Glossary
Actual Cash Value
The sum of money required to pay for damages or lost property, computed on the basis of their fair market value.
Actuary
A specialist in the mathematics of insurance who calculates rates, analyzes risks, sets reserves, etc.
Adjuster
An individual, usually representing the insurance company, who is responsible for investigating, evaluating and negotiating a policyholder’s claim. The adjuster also may calculate the amount of a loss and determine who is liable for damages.
Admitted Company
An insurance company authorized and licensed to do business in a given state.
Age Limits
The ages below or above which the insurance company will not issue a given policy or renew a policy in force.
Annuity
(1) The amount of money payable yearly or at other regular intervals. (2) An agreement by an insurer to make periodic payments that continue during the survival of the annuitant (the beneficiary of the policy) or for a specified period.
Application (APP)
A form on which the prospective insured states facts requested by the insurance company and on the basis of which (together with any information from medical examiners, attending physicians, hospitals, investigations and the agent) the insurance company decides whether or not to accept the risk, modify the coverage offered or decline the risk.
Apportionment
The division of loss among insurance companies when two or more cover the same loss.
Arbitration
A hearing between two or more parties that is decided by a third party as a means of settling a dispute.
Assigned Risk
A risk that underwriters do not care to insure but are nonetheless assigned by the state because state law requires the insured be protected.
Bad Faith
The unreasonable delay or denial of a legitimate claim. If a policyholder’s claim has been unreasonably delayed or denied, bad faith law allows the insured to seek monetary damages for pain and suffering, consequential damages, punitive damages, etc.
Beneficiary
The person who may become eligible to receive, or is receiving, benefits under an insurance policy.
Broker
An individual or company who solicits, negotiates or procures insurance or the renewal or continuance thereof on behalf of insureds or insurance companies.
Business Interruption Insurance
A type of policy that pays for loss of earnings, revenues, profits, etc., when operations are curtailed or suspended because of property loss.
Cancellation
Termination of an insurance contract by voluntary act of the insurance company or the insured, executed in accordance with provisions in the contract or by mutual agreement.
Capitation
A fixed amount of money per patient per year that medical providers receive to provide for all of their patients’ medical needs.
Carrier
An insurance company that “carries” the insurance; i.e., another name for an insurance company. (The terms “insurance company” and “insurer” are preferred because of the possible confusion of “carrier” with transportation terminology.)
Cash Value
The amount of cash that is due an insured who surrenders a life or (extremely rarely) a health policy. Such surrender with termination of all insurance benefits is often called “cashing out.”
Claim
The demand for benefits as provided by an insurance policy.
Clause
A term used to identify a particular part of a policy or endorsement.
Co-Insurance
An arrangement under which two or more insurance companies (or reinsurers) are each liable for a proportion of losses. In health insurance, a provision that the insured and insurance company will share covered losses in agreed proportion. In this context, the preferred term is “percentage participation.”
Co-Payment
The patient’s share of a healthcare bill. It usually is a small amount ($5 or $10 per office visit).
Collision Coverage
Insurance coverage, part of most automobile insurance policies, protecting an insured’s automobile(s) from damage resulting from collision with another object or automobile.
Commission
The portion of an insurance premium retained by the agent or broker as compensation for sales, service and distribution of insurance policies.
Community Rating
A method for establishing the level of healthcare insurance premiums for a given geographic area, such as an entire state. It is based on the average of actual or anticipated services used by all subscribers in that area. The intent of community rating, which is not always pure in its application, is to spread costs evenly among an entire population rather than set premiums according to individual or small group circumstances.
Comprehensive Health Insurance
A type of health insurance that combines the coverage of Major Medical and Basic Medical Expense contracts into one broad contract that provides coverage for almost all types of medical expense. The coverage is usually subject to a small deductible for some or all expenses and to a percentage participation clause (sometimes called co-insurance) applicable to all or some of the covered expenses.
Comprehensive Personal Liability Policy (CPL)
A personal liability contract providing liability protection for numerous personal activities and situations.
Cost-Sharing
A provision in health insurance plans that requires the insured to pay a portion of his or her medical expenses, including co-payments, deductibles, etc.
Coverage
Scope of the protection provided under a contract of insurance.
Credit Insurance
Insurance on a debtor in favor of a lender intended to pay off a loan or the balance thereon if the insured dies or is disabled (usually called a “credit life” policy).
Declaration Page (Dec Sheet)
The portion of an insurance policy containing a summary of the coverage and limits of insurance provided.
Decreasing Term Policy
A term policy outlining a decrease in benefits in accordance with a schedule.
Deductible
A provision or clause in an insurance policy that the first given number of dollars or percentage of expenses shall be paid by the policyholder before the insurance coverage kicks in.
