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INSURANCE GLOSSARY

A-B-C-D-E-F-G-H-I-J-K-L-M-N-O-P-Q-R-S-T-U-V-X-Y-Z

A

Accidental death and dismemberment rider
An additional benefit rider or endorsement that provides for an amount of money in addition to the death benefit of a life insurance policy.
The additional amount is payable only if the insured dies or loses any two limbs or the sight of both eyes as the result of an accident.

Accidental death benefit rider
An additional benefit rider or endorsement that provides for an amount of money in addition to the basic death benefit of a life insurance policy. This additional amount is payable only if the insured dies as the result of an accident.

Acturial department
The department in a life and health insurance company responsible for seeing that the company's operations are conducted on a mathematically sound basis.

Actuary
Technical expert in life insurance, particularly in mathematics. The person in this job applies the theory of probability to calculate mortality rates, morbidity rates, lapse rates, premium rates, policy reserves, and reserves, and other values.

Agency System
A distribution system in which insurance companies use their own commissioned agents to sell and deliver insurance policies.

Annuity
A series of payments made or received at regular intervals.

Annuity mortality table
A tabulation of probabilities of dying at each age. Used by actuaries to calculate premiums and reserves for annuities in which benefits are paid only if a designated person is alive.

Application
A form that must be completed by an individual or other party who is seeking insurance coverage.

Assignment of benefits
An authorization directing an insurer to make payment directly to a provider of benefits, such as a physician or dentist, rather than to the insured.

Attending Physician's Statement (APS)
A written statement from a physician who has treated, or is currently treating, a proposed insured or an insured for one or more conditions.

Aviation exclusion
A life insurance contract provision which specifies that the death benefit is not payable if the insured dies as a result of certain aviation activities.

B

Beneficiary
The person or other party designed to receive life insurance policy proceeds.

Benefit
The amount of money paid when an insurance claim is approved.

Blended Rates
Group mortality rates that are based partially on a group's own experience and partially on manual rates.

Blue Cross Plan
A hospital expense insurance plan offered by a regionally operated health care provider affiliated with a large national nonprofit health care organization.

Blue Shield plan
A physician expense insurance plan offered by a regionally operated health care provider affiliated with a large national nonprofit health care organization.

Business-continuation insurance
A type of business insurance designed to provide funds so the remaining partners in a business, or the remaining stockholders in a closely held corporation, can buy the business interest of a deceased or disabled partner or stockholder.

Business insurance
Insurance that is intended to serve the insurance needs of a business rather than the needs of an individual.

C

Cash surrender value
The amount of money adjusted for factors such as policy loans or late premiums, that the policy owner will receive if the policy owner cancels the coverage and surrenders the policy to the insurance company.

Cash Value
Amount of money, before adjustment for factors such as policy loans or late premiums that the policy owner will receive if the policy owner allows the policy to lapse or cancels the coverage and surrenders the policy to the insurance company.

Claim
A request for repayment under the terms of an insurance policy.

Claim administration department
Department in a life and health insurance company responsible for processing claims.

Claimant
The person or party making a formal request for payment of benefits due under the terms of an insurance contract.

Claim examiner
An employee of an insurance company whose responsibilities include investigating claims, approving the claims that are valid and denying those that are invalid or fraudulent.

Coinsurance
A type of reinsurance plan in which the ceding company pays the reinsurer part of the premium paid by the insured, minus a proportionate share of the commission and premium taxes associated with the policy that is being reinsured and a portion of the ceding company's general overhead expenses.

Commission
The amount of money paid to an insurance agent for selling an insurance policy. A commission is always calculated as a percentage of the premium.

Comprehensive major medical insurance
A form of health insurance coverage that combines the features and benefits of a hospital-surgical expense policy and the features and benefits of a major medical policy.

Coordination of benefits clause
Provision in a group health insurance policy specifying that benefits will not be paid for amounts reimbursed by other group health insurers.

Customer service department
Department in a life and health insurance company that is charged with providing assistance to the company's policy owners, agents, and beneficiaries.

D

Death Benefits
Amount of money paid or due to be paid when a person insured under a life insurance policy dies.

Deductible
Flat amount that an insured must pay before the insurance company will make any benefit payments under a health insurance policy.

Disability Income Insurance
Type of health insurance designed to compensate insured people for a portion of the income they lose because of a disabling injury or illness.

Distribution expense
Expenses involved in making insurance products available to the general public.

Double Indemnity
Death benefit coverage that pays an additional benefit equal to the basic death benefit of the policy if the insured's death is accidental.

E

Eligibility requirements
Conditions a person must meet in order to be a participant in a group life insurance, group health insurance, or retirement plan.

Evidence of insurability
Proof that a person is an insurable risk.

