A
Accelerated Death Benefit
This benefit is included with many policies today. It provides for the payment of a portion of the death benefit prior to the insured's death should the insured be diagnosed as terminally ill. The specific requirements vary by company.
Accidental Death Benefit (ADB)
This benefit is optional with many policies today. It provides an additional death benefit when the insured's death is caused by an accident.
Actual Age
A method of calculating an applicant's insurance age. This method uses the insured's actual age and is sometimes called Age Last Birthday or Attained Age.
Actuary
An individual employed by an insurance company to calculate premium rates, reserves, dividends and other important figures using risk factors obtained from experience tables.
Adjustable Life Insurance
A form of life insurance which allows the policy owner to change various benefits of the policy including the face amount, the premium amount, the length of coverage and the length of the premium payment period.
Adverse Selection
The tendency of persons with poorer-than-average health expectations (higher risk) to apply for or continue insurance coverage to a greater extent than persons with average or better-than-average health expectations (lesser risk).
Age Change
The date on which an insured's age changes. In most life insurance contracts this is the date midway between the insured's birthdays. The date of age change depends on whether the insurer uses an age nearest birthday or age last birthday calculation for determining premium rates.
Age Last Birthday
A method of calculating an applicant's insurance age. This method uses the insured's actual age and is sometimes called Actual Age or Attained Age.
Age Limits
The ages above or below which an insurer will not issue and insurance policy or continue a policy presently in force.
Age Nearest Birthday
A method of calculating an applicant's insurance age. This method is based on a person's nearest birth date for rate calculations. If the person's birth date is within the next six months, they are considered the next age.
Agent
An authorised and licensed representative of an insurance company who sells and services insurance policies. Agents represent the insurance company and typically only sell policies from that company.
Allowable Charge
Charges for medical services or supplies provided by a hospital or physician which qualify as covered expenses as stated in the health plan's certificate of coverage.
Ambulatory Services
Health care services provided to patients who are able to return home without an overnight stay in a medical facility. Typically, ambulatory services include preventive, diagnostic, and treatment services provided on an outpatient basis.
Ambulatory Surgery
Intermediate level surgical procedures that usually are too complex to be performed in a physician's office but do not require inpatient hospitalization.
Amendment
A formal document which corrects or revises an insurance policy. When authorized by the insurer and the policy owner, the amendment attaches to or becomes part of the policy.
Annuitize
To begin a series of payments from an annuity. This term also refers to the settlement of a life insurance policy under the contract's annuity options.
Annuity
A contract sold by a life insurance company that provides fixed or variable payments to an annuitant, either immediately or at a future date.
Applicant
The person applying for the insurance policy. The applicant may be different from the proposed insured or the policy owner.
Application
Forms required by the insurance company which the proposed insured completes when requesting coverage from an insurer.
Approved
A status that indicates the insurance company has completed underwriting and agrees to issue a policy to the proposed insured.
Assignment
The transfer of the ownership rights of a life insurance policy from one person to another.
Attained Age
The age of an individual on a given date. Some insurance companies use attained age as a method of calculating insurance premiums.
Attending Physician's Statement (APS)
Information provided by a proposed insured's physician covering medical history and results of medical examinations. It is used to determine the appropriate underwriting classification for the proposed insured.
B
Backdating
A procedure used to make the effective date of a policy earlier than the application date. Backdating is commonly used to make the insurance age of the insured at policy issue lower than it actually is in an effort to receive a lower premium. Most policies can be backdated up to six months. Backdating is also commonly referred to as Saving Age.
Beneficiary
A person(s) designated by the policy owner to receive the proceeds of an insurance policy upon the death of the insured.
Benefit
For life insurance, it is the amount of money specified in a life insurance contract to be paid to the beneficiary upon the death of the insured. It is commonly referred to as the Death Benefit. For health insurance, it is the amount of money payable by a health plan for the cost of covered services, as defined in the Certificate of Coverage.
Benefit Period
The maximum length of time for which benefits will be paid under the terms of the insurance policy.
Blood Chemistry Panel
A series of blood tests that an insurance company may require of applicants during the underwriting process.
Broker
A licensed representative who sells and services insurance policies. Brokers represent their customers and are usually contracted to offer insurance products from several different insurance companies.
Burial Insurance
A life insurance policy designed to provide just enough insurance to cover funeral and burial expenses.
Business Life Insurance
Life insurance purchased for business rather than personal purposes. Examples are insurance owned by a business on the life of a key employee and insurance owned by a business partner on the life of another partner.
Buy Sell Agreement
An agreement for the transfer of business ownership to the remaining owners at the death or retirement of an owner. The transaction is typically funded through a life insurance policy carried on the lives of each individual owner.
C
Captive Company
A company that provides risk-mitigation services for its parent company. The captive insurance company is owned by the parent company itself which reinsures its own Employee Benefit risks.
Carrier
Another name for an insurance company.
Cash Value
The amount of cash accumulated inside some types of permanent life insurance policies. The cash value typically grows over time and often earns a rate of interest, depending on the type of policy. It can be borrowed by the insured or withdrawn when the policy is surrendered.
Change of Beneficiary
A contract provision that allows the policy owner to change the beneficiary whenever desired, unless the beneficiary has been designated as irrevocable. Changes to an irrevocable beneficiary require written permission of the beneficiary.
Change of Beneficiary Form
A form provided by the insurer that the policy owner must complete in order to change the beneficiary on a policy.
