Insurance Glossary

Below are insurance terms to help you in your insurance buying decisions.

Life Insurance Glossary
Health Insurance Glossary
Annuity Glossary
Long Term Care Glossary
Disability Insurance Glossary

 

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Agent - A licensed person or organization authorized to sell insurance by or on behalf of an insurance company.

Binder - A temporary or preliminary agreement which provides coverage until a policy can be written or delivered.

Broker - A licensed person or organization paid by you to look for insurance on your behalf.

Cancellation - The termination of insurance coverage during the policy period. Flat cancellation is the cancellation of a policy as of its effective date, without any premium charge.

Claim - Notice to an insurer that under the terms of a policy, a loss maybe covered.

Claimant - The first or third party. That is any person who asserts right of recovery..

Decline - The company refuses to accept the request for insurance coverage.

Endorsement - Amendment to the policy used to add or delete coverage. Also referred to as a "rider."

Exclusion- Certain causes and conditions, listed in the policy, which are not covered.

Face Amount - The dollar amount to be paid to the beneficiary when the insured dies. It does not include other amounts that may be paid from insurance purchased with dividends or any policy riders.

Grace Period - A period (usually 31 days) after the premium due date, during which an overdue premium may be paid without penalty. The policy remains in force throughout this period.

Guaranteed Insurability - An option that permits the policy holder to buy additional stated amounts of life insurance at stated times in the future without evidence of insurability.

Insured - The policyholder - the person(s) protected in case of a loss or claim.

Insurer - The insurance company.

Life insurance -A policy that will pay a specified sum to beneficiaries upon the death of the insured.

Limit- Maximum amount a policy will pay either overall or under a particular coverage.

Policy - The written contract of insurance.

Policy Limit - The maximum amount a policy will pay, either overall or under a particular coverage.

Premium - The amount of money an insurance company charges for insurance coverage.

Quote - An estimate of the cost of insurance, based on information supplied to the insurance company by the applicant.

Surrender - To terminate or cancel a life insurance policy before the maturity date. In the case of a cash value policy, the policyholder may exercise one of the nonforfeiture options at the time of surrender.

Underwriting - The process of selecting applicants for insurance and classifying them according to their degrees of insurability so that the appropriate premium rates may be charged. The process includes rejection of unacceptable risks.

Waiting Period - A period of time set forth in a policy which must pass before some or all coverages begin.

Annuity Glossary

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Accumulation Unit Value (AUV) - The value of the underlying portfolio (less any charges) divided by the number of outstanding units.

Annuitant - A person entitled to receive annuity benefits.

Annuity - A contract that allows you to invest money and have it grow on a tax-deferred basis. Annuities are either fixed or variable--or a combination of fixed and variableand can require lifetime or period payments.

Beneficiary - Person chosen by the annuitant to receive the proceeds from the annuity in case of the annuitant's death.

Bond - Interest paying certificate issued by a government, public agency or corporation, promising to pay the holder a specified sum on a specified date.

Certificate Owner
The person or entity that purchases the annuity.

Contingent Annuitant - A person who will receive annuity payments in case the first annuitant dies before annuity payments begin.

Contingent deferred sales charge (CDSC) - The charge deducted from the annuity for withdrawing purchase payments in excess of allowed limits or upon full surrender of the annuity contract.

Deferred Annuity
An annuity contract where premiums are accumulated with interest and then used to provide periodic payments at a future date.

Direct Rollover
A transfer that qualifies as a rollover, but is done directly from one company to another. Usually, it is from a qualified plan into an IRA . It is reportable, but not taxable. The annuitant can avoid having taxes taken out of the eligible distribution by having a direct rollover.

Effective Interest Rate
AKA: Annual Effective Rate or Annual Effective Yield. The interest rate earned if compounded annually. If a person has $10,000 and leaves it for one year at an effective rate of 10%, they will earn $1,000 of interest. The interest rate for one day when compounded daily is approximately 0.0261%. Note that 10% divided by 365 days is approximately 0.274%.

Expected Life
Number of years a person is expected to live, given their current age. The expected life is usually obtained from a mortality table.

Fixed annuity - An insurance contract in which the insurance company guarantees your principal and locks in a rate of return for a fixed period of time.

Flexible Premium Annuity
A deferred annuity contract that allows the owner to make continual payments. The amounts and times of these payments are often left completely up to the owner. Interest is paid from the date they are received and the amount available to annuitize is dependent on when and how much is received.

Interim value The value of an investment in a fixed option before application of any market value adjustment.

Market value adjustment - The gain or loss incurred for withdrawing money from a fixed-rate option prior to maturity.

Money market portfolio - A portfolio that aims to earn income by investing in short-term securities issued by governments or corporations. These portfolios seek stability of principal. They differ from bank market rate accounts, which are bank deposits and are FDIC insured up to applicable limits.

Money market instruments - Short-term debt securities issued by corporations, governments or public agencies.

Owner/Participant - The individual who owns an annuity contract and makes purchase payments.

