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Insurance Glossary

A

accidental death benefit rider (ADB rider)
A supplementary rider that grants an additional amount of money to the normal death benefit in a life insurance policy. This is payable only if the death is the result of an accident.

accidental death and dismemberment rider (AD&D rider)
A supplementary rider that grants an additional amount of money to the normal death benefit in a life insurance policy. This is payable only if death is the result of an accident, or if the insured loses two or more limbs or eyesight as the result of an accident. Partial payments are sometimes made for the loss of one limb or partial eyesight loss.

accident perils
A classification used to evaluate types of danger (perils) in a certain occupation. These may include use of dangerous machinery, risk of falling, or other hazards.

accrued benefit
The amount of benefit that has accumulated for a particular member of a benefit pension plan at a given time.

accumulated funding deficiency
The amount of money by which a pension plan falls below the minimum required funding, according to federal or state laws. Also called a funding deficiency.

accumulated value
Total value of money invested, including all interest earned.

accumulation option
An insurance policy dividend option in which dividends are kept on deposit with the insurer to accumulate interest.

accumulation units
Ownership shares in a
variable annuity (premiums paid are credited as accumulation units, which are used to buy annuity units).

actively at work provision
An insurance provision stating that if an employee is not at work on the day on which coverage begins, the start of coverage is delayed until the employee returns to work.

actuarial assumptions
Assumptions that actuaries make in regard to earnings, mortality, turnover, interest, and other areas necessary for calculating premium rates.

actuarial cost method
The method of calculating annual contributions by the plan sponsor in order to meet the designated benefits of a pension plan.

actuarial department
The department in an insurance company responsible for statistically calculating risk, premium rates, life expectancies, etc., and doing research to develop the necessary statistics.

actuarial valuation
The valuation of a plan by an actuary to determine if assets are sufficient to meet any payouts.

actuary
An expert in the technical aspects of insurance, such as calculating mortality rates, premium rates, and other important values.

adjustable life insurance
Life insurance in which the policyholder can change the amount of coverage or premium. If this is done, the plan switches to another one with the desired attributes.

admitted reinsurer
A
reinsurer who is licensed to operate in a specific area.

admitting privileges
The right of a doctor to admit patients to a particular hospital or medical facility.

agency agreement
The agreement between principal and agent that defines the agent's duties and authority.

agency by appointment
An agency relationship in which a principal appoints an agent to act on the principal's behalf.

agency by ratification
An agency relationship in which the principal ratifies an agent's unauthorized act.

agency relationship
A relationship in which an agent is authorized to perform certain acts on behalf of a principal.

agent
An insurance-company representative licensed by the state who solicits, negotiates, or effects contracts of insurance, and services the policyholders for the insurer.

agent's statement
A portion of the insurance application in which the agent lists any knowledge or opinions concerning the applicant not otherwise revealed on the application.

age of majority
The age at which an individual can legally enter into a contract.

aggregate funding methods
Funding method in which the necessary amount of contributions is calculated for all participants, instead of separately for each individual participant.

aggregate mortality table
A mortality table based on all insured lives over time.

all-causes deductible
A deductible that must be met only once during a set period of time, such as a calendar year.

allocated funding
Funding method in which a portion of the total plan's funds are allocated to individual participants.

annuitant
A person receiving or entitled to receive an annuity.

annuity
A series of payments made on a regular schedule. There are many types of annuities, such as whole life annuity in which the payments are received for the life of the payee.

annuity certain
An annuity that is made regardless of whether or not the payee dies.

annuity period
The period of time between annuity payments.

annuity units
Ownership shares in a variable annuity.

apparent authority
Authority that a third party believes an agent to possess due to the actions, intentional or not, of the principal that the principal did not expressly grant to the agent.

application
The initial forms used when applying for insurance.

assignee
The party to whom contractual rights are transferred in an assignment.

assignment
The transfer of ownership rights in a contract from one party or person to another.

assignment of benefits
The transfer of benefits to another. This could be used to pay a physician directly, instead of having the insurance company pay the policyholder, who will then pay the physician.

assignor
The person or party who transfers the contractual rights in an assignment.

assuming company
See
reinsurer.

assumption reinsurance
Reinsurance in which the transfer is permanent and the ceding company is no longer a party of the insurance agreement.

attending physician's statement
A statement from the physician who treated or is treating the insured or the applicant.

automatic dividend option
The insurance dividend used if the policyholder does not select another option.

average indexed monthly earnings
The figures used to calculate Social Security and other governmental benefits. It is an average of earnings on which Social Security tax has been paid, adjusted for inflation.

aviation exclusion
An insurance provision stating that death benefits are not payable if the death occurs as a result of aviation activities.