Exclusions
Losses for which an insurance policy does not provide benefits.

F

Foreign Corporation
Company that is incorporated under the laws of another state.

Fraudulent Claim
Type of claim that occurs when a claimant intentionally uses false information in an attempt to collect policy proceeds.

Full-service plan
Health insurance plan which pays in full the actual cost, if reasonable and customary, of services received, rather than a specified maximum for each service.

Face Amount
Amount stated as payable at the death of the insured or in the case of an annuity at the maturity of the contract.

Family deductible
Single deductible which, when satisfied, relieves a family of the burden of satisfying a deductible for each individual family member.

Fee Schedule
Schedule or list of maximum benefits that will pay under a group medical contract for certain listed procedures.

Field underwriting
Occurs when an agent gathers pertinent information about the proposed insured and reports that information on the application blank so the home office underwriter can make an underwriting decision.

First-dollar coverage
Medical expense insurance under which no deductible or coinsurance is applicable to covered expenses.

First-year commission
An amount paid to an insurance agent based on a policy's first annual premium amount.

G

General Agent
An independent entrepreneur who is under contract to the insurer.

Grace Period
Length of time (usually 31 days) after a premium is due and unpaid during which the policy, including all riders, remains in force.

Group Insurance
Insurance that provides coverage for several people under one contract, called a master contract.

H

Health insurance
Insurance covering medical expenses or income loss resulting from injury or sickness. Health insurance is a general category that includes many different types of insurance coverage, including hospital confinement insurance, hospital expense insurance, surgical expense insurance, major medical insurance, disability income insurance, dental expense insurance, prescription drug insurance, and vision care insurance.

Health maintenance organization
Organization that provides comprehensive health care services for subscribing members in a particular geographic area.

History statement
Attending physician's statement concerning a specific health history admitted by the proposed insured.

Hospital-surgical expense insurance
Type of health insurance that provides benefits related directly to hospitalization costs and associated medical expenses incurred by an insured for treatment of a sickness or injury.

I

Inspection report
Report made by a consumer reporting agency concerning a proposed insured's lifestyle, occupation, and economic standing.

Insurability statement
Questionnaire that an insurer may ask an applicant to complete when a considerable amount of time has elapsed between the time the application is received and the time the policy is actually issued.

Insurable interest
Condition in which the person applying for an insurance policy and the person who is to receive the policy benefit will suffer an emotional or financial loss if the event insured against occurs.

Insurance
System of protection against loss in which a number of individuals agree to pay certain sums of money, called premiums, to create a pool of money which will guarantee that the individuals will be compensated for losses cause by events such as fire, accident, illness or death.

Insurance agent
Representative of an insurance company who sells insurance.

K

Key-person insurance
Life insurance purchased by a business on the life of a person whose continued participation in the business is necessary to the firm's success and whose death or disability would cause financial loss to the company.

L

Lapse
Termination of an insurance policy because premiums were not paid when they came due.

Level premiums
Premiums that remain the same each year that the life insurance policy is in force.

Level term insurance
Type of term insurance that provides a death benefit that remains the same during the period specified.

M

Major Medical Insurance
Type of medical expense insurance that provides broad coverage for most of the expenses associated with treating a covered illness or injury.

Managed care
Name given to a broad spectrum of techniques by which insurance companies attempt to reduce health care costs by participating in decisions concerning the treatment given to those they insure.

Material Misrepresentation
A misstatement by an applicant that is relevant to the insurer's acceptance of the risk, because, if the truth had been known, the insurer would not have issued the policy or would have issued the policy on a different basis.

Medicaid
Government-funded program in the United States that provides medical expense coverage for eligible people under age 65 who are indigent and meet certain other criteria.

Medical application
Application for insurance in which the proposed insured is required to undergo some type of medical examination.

Medical expense insurance
Types of health insurance designed to pay for part or all of an insured's health care expenses, such as, hospital room and board, surgeon's fee, visits to the doctors' offices, prescribed drugs, treatments and nursing care.

Mode of premium payment
Frequency with which premiums are paid for example, annually, quarterly, monthly.

Mortality charge
Cost of insurance protection element of a universal life policy. This cost is based on the net amount at risk under the policy, the insured's risk classification at the time of policy purchase, and the insured's current age.

Mutual Insurance Company
Insurance company owned by policy owners rather than stockholders.

Medical report
Report on a proposed insured's health that is completed by a physician and is based on a physical examination and questioning of the proposed insured.

Medicare
United States government program that provides medical expense coverage to persons age 65 and over and to people with certain disabilities, as specified by Congress.

P

Paramedical Report
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.

Partnership insurance
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.

