Glossary Of Terms
A provision in some life insurance policies that authorizes a policy loan using the cash value accumulated by the insurance policy to pay for past due premiums at the end of the grace period. This prevents a lapse of coverage.
Automatic Premium Loan:
Optional auto insurance that pays for damage to your auto caused by things other than a collision or rolling the car over, such as fire, theft, vandalism, flood or hail. Frequently required if you have a car loan.
Auto Comprehensive Physical Damage Coverage:
A risk insured through a pool of insurers and assigned to a specific insurer. These risks are generally considered undesirable by underwriters, but due to state law or otherwise, they must be insured.
A printed form developed by an insurer that includes questions about the prospective insured and the desired insurance coverage and limits.
The party applying for an insurance policy.
A contract that provides for a series of periodic payments to be made or received at regular intervals.
A dollar amount designated by the policy that puts a cap on the amount of money the insured must pay out of his or her own pocket for covered expenses over the course of a calendar year.
Annual Out-of-Pocket Maximum:
In insurance, the person authorized to represent the insurer in negotiating, servicing, or effecting insurance policies.
A person who investigates and settles losses for an insurance carrier.
A supplement to many life insurance policies that provides an additional cash benefit to the insured or his/her beneficiaries if an accident causes either the death of the insured or causes the insured to lose any two limbs or the sight in both eyes.
Accidental Death and Dismemberment (AD&D) Rider:
Agreement that a deceased business owner’s interest will be sold and purchased at a predetermined price or at a price according to a predetermined formula.
A marketing specialist who represents insurance organizations and who deals with either agents or companies in arranging for the coverage required by the customer.
A premium receipt acknowledging temporary insurance coverage immediately until the insurance company rejects the application or approves it and issues a policy.
A written or oral contract issued temporarily to place insurance in force when it is not possible to issue a new policy or endorse the existing policy immediately. A binder is subject to the premium and all the terms of the policy to be issued.
Any person, persons, or other entity designated to receive the policy benefits upon the death of the policyholder.
The pre-existing condition exclusion is reduced one month for every month that a person had coverage in a previous qualifying plan as long as the gap in coverage between the previous plan and the new plan is 63 days or less.
The fee you pay for certain medical services or for each prescription. For example, you may pay $20 for an office visit or $10 to fill a prescription and the health plan covers the balance of the charges.
A type of term life insurance that offers the policyowner the option to exchange the term policy for a form of permanent insurance.
Convertible Term Life Insurance:
The right to convert or change insurance coverage from an individual term insurance policy to an individual whole life insurance policy.
A legally enforceable agreement between two or more parties.
In a life insurance policy, the person designated to receive the policy benefits if the primary beneficiary dies before the insured.
The part of your insurance policy that states the obligations of the person insured and those of the insurance company.
The amount of money, usually a percentage of the premiums paid to an insurance agent for selling an insurance policy.
A specified percentage of the cost of treatment the insured is required to pay for all covered medical expenses remaining after the policy’s deductible has been met.
COBRA requires organizations with 20 or more employees to offer the continuation of group health benefits (Medical, Dental, Vision, and Medical Reimbursement Account) to employees (and covered dependents) upon experiencing a “Qualifying Event.” Employers are required to provide initial COBRA notification to covered employees and dependents. A letter is sent detailing an individual’s rights upon experiencing a “qualifying event” and an explanation of the conversion privilege. Legislation defines the following six situations as “Qualifying Events” that require COBRA continuation:
- Termination of Employment
- Reduction of Work Hours
- Employee’s Death
- Employee’s Divorce (or legal separation in some states)
- Medicare Entitlement
- Change in “Dependent” Status
COBRA (Consolidated Omnibus Budget Reconciliation Act):
A person’s request for payment from an insurer for a loss covered by the insurance policy.
A statement of coverage issued to an individual insured under a group insurance contract, outlining the insurance benefits and principal provisions applicable to the member.
Certificate of Insurance:
The cash amount payable to a life insurance policy owner in the event of termination or cancellation of the policy before its maturity or the insured event.
Cash Value (cash surrender value):
A utilization management technique that addresses the medical necessity of care as well as alternative treatments or solutions, especially when the patient is likely to require very expensive treatment.
The discontinuance of an insurance policy before its normal expiration date, by either the insured or the company.
The amount of health care expenses that the insured person must pay before receiving insurance payments for covered eligible expenses.
Calendar Year Deductible:
A provision in a life insurance policy, subject to specified conditions and exclusions, under the terms of which double the face amount of the policy is payable if the death of the insured is the result of an accident. In general, the conditions are that the insured’s death occurs prior to a specified age and results from bodily injury effected solely through external, violent and accidental means independently and exclusively of all other cause, within 60 or 90 days after such injury.
Reduction in the value of property due to age and use.