Child(ren) Rider
An optional policy provision that provides a small amount of life insurance coverage on the lives of the primary insured's children. The amount of coverage varies by company and one rider typically covers all of the insured's eligible children.
Claim
Notification to an insurance company that payment of the benefit is due under the terms of the policy.
Clause
An article or added provision in a life insurance contract, such as a Suicide Clause.
Coinsurance
A provision of a program by which the insured shares in the cost of covered services on a percentage basis. The health plan assumes only a certain percentage of the cost while the covered person pays the remainder. Coinsurance is usually paid after the insured meets the plan deductible. For example, a plan with 80/20 coinsurance means, after the deductible is paid by the insured, the insurance company will pay 80% of the remaining covered expenses up to a set amount and the insured will pay 20%.
Collateral Assignment
The pledge of a life insurance policy or its value as security for the repayment of a loan. The assignee receives rights that are superior to the rights of the original policy owner and beneficiary, to the extent of the obligation owed to the assignee.
Commissions
A fee or percentage of premium allowed to a salesperson or agent for services rendered.
Commutation Right
The right of a beneficiary to receive in a single lump-sum the remaining payments under an installment option which was selected for the settlement of the proceeds of life insurance policy.
Conditional Premium Receipt
A receipt given to an applicant when a payment accompanies an application for insurance. If conditions of the conditional coverage are met, the receipt verifies the coverage will be in force from the date of application, provided the insurer would have issued the coverage on the basis of the facts revealed on the application, medical examination and other usual sources of underwriting.
Contestability Period
The time period during which the insurer is can deny a claim if it finds material misrepresentations were made in the application. This period usually covers the first two years a policy is in force. A policy becomes "incontestable" when the contestability period is over.
Contingent Beneficiary
A person(s) designated by the policy owner to receive policy proceeds if the Primary Beneficiary is deceased at the time benefits become payable. This is often referred to as a secondary beneficiary.
Conversion Benefit
This allows the policy owner to change one policy type for another. An example is exchanging a term life insurance policy for a permanent life insurance policy. Most term life insurance policies offer this benefit.
Conversion Credit
A one-time credit given when converting term life insurance to permanent life insurance.
Coordination of Benefits (COB)
When the covered person is covered by another plan or plans, the benefits under the policy and the other Plan(s) will be coordinated so benefits from all sources do not exceed 100 percent of allowable medical expenses. This means one Plan pays its full benefits, then the other Plan(s) pay(s).
Copayment or co-pay
A specific payment by the covered person at the point of each health service visit. It does not accumulate like a deductible and is not subject to an out-of-pocket maximum.
Covered Expenses
All medical services that are covered by an insurance policy. Some health insurance plans will have a list of medical services they do not cover. It would be wise to make sure you are not in need of any service excluded by any given health insurance plan.
D
Death Benefit
The dollar amount of coverage that is paid to the designated beneficiary(s) of a life insurance policy upon the insured's death.
Decreasing Term Life Insurance
A type of term life insurance with a death benefit that decreases each year or policy anniversary. This type of life insurance is typically used to cover a loan balance that decreases over time.
Deductible
The amount of out-of-pocket expenses that must be paid for health services by the covered person before the health plan benefit payment begins. This is usually based on a calendar year.
Dental Care
The evaluation, diagnosis, prevention and/or treatment (nonsurgical, surgical or related procedures) of diseases, disorders and/or conditions of the oral cavity, maxillofacial area and/or the adjacent and associated structures and their impact on the human body; provided by a dentist, within the scope of his/her education, training and experience, in accordance with the ethics of the profession and applicable law.
Dependent
An individual other than a health plan subscriber who is eligible to receive health care services under the subscriber's contract. Generally, dependents are limited to the subscriber's spouse and minor children.
Diagnostic Tests
Tests and procedures ordered by a physician to determine if the patient has a certain condition or disease based upon specific signs or symptoms demonstrated by the patient. Such diagnostic tools include, but are not limited to radiology, ultrasound, nuclear medicine, laboratory, pathology services or tests.
Disability Insurance (DI)
A form of insurance coverage that provides a portion of income lost as the result of a total or partial disability caused by either an accident or an illness.
Double Indemnity
The payment of twice the basic benefit in the event of loss resulting from a specific cause or under specific circumstances. This is commonly referred to as an Accidental Death Benefit.
Drug Formulary
A listing of prescription medications which are approved for use and /or coverage by a Health Plan and which will be dispensed through participating pharmacies to a covered person. The list is subject to periodic review and modification by the Health Plan.
Durable Medical Equipment
Medically necessary equipment that is able to withstand repeated or prolonged use; primarily and customarily used to serve a medical purpose; not generally useful to a person in the absence of injury or sickness; and is suited for use in the home. This included supplies that are necessary for use with the equipment. This is commonly referred to as Medical Equipment.
E
Effective Date
The date an insurance policy goes into effect. This is sometimes referred to as the Policy Date.
Electronic Funds Transfer (EFT)
An arrangement in which premium payments are drawn from an insured's bank account. This is also referred as Auto-Draft or Pre-Arranged Withdrawal (PAW or PAC).