Policy
A written document that serves as evidence of an insurance contract and contains the pertinent facts about the policy owner, the insurance coverage, the insured, and the insurer.

Policy anniversary
The anniversary of the date on which a policy was issued.

Policy charge
An amount that an insurer adds to the gross premium to help cover the insurer's expenses.

Policy owner
Person or party who owns an individual insurance policy. The policy owner is not necessarily the person whose life is insured.

Policy proceeds
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 rider.

Pre-exisiting conditions
Individual health insurance, an injury that occurred or sickness that first manifested itself the policy was issued and that was not disclosed on the application.
In group health insurance, a condition for which an individual received medical care during a specified period, usually three months, immediately prior to the effective date of coverage.

Pre-exisiting conditions provision
Provision in most medical expense insurance policy stating that until the insured has been covered under the policy for a certain period, the insurer will not pay benefits for any pre-existing condition.

Premium
Payments or one of a series of payments, required by the insurer to put an insurance policy in force and keep it in force.

Primary beneficiary
Party or parties who have first rights to receive policy benefits when the benefits of an insurance policy become payable.

Primary provider of benefits
Medical expense plan that pays the full benefits provided by its plan before any benefits are paid by another medical expense plan.

R

Rated policy
Policy issued to insure a person classified as having a greater-than-average likelihood of loss. Policy may be issued with special exclusions, with a premium rate that is higher than the rate for a standard policy or with exclusions and a higher than standard premium rate.

Reasonable and customary charge
Amount of money most frequently charged for certain medical procedures in a given geographical area.

Reserve
Liability account that identifies the amount of assets needed to pay future claims.

Revocable beneficiary
A named beneficiary whose right to life insurance policy proceeds is not vested during the insured's lifetime and whose designation as beneficiary can be cancelled by the policy owner at any time prior to the insured's death.

Rider
Amendment to an insurance policy that becomes a part of the insurance contract and expands or limits the benefits payable.

Risk Class
Group of insureds who present a substantially similar risk to the insurance company.

S

Stock insurance company
An insurance company that is owned by people who buy shares of the company's stock.

Stop-loss provision
Health insurance policy provision specifying that 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 under the coinsurance feature.

Substandard Premium rate
Premium rate charged for insurance on an insured person classified as having a grater than average likelihood of loss.

Substandard risk class
Risk class made up of people with medical or non-medical impairments that give them a greater than average likelihood of loss.

Suicide Clause
Life insurance policy wording which specifies that the proceeds of the policy will not be paid if the insured takes his or her own life within a specified period of time (usually two years) after the policy's date of issue.

Surrender charge
Option of withdrawing your money from a whole, universal, or variable universal life insurance policy. When you withdraw funds, you pay a surrender charge for early withdrawal. The fee is expressed as a percentage of the amount of the amount withdrawn.

T

Term Insurance
Life insurance under which the benefit is payable only if the insured dies during a specified period of time.

Third-party administrator
Organization that administers an insurance contract for a self-insured group but that does not have financial responsibility for paying claims. Self-insured group pays its own claims.

Travel accident benefit
Accidental death benefit often included in group insurance policies issued to employer-employee groups. This benefit is payable only if an accident occurs while an employee is traveling for the employer.

U

Underwriter
Person or organization that guarantees that money will be available to pay for losses that are insured against. In this sense, the insurance company is the underwriter.

Underwriting
Process of assessing and classifying the potential degree of risk that a proposed insured represents.

Underwriting department
Department in a life and health insurance company that selects the risk that the company will insure. Underwriting department tries to make sure that the actual mortality or morbidity rates of the company's insureds do not exceed the rates assumed when premium rates were calculated.

Underwriting requirements
Instructions that indicate what evidence of insurability is required for a given situation and which of several optional information sources will be needed to provide underwriters with necessary information.

Uninsurable risk class
Group of people with a risk of loss so great that an insurance company will not offer them insurance.

V

Variable life insurance
Form of whole life insurance under which the death benefit and the cash value of the policy fluctuate according to the investment performance of a separate account fund.

Variable universal life insurance
Form of whole life insurance that combines the premium and death benefit flexibility of universal life insurance with the investment flexibility and risk of variable life insurance.

W

War exclusion provision
Life insurance policy provision that limits an insurer's liability to pay a death benefit if the insured's death is connected with war or military service.

Whole life insurance
Life insurance that remains in force during the insured's entire lifetime, provided premiums are paid as specified in the policy. Whole life insurance also builds a savings elements called the cash value as a result of the level premium approach to funding the death benefit.

Y

Yearly renewable term insurance
Term life insurance that gives the policy owner the right to continue the coverage at the end of each year. This renewal right continues for a specified number of years or until the insured reaches the age specified in the contract.