Accidental Death and Dismemberment (AD&D) Rider - A supplement to life insurance policies that provides additional cash benefits if an accident results in the death of the insured or the loss of two limbs or both eyes.
Actual Cash Value - The value of property based on its current replacement cost minus depreciation (age, condition, and time in use).
Adjuster - A person responsible for investigating and settling insurance claims on behalf of an insurer.
Agent - An individual authorized by an insurance company to represent and sell their insurance policies.
Annual Out-of-Pocket Maximum - A limit set by an insurance plan on the total amount a policyholder has to pay out of pocket for covered expenses during a calendar year.
Annuity - A contract that provides a series of periodic payments to the annuitant at regular intervals.
Applicant - The individual or entity applying for an insurance policy.
Application - The form used by an insurer to gather information from the applicant, including personal details and desired coverage.
Assigned Risk - Insurance provided through a pool of insurers to cover risks that are typically considered undesirable, assigned by state laws.
Auto Collision Coverage - Optional auto insurance that covers damage to the vehicle caused by collisions with another vehicle or object.
Auto Comprehensive Physical Damage Coverage - Optional auto insurance that covers damage to a car from non-collision events such as fire, theft, vandalism, or weather-related incidents.
Automatic Premium Loan - A provision in some life insurance policies that automatically uses the policy's accumulated cash value to pay overdue premiums and prevent policy lapse.
B
Beneficiary - A person or entity designated to receive the death benefit of an insurance policy upon the insured’s death.
Binder - A temporary insurance contract issued to provide coverage until the final policy is issued.
Binding Receipt - A receipt that provides temporary insurance coverage until an insurer either approves or rejects the application.
Broker - A marketing professional who represents insurance carriers and helps customers arrange for coverage.
Buy-Sell Agreement - A contractual agreement ensuring the transfer of a deceased business owner's interest in the business at a predetermined price or formula.
C
Calendar Year Deductible - The total amount an insured must pay in medical expenses within a calendar year before insurance payments begin for covered expenses.
Cancellation - The termination of an insurance policy before its scheduled expiration, initiated by either the insurer or the insured.
Case Management - A process that evaluates the necessity of medical treatments and explores alternative solutions, particularly for costly care.
Cash Value (Cash Surrender Value) - The amount a policyholder can receive if they terminate or cancel a life insurance policy before its maturity.
Certificate of Insurance - A document that provides evidence of coverage under a group insurance policy, detailing the benefits and conditions.
Claim - A request made by the insured to an insurance company for payment due to a covered loss.
COBRA (Consolidated Omnibus Budget Reconciliation Act) - A federal law requiring employers to offer continuation of group health benefits to employees (and their dependents) after certain qualifying events.
Coinsurance Provision - A clause in insurance that specifies the percentage of the cost the insured must pay after meeting the policy's deductible.
Collision Insurance - A type of auto insurance covering damage to the insured vehicle resulting from a collision, regardless of fault.
Commission - A fee or percentage of the premium paid to an insurance agent for selling a policy.
Comprehensive Auto Insurance - Coverage for damage to a vehicle caused by incidents other than collisions, such as theft or natural disasters.
Compulsory Auto Liability Insurance - State-mandated minimum auto insurance coverage that motorists must carry.
Conditions - The terms and requirements stated in an insurance policy that outline the obligations of both the insured and the insurer.
Contingent Beneficiary - A secondary beneficiary who will receive the policy benefits if the primary beneficiary is no longer alive.
Contract - A legally binding agreement between two or more parties.
Conversion Privilege - The option to convert a term life insurance policy to a whole life insurance policy without needing to provide additional health information.
Convertible Term Life Insurance - Term life insurance that can be converted into a permanent insurance policy.
Copay - A fixed amount an insured person must pay for certain medical services, with the insurance covering the rest.
Creditable Coverage - Prior health insurance coverage that reduces the waiting period for pre-existing condition exclusions when switching to a new policy.
D
Declination - The insurer's refusal to insure an individual after careful evaluation of the application for insurance and any other pertinent factors.
Deductibles - 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 your company will pay $750. Deductibles help to keep insurance rates reasonable. Raising the amount of the deductible lowers the cost of insurance.
Dependent - 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.
Depreciation - Reduction in the value of property due to age and use.
Double Indemnity - 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 causes, within 60 or 90 days after such injury.
E
Emergency Room Visit - A visit to a hospital for treatment of an accidental injury or for emergency medical care. To qualify as an emergency, the symptoms must be sudden, severe and require immediate medical attention. Some states judge emergencies by the "prudent layperson" law, meaning that the health plan must cover a trip to the emergency room "if a prudent layperson, acting reasonably, would have believed that an emergency medical condition existed." Keep in mind that some plans won't cover a trip to the emergency room if the symptoms appeared more than 24 hours earlier.