Emergency Care
Care for a person with a medical condition or behavioural condition of sudden onset that manifests itself by acute symptoms of sufficient severity (including sever pain) such that a person who possesses an average knowledge of health and medicine could reasonably expect the absence of immediate medical attention to result in placing the health of the insured person in serious jeopardy, serious impairment to bodily functions, serious disfigurement of the insured person, serious impairment of any bodily organ or part of the insured person, or in the case of behavioural condition, placing the health of the insured person or other persons in serious jeopardy.
Employee Participation
An insurance company will usually require a certain percentage of eligible employees to participate in the employer offered group health insurance plan. This percentage varies by company and by group size. If this percentage is not met the insurance company may not offer coverage.
Employer Contribution
The total amount of premium an employer is required to pay for each employee covered under the employer offered group health insurance coverage. An employer is usually required to contribute at least 50% of each enrolled employee's premium. Employers are usually only required to contribute to the employee cost and not the cost for an employee's dependents.
Endorsement
Used to clarify or make revisions to particular provisions of a health or life insurance policy.
Enrolee
An individual who is enrolled and eligible for coverage under a health insurance policy. This is also referred to as a Member, Insured or Participant.
Estate Planning
The planning for the administration of an estate upon the death of an individual. Estate planning typically involves establishing wills and/or trusts to minimize the loss of estate value due to estate taxes and is often funded with life insurance.
Evidence of Insurability
Factual information used by insurance companies to determine an applicant's qualification for insurance. Examples of information used may include paramedical exams, medical records, application statements, and motor vehicle reports among others.
Examiner
A health care professional designated to provide paramed or medical exams on insurance applicants.
Exclusions
Specific conditions or circumstances listed in an insurance policy for which the policy will not provide benefit payments.
Expiration Date
The date on which an insurance policy ceases to provide coverage on the insured.
Explanation of Benefits
A statement sent by a health plan to a covered person who files a claim. The explanation of benefits (EOB) lists the services provided, the amount billed, and the payment made. The EOB statement must also explain why a claim was or was not paid, and provide information about the individual's rights of appeal.
Extra Premium
The amount charged in addition to the regular premium to cover any extra hazard or special risk such as aviation or hazardous activities. This is commonly referred to as Flat Extra.
F
Face Amount
The amount of coverage provided by a life insurance policy. This is also referred to as Coverage Amount.
Face Page
One of the first pages of a life insurance policy. This page lists the policy specifications such as the name of the insured, the policy owner, the beneficiary, the policy number, the amount of insurance and the premium amount among other things.
Final Expenses
Expenses incurred at the time of a person's death including funeral costs, probate costs, current liabilities and taxes.
Fixed Benefit
An insurance policy benefit that remains the same and does not change.
Flexible Premium Policy
A type of permanent life insurance policy in which the policy owner may vary the amount or timing of premium payments.
Flexible Premium Variable Life Insurance
A type of permanent life insurance policy in which the policy owner may vary the amount or timing of premium payments. Policy values are variable and depend on the performance of a separate investment account.
Free Look Period
The period of time in which a policy owner has the legal right to examine a newly issued policy and return it for a full refund of premium if not satisfied for any reason. The period of time varies by state and is usually between 10 and 30 days with 10 being the most common.
G
Generic Drugs
Drugs which are chemically equivalent to Brand Name Drugs whose patent has expired and which are approved by the Federal Food and Drug Administration (FDA).
Grace Period
The period of time between a premium's due date and the date the policy will lapse if the premium remains unpaid. This period is usually 30 days. If the insured dies during the grace period, the unpaid premium is deducted from the policy proceeds.
Group Life Insurance
A life insurance policy issued to a group of people, usually through an employer, union or association.
Guaranteed Insurability
An insurance policy provision that allows the insured to buy additional fixed amounts of life insurance at fixed time intervals without evidence of insurability.
Guaranteed Issue
An insurance policy provision that allows a certain amount of insurance or type of insurance to be issued without medical evidence of insurability.
Guaranteed Rates
A life insurance policy provision that guarantees the premium rates will not change during the entire term of the policy. Most guaranteed term life insurance policies have guaranteed rates.
Guaranteed Renewable
An insurance policy provision that guarantees an insurance policy will continue in force provided the policy premiums are paid on time. An insurance company can typically only cancel a guaranteed renewable insurance policy for non-payment of premium.
Guaranteed Term Life Insurance
A type of renewable term life insurance that remains in force provided the policy premiums are paid on time.
H
Hazardous Activities
These are activities that, if participated in may make you ineligible for coverage from the insurance carrier. Examples include, but are not limited to scuba diving, jet, snow, and water skiing, snowboarding, hang gliding, skydiving, paragliding, bungee jumping, mountain climbing, and amateur racing. Be sure to check the specific insurance company details and / or brochure for exact specifics.
Health Benefit Plan
The health insurance product offered by a health plan.
Health Maintenance Organization (HMO)
A legal entity that provides or arranges for a comprehensive range of basic and supplemental health care services. HMO's typically have a network of providers from which the insured must seek services. HMO's also tend to have lower out-of-pocket expenses than traditional insurance plans.
Hearing Services
The study, examination, and treatment of defects and diseases of the ear, by inspection, medical treatment and/or devices.
HIV Consent Form
A required form completed by the applicant and submitted with the application for insurance. The form discloses to the applicant that the insurance company may test for the presence of HIV in the applicant's blood. By signing, the applicant acknowledges this and provides authorization for the test.
Home Health Care
Medical care provided by trained personnel in the patient's home for patients who do not need the more extensive treatment provided by a hospital, skilled nursing facility, or extended care facility, or for patients who are not capable of going to a medical facility for outpatient care.
