Glossary
accidental death benefit rider (ADB rider)
A supplementary rider
that grants an additional amount of money to the normal death benefit in a life
insurance policy. This is payable only if the death is the result of an
accident.
accidental death and dismemberment rider (AD&D rider)
A
supplementary rider that grants an additional amount of money to the normal
death benefit in a life insurance policy. This is payable only if death is the
result of an accident, or if the insured loses two or more limbs or eyesight as
the result of an accident. Partial payments are sometimes made for the loss of
one limb or partial eyesight loss.
accident perils
A classification used to evaluate types of danger
(perils) in a certain occupation. These may include use of dangerous machinery,
risk of falling, or other hazards.
accrued benefit
The amount of benefit that has accumulated for a
particular member of a benefit pension plan at a given time.
accumulated funding
deficiency
The amount of money by which a pension plan falls below the
minimum required funding, according to federal or state laws. Also called a
funding deficiency.
accumulated value
Total value of money invested, including all
interest earned.
accumulation option
An insurance policy dividend option in which
dividends are kept on deposit with the insurer to accumulate
interest.
Ownership shares in a variable annuity (premiums paid are credited as accumulation units, which are used to buy annuity units).
actively at work provision
An insurance provision stating that if
an employee is not at work on the day on which coverage begins, the start of
coverage is delayed until the employee returns to work.
actuarial assumptions
Assumptions that actuaries make in regard to
earnings, mortality, turnover, interest, and other areas necessary for
calculating premium rates.
The method of calculating annual contributions by the plan sponsor in order to meet the designated benefits of a pension plan.
actuarial department
The department in an insurance company
responsible for statistically calculating risk, premium rates, life
expectancies, etc., and doing research to develop the necessary
statistics.
The valuation of a plan by an actuary to determine if assets are sufficient to meet any payouts.
actuary
An expert in the technical aspects of insurance, such as
calculating mortality rates, premium rates, and other important values.
adjustable life insurance
Life insurance in which the policyholder
can change the amount of coverage or premium. If this is done, the plan switches
to another one with the desired attributes.
admitted reinsurer
A reinsurer who is licensed to operate in a specific area.
admitting privileges
The right of a doctor to admit patients to a
particular hospital or medical facility.
agency agreement
The agreement between principal and agent that
defines the agent's duties and authority.
agency by appointment
An agency relationship in which a principal
appoints an agent to act on the principal's behalf.
agency by ratification
An agency relationship in which the
principal ratifies an agent's unauthorized act.
agency relationship
A relationship in which an agent is authorized
to perform certain acts on behalf of a principal.
agent
An insurance-company representative licensed by the state
who solicits, negotiates, or effects contracts of insurance, and services the
policyholders for the insurer.
agent's statement
A portion of the insurance application in which
the agent lists any knowledge or opinions concerning the applicant not otherwise
revealed on the application.
age of majority
The age at which an individual can legally enter
into a contract.
aggregate funding methods
Funding method in which the necessary
amount of contributions is calculated for all participants, instead of
separately for each individual participant.
aggregate mortality table
A mortality table based on all insured
lives over time.
all-causes deductible
A deductible that must be met only once
during a set period of time, such as a calendar year.
allocated funding
Funding method in which a portion of the total
plan's funds are allocated to individual participants.
annuitant
A person receiving or entitled to receive an
annuity.
A series of payments made on a regular schedule. There are many types of annuities, such as whole life annuity in which the payments are received for the life of the payee.
annuity certain
An annuity that is made regardless of whether or
not the payee dies.
annuity period
The period of time between annuity payments.
annuity units
Ownership shares in a variable
annuity.
Authority that a third party believes an agent to possess due to the actions, intentional or not, of the principal that the principal did not expressly grant to the agent.
application
The initial forms used when applying for
insurance.
assignee
The party to whom contractual rights are transferred in
an assignment.
assignment
The transfer of ownership rights in a contract from one
party or person to another.
assignment of benefits
The transfer of benefits to another. This
could be used to pay a physician directly, instead of having the insurance
company pay the policyholder, who will then pay the physician.
assignor
The person or party who transfers the contractual rights
in an assignment.
assuming company
See reinsurer.
assumption reinsurance
Reinsurance in which the transfer is
permanent and the ceding company is no longer a party of the insurance
agreement.
attending physician's statement
A statement from the physician who
treated or is treating the insured or the applicant.
automatic dividend option
The insurance dividend used if the
policyholder does not select another option.
average indexed monthly earnings
The figures used to calculate
Social Security and other governmental benefits. It is an average of earnings on
which Social Security tax has been paid, adjusted for inflation.
aviation exclusion
An insurance provision stating that death
benefits are not payable if the death occurs as a result of aviation
activities.
backdating
Listing the effective date as being prior to the
application date, in order to lower premium rates.
band grading
Grouping insurance policies according to
death-benefit amounts.
basic death benefit
The death benefit as originally listed,
excluding any supplementary riders or provisions.
basic hospital
Insurance coverage for inpatient care (in a
hospital or other medical facility) only.
The individual or party designated to receive policy proceeds.
benefit of survivorship
Annuity payments will continue as long as
the recipient is alive.
benefit schedule
In a group insurance plan, a schedule that lists
coverage amounts provided to each class of insured individuals.
benefits
Payments made by an insurance company when an insurance
claim is approved, such as at time of death, retirement, or disability.
binder
A temporary agreement that provides coverage until a policy
is written or delivered.
binding premium receipt
Initial premium receipt in which coverage
is immediately effective but only lasts until a decision is made on the
insurance application.
birthday rule
When both parents have insurance, benefits for
dependent children are paid by the plan of the parent whose birthday occurs
first in the year.
blended rates
Mortality rates based on a combination of experience
rates and manual rates.
Blue Cross plan
Hospital-expense plan operated in conjunction with
a nonprofit healthcare organization.
Blue Shield plan
Physician-expense plan operated in conjunction
with a nonprofit healthcare organization.
break in service
Amount of time between leaving a company and
returning to work at the same company; used in calculating benefits in regard to
leaves of absence, short-term disability, and other extended periods of
unemployment.
broker
An individual or organization that is licensed by the state
and seeks insurance on behalf of a customer. Brokers do not work with a single
entity but can work with multiple insurance companies or customers.
brokerage distribution system
A system of selling insurance that
uses commissioned brokers.
bundled insurance product
An insurance policy in which the factors
used to determine premium and cash values are not identified separately.
business insurance
Insurance designed to serve business needs
rather than individual needs.
business continuation insurance
Insurance designed to allow
remaining partners or shareholders to purchase the portion of the company owned
by a deceased partner or owner.
Buyer's Guide
A publication that provides information to consumers
concerning life insurance. In some states, it is required by law that the
insurance company supply a copy to all applicants.
cafeteria plan
See flexible benefits plan.
cancellable policy
An insurance policy that can be terminated at
any time by the insurer.
cancellation
Termination of an insurance policy or coverage while
the policy is still in effect.
capacity
The largest amount of insurance the insurer will
underwrite.
capitation
The preset limit paid to a health-maintenance
organization (HMO). The amount of service used is irrelevent.
career agent
An agent who works full-time out of the insurance
company's field office instead of being an independent contractor who has an
agreement to do business with the insurance company.
career average benefit formula
Formula by which retirement
benefits are calculated, based upon compensation for the entire amount of time
in the plan.
carry-over provision
A provision stating that expenses incurred at
the end of a benefit period, usually the last three months of the year, that
apply to the deductible may also be used to cover the next period's deductible.