B

backdating
Listing the effective date as being prior to the application date, in order to lower premium rates.

band grading
Grouping insurance policies according to death-benefit amounts.

basic death benefit
The death benefit as originally listed, excluding any supplementary riders or provisions.

basic hospital
Insurance coverage for inpatient care (in a hospital or other medical facility) only.

beneficiary
The individual or party designated to receive policy proceeds.

benefit of survivorship
Annuity payments will continue as long as the recipient is alive.

benefit schedule
In a group insurance plan, a schedule that lists coverage amounts provided to each class of insured individuals.

benefits
Payments made by an insurance company when an insurance claim is approved, such as at time of death, retirement, or disability.

binder
A temporary agreement that provides coverage until a policy is written or delivered.

binding premium receipt
Initial premium receipt in which coverage is immediately effective but only lasts until a decision is made on the insurance application.

birthday rule
When both parents have insurance, benefits for dependent children are paid by the plan of the parent whose birthday occurs first in the year.

blended rates
Mortality rates based on a combination of experience rates and manual rates.

Blue Cross plan
Hospital-expense plan operated in conjunction with a nonprofit healthcare organization.

Blue Shield plan
Physician-expense plan operated in conjunction with a nonprofit healthcare organization.

break in service
Amount of time between leaving a company and returning to work at the same company; used in calculating benefits in regard to leaves of absence, short-term disability, and other extended periods of unemployment.

broker
An individual or organization that is licensed by the state and seeks insurance on behalf of a customer. Brokers do not work with a single entity but can work with multiple insurance companies or customers.

brokerage distribution system
A system of selling insurance that uses commissioned brokers.

bundled insurance product
An insurance policy in which the factors used to determine premium and cash values are not identified separately.

business insurance
Insurance designed to serve business needs rather than individual needs.

business continuation insurance
Insurance designed to allow remaining partners or shareholders to purchase the portion of the company owned by a deceased partner or owner.

Buyer's Guide
A publication that provides information to consumers concerning life insurance. In some states, it is required by law that the insurance company supply a copy to all applicants.

C

cafeteria plan
See
flexible benefits plan.

cancelable policy
An insurance policy that can be terminated at any time by the insurer.

cancellation
Termination of an insurance policy or coverage while the policy is still in effect.

capacity
The largest amount of insurance the insurer will underwrite.

capitation
The preset limit paid to a health-maintenance organization (HMO). The amount of service used is irrelevant.

career agent
An agent who works full-time out of the insurance company's field office instead of being an independent contractor who has an agreement to do business with the insurance company.

career average benefit formula
Formula by which retirement benefits are calculated, based upon compensation for the entire amount of time in the plan.

carry-over provision
A provision stating that expenses incurred at the end of a benefit period, usually the last three months of the year, that apply to the deductible may also be used to cover the next period's deductible. This protects the insured from having to pay a double deductible simply because an injury or illness occurred at the end of a period.

case management
A system used to ensure that individuals receive appropriate healthcare services at a reasonable cost. It can be used to identify alternate, cheaper treatment methods that do not sacrifice the quality of care. Also called claim management.

cash-balance pension plan
A pension plan in which the amount each participant has accrued (contributions and interest) is listed, and in which, upon retirement, the participant may remove the entire amount in a lump sum, assuming it is vested.