Hospice
A program that provides care to the terminally ill.
Hospital
A facility which is licensed by the proper authority in the jurisdiction in which they are located and provides inpatient services for the care and treatment of patients.
I.D. Card/Identification Card
A card issued to a covered person of a health insurance plan. The card is typically presented by the insured to heath care providers when seeking services.
In-Network
Refers to the use of providers who participate in the health plan's provider network. Many benefit plans encourage enrolees to use participating (in-network) providers to reduce the enrolee's out-of-pocket expense.
Incidents of Ownership
Various rights that may be exercised under the policy contract by the policy owner. Some of the incidents of ownership may include rights: (1) to cash-in the policy, (2) to receive a loan on the cash value of the policy, and (3) to change the beneficiary designation.
Incontestability Clause
A life insurance policy provision that states after the policy has been in force for a specified period of time, the company cannot deny a claim based on a material misrepresentation made in the application. The typical period of time for the clause is two years.
Indemnity Plan
A type of traditional health insurance in which the covered person is reimbursed for covered expenses without regard to choice of provider. Also known as fee-for-service plans.
Inpatient Services
Services rendered to a person who is admitted to a hospital for medical care, is assigned a bed designated for routine, special, psychiatric, or rehabilitation care, and occupies the bed for 24 hours or more.
Inspection Report
A report sometimes required by an insurance company in conjunction with the underwriting of an application for coverage. The report typically includes information pertaining to the applicant's occupation, health history and financial status. The report is usually completed by the insurance company or an investigative agency.
Insurability
General acceptability by an insurance company of an applicant for insurance based on underwriting review, which may include items such as the applicant's current health status, medical history and driving record among others.
Insurable Interest
The existence of potential financial loss on the part of the policy owner and/or beneficiary(s) in the event of the death of the insured. The policy owner and any beneficiaries must have an insurable interest.
Insurance
A system for reducing risk by transferring the risks of several individual entities to one entity, such as an insurance company. Each individual entity contributes monetarily (premiums) to cover the risk assumed by the insurance company.
Insurance Company
A company that provides insurance coverage through the issuance of insurance policies. This is also referred to as the Insurer.
Insurance Department
An area within each state's government that administers and regulates the insurance industry within the state.
Insurance Policy
The physical, written document issued by an insurance company to the policy owner. The insurance policy represents the written contract between the insurance company and the policy owner.
Insured
The individual covered by an insurance policy.
Irrevocable Beneficiary
A type of beneficiary designation that cannot be changed without the written consent of the beneficiary.
Irrevocable Trust
A trust that cannot be revoked or amended by the party who establishes it. This type of trust is often established when life insurance is purchased to protect an estate.
Issue Date
The actual date an insurance policy is issued. This may also be the effective date of the policy.
J
Juvenile Insurance
Life insurance issued on the life of a child. This type of life insurance policy is typically whole life insurance.
K
Key Person Insurance
An insurance policy placed on the life of an important person within a company. The policy proceeds are used to offset the loss experienced by the company due to the person's death.
L
Lapse
The termination of an insurance policy due to non-payment of premium.
Lapse Notice
The notice provided in writing to the policy owner that the policy has lapsed.
Length of Coverage
The length of time you will be covered by an insurance policy. Length of coverage is typically applied to term life insurance products. Below is an explanation of length of coverage.
5 years
10 years
15 years
20 years
25 years
30 years
When selecting the length of coverage, it is important to choose a period that will cover you through life's important events, or personal milestones. We all have reasons for purchasing life insurance and it's important to keep these core reasons in mind when selecting the length of coverage. Some items to consider include:
Years left on your mortgage
Years left until your children graduate high school, college, medical school, etc.
Years left until retirement
Business succession planning
Estate taxes
Establishing a trust for grandchildren
Providing for dependent relatives
Funeral expenses
Level Premium
A premium that remains the same throughout the period specified in the insurance policy.
Level Term Insurance
A type of term life insurance policy where the face value remains the same throughout the period specified in the insurance policy.
Life Expectancy
The average number of years of life remaining for persons of a given age according to a particular mortality table.
Life Insurance
Coverage placed on the life of an individual whereas an insurance company issues a policy and pays a stated death benefit in the event of the insured's death.
Life Insurance Trust
A type of life insurance policy where a trust company is named as the beneficiary and distributes the proceeds of the policy under the terms of the trust agreement.
Lifetime Benefit
The total amount of medical dollars per insured that the insurance company would pay for covered expenses. A lifetime benefit of $1,000,000 means the insurance company will pay their portion of all medical expenses for the life of the policy up to $1,000,000.
Living Benefit
A benefit that provides for the payment of a portion of the death benefit prior to an insured's death should the insured be diagnosed as terminally ill. The specific requirements vary by company. This is commonly called an Accelerated Death Benefit.
Lump Sum
The primary method of the settlement of a life insurance policy. The policy proceeds are paid to the beneficiary(s) all at once rather than in instalment payments.
M
Managed Care
A system of managing and financing health care delivery to ensure that services provided to managed care plan members are necessary, efficiently provided, and appropriately priced.
Material Misrepresentation
A statement made by an applicant or proposed insured in the policy's application which is not factually correct. If the truth had been disclosed, the insurance company would not have issued the policy, would have issued it differently, or would have issued it with limited benefits or a higher premium.
