"PROVIDING UNIQUE BENEFIT SOLUTIONS & SUPERIOR CUSTOMER SERVICE"
HEALTH • DENTAL • VISION • LIFE • DISABILITY • SUPPLEMENTAL • INVESTMENTS


Products > Glossary of Terms

A B C D E F G H I L M N O P Q R S T U V W


A

Accidental Death Benefit

In a life insurance policy, benefit in addition to the death benefit paid to the beneficiary, should death occur due to an accident. There can be certain exclusions as well as time and age limits.

Active Participant

Person whose absence from a planned event would trigger a benefit if the event needs to be canceled or postponed.

Activities of Daily Living

Bathing, preparing and eating meals, moving from room to room, getting into and out of beds or chairs, dressing, using a toilet.

Actual Cash Value

Cost of replacing damaged or destroyed property with comparable new property, minus depreciation and obsolescence.

Actuary

A specialist in the mathematics of insurance who calculates rates, reserves, dividends and other statistics.

Adjuster

A representative of the insurer who seeks to determine the extent of the insurer's liability for loss when a claim is submitted.

Admitted Assets

Assets permitted by state law to be included in an insurance company's annual statement. These assets are an important factor when regulators measure insurance company solvency. They include mortgages, stocks, bonds and real estate.

Agent

individual who sells and services insurance policies in either of two classifications: 1. Independent agent represents at least two insurance companies and (at least in theory) services clients by searching the market for the most advantageous price for the most coverage. The agent's commission is a percentage of each premium paid and includes a fee for servicing the insured's policy. 2. Direct or career agent represents only one company and sells only its policies. This agent is paid on a commission basis in much the same manner as the independent agent.

Aggregate Limit

Usually refers to liability insurance and indicates the amount of coverage that the insured has under the contract for a specific period of time, usually the contract period, no matter how many separate accidents might occur.

Annual Administrative Fee

Charge for expenses associated with administering a group employee benefit plan.

Annuitization

Process by which you convert part or all of the money in a qualified retirement plan or non-qualified annuity contract into a stream of regular income payments, either for your lifetime or the lifetimes of you and your joint annuitant. Once you choose to annuitize, the payment schedule and the amount is generally fixed and can't be altered.

Annuitization Options

Choices in the way to annuitize.

Annuity

An agreement by an insurer to make periodic payments that continue during the survival of the annuitant(s) or for a specified period.

Assets

Assets refer to "all the available properties of every kind or possession of an insurance company that might be used to pay its debts." There are three classifications of assets: invested assets, all other assets, and total admitted assets. Invested assets refer to things such as bonds, stocks, cash and income-producing real estate. All other assets refer to non-income producing possessions such as the building the company occupies, office furniture, and debts owed, usually in the form of deferred and unpaid premiums. Total admitted assets refer to everything a company owns. All other plus invested assets equals total admitted assets. By law, some states don't permit insurance companies to claim certain goods and possessions, such as deferred and unpaid premiums, in the all other assets category, declaring them "non-admissible."

Attained Age

Insured's age at a particular time.


B

Benefit Period

In health insurance, the number of days for which benefits are paid to the named insured and his or her dependents. For example, the number of days that benefits are calculated for a calendar year consist of the days beginning on Jan. 1 and ending on Dec. 31 of each year.

Broker

Insurance salesperson that searches the marketplace in the interest of clients, not insurance companies.

Broker-Agent

Independent insurance salesperson that represents particular insurers but also might function as a broker by searching the entire insurance market to place an applicant's coverage to maximize protection and minimize cost. This person is licensed as an agent and a broker.


C

Captive Agent

Representative of a single insurer or fleet of insurers who is obliged to submit business only to that company, or at the very minimum, give that company first refusal rights on a sale. In exchange, that insurer usually provides its captive agents with an allowance for office expenses as well as an extensive list of employee benefits such as pensions, life insurance, health insurance, and credit unions.

Case Management

A system of coordinating medical services to treat a patient, improve care and reduce cost. A case manager coordinates health care delivery for patients.

Claim

A demand made by the insured, or the insured's beneficiary, for payment of the benefits as provided by the policy.

Concurrent Periods

In hospital income protection, when a patient is confined to a hospital due to more than one injury and/or illness at the same time, benefits are paid as if the total disability resulted from only one cause.