A person for whom the insured has some legal obligation to. For most plans, it is the insured’s spouse and/or children. Some plans also allow non-traditional spousal relationships (significant other, life-partner, etc.) to be considered a dependent with some additional certifying paperwork.
The portion of the loss that the policyholder agrees to pay out of pocket, before the insurance company pays the amount they are obligated to cover. For example, if the covered claim is $1000 and your deductible is $250, you pay $250 and the insurance company will pay $750. Deductibles help to keep insurance rates reasonable. Raising the amount of the deductible can help lower the cost of insurance.
The insurer’s refusal to insure an individual after careful evaluation of the application for insurance and any other pertinent factors.
A nonforfeiture benefit under which the net cash value of the policy is used to purchase term insurance for the amount of coverage available under the original policy.
Extended Term Life Insurance:
Conditions, situations and services not covered by the health plan.
Exclusions and Limitations:
Attachment or addendum to an insurance policy; an endorsement changes the contract’s original terms.
A visit to a hospital for treatment of an accidental injury or for emergency medical care.
Emergency Room Visit:
The amount stated in the life insurance policy as the death benefit.
Established by each state to support insurers and protect consumers in the case of insurer insolvency, guaranty associations are funded by insurers through assessments.
A health insurance policy that the insurer is required to renew – as long as premiums are paid – at least until the insured attains the age limit specified in the policy, or the policy is cancelled by the insured. The insurer may increase the premium rate for any class of guaranteed renewable policies.
Guaranteed Renewable Policy:
An insurance plan designed for a group, such as employees of a single employer. Insurance is provided to them under a single policy.
Group Health Insurance:
The specified length of time, after a Life or Health Insurance premium payment is due in which the insured may make the payment and keep the policy in force. (Usually 30 days.)
A health care financing and delivery system that provides comprehensive health care for subscribing members in a particular geographic area using managed care techniques. Most HMOs require that you only utilize physicians within their network, often going so far as to require you to choose a primary care physician who directs most courses of your treatment.
HMO (Health Maintenance Organization)::
Under this federal law (known as HIPAA), group health plans cannot deny coverage based solely on an individual’s health status. This law also gives employees who change or lose their jobs better access to health coverage, guarantees renewability and availability to certain employees and limits exclusions for pre-existing conditions. For example, under this law, group health plans must credit any employee the amount of time that they spent on any health plan prior to the new plan, which is known as “prior credible coverage.” A pre-existing condition will be covered without a waiting period when an employee joins a new group plan if the employee has been insured for the previous 12 months with credible health insurance, with no lapse in coverage of 63 days or more. This means that if an employee has been insured for 12 months or more, the employee will be able to go from one job to another and his or her pre-existing coverage will remain intact — without additional waiting periods. However, if an employee has a pre-existing condition and was not covered previously for 12 months before joining a new plan, the longest the employee will have to wait for their pre-existing coverage to be covered is 12 months.
HIPPA – Health Insurance Portability and Accountability Act of 1996:
A named beneficiary whose rights to life insurance policy proceeds cannot be canceled or changed by the policyowner unless the beneficiary consents.
The party to the insurance contract who promises to pay losses or benefits. Also, any corporation engaged primarily in the business of furnishing insurance to the public.
A person or organization covered by an insurance policy, including the “named insured” and any other parties for whom protection is provided under the policy terms.
An organization that has been chartered by a governmental entity to transact the business of insurance.
Any interest a person has in property that is the subject of insurance, so that damage to this property would cause the insured a financial loss.
A life insurance policy wording that provides a time limit (e.g. two years) on the insurer’s right to dispute a policy’s validity based on material misstatements in the application.
Legal principle that specifies an insured should not collect more than the actual cash value of a loss but should be restored to approximately the same financial position as existed before the loss.
Compensation to the victim of a loss, in whole or in part, by payment, repair, or replacement.
Insurance Protection of a business against financial loss caused by the death or disablement of a vital member of the company, usually individuals possessing special managerial or technical skill or expertise. Also called key executive insurance.
The happening of the event for which insurance pays.
Insurance that pays a specified sum of money to designated beneficiaries if the insured person dies during the policy term.
Insurance that provides compensation for a harm or wrong to a third party for which an insured is legally obligated to pay.
A legal obligation to compensate a person harmed by one’s acts or omissions.
Termination of a policy due to nonpayment of premiums.
Medical and funeral expense coverage for bodily injuries sustained from or while occupying an insured vehicle, regardless of the insured’s negligence.
Medical Payments Coverage:
Non-formulary drugs often require a higher copayment. Non-formulary drugs are those that have not yet been reviewed or have been denied formulary status, typically because they offer no extra benefit over the drugs already on a plan’s formulary list.
A group of doctors, hospitals and other health-care providers contracting with a health policy, usually to provide care at special rates and to handle paperwork with the health plan.
Failure to use a generally acceptable level of care and caution.