Material Misrepresentation
A statement made by an applicant or proposed insured in the policy's application which is not factually correct. If the truth had been disclosed, the insurance company would not have issued the policy, would have issued it differently, or would have issued it with limited benefits or a higher premium.
Maternity Care
Care that promotes the overall health of mother and child from conception, during pregnancy and delivery, and through the post-partum period after delivery.
Medical Examination
An exam completed by a physician. The exam may be required as a part of medical underwriting.
Medically Necessary
Those covered services required to preserve and maintain the health status of a covered person in accordance with the accepted standards of medical practice in the medical community in the area where services are rendered. In other words, services or treatments are considered medically necessary and appropriate if they could not have been omitted without adversely affecting the patient's condition or the quality of medical care provided.
Member
An individual or dependent that is enrolled in and covered by a managed health care plan. Also referred to as an Enrolee, Beneficiary, Participant, Covered Person, Subscriber, and Eligible Individual.
Mental Health/Behavioural Health
A condition or disease regardless of its cause, listed in the most recent edition of the American Psychiatric Association's Diagnostic and Statistical Manual of Mental Disorders.
Misrepresentation
The act of making, issuing, circulating, or causing to be issued or circulated any written or verbal statement that does not accurately represent the correct policy terms.
Mode
The term of premium payments for an insurance policy. Typical modes include monthly, quarterly, semi-annual and annual.
Moral Hazard
A condition of morals or habits that could affect and individual's insurability.
Mortality
The frequency of deaths in proportion to a specific population.
Mortality Rate
The number of deaths in a group of people usually expressed as deaths per thousand.
Mortality Table
A table or chart listing the probabilities of death occurring at various ages. This is often used by insurance companies to establish rating and underwriting guidelines.
Multi-Year Premium Mode
A premium payment option where future annual premiums are paid in advance at a discount.
Multinational pooling
Centralized profit & loss account, combining the financial performance of a company’s global Employee Benefits contracts with worldwide experience rating.
Mutual Insurance Company
An insurance company which is owned by its policy owners. Net earnings and savings of the company are distributed to the policy owners in the form of dividends.
N
Network
The doctors, clinics, hospitals, and other medical providers that a health plan contracts with to provide health care to its members. Members are generally limited to network providers for full coverage of their health costs.
Network Providers
The doctors, clinics, hospitals, and other medical providers that are in the network(s) of the health plan.
Non-Contributory
A group benefit plan typically through an employer, in which the employer pays all of the premiums.
Non-Participating Provider
A provider that has not contracted with a health plan to provide health care services to covered persons. Generally health care benefits are reduced when a non-participating provider is utilized.
Non-Tobacco/Non-Smoker
A rating class assigned to an insurance policy in which the insured has been classified as a non-user of tobacco and/or nicotine products.
O
Occupational Hazards
Hazards associated with an insured's occupation that increases the possibility of injury, illness or death. Such hazards may have an impact on the insurability of an applicant.
Optional Coverage
These types of coverages are usually purchased and added to the base policy. Examples include, but are not limited to dental, prescriptions, maternity, and term life accidental death & disability (AD&D).
Orphan
A policy owner who is not currently being serviced by the writing agent/broker.
Out-of-Network
The use of health care providers who have not contracted with the health plan to provide services. HMO members are generally not covered for out-of-network services except in emergency situations. Members enrolled in Preferred Provider Organizations (PPO) and Point-Of-Service (POS) coverage can go out-of-network, but will pay some additional costs.
Out-of-Pocket Maximum
The amount which a covered person must pay for deductibles, coinsurance and co-pays in a defined time period (generally calendar year) before the health plan covers all remaining medical services at 100%.
Outpatient
A patient who received medical services at a health facility without being admitted to the facility for an overnight stay.
Outpatient Surgery
Surgery performed in a facility or center devoted primarily to the performance of one day or same day surgery without anticipation of the overnight say of patients.
Overhead Expense Insurance
Insurance for business owners to help offset continuing business expenses if the owner becomes disabled.
P
Paid-Up Insurance
An insurance policy that does not require future premium payments to provide the death benefit of the insured person.
Paramedical Exam/Paramed Exam
A brief physical examination the insurer typically requires of applicants during the underwriting process. The exam is usually performed by a registered nurse at a time and location convenient to the applicant. The exam usually consists of measurements (e.g. height/weight, blood pressure, and heart rate), body fluid samples (e.g. urine, blood) and a medical history questionnaire. The insurance company pays for the exam.
Partial Day Treatment
A program offered by appropriately licensed psychiatric facilities that includes either a day or evening treatment program for mental health or substance abuse.
Participating Provider
A provider who has contracted with a managed care plan to provide medical services to plan members. The provider may be a hospital or other medical facility, a pharmacy, a physician, or other practitioner who has contractually accepted the terms and conditions as set forth by the plan. This is commonly referred to as a Preferred Provider.
Payment Mode
Most insurance companies allow you to choose from the following payment modes:
Annually
Semi-annually
Quarterly
Monthly
There are some things to consider when selecting payment mode:
Annually is actually less expensive in the long run. Although you pay the entire amount up front, over the course of a year you will pay less. The reason is that insurance companies build in a 'factor' for modal premiums to cover their cost of billing administration. For example, assume your annual premium is $1,000.
Annual premium = $1,000. Annual cost = $1,000.