Deferred Annuity
An annuity that pays income benefits at a designated future date, as opposed to an “immediate annuity,” which pays benefits at once.
Depreciation
Depreciation is the loss in value from all causes, including age, wear and tear.
Earned Premium
The portion of a premium for which the policy protection has already been given.
Elimination Period
A loosely-used term sometimes designating the “probationary period” or “waiting period” between the incurrence of a disability and the date benefits begin.
Endorsement
A form attached to an insurance policy bearing the language necessary to change the terms of the policy to fit special circumstances.
ERISA
Acronym for a federal law called the Employee Retirement Income Security Act. Enacted in 1974 to protect employee pensions and retirement plans, the law, preempts all state remedies, to recover general and punitive damages when insurance has been obtained through employment. ERISA does not apply to government and church employees, those who coverage was transferred from Medicare, or those who purchase their insurance directly from a health insurer.
Exclusions
Items for which no benefits are payable in an insurance policy.
Experience
The loss record of a policyholder, an insurance company or a class of coverage.
Extended Replacement Coverage
Allows a policyholder to replace what they lost at today’s prices, even if the cost exceeds the limits stated oh the Dec Page,up to a set extended percentage limit
Face Amount
In a life insurance policy, the death benefit stated on the first page of the policy.
Fee-for-Service
Traditional health care coverage wherein the patient or insurance company is billed for each test or service performed.
Fiduciary
One who occupies a position of special trust and confidence and therefore upon whom the law places special obligations.
Gag Clause/Gag Rule
A provision in some managed care insurance contracts that forbids doctors from discussing with patients all available treatment options or from disclosing financial incentives they may receive by limiting or denying care.
Gatekeeper
In an HMO, the primary care doctor who coordinates all of a patient’s necessary diagnostic testing and specialty referrals.
General Agent
An insurance company representative in a given territory. A true general agent is an independent contractor compensated on a commission basis. In practice, in the life and health fields, the general agent may receive certain expense subsidies from the company for office operation and training of new agents.
Grace Period
The period of time (usually one month) after a premium due date during which the insurance policy remains in force without penalty even though the premium has yet to be paid.
Group Contract
A contract of insurance made with an employer or other entity that covers a group of persons by virtue of their relationship to the entity. A group contract may be for life insurance, health insurance or an annuity.
Guaranteed Insurability Rider
In a health or life insurance policy, an attached rider that permits the insured to purchase additional insurance on one or more specified “option dates” without providing new evidence of insurability at that time.
Guaranteed Renewable
A contract that the insured has the right to continue, by the timely payment of premiums, for a substantial period of time, during which the insurance company may not make any change in the contract other than to the premium rate for general classes of policyholders.
Guaranteed Replacement Cost Coverage
Entitles the policyholder to a guaranteed replacement of lost or damaged items, regardless of their cost.
Health Maintenance Organization (HMO)
A legal entity that provides a set of health services to its members in a geographic area. HMOs are reimbursed through a pre-determined, fixed, periodic prepayment made by or on behalf of each subscriber without regard to the amount of actual services provided.
Homeowners Policy
A “package” or multi-line policy providing the protection needed by most homeowners. The policy provides coverage for losses including but not limited to, fire, water, wind, theft and liability insurance. Coverage is provided for repair/replacement building, contents and additional living expenses.
Hospital Benefits
Benefits payable when an insured is hospitalized
Indemnify
To restore the victim of a loss, in whole or in part, by payment, repair or replacement.
Insurable Interest
A legal interest in another person’s life or health or in the protection of property from injury, loss, destruction or pecuniary damage.
Insured
The party to an insurance agreement to whom, or on behalf of whom, the insurance company agrees to indemnify for losses, provide benefits or render service.
Joint Life Policy
A life insurance policy that pays out when the first of two or more covered persons die.
Knowledge and Notice of Occurrence
If an insureds employee or agent fail to notify the carrier of any covered accident that they have knowledge of it will not invalidate the coverage afforded under the policy with respects the insured.
Lapse
Termination of an insurance policy due to failure to pay the premium.
Level Premium Insurance
Life insurance, the premium for which remains at the same level for the duration of the policy.
Liability Insurance
Insurance that pays and renders service on behalf of an insured for losses arising out of his responsibility, negligence, contractual assumptions, etc.
Liability Limits
The sum beyond which a liability insurance company does not protect the insured on a particular policy.
Life Insurance
An argument between an insurance company and the policyholder to pay a specified amount to a designated beneficiary on the insured’s death.
Lifetime Policy
A policy guaranteed renewable or non-cancelable to age 65 (or sometimes later), or a policy paying disability benefits for life.
Limit of Liability
The maximum amount that an insurance company agrees to pay in case of loss.
