio Method

The proportion of total taxable wages for laid off
employees during the measurement period divided by the total payroll during
the period. This calculation is used by states to determine the unemployment
contribution rate to charge employers.

Defined Benefit Plan

A pension plan that pays out a predetermined dollar
amount to participants, based on a set of rules that typically combine the number
of years of employment and wages paid over the time period when each
employee worked for the company.

Target Benefit Plan

A defined benefit plan under which the employer makes
annual contributions into the plan based on the actuarial assumption at that time
regarding the amount of funding needed to achieve a targeted benefit level.

Workers' Compensation Benefits

Employer-paid insurance that provides their employees with wage compensation if they are injured on the job.

Living Will

This is a will which specifically expresses the testator's desire not to be kept alive on life support machines, should the occasion arise.

Accidental Death Benefit (ADB)

Coverage against accidental death usually payable in addition to base amount of coverage.

Automatic Benefits Payment

Automatic payment of moneys derived from a benefit.

Benefit

An instruction that pays a cash amount upon the occurrence of a specific event.

Benefit Value

The amount of cash payable on a benefit.

Death Benefit

Amount paid on death of an insured.

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