Semi-annual premium = $520. Annual cost = $1,040.
Quarterly premium = $265. Annual cost = $1,060.
Monthly premium = $87.50. Annual cost = $1,050.
* All numbers are hypothetical. Actual modal factors vary by company.
* Monthly payments can be made by automatic deduction from your checking account. In fact, if you choose monthly payments, it is a requirement. Almost all insurance companies require automatic deduction for the monthly payment mode. Although this option does not appeal to everyone, it can be a convenient way to budget for and pay your premiums.
Permanent Life Insurance
The type of life insurance that may provide coverage for the insured's entire lifetime. Permanent life insurance policies may include cash value accounts, policy loans, surrender options/fees, etc. Examples are Whole Life Insurance and Universal Life Insurance. Most term life insurance policies can be converted to permanent life insurance policies.
Physical Therapy
Rehabilitation concerned with the restoration of function and the prevention of disability following surgery, injury, disease or the loss of a body part.
Plan Benefit Maximum
The maximum amount that a health insurance plan will pay toward the cost of services incurred by an individual or family within a specified period of time, usually a calendar year.
Point of Service (POS)
A health care plan that permits covered persons to choose providers outside the plan's network, yet is designed to encourage the use of providers in the network. A POS plan may have an HMO component and a PPO component. The member chooses where to seek services at the point of service, rather than choosing at the time of enrolment.
Policy Anniversary
The anniversary of the date of issue as shown in the policy.
Policy Date
The date the insurance policy becomes effective.
Policy Fee
A charge for policy administration expenses incurred by the insurance company. The policy fee is usually included in the premium.
Policy Loan
A loan from the insurance company to the policy owner secured by the policy's cash value.
Policy Owner
The individual who owns an insurance policy and who has all contractual rights related to the insurance policy. The policy owner may or may not be the same person as the insured, payer or beneficiary.
Pool
A method of distributing insurance risk in which the individual participants share overall risk with the other participants.
Pre-Authorization
The process of obtaining prior approval as to the appropriateness of a service or medication. Prior authorization does not guarantee coverage.
Pre-Authorized Check (PAC)
A premium-payment arrangement in which the policy owner authorizes the insurer to withdraw the premium payments from a bank account. This arrangement is usually required for the monthly payment mode.
Pre-Certification
An administrative procedure whereby a health provider submits a treatment plan to a third party before treatment is initiated. The third party usually reviews the treatment plan, indicating one or more of the following: patient's eligibility, guarantee of eligibility time, covered services, amounts payable, application of appropriate deductibles, co-payment factors and maximums.
Pre-Existing Condition
A physical and/or mental condition of an insured person that existed prior to the issuance of his or her insurance policy or that existed prior to issuance and for which treatment was received.
Preferred Plus Rating Class
The best premium rate class available on life insurance policies for applicants that are determined by underwriting to be in better than average health.
Preferred Provider Organization (PPO)
A type of managed care plan which contracts with independent providers (hospitals, physicians, ancillary providers) for negotiated discounted fees for services provided to covered persons. The covered persons usually have free choice of providers but have a financial incentive (e.g., reduced copayments, lower deductibles) to use participating providers.
Preferred Rating Class
One of the best premium rate classes available on life insurance policies for applicants that are determined by underwriting to be in better than average health.
Premium
UK Version: the sum(s) payable by the principal Employer to Generali as required under the Policy.
Premium Mode
The frequency of premium payments elected by the policy owner. Typical premium modes include monthly, quarterly, semi-annual and annual.
Premium Notice
A notice from an insurance company to a policy owner that a premium will be due on a given date.
Premium Rate
The price per unit of insurance.
Premium Rate Class
The appropriate price category to which an applicant qualifies according to an insurance company's underwriting guidelines. Common rate classes are Preferred Plus, Preferred, Standard Plus, Standard and Substandard.
Premium Receipt
The receipt given a policy owner for the payment of a premium.
Prescription
A written order or refill notice issued by a licensed medical professional for drugs which are only available through a pharmacy.
Prescription Card
Provides coverage for prescription drugs. Benefits vary by insurance plan and may include coverage for generic and brand name prescription drugs.
Preventive Care
Comprehensive health care that emphasizes priorities for prevention, early detection, and early treatment of disease or its consequences. Preventive care usually includes routine physical examinations, immunizations, and wellness programs.
Primary Beneficiary
The person(s) designated by the policy owner to which the proceeds of a life insurance policy will be paid upon the death of the insured.
Primary Care Physician (PCP)
The physician a member must contact before having access to medical care benefits. The PCP provides basic health care services and serves as a manager of the delivery of all other health care for which benefits may be payable in accordance with the utilization review and quality assurance programs of the plan.
Prior Authorization
See Pre Authorization.
Proceeds
The amount payable under the terms of a life insurance policy upon the insured's death or upon the maturity of an endowment.
Proposed Insured
The person named in a life insurance application as the person whose life is to be covered by the insurance.
Prosthetic Devices
An artificial substitute for a missing body part used for functional reasons, because a part of the body is permanently damaged, is absent or is malfunctioning.
Provider
An individual or organization that provides health care services. Providers may include but not limited to: physicians, hospitals, physical therapists, medical equipment suppliers, and pharmacists.
Provider Network
The set of providers contracted with a health plan to provide services to the covered person(s).
Provision
A statement or clause, found in an insurance policy, to establish some term of the contract.