This protects the insured from having to pay a double deductible simply because
an injury or illness occurred at the end of a period.
case management
A
system used to ensure that individuals receive appropriate healthcare services
at a reasonable cost. It can be used to identify alternate, cheaper treatment
methods that do not sacrifice the quality of care. Also called claim
management.
cash-balance pension plan
A pension plan in which the amount each
participant has accrued (contributions and interest) is listed, and in which,
upon retirement, the participant may remove the entire amount in a lump sum,
assuming it is vested.
Cash or Deferred Arrangement (CODA)
See Section 401(k) Plan.
cash-payment option
An option in life-insurance plans in which
dividends are paid in cash to the policyholder.
cash-refund option
An insurance option that states that if any
proceeds remain after the death of the beneficiary, the balance of the benefits
will be paid to the contingent payee in a lump sum.
cash surrender value
The amount of money due the policyholder if
the policy is surrendered to the insurance company.
cash surrender value option
An option allowing the policyholder to
discontinue premiums and surrender the policy, receiving the cash surrender
value.
cash value
The amount of money due the policyholder if the
insurance policy is lapsed or cancelled.
ceding company
In a reinsurance deal, the original insurer who purchases reinsurance.
certain payment
A payment that will be made regardless of
circumstances.
certificate of indebtedness
A certificate given to the beneficiary
of an insurance policy, stating the minimum interest rate and frequency of
payments under the interest settlement option.
certificate of insurance
A certificate specifying the type and
amount of insurance coverage as well as the beneficiary.
cession
The portion of insurance that is ceded to a reinsurer.
change-of-condition provision
A provision stating that the policy
will not become effective unless all conditions in the application are still
true and valid at the time the policy is delivered.
change of occupation provision
A provision allowing the insurance
company to change benefits or premiums if the insured changes occupations.
claim
A request by the insured or someone connected with the
insured (healthcare provider) for the insurance company to pay for the loss
incurred.
claim administration department
The department in an insurance
company that processes claims.
claim examiner
An employee of the insurance company who examines
all claims for validity, and approves or denies payment accordingly.
claim frequency rate
The percentage of insureds who file claims,
or the number of claims filed over a set period; this is used to calculate
premiums.
claim management
See case management.
claimant
The individual or party requesting payment of benefits
according to the insurance policy.
class beneficiary designation
The beneficiary is designated as a
group instead of naming each person separately, such as children.
clean-up fund
A life insurance benefit used to pay expenses and
outstanding debts, in case of death.
closing
The process of finalizing the purchase of insurance or
other financial products, by having the purchaser read and sign the final
documents as well as any other legal details.
COBRA (The Consolidate Omnibus Budget
Reconciliation Act of 1985)
Federal law that requires companies with 20
or more employees to offer individuals who would otherwise lose their insurance
coverage (i.e., through termination) the option to continue their group
healthcare coverage. Also, some states require that smaller companies, with as
few as two employees, offer the ability to extend their coverage.
See Section 401(k) Plan.
coinsurance
The percentage of expenses that the policyholder must
pay after the deductible has been paid in full. In some cases, a co-payment is
used instead.
A provision requiring the insured to pay coinsurance on certain expenses.
COLA (cost-of-living
adjustment)
Increases in benefits based on increases in the cost of
living.
combination clause
A clause in disability insurance stating when
the definition of total disability changes from the inability to perform the
current occupation to the inability to perform any occupation.
combination plan
A pension plan in which part of the funding is
allocated and part is not; the unallocated portion is placed in a conversion
fund for later use.
commission
The fee, generally a percentage of the premium amount,
paid to an insurance agent for selling a policy.
common-accident provision
A provision within insurance policies
stating that if two or more members of a family are injured in a single
accident, they pay a single deductible between them, instead of the separate
deductibles.
common-disaster clause
An insurance provision requiring the
beneficiary to survive the insured by a certain length of time in order to
receive the policy benefits.
community rating
Using the same premium rates for a specific group
without considering loss experience.
comprehensive major-medical insurance
Health insurance that
includes the benefits of a major-medical policy and a hospital-expense
policy.
conditionally renewable policy
An insurance policy that the
insurer can refuse to renew for predetermined reasons.
confirmation certificate
Certificate provided to a beneficiary,
stating the amount of insurance proceeds, current interest rate, and other
account information.
conservation
The attempt by an insurance company to prevent
policies from lapsing.
Consolidated Omnibus Budget Reconciliation Act of 1985
See COBRA.
consumer report
A report on an individual's credit history or
other personal information; regulated under the Fair Credit Reporting Act.
consumer-reporting agency
A company that generates consumer
reports.
contestable period
The length of time during which an insurer can
challenge the validity of an insurance policy.
contingencies
Events that affect risk that may or may not
occur.
contingent
beneficiary
See secondary
beneficiary.
contingent payment
A payment made only if a certain condition is
met.
continuous premium life
insurance
See straight-life insurance.
contract of adhesion
An agreement prepared by one side, which is
either accepted or rejected by the other side. There is no bargaining.
contribution limit
Maximum legal limit on any contribution to an
employee benefit account.
contributory group insurance
Group plans in which the insured
individuals pay a portion of the cost.
contributory plan
Any plan in which the participants pay a portion
of the cost.
conversion privilege
The right to convert from group to individual
coverage; this generally occurs when the person in question leaves the group
that was supplying group coverage.
convertible term insurance
Term insurance that may be converted to
whole life insurance by the policyholder without having to update or show new
evidence of insurability.
coordination-of-benefits clause
A provision in insurance policies
stating benefits will not be paid if another insurance policy has already
covered the expenses.
co-payment
Similar to coinsurance in that the policyholder must
pay a portion of the expenses in the form of a flat fee, such as a set
co-payment for doctor visits.
See COLA.
credibility percentage
The consideration given to actual claim
experience in determining future claims or dividends.
credit life insurance
Insurance meant to pay off a loan if the
insured dies before it is repaid.
current review
The monitoring of the insured's treatment while in
a hospital or other medical facility to determine if continued care is
necessary.
current settlement option rates
Settlement option rates based on
interest rates currently earned by the insurance company.
curtailment
A change to a plan that reduces benefits or
contributions.
death benefit
The amount of money paid to the beneficiary upon the
death of the insured.
decline
A refusal by an insurance company to grant insurance
coverage.
decreasing term insurance
Insurance in which the amount of
coverage decreases during the term of coverage.
decrement
A reduction in the number of participants in an
employee-benefits plan.
deductible
The amount of covered expenses the insured must pay
before any benefits are received from the insurance company.
deferral date
A date occurring after the normal premium due date
(generally on the one-year anniversary of issue) when the premiums for the next
year are due.
deferred annuity
An annuity in which the initial payment is
postponed.
deferred compensation plan
A compensation plan in which benefits,
such as retirement benefits, are paid at a later time.
deferred premiums
Premiums that are deferred until a date later
than the normal due date (generally the one-year anniversary of issue).
defined benefit formula
A formula used to determine the benefits
due each participant in a defined benefit plan.
defined benefit plan
A group benefits plan that pays benefits
based on a prespecified formula.
defined contribution formula
A formula used to determine the
amount of contributions made toward a group benefits plan
defined contribution plan
A group benefits plan in which the
amount of employer contributions made is defined according to a set formula.
