Commutation

Definition

• An option afforded to the beneficiaries of select life insurance policies or annuities that gives them the opportunity to change the method or frequency of benefit payments. Commutation can allow a beneficiary to receive benefits in the form of a single lump-sum payment instead of a series of smaller payments over a number of years or vice verse, depending on the terms of the policy.

Synonyms
interchange, compensation, exchange, substitution, replacement

Related Terms and Acronyms

• Annuity Consideration — Definition,
  • The payment(s) made by an individual in order to accumulate value in an annuity.
• Commissioners' Reserve Valuation Method — Definition,
  • A method used to determine the minimum statutory reserves for annuities and insurance products.
• Death Benefit (DB) — Acronym, Very Important,
  • A payment or series of payments made to the beneficiaries of a life insurance policy.
  ➥ An amount paid to a beneficiary in a life linsurance policy.
• Lump Sum Payment — Definition,
  • An extra payment made to reduce a loan.
  • One-time single-sum payment or payout.