Q
Quota Share
Reinsurers taking a stated percent share of each policy that an insurer produces ("writes"). This means that the reinsurer will receive that stated percentage of each dollar of premiums and will pay that percentage of each dollar of losses. In addition, the reinsurer will allow a "ceding commission" to the insurer to cover the initial costs incurred by the insurer (marketing, underwriting, claims etc.).
Quote
The estimated premium amount for an applicant based on several factors including type of insurance, coverage amount, length of coverage, age, gender, health and medical history, family history, build and approximate rating class. All quotes are preliminary estimates with final rates determined by insurance company underwriting.
R
Radiation Therapy
The use of ionizing radiation in the treatment of disease, usually cancer. These services are provided by a radiation therapies or a physician qualified in therapeutic radiology.
Rate Banding
The process of grouping term life insurance death benefit amounts. The rate per thousand typically changes at certain death benefit levels or band breaks.
Rate Per Thousand
The price per unit (or $1,000) of death benefit. Term life insurance premiums are calculated by multiplying the rates per thousand of death benefit, then adding the policy fee.
Rated Policy
A policy issued at a substandard rating class based on underwriting guidelines.
Rating Class
The appropriate price category to which an applicant qualifies according to an insurance company's underwriting guidelines. Common rate classes are Preferred Plus, Preferred, Standard Plus, Standard and Substandard.
Re-Entry
A policy provision that allows an insured to renew their term life insurance policy at the end of the term based on their attained age and health status. Evidence of insurability is required for re-entry.
Reasonable and Customary Fee
The average fee charged by a particular type of health care practitioner within a geographic area.
Rebating
The act of giving something of value to an applicant by the agent/broker in return for purchasing a life insurance policy (e.g. sharing commissions). Rebating is illegal in most states.
Referral
A recommendation by a physician and/or managed care plan for a covered person to be evaluated and/or treated by a different physician.
Reinstatement
A policy provision that allows a policy to be restored from a lapsed status. This is usually allowed during the 31 days following the expiration of an insurance policy's grace period.
Reinsurance
The practice of insurers transferring portions of risk portfolios to other insurance companies as a means of risk management. The reinsurer and the insurer enter into a reinsurance agreement which details the conditions upon which the reinsurer would pay the insurer's losses. The reinsurer is paid a reinsurance premium by the insurer, and the insurer issues insurance policies to its own policyholders. The main reason for insurers to buy reinsurance is to transfer risk from the insurer to the reinsurer.
Reinsurance Treaty
It is a method of reinsurance in which the insurer and the reinsurer formulate and execute a reinsurance contract. The reinsurer then covers all the insurance policies coming within the scope of that contract. The reinsurance contract may oblige the reinsurer to accept reinsurance of all contracts within the scope (known as "obligatory" reinsurance), or it may require the insurer to give the reinsurer the option to reinsure each such contract (known as "facultative-obligatory" reinsurance).
Renewable Term Insurance
Term life insurance that may be renewed for another term without evidence of insurability.
Renewal
The process of continuing a policy by paying the premium due.
Replacement
The act of terminating a policy with an insurance company and replacing it with a new insurance policy. An internal replacement involves both policies from the same company while and external replacement involves two separate policies, each from a different insurance company. Replacement transactions are highly regulated for the benefit of consumer protection.
Replacement Form
A required form that must be completed if the applicant is replacing existing coverage. The replacement form notifies the existing insurer that the applicant is replacing their policy with a policy from another company.
Reserve
The amount of money an insurance company holds which, with future premiums and an assumed rate of interest, will pay all contractual obligations as they become due. Insurance company reserves are an important factor used to establish a company's industry ratings.
Respiratory Therapy
Treatment to preserve or improve lung function.
Revocable Beneficiary
A type of beneficiary designation that can be changed without the beneficiary's consent.
Rider
A special provision attached to a policy that either expands or restricts the benefits of the policy. Exclusion riders typically exclude certain conditions from coverage.
Ridered
A ridered insurance policy is one in which a specific condition is excluded from coverage.
Risk
The probability of injury, illness or death associated with an insured.
Risk Classification
The process by which underwriting determines the risk associated with an applicant and assigns an appropriate rating class to the policy.
S
Saving Age
A procedure used to make the effective date of a policy earlier than the application date. Saving age is commonly used to make the insurance age of the insured at policy issue lower than it actually is in an effort to receive a lower premium. Most policies can be backdated up to six months. Saving age is commonly referred to as backdating.
Second-To-Die Life Insurance
A type of life insurance policy that insures the lives of two people, typically a husband and wife. The death benefit proceeds are payable upon the second death.
Secondary Beneficiary
A person(s) designated by the policy owner to receive policy proceeds if the Primary Beneficiary is deceased at the time benefits become payable. This is often referred to as a contingent beneficiary.
Service Area
The geographical area covered by a health plan within which it provides direct service benefits.
Settlement
The process of receiving the proceeds from a life insurance policy. Settlement choices usually include lump sum payments or annuization.
Simplified Underwriting
An underwriting process that applies a less strict analysis of risk factors.
Single Premium Life Insurance
A life insurance policy that requires only one premium and is guaranteed to remain paid-up throughout the insured's lifetime.
Skilled Nursing Facility (SNF)
A facility, either free-standing or part of a hospital, with a professionally trained staff that provides medical treatment, continuous nursing, rehabilitation, and various other health and social services to patients who are not in an acute phase of illness, but who require skilled care on an inpatient basis in lieu of hospital inpatient services.