denial of claim
Refusal by an insurance company to pay for
services obtained, such as a hospital visit.
dependent
An individual who relies on someone else for
support.
dependent life insurance
Life insurance covering dependents of the
primary insured.
deposit term insurance
A form of insurance with much larger
premiums the first year than in subsequent years.
deviated rate
A premium rate that is above the prima facie
rate.
diagnostic related groups
A payment system in which benefit
payments are based on the individual diagnosis of a patient instead of the
actual medical service received.
direct response marketing
A way in which insurance carriers sell
directly to the customer without using insurance agents, generally through
direct mail, telephone, or media advertisements such as television
commercials.
disability
Inability to work due to an injury or sickness.
disability benefits
Benefits paid while the insured is
disabled.
disability income insurance
Insurance that provides a percentage
of regular income to an individual who has become disabled and is unable to
work.
disabled life annuity
An annuity paid as long as an individual is
still alive and disabled.
disintermediation
Removal of an intermediary in order to earn
higher profits, such as an insurance carrier selling directly to the customers
without using independent insurance agents.
dividend
A payment made to an insured by the insurance company
that reflects excess premiums.
dividend accumulations
The accumulation of funds when the
policyholder leaves dividends on deposit with the insurer; often done to
increase interest earnings from the insurer's investments.
dividend options
The options policyholders have in selecting how
they will receive their shares of dividends from the insurance company.
doctrine of reasonable expectations
Court rulings stating that the
reasonable expectations of policyholders and their beneficiaries will be honored
even if the insurance policy does not support them. These serve to eliminate
fine-print clauses that alter the meaning of the policy from what the insured
was lead to believe.
double indemnity
A doubling of the basic death benefit if the
insured's death is precipitated in a certain manner, most often through an
accident.
drinking criticism
Evidence that the insured is suffering from
alcohol or drug abuse.
early retirement age
An age earlier than the normal retirement age
at which time the participant can receive benefits. such as pension benefits,
although they may be reduced.
election period
A 60-day period following notification of an
insured's eligibility for COBRA continuation coverage, during which the
individual can accept or decline the coverage.
eligibility period
For group health insurance, the period of time
in which a new employee may enroll in the group coverage.
eligibility requirements
Requirements for joining a group
health-insurance plan or another insurance/financial plan.
employee assistance programs
Employee counseling services that are
often fully confidential and can cover a wide range of mental-health issues.
Employee Retirement Income Security Act of 1974
See ERISA.
endorsement
See rider.
endorsement method
A method of changing the beneficiary of an
insurance policy in which the policyholder notifies the insurance company and an
endorsement is added to the policy.
enhancement type policy
Life insurance in which a portion of the
dividends paid for term insurance guarantee a preset total death benefit.
enrolled actuary
An actuary who is a member of the Joint Board for
the Enrollment of Actuaries, a federal agency.
entire contract provision
An insurance provision stating that the
policy itself and any attachments are the whole agreement between the
policyholder and the insurance company; nothing else is relevant.
EPO (Exclusive Provider
Organization)
A health system in which any physician within the
contracted network can be visited without prior approval or referrals by the
insurance company or a primary-care physician. No services received outside the
network, however, are covered.
Insurance in which the benefit levels are based on a portfolio of equity investments and may change over time depending on the performance of the investments.
equity pension
Pensions in which the benefit levels are based on a
portfolio of equity investments and may change over time depending on the
performance of the investments.
equivalent single payment
A single payment that replaces others of
equal combined value.
equivocal suicide
A suicide in which there is doubt as to the
intention of the deceased to die.
ERISA (Employee Retirement Income
Security Act of 1974)
A federal law guaranteeing the rights of
pension plan members, rules and standards for investing pension plan assets, and
requirements for disclosing plan funding and provisions.
error and omissions insurance
Insurance that protects the insured
from injurious actions, such as negligence, by an agent.
evidence of insurability
Evidence that an individual's risk falls
within an insurable range.
excess interest
Interest paid above the guaranteed amount during a
settlement.
A program permitting the insured to replace one policy with another one without having to show new or updated evidence of insurability.
exclusion
Specific conditions, causes, or issues listed in the
policy that are not covered by an insurance policy.
Exclusive Provider Organization
See EPO.
Statutes that prevent the insurance company from incurring liability in cases in which a conflict in policy claims has arisen after the insurance company has paid the claims to a party in good faith.
experience rating
The use of a group's history of premiums and
claims to calculate premium rates. (A history of high claims, for example, could
result in increased premium costs.)
experience refund
A refund of premiums when the claims experience
proves to be superior to that used when the premium was calculated.
expiration date
The date when an insurance policy ends.
express authority
The authority a principal explicitly grants an
agent.
face amount
In a life-insurance policy, the amount to be paid to
the listed beneficiary upon the death of the insured.
factor table
An underwriting tool used to determine net worth
through the practice of multiplying annual income by various factors to find the
maximum amount of insurance available.
Fair Credit Reporting Act
See FCRA.
family deductible
A single group deductible covering all insurance
policies within a family instead of multiple separate deductibles.
family insurance policy
A single life-insurance policy that covers
all members of a family.
federally qualified HMO
An HMO that meets the requirements of the
Health Maintenance Organization Act of 1973. Under the law, these HMOs receive
advantages, such as eligibility for federal loans.
FCRA (Fair Credit Reporting
Act)
Federal law requiring consumer-reporting agencies to be impartial
and maintain the consumer's right to privacy.
fee for service
See indemnity.
fee schedule
A list of dollar amounts paid for certain
procedures.
fee schedule basis
Compensation plans in which physicians or
health-service organizations are paid a set amount per service, according to a
fee schedule.
fiduciary
A person or organization that manages or controls money
or financial assets belonging to others, or that offers financial advice for a
fee.
field office
A local sales office.
final average benefit formula
Formula by which retirement benefits
are calculated, based on an average of the last few years of employment.
financial institution
Any organization, such as a bank or
insurance company, that accepts and pays out money in a situation in which fees
or interest are paid for the use of money.
financial settlement
A lump sum paid to the insured that ends the
insurer's responsibilities under the policy.
fire insurance
Insurance coverage for losses resulting from
fire.
first-year commission
Commission paid to an insurance agent based
on the amount of the premium the first year the policy is in effect.
fixed-payment option
An insurance settlement option in which the
beneficiary is paid in installments until the proceeds from the policy and any
interest run out.
fixed-period option
An insurance settlement option in which the
beneficiary is paid in a series of payments instead of a single payment.
flat amount formula
A method of determining benefits by which all
participants receive a flat, periodic benefit amount, such as $1,000 a
month.
flat percentage of earnings formula
A method of determining
benefits by which participants receive a percentage of pre-retirement
compensation, or in the case of disability, predisability income.
flexible benefits
plan
An employee benefits plan in which the employees have several
options as to the type or amount of benefits. Also called a cafeteria
plan.
foreseeability
The reasonable expectation that an injury or harm
will occur to the insured.
forfeiture
The unvested portion of a pension or other financial
plan that remains after a participant withdraws from the plan.
fractional premiums
Premiums that are paid in installments through
the year rather than in total once a year.
fraudulent claim
A claim in which the claimant knowingly uses
false information in order to collect on the policy.
free examination period
The period of time during which the
policyholder can return the policy for a full refund of any premium paid.
full-service plan
Health insurance plan that pays the full cost,
provided it qualifies as reasonable and customary.
fully contributory
A situation in which the insured individual in
a group plan pays the entire cost of the insurance.
funding agency
The group that holds the assets (money) of a
pension plan or other financial plan.
funding deficiency
See accumulated funding deficiency.
future service
The prospective service an employee will give to
the employer following entrance into a pension plan until the normal date or
retirement.
future-service benefits
Benefits provided in exchange for service
in the future.