Coverage

The scope of protection provided under an insurance policy. In property insurance, coverage lists perils insured against, properties covered, locations covered, individuals insured, and the limits of indemnification. In life insurance, living and death benefits are listed.

Convertible Life

Term life insurance coverage that can be converted into permanent insurance regardless of an insured's physical condition and without a medical examination. The individual cannot be denied coverage or charged an additional premium for any health problems.

Co-payment

A predetermined, flat fee an individual pays for health-care services, in addition to what insurance covers. For example, some HMOs require a $10 co-payment for each office visit, regardless of the type or level of services provided during the visit. Co-payments are not usually specified by percentages.

Creditable Coverage

Term means that benefits provided by other drug plans are at least as good as those provided by the new Medicare Part D program. This may be important to people eligible for Medicare Part D but who do not sign up at their first opportunity because if the other plans provide creditable coverage, plan members can later convert to Medicare Part D without paying higher premiums than those in effect during their open enrollment period.


D

Death Benefit

The limit of insurance or the amount of benefit that will be paid in the event of the death of a covered person.

Deductible

Amount of loss that the insured pays before the insurance kicks in.

Disease Management

A system of coordinated health-care interventions and communications for patients with certain illnesses.

Dividend

The return of part of the policy's premium for a policy issued on a participating basis by either a mutual or stock insurer. A portion of the surplus paid to the stockholders of a corporation.


E

Earned Premium

The amount of the premium that as been paid for in advance that has been "earned" by virtue of the fact that time has passed without claim.

Elimination Period

The time which must pass after filing a claim before policyholder can collect insurance benefits. Also known as "waiting period."

Exclusions

Items or conditions that are not covered by the general insurance contract.

Exposure

Measure of vulnerability to loss, usually expressed in dollars or units.


F

File-and-Use Rating Laws

State-based laws which permit insurers to adopt new rates without the prior approval of the insurance department. Usually insurers submit their new rates with supporting statistical data.

Future Purchase Option

Life and health insurance provisions that guarantee the insured the right to buy additional coverage without proving insurability. Also known as "guaranteed insurability option."


G

Grace Period

The length of time (usually 31 days) after a premium is due and unpaid during which the policy, including all riders, remains in force. If a premium is paid during the grace period, the premium is considered to have been paid on time. In Universal Life policies, it typically provides for coverage to remain in force for 60 days following the date cash value becomes insufficient to support the payment of monthly insurance costs.

Guaranteed Insurability Option

See "future purchase option."

Guaranteed Issue Right

The right to purchase insurance without physical examination; the present and past physical condition of the applicant are not considered.

Guaranteed Renewable

A policy provision in many products which guarantees the policy owner the right to renew coverage at every policy anniversary date. The company does not have the right to cancel coverage except for nonpayment of premiums by the policy owner; however, the company can raise rates if they choose.

H

Hazard

A circumstance that increases the likelihood or probable severity of a loss.

Hazardous Activity

Bungee jumping, scuba diving, horse riding and other activities not generally covered by standard insurance policies. For insurers that do provide cover for such activities, it is unlikely they will cover liability and personal accident, which should be provided by the company hosting the activity.

Health Maintenance Organization (HMO)

Prepaid group health insurance plan that entitles members to services of participating physicians, hospitals and clinics. Emphasis is on preventative medicine, and members must use contracted health-care providers.

Health Reimbursement Arrangement

Owners of high-deductible health plans who are not qualified for a health savings account can use an HRA.

Health Savings Account

Plan that allows you to contribute pre-tax money to be used for qualified medical expenses. HSAs, which are portable, must be linked to a high-deductible health insurance policy.


I

\

Insurance Institute of America (IIA)

An organization which develops programs and conducts national examinations in general insurance, risk management, management, adjusting, underwriting, auditing and loss control management.

Insurance Regulatory Information System (IRIS)

Introduced by the National Association of Insurance Commissioners in 1974 to identify insurance companies that might require further regulatory review.


L

Least Expensive Alternative Treatment

The amount an insurance company will pay based on its determination of cost for a particular procedure.

Licensed

Indicates the company is incorporated (or chartered) in another state but is a licensed (admitted) insurer for this state to write specific lines of business for which it qualifies.