Endorsement - Attachment or addendum to an insurance policy; an endorsement changes the contract's original terms.
Exclusions and Limitations - Conditions, situations and services not covered by the health plan.
Extended Term Life Insurance - 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.
F
Face Amount - The amount stated in the life insurance policy as the death benefit.
Floater - Additional coverage for items not otherwise included in the basic policy (such as jewelry or antiques).
G
Grace Period - The specified length of time, after a Life or Health premium payment is due in which the insured may make the payment and keep the policy in force. (Usually 30 days.)
Group Health Insurance - An insurance plan designed for a group, such as employees of a single employer. Insurance is provided to them under a single policy.
Guaranteed Renewable Policy - 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.
Guaranty Association - Established by each state to support insurers and protect consumers in the case of insurer insolvency, guaranty associations are funded by insurers through assessments.
I
Indemnification - Compensation to the victim of a loss, in whole or in part, by payment, repair, or replacement.
Indemnity - 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.
Insolvent - Having insufficient financial resources (assets) to meet financial obligations (liabilities).
Insurable Risk - The conditions that make a risk insurable are (a) the peril insured against must produce a definite loss not under the control of the insured, (b) there must be a large number of homogeneous exposures subject to the same perils, (c) the loss must be calculable and the cost of insuring it must be economically feasible, (d) the peril must be unlikely to affect all insureds simultaneously, and (e) the loss produced by a risk must be definite and have a potential to be financially serious.
Incontestable Clause - 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.
Insurable Interest - 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.
Insurance Company - An organization that has been chartered by a governmental entity to transact the business of insurance.
Insured - 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.
Insurer - 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.
Irrevocable Beneficiary - A named beneficiary whose rights to life insurance policy proceeds cannot be canceled or changed by the policyowner unless the beneficiary consents.
J
Key Employee - 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.
K
L
Lapse - Termination of a policy due to nonpayment of premiums.
Liability - A legal obligation to compensate a person harmed by one's acts or omissions.
Liability Coverage - Insurance that provides compensation for a harm or wrong to a third party for which an insured is legally obligated to pay.
Life Insurance - Insurance that pays a specified sum of money to designated beneficiaries if the insured person dies during the policy term.
Lifetime Maximum - The maximum amount of money a plan will pay towards healthcare services over the course of the insured's lifetime.
Living Benefits - Living benefit options for term life include: Accelerated death benefits. This living benefit pays out a portion of your term life policy if you ever face a terminal illness. This gives you needed cash to cover medical expenses, debt and more.
Loss - The happening of the event for which insurance pays.
Loss Expense - Allocated - Handling expenses, such as legal or independent adjuster fees, paid by an insurance company in settling a claim which can be definitely charged to that particular claim.
Loss Expense - Unallocated - Salaries and other expenses incurred in connection with the operation of a claim department of an insurance carrier which cannot be charged to individual claims.
M
Medical Payments Coverage - Medical and funeral expense coverage for bodily injuries sustained from or while occupying an insured vehicle, regardless of the insured's negligence.
Misrepresentation - Act of making, issuing, circulating or causing to be issued or circulated an estimate, an illustration, a circular or a statement of any kind that does not represent the correct policy terms, dividends or share of surplus or the name or title for any policy or class of policies that does not in fact reflect its true nature.
N
Negligence - Failure to use a generally acceptable level of care and caution.
Network - A group of doctors, hospitals and other health-care providers contracting with a health plan, usually to provide care at special rates and to handle paperwork with the health plan.
No-fault Insurance - A system of compensation enacted by law in many states under which indemnification is made by the insured's own insurance company regardless of who is at fault. Details of this system vary significantly from state to state.
Non-Formulary Drugs - 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.
P
Paid-up Policy - An in-force life insurance policy for which no further premium payments are required.
Peril - The cause of loss or damage.
Personal Injury Protection - First-party no-fault coverage in which an insurer pays, within the specified limits, the wage loss, medical, hospital and funeral expenses of the insured.
Physical Damage - Damage to or loss of the automobile resulting from collision, fire, theft or other perils.
Permanent Insurance - A general term for ordinary life and whole life insurance policies that remain in effect as long as their premiums are paid.
Personal Property Insurance - Protects against the loss of, or damage to property other than real property (real estate) caused by specific perils.
Point-of-Service Plan - An HMO (see Health Maintenance Organization) plan that also incorporates an indemnity plan option allowing members to obtain medical care from providers outside of the HMO network at a reduced benefit and at greater out-of-pocket expense.
Policy - 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.
Policy Declarations - 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.
Policy Limits - The maximum amount an insured may collect or for which an insured is protected, under the terms of the policy.
Policy Loan - A loan from a life insurer to the owner of a policy that has a cash value.
Policyholder - The person who buys insurance.
Policyowner - An individual with an ownership interest in an insurance policy.
Policy Period - The amount of time an insurance contract or policy lasts.