GAAP (generally accepted accounting
principles)
Accounting principles used by the majority of companies in
the United States.
generally accepted accounting principles
See GAAP.
good-health provision
A provision stating that the insurance
policy is void if the applicant was not in good health at the time the policy
was signed or delivered.
grace period
The period of time after a premium due date has
passed during which the policy remains active even though payment has yet to be
made.
graded premium whole life insurance
Whole life insurance in which
premiums increase at specified times until they reach a preset maximum level
where they then remain.
gross premium
The total amount the policyholder pays for
insurance, including premiums and any additional expenses.
group deferred annuity
An annuity plan in which deferred annuities
are purchased to provide retirement benefits for the participants of the group
plan.
group insurance
An insurance contract that provides coverage to a
group.
guaranteed issue limit
The maximum amount for which an insurance
company will insure an individual without receiving information concerning their
insurability; used in group insurance.
An addendum to an insurance policy that allows the policyholder to purchase additional insurance at a preset rate at preset times without having to show updated evidence of insurability.
guaranteed-issue insurance
Group insurance in which all members of
the group who meet certain conditions automatically receive coverage without
individual underwriting.
guaranteed-renewable policy
An insurance policy that states that
the policy will continue to be renewed for a set period of time.
guaranty association
An organization whose purpose is to protect
policyholders in the event an insurance company becomes insolvent.
Health-care decision counseling
Counseling services that assist
people in making informed decisions concerning medical tests and treatment;
these are sometimes provided by insurance companies.
health insurance
An insurance policy that protects the insured in
case of illness or injury, and that pays for the appropriate medical treatments
required, based upon limits established within the individual policies.
Health Insurance Portability and Accountability Act of 1996
See
HIPAA.
health maintenance organization
See HMO.
HIPAA (Health Insurance Portability
and Accountability Act of 1996)
Federal law that protects health
coverage when the insured changes or loses a job. This is done by guaranteeing
portability - defined in this case as using previous health coverage (the
coverage possessed before leaving employment) to reduce or eliminate any
preexisting-condition exclusions that may apply under future insurance plans.
This does not mean current coverage is maintained after leaving employment,
although various state laws allow for coverage to continue on a temporary
basis.
history statement
Physician's statement regarding the health
history of the insured.
HMO (health maintenance
organization)
An insurance plan in which individuals or their employers
pay a fixed monthly fee for service regardless of the amount of medical costs
incurred. To receive the benefits, however, the insured must use a primary-care
physician within the system for all initial treatments except in
life-threatening emergencies. Hospitals or specialists must be recommended by
the primary-care physician and be within the HMO network.
hold-harmless release
A release stating that the payee of a claim
will reimburse the insurance company if another claimant appears and
successfully challenges the initial disbursement of benefits.
homeowner insurance
Insurance covering the risks of owning a home,
such as fire or vandalism.
hospital confinement insurance
A form of health insurance that
provides a preset benefit amount for each day spent in a hospital, regardless of
the actual medical expenses incurred.
hospital expense insurance
Health insurance that provides benefits
directly connected to the cost of hospitalization, such as surgery, outpatient
care, nursing home or convalescent care, and physician fees incurred while in a
hospital.
hour of service
Defined under ERISA, as an hour for which an employee is paid or is due to
be paid.
A classification used to evaluate types of danger (perils) in a certain occupation, such as exposure to poisons, chemicals, or extreme temperatures.
immediate annuity
An annuity in which payments begin in the first
period after purchase.
impairment
An aspect of health or lifestyle, including occupation,
that could affect mortality.
impairment rider
A health-insurance rider limiting coverage for a
specific health condition.
implied authority
Authority a principal intends for the agent to
possess but that hasn't been expressly granted.
incentive coinsurance provisions
Provisions granting incentives to
perform certain acts, such as taking preventative medicine, in order to have the
insurer pay a higher proportion of expenses.
incident of ownership
Any policy right, such as the right to
assign the coverage, cancel the policy, or change the beneficiary.
income-replacement ratio
Percentage of pre-retirement income
needed to maintain the same standard of living after retirement. This is less
than the pre-retirement income, due to a decrease in taxes and other expenses
after retirement.
incontestable clause
A provision in the insurance policy that
defines a time limit, generally two years, after which the insurance company
agrees not to dispute the validity of the policy.
increasing term insurance
Term insurance in which the death
benefit increases over time, either at preset points or based a formula, such as
cost of living.
indemnity
An insurance
health plan that allows absolute freedom in selecting physicians or medical
facilities, and, unlike other health plans, self-referral to a specialist. A
yearly deductible must be met before coinsurance is paid by the insurance
company, and coinsurance is set at a predetermined rate in which the insurance
company pays that percentage of costs. Also called fee for service.
indexed life insurance
Life insurance in which the premium rate
and death benefit both rise annually based upon the Consumer Price Index.
individual insurance
Insurance issued to a single individual.
individual retirement account
See IRA
initial premium
The first payment for an insurance
policy.
An investigative report from a consumer-reporting agency on the insured's lifestyle, occupation, and other indicators of economic standing.
installation
Administrative activities that take place between the
decision to purchase an insurance policy and the issuing of the policy.
installment certificate
A certificate given to the beneficiary of
an insurance policy stating the benefit payment information.
installment refund option
An insurance option that states if any
proceeds from a policy remain after the beneficiary's death, they will be paid
to the contingent payee in a series of installments.
insurability provision
An insurance provision stating that the
policy will not become effective unless the insured is still considered
insurable at the time of delivery.
insurability statement
A statement ascertaining if there have been
changes in insurability between the time of application and policy issue.
insurable interest
A valid concern for the person applying for the
insurance policy that is required by law. The insured person must suffer a loss
if the event insured against occurs.
insurance
Protection against loss in which premiums are paid in
exchange for benefits should a loss occur.
insurance agent
A sales representative of an insurance
company.
insured
The policyholder or party protected by the insurance
policy.
insurer
The insurance company or party that provides the insurance
policy.
insurer-administered group insurance plan
A group insurance plan
in which the insurer handles all administrative work.
integrated deductible
A deductible that can be satisfied by
payments in another portion of the plan. (For example, if a person pays the full
deductible in a basic medical plan, the deductible in the hospital plan is
considered paid.)
interest option
An insurance option in which the policy proceeds
are left on deposit for a set period of time and the interest from those
proceeds is paid to the beneficiary. After the period of time has elapsed, the
policy proceeds are paid.
interim insurance
agreement
An agreement that provides temporary insurance for a short
period of time, such as during the period in which regular insurance is being
written. Also called temporary insurance agreements.
internal replacement
Surrendering one insurance policy in order to
buy another one from the same insurer.
Claim settlement in which the insurance company turns the proceeds over to a court, with the understanding that the court should decide who is the proper recipient.
investigative consumer report
A consumer report that involves
interviews with knowledgeable parties in order to gather information.
investment-sensitive insurance
Insurance in which the benefits are
based on the insurer's investment earnings, generally with a guaranteed
minimum.
involuntary plan termination
The termination of a pension plan by
a party other than the plan sponsor, generally a governmental organization.