Cash or Deferred Arrangement (CODA)
See
Section 401(k) Plan.

cash-payment option
An option in life-insurance plans in which dividends are paid in cash to the policyholder.

cash-refund option
An insurance option that states that if any proceeds remain after the death of the beneficiary, the balance of the benefits will be paid to the contingent payee in a lump sum.

cash surrender value
The amount of money due the policyholder if the policy is surrendered to the insurance company.

cash surrender value option
An option allowing the policyholder to discontinue premiums and surrender the policy, receiving the cash surrender value.

cash value
The amount of money due the policyholder if the insurance policy is lapsed or cancelled.

ceding company
In a reinsurance deal, the original insurer who purchases reinsurance.

certain payment
A payment that will be made regardless of circumstances.

certificate of indebtedness
A certificate given to the beneficiary of an insurance policy, stating the minimum interest rate and frequency of payments under the interest settlement option.

certificate of insurance
A certificate specifying the type and amount of insurance coverage as well as the beneficiary.

cession
The portion of insurance that is ceded to a reinsurer.

change-of-condition provision
A provision stating that the policy will not become effective unless all conditions in the application are still true and valid at the time the policy is delivered.

change of occupation provision
A provision allowing the insurance company to change benefits or premiums if the insured changes occupations.

claim
A request by the insured or someone connected with the insured (healthcare provider) for the insurance company to pay for the loss incurred.

claim administration department
The department in an insurance company that processes claims.

claim examiner
An employee of the insurance company who examines all claims for validity, and approves or denies payment accordingly.

claim frequency rate
The percentage of insureds who file claims, or the number of claims filed over a set period; this is used to calculate premiums.

claim management
See
case management.

claimant
The individual or party requesting payment of benefits according to the insurance policy.

class beneficiary designation
The beneficiary is designated as a group instead of naming each person separately, such as children.

clean-up fund
A life insurance benefit used to pay expenses and outstanding debts, in case of death.

closing
The process of finalizing the purchase of insurance or other financial products, by having the purchaser read and sign the final documents as well as any other legal details.

COBRA (The Consolidate Omnibus Budget Reconciliation Act of 1985)
Federal law that requires companies with 20 or more employees to offer individuals who would otherwise lose their insurance coverage (i.e., through termination) the option to continue their group healthcare coverage. Also, some states require that smaller companies, with as few as two employees, offer the ability to extend their coverage.

CODA (Cash or Deferred Arrangement)
See
Section 401(k) Plan.

coinsurance
The percentage of expenses that the policyholder must pay after the deductible has been paid in full. In some cases, a co-payment is used instead.

coinsurance provision
A provision requiring the insured to pay coinsurance on certain expenses.

COLA (cost-of-living adjustment)
Increases in benefits based on increases in the cost of living.

combination clause
A clause in disability insurance stating when the definition of total disability changes from the inability to perform the current occupation to the inability to perform any occupation.

combination plan
A pension plan in which part of the funding is allocated and part is not; the unallocated portion is placed in a conversion fund for later use.

commission
The fee, generally a percentage of the premium amount, paid to an insurance agent for selling a policy.

common-accident provision
A provision within insurance policies stating that if two or more members of a family are injured in a single accident, they pay a single deductible between them, instead of the separate deductibles.

common-disaster clause
An insurance provision requiring the beneficiary to survive the insured by a certain length of time in order to receive the policy benefits.

community rating
Using the same premium rates for a specific group without considering loss experience.

comprehensive major-medical insurance
Health insurance that includes the benefits of a major-medical policy and a hospital-expense policy.

conditionally renewable policy
An insurance policy that the insurer can refuse to renew for predetermined reasons.

confirmation certificate
Certificate provided to a beneficiary, stating the amount of insurance proceeds, current interest rate, and other account information.

conservation
The attempt by an insurance company to prevent policies from lapsing.