PPO (Preferred Provider Organization) - 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.
Pre-Existing Condition - (1) According to most individual health insurance policies, an injury that occurred or a sickness that first appeared or manifested itself before the policy was issued and that was not disclosed on the application for insurance. (2) According to most group health insurance policies, a condition (excluding pregnancy) for which an individual received medical care during the three months to six months immediately prior to the enrollment of his coverage.
Pre-Existing Conditions Provision - A health insurance policy provision stating that benefits will not be paid for any illness and/or condition that existed prior to one becoming an insured under the particular health plan in question, until the insured has been covered under the policy for a specified period.
Preferred Risk - 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.
Premium - The price for insurance coverage as described in the insurance policy for a specific period of time.
Primary Beneficiary - The person designated as the first to receive the proceeds of a life insurance policy upon the death of the insured.
Primary Care Physician (PCP) - 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.
Policyholder - The person who buys insurance.
Probationary Period - The length of time that a new group member must wait before becoming eligible to enroll in a group insurance plan.
Proof of Loss - A sworn statement that usually must be furnished by the insured to an insurer before any loss under a policy may be paid.
Property Damage Coverage - An agreement by an insurance carrier to protect an insured against legal liability for damage by an insured automobile to the property of another.
Protection Amount - 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.
Q
R
Rate - The pricing factor upon which the insurance buyer's premium is based.
Rated Policy - 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 has had a DUI (Driving Under the Influence) or other traffic violations.
Rebating - Giving any valuable consideration, usually all or part of the commission, to the prospect or insured as an inducement to buy or renew. Insurance rebating is prohibited by law.
Reimbursement - The payment of an amount of money by an insurance policy for a covered loss.
Reinstatement - 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.
Replacement Cost Coverage - In the event of a covered loss, you may be reimbursed for the cost you incur to replace many of your damaged contents with similar property, brand new. The total amount you'd be reimbursed is subject to the terms and conditions of your particular policy, including applicable deductible and coverage limits.
Renewable Term Life Insurance - 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.
Revocable Beneficiary - A life insurance policy whose designation as beneficiary can be revoked or changed by the policyowner at any time prior to the insured's death.
Rider - An addition to an insurance policy that becomes a part of the contract.
Risk - The possibility or chance of loss or injury.
S
Salvage - Recovery made by an insurance company by the sale of property which has been taken over from the insured as a part of loss settlement.
Settlement - 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.
Standard Industrial Classification (SIC) - The Standard Industrial Classification (SIC) system is a series of number codes that attempts to classify all business establishments by the types of products or services they make available. Establishments engaged in the same activity, whatever their size or type of ownership, are assigned the same SIC code. These definitions are important for standardization. Insurance companies use SIC codes to determine specific rates for various industries. HealthInsurance.com uses these codes to ensure that you receive the best possible rate for your occupation.
Standard Risk - A person who, according to a company's underwriting standards, is entitled to purchase insurance protection without extra rating or special restrictions.
Standard Risk Rate - The risk category that is composed of proposed insureds who have a likelihood of loss that is not significantly greater than average.
Subrogation - Subrogation refers to an insurance company seeking reimbursement from the person or entity legally responsible for an accident after the insurer has paid out money on behalf of its insured. The general rule is that, after paying your claim, your insurer is "subrogated" to the rights of your policy and can "step into your shoes" to go after or sue the negligent party on your behalf.
Substandard Risk - 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.
Stop-Loss Provision - A major medical policy provision under which the insurer will pay 100 percent 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.
T
Term Insurance - 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.
Theft Limit (or Inside Policy Limits) - The highest amount an insurance company will pay on certain items of personal property. For instance, some policies have a $5,000 limit for computers. If an item would cost more than the limit to replace, you may need to purchase supplementary coverage.
U
Umbrella Liability Insurance - Umbrella liability insurance is becoming more popular as people are realizing how inexpensive an umbrella policy and umbrella coverage can be. See how umbrella liability protection can be a nice added cushion of insurance on top of your existing policies.
Underwriter - (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.
Underwriting - 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.
Unilateral - A distinguishing characteristic of a life insurance contract in that it is only the insurance company that pledges anything. The policyowner does not even promise to pay premiums; therefore, it is really a one-sided contract favoring the policyowner.
Uninsured (Underinsured) Motorist Coverage - A form of insurance that pays the policyholder and passengers in his/her car for bodily injury caused by the owner or operator of an uninsured or inadequately insured automobile.
Uninsurable Risk - One not acceptable for insurance due to excessive risk.
Universal Life - 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.
Urgent Care - 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.
Usual, Customary and Reasonable Fee - The maximum dollar amount of a covered expense that is considered eligible for reimbursement under a major medical policy.
V
Waiver - An agreement attached to a policy which exempts from coverage certain disabilities or injuries that otherwise would be covered by the policy.