IRA (individual retirement
account)
A savings plan in which participants can make pretax deposits
into an investment account.
irrevocable beneficiary
A beneficiary who cannot be removed later
by the policyholder, without the beneficiary's consent.
issuing bank
A bank that sells and issues insurance policies in
its own name.
joint and survivor annuity
Annuities in which payments are made to
multiple annuitants and which continue until all annuitants are deceased.
joint and survivorship option
Insurance settlement option in which
payments are made to multiple parties and continue until all parties are
deceased.
joint whole-life insurance policy
A single insurance policy that
covers two individuals and usually pays the proceeds when the first insured
individual dies.
juvenile insurance policy
An insurance policy on a child.
Keogh Act (Self-Employed Individuals
Tax Retirement Act of 1962)
A federal law allowing self-employed
individuals to save money for retirement by depositing money in a
government-approved account that is managed by a financial institution; similar
to a Section 401(k) Plan.
key-person insurance
Insurance designed to protect a business firm
against the loss of business income resulting from the disability or death of an
employee in a significant position.
lapse
Termination of an insurance policy because premiums were not
paid on time.
late-remittance offer
An offer by the insurance company to accept
overdue premiums, even if past the grace period, without requiring additional
applications or paperwork in order to reinstate a lapsed policy.
legal-actions provision
Restrictions in an insurance policy
concerning when a claimant may sue to collect a disputed claim amount - the
minimum waiting period before suing is allowed and the cutoff point when it is
no longer permitted.
length of stay
Amount of time spent in a hospital or other medical
facility.
level-commission schedule
A commission schedule that has the same
commission rate for all years of the policy.
level-premium annuity
A deferred annuity in which equal premium
payments are made over time, such as annually, until the benefit payments are to
begin.
level-premium system
Pricing system in which premiums remain the
same for the life of the policy.
level premiums
Premiums that remain the same for the life of the
policy.
level term insurance
Insurance in which the benefits remain the
same over the specified period.
liability insurance
Insurance providing coverage for those who
have been found to have legal responsibility for injuring others or their
property.
life annuity
An annuity made for the length of the annuitant's
life.
life annuity with period certain
A life annuity that will continue
to pay the annuity to another person selected by the annuitant if the annuitant
should die; these payments continue for the length of a pre-selected period.
life income option
An insurance option in which the beneficiary is
paid in equal payments for the length of the beneficiary's life.
life insurance
Insurance that protects against economic loss by
paying a specified sum to beneficiaries upon the death of the insured.
lifetime maximum
Under an insurance policy, the maximum amount
paid for the insured while under the policy.
limit
Maximum amount a policy will pay.
limited-coverage policy
An insurance policy covering only specific
illnesses, such as cancer.
limited-payment whole life insurance
Whole life insurance that
does not require premiums to be paid during the entire life of the insured;
premiums stop at a set point, but coverage remains.
living-benefit rider An insurance rider specifying that, under certain circumstances such as terminal illness, the insured can take a portion of the death benefit before death.
long-term-care policy
A benefits plan that provides a specific
dollar benefit or a percentage of expenses charged for nursing home care, home
health-care, and adult day care if a covered person suffers a loss of functional
or cognitive capacity.
long-term disability
Disability lasting for an extended period of
time as defined in the insurance policy.
long-term disability insurance
Insurance plans that provide income
for an individual who has become disabled and is no longer able to work. The
compensation provided is either a flat amount or based on a percentage of the
regular income.
The ratio of claims to premiums (claims divided by premiums).
maintenance expenses
Costs involved in maintaining a policy,
including processing, making dividend payments, and the time customer-service
personnel spend assisting policyholders.
major-medical insurance
Medical insurance covering the majority of
expenses associated with illness or injury.
managed care
A system of medical care that attempts to reduce
costs while providing quality care under the control of the insurance company.
(HMOs and PPOs are examples of managed care.)
mandated benefit
A benefit required by state or federal law that
must be included in an insurance policy.
manual rates
Preset rates used for broad groups when there is no
history concerning a particular insured group.
master policy
The contract between an insurance company and a
group-insurance policyholder that provides insurance for more than one
person.
matching contributions
Contributions by the employer made to an
employee-benefits plan, such as a 401(k), that match the employee contributions
at a set percentage.
material fact
Any relevant fact related to underwriting decisions
concerning policies.
material misrepresentation
False statements by an applicant or
policyholder that affect whether or not the insurer will accept the risk and
issue a policy.
matured endowment
An endowment insurance policy that is payable
due to having reached the end of its term.
maximum benefit
The largest benefit amount available to a plan
participant. IRS regulations determine this amount.
maximum benefit period
Maximum period of time during which
benefits are paid.
maximum dollar limit
Maximum amount of money that will be paid for
claims during a set period of time (one year, lifetime, etc.).
Medicaid
A governmental program that provides medical coverage for
people under 65 who meet certain requirements.
medical application
An insurance application requiring medical
tests or an examination.
medical-expense insurance
Health insurance covering all or a
portion of medical expenses.
medical report
A physician's report on the insured's health.
Medicare
A governmental program providing medical coverage for
people 65 and over who meet certain requirements.
Medicare supplement
Supplemental medical-expense coverage
providing benefits for expenses not covered by Medicare.
minimum deposit arrangement
A system in which the policyholder can
apply the initial year's cash value of an insurance policy to the premium amount
of that same year.
minimum service requirement
Requirements that employees be
employed for a set amount of time before being eligible to join a group
plan.
misquote
An error in estimating the insurance premium.
misrepresentation
False or misleading statements on the part of
the insurance company or the applicant to sway the other into accepting a
policy.
misstatement-of-age provision
A provision in an insurance policy
that delineates the results if it is learned that the insured has misstated
their age in the application. (Age is often a significant factor in the
calculation of premiums and benefits.)
mode of premium payment
The timing in which premiums are paid,
such as monthly or annually.
modified net premiums
Net premiums that do not remain the same
throughout the life of the policy. (They are generally lower in the first
year.)
modified premium life insurance
A method generally used in whole
life insurance in which the premiums for the first few years are lower than
normal, and the premiums for the years following are higher than normal.
money purchase pension plan
A pension plan in which the
participant contributes a set percentage of income. Benefits equal the
contributions plus gains from investment.
monthly outstanding balance method
A method of paying the premium
in monthly installments.
moral hazard
Risk that an applicant for insurance will
intentionally lie or conceal information that is pertinent to the policy.
morbidity
Illness or disability.
morbidity rate
The likelihood that an individual in a specific
group will become ill or suffer a disability. (This is used to determine
premiums for that specific group.)
morbidity table
A chart showing morbidity rates generally based
upon age.
mortality curve
The difference in mortality rates related to age
(often shown as a line graph).
mortality experience
The actual number of deaths for a particular
group.
mortality rate
The frequency of death within a particular
group.
mortality table
The difference in mortality rates related to age
(often shown as a chart).
mortgage-redemption insurance
Insurance that pays the remaining
mortgage on the insured's home in case of death.
multi-employer plan
Pension or other benefits plans involving more
than one employer, so that if an employee moves to another employer in the plan,
their coverage continues unabated.
multi-employer trust
Insurance plans that cover the employees of
multiple employers.
mutual-benefit method
A method of funding life insurance in which
the members of a group are each charged an equal fee upon the death of one
member to cover the death benefit. (This is rarely used now except for some
fraternal orders.)
mutual insurance company
An insurance company owned by the
policyholders instead of stockholders or other individuals.