Licensed for Reinsurance Only

Indicates the company is a licensed (admitted) insurer to write reinsurance on risks in this state.

Lifetime Reserve Days

Sixty additional days Medicare pays for when you are hospitalized for more than 90 days in a benefit period. These days can only be used once during your lifetime. For each lifetime reserve day, Medicare pays all covered costs except for a daily coinsurance amount.

Living Benefits

This feature allows you, under certain circumstances, to receive the proceeds of your life insurance policy before you die. Such circumstances include terminal or catastrophic illness, the need for long-term care, or confinement to a nursing home. Also known as "accelerated death benefits."

M

Mortality and Expense Risk Fees

A charge that covers such annuity contract guarantees as death benefits.

Mutual Insurance Companies

Companies with no capital stock, and owned by policyholders. The earnings of the company--over and above the payments of the losses, operating expenses and reserves--are the property of the policyholders. There are two types of mutual insurance companies. A non-assessable mutual charges a fixed premium and the policyholders cannot be assessed further. Legal reserves and surplus are maintained to provide payment of all claims. Assessable mutuals are companies that charge an initial fixed premium and, if that isn't sufficient, might assess policyholders to meet losses in excess of the premiums that have been charged.


N

Named Perils

Perils specifically covered on insured property.

National Association of Insurance Commissioners (NAIC)

Association of state insurance commissioners whose purpose is to promote uniformity of insurance regulation, monitor insurance solvency and develop model laws for passage by state legislatures.

Non-cancelable

Contract terms, including costs that can never be changed.


O

Occurrence

An event that results in an insured loss.

Out-of-Pocket Limit

A predetermined amount of money that an individual must pay before insurance will pay 100% for an individual's health-care expenses.

Own Occupation

Insurance contract provision that allows policyholders to collect benefits if they can no longer work in their own occupation.


P

Paid-Up Additional Insurance

An option that allows the policyholder to use policy dividends and/or additional premiums to buy additional insurance on the same plan as the basic policy and at a face amount determined by the insured's attained age.

Point-of-Service Plan

Health insurance policy that allows the employee to choose between in-network and out-of-network care each time medical treatment is needed.

Policy

The written contract effecting insurance, or the certificate thereof, by whatever name called, and including all clause, riders, endorsements, and papers attached thereto and made a part thereof.

Policyholder Surplus

The sum of paid in capital, paid in and contributed surplus, and net earned surplus, including voluntary contingency reserves. It also is the difference between total admitted assets and total liabilities.

Pre-Existing Condition

A coverage limitation included in many health policies which states that certain physical or mental conditions, either previously diagnosed or which would normally be expected to require treatment prior to issue, will not be covered under the new policy for a specified period of time.

Preferred Provider Organization

Network of medical providers who charge on a fee-for-service basis, but are paid on a negotiated, discounted fee schedule.

Premium

The price of insurance protection for a specified risk for a specified period of time.

Q

Qualified High-Deductible Health Plan

A health plan with lower premiums that covers health-care expenses only after the insured has paid each year a large amount out of pocket or from another source. To qualify as a health plan coupled with a Health Savings Account, the Internal Revenue Code requires the deductible to be at least $1,000 for an individual and $2,000 for a family. High-deductible plans are also known as catastrophic plans.

Qualified Versus Non-Qualified Policies

Qualified plans are those employee benefit plans that meet Internal Revenue Service requirements as stated in IRS Code Section 401a. When a plan is approved, contributions made by the employer are tax deductible expenses.

Qualifying Event

An occurrence that triggers an insured's protection.


R

Reciprocal Insurance Exchange

An unincorporated groups of individuals, firms or corporations, commonly termed subscribers, who mutually insure one another, each separately assuming his or her share of each risk. Its chief administrator is an attorney-in-fact.

Re-Entry

Re-entry, which is the allowance for level-premium term policy owners to qualify for another level-premium period, generally with new evidence of insurability.

Reinsurance

In effect, insurance that an insurance company buys for its own protection. The risk of loss is spread so a disproportionately large loss under a single policy doesn't fall on one company. Reinsurance enables an insurance company to expand its capacity; stabilize its underwriting results; finance its expanding volume; secure catastrophe protection against shock losses; withdraw from a line of business or a geographical area within a specified time period.