Specialist
A physician trained and/or certified to treat a specific body system, such as a cardiologist (heart), gynaecologist (woman's reproductive system), or dermatologist (skin).
Speech Therapy
The study, examination, and treatment of defects and diseases of the voice, speech, and spoken and written language, and the use of appropriate devices and treatment.
Split Dollar Plan
An arrangement in which two parties, usually an employer and employee, jointly purchase the policy, pay premiums and share in the policy's benefits.
Spousal Discount
A discount for purchasing life insurance coverage together with a spouse from the same insurance company. Typically, the second policy fee is waived. Spousal discounts are more often seen on permanent life insurance policies.
Standard Plus Rating Class
The premium rate class available on life insurance policies for applicants that are determined by underwriting to be of slightly better than average health.
Standard Rating Class
The premium rate class available on life insurance policies for applicants that are determined by underwriting to be of average health.
Standard Risk
An average risk as determined by underwriting.
Stock Insurance Company
An insurance company formed and capitalized through the sale of shares of stock. Those purchasing the stock are owners and share in the company's earnings through stock dividends declared by the company.
Stop Loss
The total dollar amount up to which you share medical costs with the insurance company. For example, if the stop loss is $5,000 and your share is 20%, you pay $1,000 and the company pays 100% thereafter up to the lifetime benefit.
Sub-Standard Risk
A below average risk as determined by underwriting. Insurance policies can be issued to individuals with sub-standard risk and are referred to as table rated or modified.
Subscriber
The individual who is responsible for payment of premiums or whose employment is the basis for eligibility for membership in a group health plan. This is also referred to as a member or enrolee.
Substance Abuse/Chemical Dependency
The consumption of alcohol or other chemical agents at dosages that place a person's social, economic, psychological and physical welfare in potential hazard, or endangers public health, morals, safety or welfare, or a combination of these.
Suicide Clause
A life insurance policy provision that states if the insured dies by suicide within a certain period of time from the date of issue (usually two years) the amount payable would be limited to the total premiums paid minus any policy loans or outstanding premiums.
Supplemental Accident
Provides first-dollar coverage for accidental injuries. This benefit is usually not subject to copayments, deductibles, or coinsurance.
Surrender
The cancellation of a life insurance policy.
T
Term Conversion
A policy provision that allows a term life insurance policy to be converted to a permanent life policy offered by the company for a specified period of time. Usually the insured can convert to a permanent policy at the same amount of coverage without providing evidence of insurability.
Term Life Insurance
A life insurance product that provides death benefit protection for a specified period of time. The policy pays benefits only if the insured dies during the term.
Third-Party Owner
A policy owner who is not the insured.
Twisting
The illegal practice of inducing a policy owner to replace a policy by providing inaccurate, incomplete or misleading information.
U
Underwriter
The individual or team within a life insurance company who is trained to evaluate the insurability and determine the classification of applicants for insurance protection.
Underwriting
The process of evaluating applications for insurance based on an established set of guidelines. Underwriting determines the risk associated with an applicant and either assigns the appropriate rating class for the policy or declines to offer a policy.
Uninsurable Risk
An individual who is not acceptable for insurance due to excessive risk related to current health, medical history, occupation, avocations, etc.
Universal Life Insurance
A type of permanent life insurance that combines term life insurance and an investment feature into one contract. Universal Life insurance policies generally offer flexible premium payments.
Urgent Care
Care for injury, illness, or another type of condition (usually not life threatening) which should be treated within 24 hours. This is also referred to as after-hours care.
Usual, customary and Reasonable (UCR) Usual Fee
The fee usually charged for a given service by an individual provider to his or her private patient, that is, his or her own usual fee. Customary Fee, the range of usual fees charged by providers of similar training and experience in an area. Reasonable Fee, a fee that meets the two previous criteria or, in the opinion of the responsible medical or dental association's review committee, is justifiable considering the special circumstances of the particular case in question.
Utilization Management (UM)
A management tool used by managed care plans involving the systematic process of reviewing and controlling patients' use of medical services and providers' use of medical resources in order to optimize efficiency and appropriateness of care. UM includes an array of techniques, such as second surgical opinion, preadmission certification, concurrent review, case management, discharge planning, and retrospective chart review.
Utilization Review
The assessment of treatment in accordance with guidelines and standards that are established and accepted by health care professionals using medical necessity criteria. The assessment occurs before and during the delivery of health care. Its purpose is to enhance the cost-effectiveness of health care through reviewing its appropriateness.
V
Variable Life Insurance
A variation of permanent life insurance that offers cash values that fluctuate based on the performance of the underlying mutual funds in the investment account.
W
Waiver of Premium Rider (WP)
An optional policy rider that provides for the continuation of life insurance coverage without further premium payments if the insured becomes totally disabled.
War Clause
A provision in a life insurance policy excluding the liability of an insurance company if the insured's death is the direct result of a war.
Whole Life Insurance
A type of permanent life insurance which provides a level death benefit upon the insured's death or a cash endowment upon policy maturity that is equal to the death benefit. Whole life insurance policies also accumulate cash values.
Y
Yearly Renewable Term (YRT)
A type of term life insurance policy that provides a level death benefit with premiums that increase each year with the insured's age. YRT is also referred to as annually renewable term.