NAIC (National Association of Insurance
Commissioners)
An association of state insurance commissioners
established in order to create consistent insurance regulations.
National Association of Insurance Commissioners
See NAIC.
national brokerage houses
Independent companies that provide
advice in risk management and employee benefits.
National Organization of Life and Health Guaranty Associations
See
NOLHGA.
needs analysis
Analyzing the customer to determine his or her
insurance needs.
net premium
The amount of money that must be collected in order to
meet the benefits to be paid.
net single premium
The amount of money that must be collected at
the time of issue in order to meet the benefits to be paid later (present value
of expected benefits).
NOLHGA (National Organization of Life
and Health Guaranty Associations)
An organization made up of state
guaranty associations that provides information and resolves issues resulting
from the insolvency of insurers licensed in multiple states.
nonadmitted reinsurer
A reinsurer who is not licensed to operate in a specific
area.
noncancellable and guaranteed-renewable policy
An insurance policy
in which the insurance company can neither raise premiums nor terminate the
policy.
noncontributory group insurance
Group insurance in which the
entire premium is paid by the group policyholder, and participants pay no
portion of the insurance premium.
noncontributory plan
A plan in which all contributions are made by
the sponsor and nothing is paid by the individual participants.
nonelective contributions
Non matching employer contributions to a
group plan, such as a 401(k).
nonmedical application
An insurance application that does not
require a medical examination.
nonmedical supplement
A supplemental report outlining the
applicant's health history.
nonparticipating policy
A policy or annuity in which the
policyholder does not receive dividends.
nonqualified annuity
An annuity funded with money that has already
been taxed.
nonqualified deferred compensation plan
Benefits plan that does
not meet the legal requirements to be pretaxed like a qualified plan.
nonretroactive disability benefits
Disability benefits that are
paid only after a set length of time following the time the disability
occurred.
normal cost
The amount needed to cover a single year of retirement
benefits for a plan participant or for a plan itself.
normal retirement age
The age at which a participant can retire
and receive full benefits.
numerical rating system
A system of ranking risk in which
numerical values are assigned to various factors according to their impact on
mortality.
occupation class
A group of occupations that present a similar
level of risk.
option
Any choice or decision that policyholders can make
concerning settlements, dividends, or other aspects of the policy.
optionally renewable policy
An insurance policy that can be
renewed only if the insurer chooses to do so.
ordinary life insurance
Life insurance with monthly premiums and
unlimited (within reason or legal constraints) maximum death benefits.
outliers
Patients with unique conditions or illnesses that cannot
be classified under the standard groups.
out-of-pocket maximum
A preset amount that the plan participant
must pay before the insurance company pays 100% of the expenses.
outpatient
Healthcare services that do not involve an overnight
stay in a hospital or other medical facility.
overinsurance
Coverage exceeding the probable loss to which it
applies.
overinsurance provision
Provisions stating that, in some cases,
benefits will be reduced if a condition of overinsurance exists.
overlined A situation in which an insurance company has accepted a level of insurance above its capacity at a certain risk level.
paid-up policy
An insurance policy that still provides benefits
even though all premiums have been paid.
paramedical report
Any medical report created by medical personnel
other than a physician. (They are often used as part of an insurance
application.)
partial disability
A disability that affects some but not all
duties or that affects the amount of time the individual can work (from
full-time to part-time).
partial disability
benefit
A benefit, generally a portion of the full disability amount,
paid when the insured suffers a partial disability. Also called residual
disability benefit.
partial-plan termination
Termination of an employee-benefits plan
or pension for some participants but not all.
partial-surrender
provision
A provision in an insurance policy that allows the
policyholder to take a certain amount of cash from the policy's cash value, thus
decreasing the cash value. Also called a withdrawal provision.
participating policy
An insurance policy in which dividends are
paid to the policyholder.
past service
The amount of service an employee gives before a
pension plan is instituted or before the employee enrolled.
payee
The person to whom benefits are payable.
payroll-deduction plan
Premium payment plan in which the premium
amount is deducted from the employee's paycheck.
PCP (primary-care provider)
The
healthcare professional who is the first source for overseeing an individual's
medical needs. (The PCP refers the individual to specialists or hospitals as
needed.)
peer review group
Local groups of physicians or medical experts
who promote ethical practices in their industry.
pension
Income paid to a person who has retired for the remainder
of their life.
Pension Benefit Guaranty Corporation
The organization that insures
benefits in defined benefit pension plans and guarantees that benefits will be
paid regardless of what happens to the pension fund.
pension fund
The institution that manages the assets used to pay
pensions, or the assets themselves.
per-capita beneficiary designation
A group of beneficiaries among
whom only those who survive the insured will collect on policy proceeds.
per-cause deductible
A deductible that must be met for each
separate illness or injury before insurance benefits are paid.
per-cause maximum
The maximum amount of money a medical-expense
policy will pay for any particular illness or injury.
peril
The cause of damages or a loss, such as a flood or
theft.
period certain
The period of time during which an insurance
company guarantees that benefits will continue to be paid.
permanent and total disability
A medical condition that prevents
any return to employment.
per stirpes beneficiary designation
A system under which the
beneficiary's descendants will receive the beneficiary's share of the insurance
proceeds, if the beneficiary dies before the insured.
physical examination provision
A provision that allows the insurer
to have the insured examined by a doctor of the insurer's choice at the
insurer's expense.
plan document
A document outlining the terms of an
employee-benefits plan.
plan participant
An individual taking part in a plan who shares in
the responsibilities and benefits listed in the plan.
plan sponsor
The party that maintains a plan, such as a pension
plan.
point-of-service program (POS)
Healthcare delivery method offered as an option of an employer's indemnity
program in which employees coordinate their healthcare needs through a
primary-care physician.
policy
A written contract of insurance.
The annual anniversary of the date on which a policy was issued.
policy fee
An additional cost added to the premium to cover
expenses. It is a set fee that is not based on policy size.
policyholder
The party or individual who owns an insurance policy
(contract).
policy limit
The maximum amount a policy will pay.
policy loan
A loan made to a policyholder by the insurer and
secured by the policy's cash value.
policy proceeds
The amount of benefits the beneficiary receives
after all adjustments, fees, and other factors are taken into consideration.
policy provisions
Statements describing the operation of the
policy.
policy summary
A summary of the policy, containing any data
required by law, that is given to the applicant during the application
process.
policy year
A single year, beginning when the policy is
issued.
pooling
The combination of several small groups into one large
group for insurance purposes, such as obtaining lower premiums or more group
benefits.
portability
The ability to transfer benefits from one plan to
another or from one employer to another.
portfolio
The collection of products offered by an insurance
company.
See point-of-service program.
post notice
A requirement under the Fair Credit Reporting Act that
if an insurance company makes an adverse decision concerning an applicant based
on information obtained from a consumer reporting agency, they must notify the
applicant of this.
power of agency
The agent's right to act on behalf of an
insurer.