Consolidated Omnibus Budget Reconciliation Act of 1985
See
COBRA.

consumer report
A report on an individual's credit history or other personal information; regulated under the Fair Credit Reporting Act.

consumer-reporting agency
A company that generates consumer reports.

contestable period
The length of time during which an insurer can challenge the validity of an insurance policy.

contingencies
Events that affect risk that may or may not occur.

contingent beneficiary
See
secondary beneficiary.

contingent payment
A payment made only if a certain condition is met.

continuous premium life insurance
See
straight-life insurance.

contract of adhesion
An agreement prepared by one side, which is either accepted or rejected by the other side. There is no bargaining.

contribution limit
Maximum legal limit on any contribution to an employee benefit account.

contributory group insurance
Group plans in which the insured individuals pay a portion of the cost.

contributory plan
Any plan in which the participants pay a portion of the cost.

conversion privilege
The right to convert from group to individual coverage; this generally occurs when the person in question leaves the group that was supplying group coverage.

convertible term insurance
Term insurance that may be converted to whole life insurance by the policyholder without having to update or show new evidence of insurability.

coordination-of-benefits clause
A provision in insurance policies stating benefits will not be paid if another insurance policy has already covered the expenses.

co-payment
Similar to coinsurance in that the policyholder must pay a portion of the expenses in the form of a flat fee, such as a set co-payment for doctor visits.

cost-of-living adjustment
See
COLA.

credibility percentage
The consideration given to actual claim experience in determining future claims or dividends.

credit life insurance
Insurance meant to pay off a loan if the insured dies before it is repaid.

current review
The monitoring of the insured's treatment while in a hospital or other medical facility to determine if continued care is necessary.

current settlement option rates
Settlement option rates based on interest rates currently earned by the insurance company.

curtailment
A change to a plan that reduces benefits or contributions. 

D

death benefit
The amount of money paid to the beneficiary upon the death of the insured.

decline
A refusal by an insurance company to grant insurance coverage.

decreasing term insurance
Insurance in which the amount of coverage decreases during the term of coverage.

decrement
A reduction in the number of participants in an employee-benefits plan.

deductible
The amount of covered expenses the insured must pay before any benefits are received from the insurance company.

deferral date
A date occurring after the normal premium due date (generally on the one-year anniversary of issue) when the premiums for the next year are due.

deferred annuity
An annuity in which the initial payment is postponed.

deferred compensation plan
A compensation plan in which benefits, such as retirement benefits, are paid at a later time.

deferred premiums
Premiums that are deferred until a date later than the normal due date (generally the one-year anniversary of issue).

defined benefit formula
A formula used to determine the benefits due each participant in a defined benefit plan.

defined benefit plan
A group benefits plan that pays benefits based on a prespecified formula.

defined contribution formula
A formula used to determine the amount of contributions made toward a group benefits plan

defined contribution plan
A group benefits plan in which the amount of employer contributions made is defined according to a set formula.

denial of claim
Refusal by an insurance company to pay for services obtained, such as a hospital visit.

dependent
An individual who relies on someone else for support.

dependent life insurance
Life insurance covering dependents of the primary insured.

deposit term insurance
A form of insurance with much larger premiums the first year than in subsequent years.

deviated rate
A premium rate that is above the prima facie rate.

diagnostic related groups
A payment system in which benefit payments are based on the individual diagnosis of a patient instead of the actual medical service received. 

direct response marketing
A way in which insurance carriers sell directly to the customer without using insurance agents, generally through direct mail, telephone, or media advertisements such as television commercials.

disability
Inability to work due to an injury or sickness.

disability benefits
Benefits paid while the insured is disabled.

disability income insurance
Insurance that provides a percentage of regular income to an individual who has become disabled and is unable to work.

disabled life annuity
An annuity paid as long as an individual is still alive and disabled.

disintermediation
Removal of an intermediary in order to earn higher profits, such as an insurance carrier selling directly to the customers without using independent insurance agents.

dividend
A payment made to an insured by the insurance company that reflects excess premiums.

dividend accumulations
The accumulation of funds when the policyholder leaves dividends on deposit with the insurer; often done to increase interest earnings from the insurer's investments.

dividend options
The options policyholders have in selecting how they will receive their shares of dividends from the insurance company.

doctrine of reasonable expectations
Court rulings stating that the reasonable expectations of policyholders and their beneficiaries will be honored even if the insurance policy does not support them. These serve to eliminate fine-print clauses that alter the meaning of the policy from what the insured was lead to believe.

double indemnity
A doubling of the basic death benefit if the insured's death is precipitated in a certain manner, most often through an accident.

drinking criticism
Evidence that the insured is suffering from alcohol or drug abuse.