Long-Term Disability
A disability that last longer than 12 weeks on average. It also describes a form of group disability insurance with benefits for more than the customary 12 to 26 weeks of disability, reaching five years on average.
Loss Ratio
The percentage of losses to premiums, usually losses incurred to premiums earned. The amount of the premium dollar returned to the insured as claims payments and other benefits.
Major Hospitalization Policy or Insurance
A type of health insurance that provides benefits for most of the costs of hospitalization up to a limit and subject to a deductible. Such policies may contain internal maximum limits and percentage participation clauses. They are distinguished from major medical insurance by the fact that they pay only in the event of hospitalization.
Major Medical Insurance
A type of health insurance that provides benefits for most types of medical expenses incurred up to a limit and subject to a deductible. Such contracts may contain internal limits and a percentage participation clause (sometimes called a co-insurance clause). A major medical policy pays expenses both in and out of the hospital.
Managed Care
A health care coverage system in which all medical treatment and payments are approved or denied by the insurer.
Mandated Benefits
Benefits mandated by the state for inclusion in any major medical coverage. These may include mammograms, automatic coverage of newborn or adopted children, home/hospice treatment options and others.
Maturity
The date at which the face value of a life insurance policy comes due either by reason of death or endowment.
Medicare
A government-sponsored health insurance program for the elderly and disabled.
Morbidity
Sickness. A morbidity table shows the incidence of sickness.
Mortality
Death. A mortality table shows the incidence of death.
NAIC
National Association of Insurance Commissioners. An association of state insurance commissioners active in discussions of regulatory problems and in the formation and recommendation of uniform practices and legislation.
NALU
National Association of Life Underwriters. An organization of life insurance agents with state and local associations throughout the country.
Open Enrollment
A specified period of time during which individuals may enroll or change their benefits program.
Open-Ended HMOs
HMOs that allow individuals enrolled in the plan to to use out-of-plan providers and still receive partial or full coverage and payment for the professional’s services under a traditional indemnity plan.
Out-of-Plan (or Out-of-Network)
A term commonly used in health insurance policies to refer to This phrase refers to doctors, hospitals or other health care providers who are considered nonparticipants in an insurance plan (usually an HMO or PPO). Out-of-Plan expenses may not be covered at all, or, in some cases may be reimbursed or partially reimbursed by the insurance company.
Out-of-Pocket
The amount of money that a policyholder must pay out of their own funds before an insurance company or (self-insured employer) will pay 100 percent for an individual’s health care expenses. This amount is predetermined and set in the terms of the policy’s coverage.
Outpatient
A patient that receives treatment or care, including some surgies, but that is released the same day and does not stay overnight in a hospital.
Paid-Up
Describes life insurance on which all premiums have been paid but that has not yet matured by death or endowment.
Plaintiff
The party who brings a civil action, complains or sues and is so named on the record.
Portability
A provision in an insurance contract that allows the insured to retain benefits upon change of job.
Pre-Certification
The process of obtaining pre-approval for a medical treatment.
Pre-Existing Condition
A condition of health or physical condition that existed before a health policy was issued. Generally, for an insurer to deem a condition pre-existing, the insured must have seen a doctor and been diagnosed for the condition prior to the policy taking effect.
Pre-Paid Hospital Service Plan
The common name for a Health Maintenance Organization (HMO) plan. It provides comprehensive health care for members who pay a flat fee for services, including outpatient or hospital treatment.
Preferred Risk
An insurance classification indicating a risk that is superior to the average risk on which a given rate has been calculated. Such risks are usually eligible for a reduced rate.
Premium
The periodic amount of money paid to keep a policy in force.
Primary Care
Basic or general healthcare often administered by a family physician. Depending on the situation, patients also may receive primary care from a nurse, a paramedic or other healthcare provider. Managed care systems try to resolve as many health problems as possible at this level.
Producer
Term commonly applied to an agent, solicitor or other person who sells insurance, producing business for an insurance company and generating a commission for himself.
Proof of Loss
A formal statement made by the insured to the insurance company regarding a loss. The purpose of the proof of loss is to place before the company sufficient information concerning the loss to enable it to determine its liability under the policy or bond.
Punitive Damages
A monetary award to deter or punish a company for its fraudulent, oppressive or malicious behavior.
Qualified Impairment Insurance
A rider on a health insurance plan eliminating a policy exclusion for an impairment, making the impairment acceptable or “qualified” with respect to insurance coverage.
Quota Share Reinsurance
A form of pro rata reinsurance where the reinsurer assumes an agreed percentage of each insurance policy being insured and shares all premiums and losses accordingly with the reinsured.