PPO (preferred provider
organization)
A managed-care system in which the insured can choose from
a network of healthcare providers for medical attention, or the insured can go
outside the group. A discounted fee is available for insureds who use the listed
healthcare providers.
pre-admission review
Prior authorization from the insurer is
required before an insured can be admitted to a hospital, except in emergency
situations.
pre-admission certification
Written approval by the insurance
company or representative for an insured to be admitted to a hospital or other
medical facility.
pre-authorized payment system
A form of payment in which the
insured authorizes both the bank and the insurance company to allow automatic
withdrawals of an account in order to pay premiums.
predetermination of benefits provision
A provision stating that in
situations in which costs will exceed a certain amount, the medical provider
must submit treatment plans to the insurer before any services are undertaken in
order to determine what amount is payable by the insurance plan.
preexisting condition
A medical condition that existed prior to
obtaining insurance.
preexisting-conditions provision
A provision in an insurance plan
that states that medical expenses relating to preexisting conditions will not be
covered until the insured has been enrolled in the plan for a certain length of
time.
preference beneficiary clause
A clause stating that if no specific
beneficiary exists, all benefits will be paid in a preset order according to
lists of individuals within the policy.
preferred provider organization
See PPO.
preferred risk class
A risk class whose expected mortality is
below that of the standard risk class.
premium
Payment charged by an insurance company to establish and
maintain an insurance policy.
premium deposits
Funds deposited with the insurance company to
cover future premiums.
premium-reduction option
An insurance option in which dividends
are applied toward premiums to reduce their amounts.
pre-notice
A requirement under the Fair Credit Reporting Act
stating that insurance companies must inform applicants that consumer reports on
them may be produced.
presumptive disability
A condition, such as total blindness, that
automatically results in the individual being classified as totally
disabled.
prima facie rate
Standard premium rates suggested by government
regulators.
primary beneficiary
The beneficiary with the first right to
collect on policy benefits.
primary-care provider
See PCP.
principal
The person or group authorizing another, the agent, to
act on their behalf.
proceeds
The money the insurance company pays for insurance
policies or annuities.
providers
The physicians, nurses, hospitals, and others who
perform healthcare services.
proximate cause of death
The event that is responsible for the
death in question.
qualified annuity
A form of annuity in which the money funding the
annuity is deductible from the gross income.
qualified domestic-relations order
A settlement in which a portion
of a pension plan or other employee-benefits plan is assigned to an alternate
payee due to issues arising from alimony, child support, or other domestic
matter.
qualified joint and survivor (QJ&S) annuity
An annuity in which
benefits continue to the spouse of the plan participant even after the death of
the participant. These continuing benefits are often at a lesser rate than the
original annuity benefits.
qualified plan
Employee-benefits plans that meet federal
requirements allowing them tax advantages.
quote Estimates of the cost of insurance, based on the initial information given by the applicant.
rate making
The calculation of premium rates.
rate of return method
A method of comparing insurance policy costs
by calculating the interest rate.
rated policy
An insurance policy issued to an individual with
above-average losses. (These policies often have higher premiums or certain
exclusions that are not standard.)
reasonable-and-customary fees
The standard fees charged by
physicians, hospitals, or other healthcare providers. (These are often used as a
base for what an insurance plan will or will not cover.)
recording method
A method of changing the beneficiary of an
insurance policy simply by notifying the insurance company in writing.
recovery benefit
A benefit paid if an insured suffers a loss of
income after returning to work due to the earlier disability.
refund annuity
An annuity guaranteeing that at minimum the price
of the annuity will be paid out.
reinstatement
Restoring a lapsed policy and putting it back into
force.
reinstatement provision
A provision stating the requirements the
policyholder must meet in order to have a policy put back into force if it has
been terminated as a result of not paying the premiums.
reinsurance
Transactions in which one insurance company buys
insurance from another company to help cover all or part of the risks in the
insurance policy.
reinsurance treaty
The agreement between the reinsurer and the ceding company.
reinsurer
The insurance
company that accepts the risk in a reinsurance deal. Also called the assuming
company.
relative value schedule
A schedule describing the cost of medical
procedures as a unit rather than a dollar amount. (A procedure with a value of
50, for example, would be more expensive than a procedure with a value of
40.)
renewal premiums
Premiums payable after the initial premium.
renewal provision
An insurance provision stating the guidelines
that a policyholder must meet to continue insurance coverage at the end of the
initial term, and what actions must be taken to do so.
replacement
Surrendering an insurance policy in order to purchase
a different insurance policy.
replacement cost
The cost to replace an insured item.
representation
Statements by insurance applicants as to some past
or existing fact or circumstance. Such statements must be true to the best of
the applicant's knowledge and belief, but are not warranted as exact in every
detail.
rescission
The attempt by an insurer to void a policy due to
material misrepresentation on the insurance application.
residual disability
benefit
See partial disability
benefit.
resisted claim
A claim the insurer refuses to pay, but which is
still being contested.
result clause
A war-hazard exclusion in which benefits will not be
paid for losses resulting from war or related acts.
retention
In reinsurance, the amount of risk the ceding company
retains.
retention limit
The maximum amount of insurance an insurance
company will carry before ceding part of the risk to a reinsurer.
retired lives reserve
A fund used to provide employees with group
life insurance after they retire.
retroactive disability benefit
Disability benefits that are
payable beginning at the time of disability, but whose initial payment occurs
after the elimination period has expired.
retro premium
A premium rate set at the beginning of the payment
period but paid at the end only if claim experience justifies it. This is in
addition to a smaller base premium that is paid at the beginning of the payment
period.
revocable beneficiary
A beneficiary that can be dropped as
beneficiary at any time by the policyholder before the insured's death.
rider
A policy amendment used
to change coverage. Also called an endorsement.
risk
The chance of loss to the insurance company, such as the
insured being more likely to develop lung cancer because of smoking.
risk class
A group of insured individuals who are of similar risk
for the insurance company, such as nonsmokers, substandard, etc.
second opinion
A medical opinion provided by a second physician or
medical expert after first receiving an opinion on the medical issue by another
physician or medical expert.
secondary beneficiary
The
party who will receive insurance proceeds should the beneficiary die before the
insured person. Also called contingent beneficiary.
Section 401(k) Plan
A
tax-deferred investment plan generally used for retirement purposes. Also
called a Cash or Deferred Arrangement (CODA).
self-administered group insurance plan
A group insurance plan in
which the policyholder performs administrative functions, such as record
keeping, request processing, and address changes, instead of the insurer.
Self-Employed Individuals Tax Retirement Act of 1962
See Keogh Act.
self-insured group insurance
Group insurance in which the group
sponsor rather than the insurance company is responsible for paying claims.
settlement
An action that eliminates the responsibility of the
insurer toward the payee. (Generally it involves the payment of all
benefits.)
settlement agreement
The agreement as to how policy proceeds will
be paid to the beneficiary.
settlement option payments
Disbursement of benefits in multiple
payments rather than in a lump sum.
settlement options
Options given to the policyholder or
beneficiary as to how the policy proceeds will be paid.
short-form reinstatement application
A reinstatement application
asking only enough questions to determine if major changes in the insured's
condition have occurred.
short-term disability
Injury or illness that disables an
individual for a temporary length of time.
short-term disability insurance
Insurance that provides benefits,
often as a portion of salary, during a period of short-term disability.
simplified employee pension
A pension plan in which employer
contributions go into an IRA owned by the individual instead of a group pension
plan.
simultaneous death act
A law stating that if a beneficiary and an
insured die at the same time, it is assumed that the beneficiary died first.
single-premium annuity
An annuity purchased with a single premium
payment.
single-premium method
Method of paying the entire premium at once,
either in a lump sum or as additional principal to a loan.
single-purchase annuity contract
A contract with a single premium
used to purchase annuities for all participants in a terminating pension
plan.
small-group insurance plan
Group insurance, usually covering less
than 25 people, that is designed to be simpler to underwrite than the typical
group plan.
social-insurance supplement policy
Medical-expense insurance
designed to supplement benefits provided by the government.