Periodic Transfer
This is a transfer from one company to another pursuant to IRS Ruling PL102-318. It allows for the transfer of the money from one company to another over a period of time of substantially equal payments. Most are set up as monthly, however they can be quarterly or annually. Effectively, a policyholder annuitizes their policy, but has the proceeds sent as a transfer to another company to purchase an annuity there rather than receiving the payments as income.

Principal - The amount of money you put into an investment.

Purchase payment - A contribution to or an investment in an annuity.

Rollover
Money that originally came from a qualified plan, was distributed to the owner, and is now being placed in an eligible qualified plan. Most often the plan it is being placed into is an IRA. These are reportable to the IRS, but not taxable.

Single Premium Annuity
Annuity purchased with a payment of one lump sum premium.

Surrender Value
Is equal to the accumulated value less any surrender charges specified in the contract.

Stock (equity) - A unit of ownership in a company. When you buy a stock, you become a part-owner of the company whose stock you purchase. Stock is equity.

Tax Sheltered Annuity (TSA)
An employer sponsored retirement savings program limited by law to employees of public educational organizations and certain nonprofit organizations.

Underlying portfolios - (portfolios within a variable annuity) These portfolios are available only within variable insurance products and are not available for purchase by the general investing public.

Variable Annuity - An insurance annuity contract offering both variable and fixed-rate investment options. The return on investment in a variable option is not fixed but fluctuates with the market.

1035 Exchange
Pursuant to IRS Section 1035, allowing the exchange of contracts without losing the tax-deferred status of the interest. Must be an exchange of the entire contract, and must be a direct company to company transfer. Permissible exchanges include: annuity to annuity, life to annuity, life to life, endowment to endowment and endowment to annuity.

403(b) Plan
Tax Sheltered Annuity.

 

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adult day care - community-based programs providing an array of health, social, and other supportive services to functionally-impaired adults

advance directives - an individual’s right to make decisions about his or her health care.

assisted living - as defined in Senate Bill 545, April 1996, a facility that provides housing and supportive services, supervision, personalized assistance, health-related services, or some combination that meets the needs of individuals who are unable to perform or who need assistance in performing the activities of daily living or instrumental activities of daily living in a way that promotes optimum dignity and independence for the individuals.

capitation - health insurance payment mechanism in which the provider automatically receives a fixed payment per enrollee over a specified period to cover a defined set of services, regardless of actual services provided.

care coordination - also known as care management or case management; a collaborative process that promotes quality care and cost effective outcomes which enhance the physical, psychosocial and vocational health of individuals.

Certified Adult Residential Environment Home (CARE home) - a form of assisted living that provides room, board, help in reaching community resources, and protective oversight, but not nursing care or psychiatric treatment to a resident 18 or older who requires these services to remain in the community.

chronic care - the ongoing provision of medical, functional, psychological, social, environmental, and spiritual care services that enable people with serious and persistent health and/or mental conditions to optimize their functional independence and well-being, from the time of condition onset until problem resolution or death. Chronic care conditions are multidimensional, interdependent, complex and ongoing.

cost-sharing - the portion of health expenses that the beneficiary must pay.

cost shifting - the act in which a provider compensates for decreased revenues from one payer by increasing charges to another payer.

custodial care - level of care that provides supervision and assistance.

dementia - deterioration of intellectual faculties resulting from a disorder of the brain and often accompanied by emotional disturbance; disorders include senile dementia of the Alzheimer's type, multi-infarct dementia, reversible dementia, progressive neurological disorders, alcohol-induced dementia, serious and persistent mental illness, spinal cord injury, developmental disability, brain injury. Alzheimer's disease accounts for approximately 60% of cases of organic dementia in the elderly and multi-infarct dementia comprises approximately 25% of the cases of dementia in the elderly.

demonstration waiver - an exemption from certain federal rules that allows policymakers to experiment with Medicare and Medicaid program innovations on a pilot study basis. It is time limited and permits policymakers to expand the knowledge base underlying a program through research and program experimentation. An 1115 Medicaid waiver is a demonstration waiver.

developmental disabilities - for people over age 5, a developmental disability is attributable to physical and mental impairment, or a combination which results in substantial functional limitation in three or more of the following areas of major life activity -- learning, mobility, self-care, receptive and expressive language, self-direction, economic self-sufficiency, and the capacity for independent living. Among infants and children under age 5, it is a substantial developmental delay or specific congenital or acquired condition with a high probability of resulting in developmental disabilities if services are not provided.

health outcome - immediate or delayed consequences of medical intervention that affects an individual physically and/or mentally and relates to the length and quality of life, including death, functional disability, appearance, pain, anxiety and peace of mind.

in-home health services - services provided in the home by a general or specialty home health agency or by a residential services agency that may be provided by personal care attendants, home health aides hired privately and informally or through staff agencies or registries.

inpatient care - services provided to an individual who has been admitted to a hospital or other facility for diagnosis and/or treatment that require at least an overnight stay.

integrated care systems (ICS) - providers or insurance entities that integrate preventive, acute, and long term care services. ICS’s would employ case management and interventions intended to avoid functional deterioration and unnecessary institutionalization.