Rating Bureau
An organization that classifies and promulgates rates and in some cases compiles data and measures hazards of individual risks in term of rates in a given territory.
Replacement Cost
The cost of replacing property.
Rescission
Canceling an insurance policy due to nondisclosure of a material fact or misrepresentation of a material fact on an insurance application.
Rider
An amendment attached to a policy that modifies the conditions of the policy by expanding or decreasing its benefits or excluding certain conditions from coverage.
Risk
The chance of loss. Also, a person or thing insured.
Short-Term Disability
An injury or illness that keeps a person from working for a short time. The definition of short-term disability (and the time period over which coverage extends) differs among insurance companies and employers. Short-term disability insurance coverage is designed to protect an individual’s full or partial wages during a time of injury or illness (that is not work-related) that would prohibit the individual from working.
Stop-Loss
The dollar amount of claims filed for eligible expenses at which which point you’ve paid 100 percent of your out-of-pocket and the insurance begins to pay at 100%. Stop-loss is reached when an insured individual has paid the deductible and reached the out-of-pocket maximum amount of co-insurance.
Subrogation
An insurance carrier may reserve the “right of subrogation” in the event of a loss. This means that the company may choose to take action to recover the amount of a claim paid to a covered insured if the loss was caused by a third party. After expenses, the amount recovered must be divided proportionately with the insured to cover any deductible for which the insured was reponsible.
Third-Party Claims
Claims made against another person’s insurance company. For example, a person sues a condominium owner’s insurer when he sustains injuries due to a faulty balcony.
Time Element Coverage
Time element insurance coverage provides insurance for a covered incident resulting in loss of use of property for a period of time. Examples of time element coverage include Business Interruption, Rents and Rental Value, Additional Living Expenses, and Leasehold Interest coverage.
Tort
A tort is a negligent or intentional act that violates a person’s rights or injures someone in some way. A tort allows someone to sue for damages. A tort is a civil action subject to judgement for damages payable to the wronged party. However, in some cases, there may be both a tort and a crime. For example, in battery, the wrongdoer may be subject to both civil and criminal penalties.)
Triple Option Plan
A type of insurance plan that offers the policyholder three options to choose from. The options are usually traditional indemnity, an HMO plan, and a PPO plan.
Umbrella Libility Coverage
Umbrella liability insurance provides coverage beyond what is considered the usual and standard coverage for liability. Corporations often purchase umbrella liability insurance as a safeguard against situations that would impede the ability of the company to continue its usual operations.
Unassigned Claim
A claim that is submitted for a service or supply by a provider who does not accept assignment.
Underwriter
A person trained in evaluating risks and determining rates and coverage for them.
Unearned Premium
The portion of an advance premium payment that has not yet been used for the coverage written.
Usual, Customary and Reasonable (UCR) or Covered Expenses
An amount customarily covered or charged for similar services and supplies which are considered medically necessary, recommended by a doctor, or required for treatment.
Valuable Papers Coverage
An “all risk” insurance policy that provides coverage for costs associated with research to reconstruct damaged records and associated costs. “Valuable papers” may include written or recorded documents and records, including books, maps, films, drawings, abstracts, deeds, mortgages, and manuscripts.
Variable Premium Life Insurance
Life insurance programs most commonly found in universal life, in which the premium due is variable. The variation in premium will depend on the investment earnings from earned dividends that may be reinvested and used to pay premiums.
Viatical Settlement
When all or part of the proceeds from a life insurance policy are paid out to an insured who is terminally ill before they die.
Viator
The agent or broker who sells rights to life insurance coverage.
Virtual Insurance
An evolving term that typically refers (theoretically) to any form of insurance coverage that is sold, delivered and serviced electronically, specifically via the Internet. Another term is e-insurance.
Voided Policy
When important information related to seeking insurance coverage has been concealed, misrepresented or is fraudulent, the insurer may have the right to dissolve a policy’s coverage as though the policy never existed.
Voluntary Compensation Coverage
Protection which an employer may purchase to cover employees not otherwise included in the scope of workers compensation laws.
Waiting Period
The period of time between the beginning of a disability and the date benefits begin.
Whole Life
A life insurance policy that runs for the entire life of the individual, that is, until death. Premiums for a whole life policy may be paid for the whole life or for a limited period, during which a higher premium pays up the policy.
Worker’s Compensation
Insurance that employers are required to have to cover employees who get sick or injured on the job. A state-mandated program providing insurance coverage for work-related injuries and disabilities.
Write
In insurance terms, to insure. It also means to underwrite or to sell insurance.
Yearly Renewable Term Insurance
Also referred to as “Annually Renewable Term Insurance.” A term life insurance policy that the insured can renew for a specific number of years without medical examination or otherwise proving insurability. The insurance policy premium is increased each year.