Social Security
A federal program providing retirement income,
disability coverage, and healthcare to qualified individuals.
sole-proprietorship insurance
Insurance on the life of a sole
proprietor of a business, designed to counter the potential loss of income to
the owner's family following death or disability.
specified-expense coverage
Insurance that covers specific topics
such as dental-expense coverage.
spendthrift trust clause
An insurance provision protecting policy
proceeds held by the insurer from creditors of the beneficiary.
split-dollar insurance plan
A form of employee benefits in which
the employee has individual life insurance that is partially paid for by the
employer.
spouse and children's insurance rider
An insurance rider that
provides a degree of coverage for a spouse and children as well as the
insured.
stand-alone dental
An insurance plan providing dental coverage
only.
stand-alone life
An insurance plan providing life insurance
only.
stand-alone Rx/ stand-alone prescription
An insurance plan
providing prescription-drug coverage only.
State law stating what the minimum benefits a life-insurance policy can have.
standard plan termination
The termination of a plan that has
sufficient funds to pay for any and all benefits the participants may be
entitled to.
standard premium rate
The premium rate for a person considered to
be average in the chance of experiencing a loss.
standard risk class
A class of individuals considered to be
average in the chance of experiencing a loss.
stock-repurchase insurance
Insurance used to repurchase company
stock from a deceased stockholder.
stop-loss provision
An insurance provision stating that the
insurance company will pay all expenses after a set amount of out-of-pocket
expenses has been paid.
straight-life annuity
An annuity that lasts for the length of the
annuitant's life and stops all payments at the time of death.
straight-life income option
An insurance option that states that
benefit payments will be made to the beneficiary until the beneficiary dies and
that at that time all payments cease.
straight-life
insurance
Life insurance in which the premiums are paid until death.
Also called continuous premium life insurance.
substandard premium rate
A premium rate, generally higher than a
standard premium, charged on a substandard risk.
substandard risk class
A risk class with a greater chance of loss
than the average person.
suicide clause
An insurance
provision that states that no benefits will be paid if the insured dies as a
result of suicide. (This is often limited to a set period of time following the
issue of the insurance policy.)
superimposed major-medical plan
A medical plan used in conjunction
with basic medical plans that provides coverage if expenses exceed what is
covered by the basic plans.
supplemental group life insurance
Group life insurance providing
additional coverage over the basic coverage of existing group plans.
supplemental major-medical insurance
Medical insurance providing
additional coverage over the basic coverage of existing medical insurance.
supplementary-benefit rider
An insurance rider providing
additional benefits.
surcharge
Any extra charge applied by the insurer.
surgical schedule
A schedule listing maximum benefits payable for
different surgical procedures.
surrender
To cancel an insurance policy before its maturity
date.
surrender charge
A fee charged when the policy is surrendered for
its cash value.
survivor income benefit insurance
Life insurance that provides
income benefits to a survivor (often limited to a spouse or children).
survivorship clause
In life insurance, a provision requiring that
the beneficiary survive the owner of the policy by a set amount of time in order
to receive the benefits.
survivorship life insurance
Life insurance covering two people
that does not pay benefits until both have died.
temporary insurance
agreements
See interim
insurance agreements.
temporary life annuity
A series of payments, structured like an
annuity, that continues for a limited amount of time.
termination expenses
The cost of processing death-benefit claims
and the subsequent payouts.
term insurance
Insurance in which the benefit is payable only if
the loss occurs during a specific period of time.
testamentary disposition
The use of a will to determine who the
beneficiary is.
third-party administrator
A group that administers an insurance
policy but that is not responsible for paying any claims.
third-party insurance
Insurance coverage applied for by someone
other than the proposed insured.
total disability
A disability in which the individual is unable to
perform any of the essential duties of the position previously held, or any
position for which training, education, and experience exist.
triple indemnity
A form of accidental death coverage that pays
triple the normal benefit if the death occurred while a passenger on a public
system such as a bus or airplane.
trust fund plan
A pension plan in which all contributions are sent
to a trustee who then invests the contributions and makes any benefit
payments.
ultimate cost
The total net cost of a pension plan over the life
of the plan.
unallocated funding
Group benefits-plan funding in which the funds
are held as a whole and not allocated to specific participants.
unbundled insurance product
Insurance policies in which the
factors used to calculate premiums and cash values are identified
separately.
unclaimed benefits
Benefits for which no beneficiary or payee can
be located. (State law governs how these situations are handled.)
underwriter
The person who performs the underwriting function or
an organization that ensures money is available for policies that must be
paid.
underwriting
The process of selecting insurance applicants and
classifying them based on their risk, so proper premiums can be charged.
underwriting department
The department in an insurance company
that performs the underwriting function.
underwriting impairments
Factors that increase risk above
normal.
underwriting requirements
Set guidelines, which may include
medical records or personal history, that state what is required to determine an
individual's insurability.
uninsurable risk class
Individuals who cannot gain insurance due
to the high level of risk associated with them.
unit-benefit formula
A system for figuring benefits for a pension
plan based on years of service.
usual, customary, and reasonable expenses
Regular charges for a
particular medical service.
utilization review
A form of claims review in which the insurance
company analyzes a case to determine if the treatment given is appropriate or
necessary.
valuation mortality tables
Mortality tables used as an industry
standard rather than the mortality tables used by separate insurance
companies.
valued contract
A contract, such as an insurance contract, in
which the benefit amounts are established in advance.
variable
annuity
An annuity in which the benefit payment is not guaranteed or
specified, and, therefore, may change over time.
variable life insurance
Life insurance, generally with a minimum
guaranteed death benefit, in which the benefits and cash value can change based
on the investment accounts' performance.
vested benefit
In benefit plans where a participant accrues
benefits as a result of time spent in the plan, vested benefits are those
benefits now available due to the length of time the participant has been
enrolled.
void contract
A contract that is not valid for any reason,
including legal issues.
waiting period
A period of time that must pass before insurance
coverage begins, benefits are qualified for, or entrance into a plan is
permitted.
waiver-of-deductible provision
A waiver of the initial deductible
if injuries are caused by an accident.
waiver-of-premium-for-disability (WP) benefit
A promise by the
insurer to stop collecting premiums from the insured for the entire period the
insured is injured and unable to work.
war exclusion provision
Insurance policy provisions that decrease
or eliminate benefits if death is a result of war or military service.
weekly indemnity plan
A form of short-term disability that pays a
percentage of weekly earnings to the insured.
whole life annuity
A series of payments made on a regular schedule
over the entire life of the payee.
whole life insurance
Life insurance that remains in effect for the
entire life of the insured.
withdrawal
A voluntary cancellation of a policy by the
insured.
withdrawal provision
See partial surrender
provision.
workers' compensation
Government-mandated insurance for employees
and their dependents if the employee suffers a job-related injury, disease, or
death.
Term life insurance that allows the policyholder to renew each year regardless of circumstances or conditions for a specified time period.
year of service
Defined under ERISA, a 12-month period during
which an employee works at least 1,000 hours for the employer.