E

early retirement age
An age earlier than the normal retirement age at which time the participant can receive benefits. such as pension benefits, although they may be reduced.

election period
A 60-day period following notification of an insured's eligibility for COBRA continuation coverage, during which the individual can accept or decline the coverage.

eligibility period
For group health insurance, the period of time in which a new employee may enroll in the group coverage.

eligibility requirements
Requirements for joining a group health-insurance plan or another insurance/financial plan.

employee assistance programs
Employee counseling services that are often fully confidential and can cover a wide range of mental-health issues.

Employee Retirement Income Security Act of 1974
See
ERISA.

endorsement
See
rider.

endorsement method
A method of changing the beneficiary of an insurance policy in which the policyholder notifies the insurance company and an endorsement is added to the policy.

enhancement type policy
Life insurance in which a portion of the dividends paid for term insurance guarantee a preset total death benefit.

enrolled actuary
An actuary who is a member of the Joint Board for the Enrollment of Actuaries, a federal agency.

entire contract provision
An insurance provision stating that the policy itself and any attachments are the whole agreement between the policyholder and the insurance company; nothing else is relevant.

EPO (Exclusive Provider Organization)
A health system in which any physician within the contracted network can be visited without prior approval or referrals by the insurance company or a primary-care physician. No services received outside the network, however, are covered.

Equity-based insurance product
Insurance in which the benefit levels are based on a portfolio of equity investments and may change over time depending on the performance of the investments.

equity pension
Pensions in which the benefit levels are based on a portfolio of equity investments and may change over time depending on the performance of the investments.

equivalent single payment
A single payment that replaces others of equal combined value.

equivocal suicide
A suicide in which there is doubt as to the intention of the deceased to die.

ERISA (Employee Retirement Income Security Act of 1974)
A federal law guaranteeing the rights of pension plan members, rules and standards for investing pension plan assets, and requirements for disclosing plan funding and provisions.

error and omissions insurance
Insurance that protects the insured from injurious actions, such as negligence, by an agent.

evidence of insurability
Evidence that an individual's risk falls within an insurable range.

excess interest
Interest paid above the guaranteed amount during a settlement.

exchange program
A program permitting the insured to replace one policy with another one without having to show new or updated evidence of insurability.

exclusion
Specific conditions, causes, or issues listed in the policy that are not covered by an insurance policy. 

Exclusive Provider Organization
See
EPO.

Exoneration statutes
Statutes that prevent the insurance company from incurring liability in cases in which a conflict in policy claims has arisen after the insurance company has paid the claims to a party in good faith.

experience rating
The use of a group's history of premiums and claims to calculate premium rates. (A history of high claims, for example, could result in increased premium costs.)

experience refund
A refund of premiums when the claims experience proves to be superior to that used when the premium was calculated.

expiration date
The date when an insurance policy ends.

express authority
The authority a principal explicitly grants an agent.

F

face amount
In a life-insurance policy, the amount to be paid to the listed beneficiary upon the death of the insured.

factor table
An underwriting tool used to determine net worth through the practice of multiplying annual income by various factors to find the maximum amount of insurance available.

Fair Credit Reporting Act
See
FCRA.

family deductible
A single group deductible covering all insurance policies within a family instead of multiple separate deductibles.

family insurance policy
A single life-insurance policy that covers all members of a family.

federally qualified HMO
An HMO that meets the requirements of the Health Maintenance Organization Act of 1973. Under the law, these HMOs receive advantages, such as eligibility for federal loans.