Intermediate Care Facility for the Mentally Retarded (ICF/MR) - institution designed to provide care and training in activities of daily living and social skills to the person with mental retardation and those with related conditions (e.g., individuals who are developmentally disabled).

Medigap policies - privately purchased insurance policies that provide coverage for medical costs not covered by Medicare.

Older Americans Act (OAA) - originated in 1965 to coordinate and fund a comprehensive service system for older people. It uses age 60 as the main criterion for participation rather than income although it does encourage "targeting" of low-income and minority elders.

payor - legal entity with primary authority for acting on behalf of consumers in distributing resources and ensuring that the primary interests of consumers are honored.

pre-paid health plan - a health plan that provides a specified set of health benefits to a subscriber or group of subscribers in return for a periodic premium.

provider - legal entity with direct service responsibility.

quality of care - the degree to which health services for individuals and populations increase the likelihood of desired health outcomes and are consistent with current professional knowledge; the complex and multidimensional nature of long-term care requires a broader approach to definition and measurement of outcomes.

risk adjustment - increases or reductions in the amount of payment made to a health plan on behalf of a group of enrollees to compensate for health care expenditures that are expected to be lower or higher than average.

risk selection - enrollment choices made by health plans or enrollees on the basis of perceived risk, which result in variation in expected health care expenditures across plans.

Supplemental Security Income (SSI) - a public assistance program which provides financial assistance to persons who are aged, blind, or disabled. Persons determined eligible for SSI are automatically eligible for Medicaid.

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Benefit Period - How long a policy will pay benefits to the insured.

Elimination Period - An individual must be disabled for a certain
amount of time before they can start receiving disability benefits ,
this length of time is called "elimination period"

Guaranteed Renewable - You are gauranteed renewability, however, the rates can change on renewal.

Integrated Benefits - Where your insurance company considers the total benefits received from all other disability sources, such as SSA, or Workmans Comp, and subtract it from your benefit.

Long Term Disability Policies- Are policies that have a benefit
period which extends to retirement age, usually 65.

Non Cancellable - Non cancellable contracts means that the insurer can not
make modifications to or raise the rates of the policy, unless stated in the contract.

Own Occupation Disability - When you can not perform the duties of your occupatiuon, training and experience.
.
Residual Disability Policies - If an individual experiences at least a 20% decline in pre-disability income, the policy pays the insured a proportional benefit of their loss of income.

Short Term Disability Policies -Policies that extend two years or less

Total Disability - Definitions vary per policy, but usually it is a disability in which you are not able to perform the duties of any occupation. Also known as Any Occupation Disability.

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Coinsurance: The amount you are required to pay for medical care in a fee-for-service plan after you have met your deductible. The coinsurance rate is usually expressed as a percentage. For example, if the insurance company pays 80 percent of the claim, you pay 20 percent.

Coordination of Benefits: A system to eliminate duplication of benefits when you are covered under more than one group plan. Benefits under the two plans usually are limited to no more than 100 percent of the claim.

Copayment: Another way of sharing medical costs. You pay a flat fee every time you receive a medical service (for example, $5 for every visit to the doctor). The insurance company pays the rest.

Covered Expenses: Most insurance plans, whether they are fee-for-service, HMOs, or PPOs, do not pay for all services. Some may not pay for prescription drugs. Others may not pay for mental health care. Covered services are those medical procedures the insurer agrees to pay for. They are listed in the policy.

Deductible: The amount of money you must pay each year to cover your medical care expenses before your insurance policy starts paying.

Exclusions: Specific conditions or circumstances for which the policy will not provide benefits.

HMO (Health Maintenance Organization): Prepaid health plans. You pay a monthly premium and the HMO covers your doctors' visits, hospital stays, emergency care, surgery, checkups, lab tests, x-rays, and therapy. You must use the doctors and hospitals designated by the HMO.

Managed Care: Ways to manage costs, use, and quality of the health care system. All HMOs and PPOs, and many fee-for-service plans, have managed care.

Maximum Out-of-Pocket: The most money you will be required pay a year for deductibles and coinsurance. It is a stated dollar amount set by the insurance company, in addition to regular premiums.

Noncancellable Policy: A policy that guarantees you can receive insurance, as long as you pay the premium. It is also called a guaranteed renewable policy.

PPO (Preferred Provider Organization): A combination of traditional fee-for-service and an HMO. When you use the doctors and hospitals that are part of the PPO, you can have a larger part of your medical bills covered. You can use other doctors, but at a higher cost.

Preexisting Condition: A health problem that existed before the date your insurance became effective.

Premium: The amount you or your employer pays in exchange for insurance coverage.

Primary Care Doctor: Usually your first contact for health care. This is often a family physician or internist, but some women use their gynecologist. A primary care doctor monitors your health and diagnoses and treats minor health problems, and refers you to specialists if another level of care is needed.

Provider: Any person (doctor, nurse, dentist) or institution (hospital or clinic) that provides medical care.

Third-Party Payer: Any payer for health care services other than you. This can be an insurance company, an HMO, a PPO, or the Federal Government.