Any medical care costs not covered by insurance, which must be paid by the insured.
Health care services received outside the HMO, POS or PPO network.
The face amount of a life insurance policy, or amount of money that will be paid to a beneficiary upon the death of an insured. This amount will be reduced by the amount of any outstanding policy loan.
A sworn statement that usually must be furnished by the insured to an insurer before any loss under a policy may be paid.
Proof of Loss:
The length of time that a new group member must wait before becoming eligible to enroll in a group insurance plan.
A general or family practitioner who serves as the insured’s personal physician and first contact with a managed care system. The PCP will usually direct the course of your treatment and/or refer you to other doctors and/or specialists in the network.
Primary Care Physician (PCP):
The person designated as the first to receive the proceeds of a life insurance policy upon the death of the insured.
The price for insurance coverage as described in the insurance policy for a specific period of time.
A risk whose physical condition, occupation, mode of living and other characteristics indicate a prospect for longevity superior to that of the average longevity of unimpaired lives of the same age.
An organization where providers are under contract to an insurance company or health plan to provide care at a discounted or negotiated rate. Typically, you can see any doctor in the PPO network without requiring special approval, and you usually do not need to choose a primary care physician. Most PPOs will also allow you to seek care outside of the PPO network; however, the benefits are usually reduced and the insured has a greater out-of-pocket expense.
PPO (Preferred Provider Organization):
The amount of time an insurance contract or policy lasts.
An individual with an ownership interest in an insurance policy.
The person who buys insurance.
A loan from a life insurer to the owner of a policy that has a cash value.
The maximum amount an insured may collect or for which an insured is protected, under the terms of the policy.
The part of the insurance contract that lists basic underwriting information, including the insured’s name, address and description of insured locations as well as policy limits.
The written forms that make up the insurance contract between an insured and insurer. A policy includes the terms and conditions of the coverage, the perils insured or excluded, etc.
A general term for ordinary life and whole life insurance policies that remain in effect as long as their premiums are paid.
The cause of loss or damage.
An in-force life insurance policy for which no further premium payments are required.
The possibility or chance of loss or injury.
An addition to an insurance policy that becomes a part of the contract.
A life insurance policy whose designation as beneficiary can be revoked or changed by the policy owner at any time prior to the insured’s death.
A renewable life policy permits the owner of the policy to automatically renew the policy beyond its original term by acceptance of a premium for a new policy term without evidence of insurability.
Renewable Term Life Insurance:
The process by which a life insurance company puts back in force a policy that has lapsed or has been canceled for nonpayment of premium.
The payment of an amount of money by an insurance policy for a covered loss.
Sometimes called an “extra-risk” policy, an insurance policy issued at a higher-than-standard premium rate to cover the extra risk where, for example, an insured is a smoker.
The pricing factor upon which the insurance buyer’s premium is based.
A major medical policy provision under which the insurer will pay 100% of the insured’s eligible medical expenses after the insured has incurred a specified amount of out-of-pocket expenses in deductible and coinsurance payments.
A risk that cannot meet the normal requirements of an auto insurance policy. Protection is provided in consideration of a waiver, a special policy form, or a higher premium charge. Substandard risks may include those persons who are rated because of poor driving habits.
The risk category that is composed of proposed insureds who have a likelihood of loss that is not significantly greater than average.
Standard Risk Rate:
A person who, according to a company’s underwriting standards, is entitled to purchase insurance protection without extra rating or special restrictions.
An agreement between a claimant or beneficiary to an insurance policy and the insurance company regarding the amount and method of a claim or benefit payment.
The highest amount an insurance company will pay on certain items of personal property.
Theft Limit (or Inside Policy Limits):
Life insurance under which the benefit is payable only if the insured dies during a specified period. If the insured survives beyond that period, coverage ceases. This type of policy does not build up any cash or nonforfeiture values.
The maximum dollar amount of a covered expense that is considered eligible for reimbursement under a major medical policy.
Usual, Customary and Reasonable Fee:
Urgent care is appropriate when a medical urgency arises which necessitates immediate care, but has not reached the level of extreme emergency. Most managed care plans require you to seek urgent care at a participating urgent care facility or hospital.
Flexible premium, two-part contract containing renewable term insurance and a cash value account that generally earns interest at a higher rate than a traditional policy. The interest rate varies. Premiums are deposited in the cash value accounts after the company deducts its fee and a monthly cost for the term coverage.
One not acceptable for insurance due to excessive risk.
The process of reviewing applications for coverage. Applications that are accepted are then classified by the underwriter according to the type and degree of risk.
(a) A company that receives the premiums and accepts responsibility for the fulfillment of the policy contract; (b) the company employee who decides whether or not the company should assume a particular risk; (c) the agent who sells the policy.
An agreement attached to a policy which exempts from coverage certain disabilities or injuries that otherwise would be covered by the policy.