FCRA (Fair Credit Reporting Act)
Federal law requiring consumer-reporting agencies to be impartial and maintain the consumer's right to privacy.

fee for service
See
indemnity.

fee schedule
A list of dollar amounts paid for certain procedures.

fee schedule basis
Compensation plans in which physicians or health-service organizations are paid a set amount per service, according to a fee schedule.

fiduciary
A person or organization that manages or controls money or financial assets belonging to others, or that offers financial advice for a fee.

field office
A local sales office.

final average benefit formula
Formula by which retirement benefits are calculated, based on an average of the last few years of employment.

financial institution
Any organization, such as a bank or insurance company, that accepts and pays out money in a situation in which fees or interest are paid for the use of money.

financial settlement
A lump sum paid to the insured that ends the insurer's responsibilities under the policy.

fire insurance
Insurance coverage for losses resulting from fire.

first-year commission
Commission paid to an insurance agent based on the amount of the premium the first year the policy is in effect.

fixed-payment option
An insurance settlement option in which the beneficiary is paid in installments until the proceeds from the policy and any interest run out.

fixed-period option
An insurance settlement option in which the beneficiary is paid in a series of payments instead of a single payment.

flat amount formula
A method of determining benefits by which all participants receive a flat, periodic benefit amount, such as $1,000 a month.

flat percentage of earnings formula
A method of determining benefits by which participants receive a percentage of pre-retirement compensation, or in the case of disability, predisability income.

flexible benefits plan
An employee benefits plan in which the employees have several options as to the type or amount of benefits. Also called a cafeteria plan.

foreseeability
The reasonable expectation that an injury or harm will occur to the insured.

forfeiture
The unvested portion of a pension or other financial plan that remains after a participant withdraws from the plan.

fractional premiums
Premiums that are paid in installments through the year rather than in total once a year.

fraudulent claim
A claim in which the claimant knowingly uses false information in order to collect on the policy.

free examination period
The period of time during which the policyholder can return the policy for a full refund of any premium paid.

full-service plan
Health insurance plan that pays the full cost, provided it qualifies as reasonable and customary.

fully contributory
A situation in which the insured individual in a group plan pays the entire cost of the insurance.

funding agency
The group that holds the assets (money) of a pension plan or other financial plan.

funding deficiency
See
accumulated funding deficiency.

future service
The prospective service an employee will give to the employer following entrance into a pension plan until the normal date or retirement.

future-service benefits
Benefits provided in exchange for service in the future.

G

GAAP (generally accepted accounting principles)
Accounting principles used by the majority of companies in the United States.

generally accepted accounting principles
See
GAAP.

good-health provision
A provision stating that the insurance policy is void if the applicant was not in good health at the time the policy was signed or delivered.

grace period
The period of time after a premium due date has passed during which the policy remains active even though payment has yet to be made.

graded premium whole life insurance
Whole life insurance in which premiums increase at specified times until they reach a preset maximum level where they then remain.

gross premium
The total amount the policyholder pays for insurance, including premiums and any additional expenses.

group deferred annuity
An annuity plan in which deferred annuities are purchased to provide retirement benefits for the participants of the group plan.

group insurance
An insurance contract that provides coverage to a group.

guaranteed issue limit
The maximum amount for which an insurance company will insure an individual without receiving information concerning their insurability; used in group insurance.

guaranteed-insurability rider
An addendum to an insurance policy that allows the policyholder to purchase additional insurance at a preset rate at preset times without having to show updated evidence of insurability.

guaranteed-issue insurance
Group insurance in which all members of the group who meet certain conditions automatically receive coverage without individual underwriting.

guaranteed-renewable policy
An insurance policy that states that the policy will continue to be renewed for a set period of time.

guaranty association
An organization whose purpose is to protect policyholders in the event an insurance company becomes insolvent.

H

Health-care decision counseling
Counseling services that assist people in making informed decisions concerning medical tests and treatment; these are sometimes provided by insurance companies.

health insurance
An insurance policy that protects the insured in case of illness or injury, and that pays for the appropriate medical treatments required, based upon limits established within the individual policies.

Health Insurance Portability and Accountability Act of 1996
See
HIPAA.

health maintenance organization
See
HMO.

HIPAA (Health Insurance Portability and Accountability Act of 1996)
Federal law that protects health coverage when the insured changes or loses a job. This is done by guaranteeing portability defined in this case as using previous health coverage (the coverage possessed before leaving employment) to reduce or eliminate any preexisting-condition exclusions that may apply under future insurance plans. This does not mean current coverage is maintained after leaving employment, although various state laws allow for coverage to continue on a temporary basis.

history statement
Physician's statement regarding the health history of the insured.