Renewal

The automatic re-establishment of in-force status affected by the payment of another premium.

Residual Benefit

In disability insurance, a benefit paid when you suffer a loss of income due to a covered disability or if loss of income persists. This benefit is based on a formula specified in your policy and it is generally a percentage of the full benefit. It may be paid up to the maximum benefit period.

Risk Class

Risk class, in insurance underwriting, is a grouping of insured with a similar level of risk. Typical underwriting classifications are preferred, standard and substandard, smoking and nonsmoking, male and female.

Risk Management

Management of the pure risks to which a company might be subject. It involves analyzing all exposures to the possibility of loss and determining how to handle these exposures through practices such as avoiding the risk, retaining the risk, reducing the risk, or transferring the risk, usually by insurance.

S

Section 1035 Exchange

This refers to a part of the Internal Revenue Code that allows owners to replace a life insurance or annuity policy without creating a taxable event.

Section 7702

Part of the Internal Revenue Code that defines the conditions a life policy must satisfy to qualify as a life insurance contract, which has tax advantages.

Separate Account

A separate account is an investment option that is maintained separately from an insurer's general account. Investment risk associated with separate-account investments is born by the contract owner.

State of Domicile

The state in which the company is incorporated or chartered. The company also is licensed (admitted) under the state's insurance statutes for those lines of business for which it qualifies.

Statutory Reserve

A reserve, either specific or general, required by law.

Stop Loss

Any provision in a policy designed to cut off an insurer's losses at a given point.

Subrogation

The right of an insurer who has taken over another's loss also to take over the other person's right to pursue remedies against a third party.

Successive Periods

In hospital income protection, when confinements in a hospital are due to the same or related causes and are separated by less than a contractually stipulated period of time, they are considered part of the same period of confinement.

Surrender Charge

Fee charged to a policyholder when a life insurance policy or annuity is surrendered for its cash value. This fee reflectsexpenses the insurance company incurs by placing the policy on its books, and subsequent administrative expenses.

Surrender Period

A set amount of time during which you have to keep the majority of your money in an annuity contract. Most surrender periods last from five to 10 years. Most contracts will allow you to take out at least 10% a year of the accumulated value of the account, even during the surrender period. If you take out more than that 10%, you will have to pay a surrender charge on the amount that you have withdrawn above that 10%.


T

Term Life Insurance

Life insurance that provides protection for a specified period of time. Common policy periods are one year, five years, 10 years or until the insured reaches age 65 or 70. The policy doesn't build up any of the non-forfeiture values associated with whole life policies.


U

Underwriter

The individual trained in evaluating risks and determining rates and coverages for them. Also, an insurer.

Underwriting

The process of selecting risks for insurance and classifying them according to their degrees of insurability so that the appropriate rates may be assigned. The process also includes rejection of those risks that do not qualify.

Unearned Premiums

That part of the premium applicable to the unexpired part of the policy period.

Universal Life Insurance

A combination flexible premium, adjustable life insurance policy.

Usual, Customary and Reasonable Fees

An amount customarily charged for or covered for similar services and supplies which are medically necessary, recommended by a doctor or required for treatment.

Utilization

How much a covered group uses a particular health plan or program.


V

Valuation

A calculation of the policy reserve in life insurance. Also, a mathematical analysis of the financial condition of a pension plan.

Variable Life Insurance

A form of life insurance whose face value fluctuates depending upon the value of the dollar, securities or other equity products supporting the policy at the time payment is due.

Variable Universal Life Insurance

A combination of the features of variable life insurance and universal life insurance under the same contract. Benefits are variable based on the value of underlying equity investments, and premiums and benefits are adjustable at the option of the policyholder.

Viator

The terminally ill person who sells his or her life insurance policy.

Voluntary Reserve

An allocation of surplus not required by law. Insurers often accumulate such reserves to strengthen their financial structure.


W

Waiting Period

See "elimination period."

Waiver of Premium

A provision in some insurance contracts which enables an insurance company to waive the collection of premiums while keeping the policy in force if the policyholder becomes unable to work because of an accident or injury. The waiver of premium for disability remains in effect as long as the ensured is disabled.

Whole Life Insurance

Life insurance which might be kept in force for a person's whole life and which pays a benefit upon the person's death, whenever that might be.