HMO (health maintenance organization)
An insurance plan in which individuals or their employers pay a fixed monthly fee for service regardless of the amount of medical costs incurred. To receive the benefits, however, the insured must use a primary-care physician within the system for all initial treatments except in life-threatening emergencies. Hospitals or specialists must be recommended by the primary-care physician and be within the HMO network.

hold-harmless release
A release stating that the payee of a claim will reimburse the insurance company if another claimant appears and successfully challenges the initial disbursement of benefits.

homeowner insurance
Insurance covering the risks of owning a home, such as fire or vandalism.

hospital confinement insurance
A form of health insurance that provides a preset benefit amount for each day spent in a hospital, regardless of the actual medical expenses incurred.

hospital expense insurance
Health insurance that provides benefits directly connected to the cost of hospitalization, such as surgery, outpatient care, nursing home or convalescent care, and physician fees incurred while in a hospital.

hour of service
Defined under
ERISA, as an hour for which an employee is paid or is due to be paid.

I

illness perils
A classification used to evaluate types of danger (perils) in a certain occupation, such as exposure to poisons, chemicals, or extreme temperatures.

immediate annuity
An annuity in which payments begin in the first period after purchase.

impairment
An aspect of health or lifestyle, including occupation, that could affect mortality.

impairment rider
A health-insurance rider limiting coverage for a specific health condition.

implied authority
Authority a principal intends for the agent to possess but that hasn't been expressly granted.

incentive coinsurance provisions
Provisions granting incentives to perform certain acts, such as taking preventative medicine, in order to have the insurer pay a higher proportion of expenses.

incident of ownership
Any policy right, such as the right to assign the coverage, cancel the policy, or change the beneficiary.

income-replacement ratio
Percentage of pre-retirement income needed to maintain the same standard of living after retirement. This is less than the pre-retirement income, due to a decrease in taxes and other expenses after retirement.

incontestable clause
A provision in the insurance policy that defines a time limit, generally two years, after which the insurance company agrees not to dispute the validity of the policy.

increasing term insurance
Term insurance in which the death benefit increases over time, either at preset points or based a formula, such as cost of living.

indemnity
An insurance health plan that allows absolute freedom in selecting physicians or medical facilities, and, unlike other health plans, self-referral to a specialist. A yearly deductible must be met before coinsurance is paid by the insurance company, and coinsurance is set at a predetermined rate in which the insurance company pays that percentage of costs. Also called fee for service.

indexed life insurance
Life insurance in which the premium rate and death benefit both rise annually based upon the Consumer Price Index.

individual insurance
Insurance issued to a single individual.

individual retirement account
See
IRA

initial premium
The first payment for an insurance policy.

inspection report
An investigative report from a consumer-reporting agency on the insured's lifestyle, occupation, and other indicators of economic standing.

installation
Administrative activities that take place between the decision to purchase an insurance policy and the issuing of the policy.

installment certificate
A certificate given to the beneficiary of an insurance policy stating the benefit payment information.

installment refund option
An insurance option that states if any proceeds from a policy remain after the beneficiary's death, they will be paid to the contingent payee in a series of installments.

insurability provision
An insurance provision stating that the policy will not become effective unless the insured is still considered insurable at the time of delivery.

insurability statement
A statement ascertaining if there have been changes in insurability between the time of application and policy issue.

insurable interest
A valid concern for the person applying for the insurance policy that is required by law. The insured person must suffer a loss if the event insured against occurs.

insurance
Protection against loss in which premiums are paid in exchange for benefits should a loss occur.

insurance agent
A sales representative of an insurance company.

insured
The policyholder or party protected by the insurance policy.

insurer
The insurance company or party that provides the insurance policy.

insurer-administered group insurance plan
A group insurance plan in which the insurer handles all administrative work.

integrated deductible
A deductible that can be satisfied by payments in another portion of the plan. (For example, if a person pays the full deductible in a basic medical plan, the deductible in the hospital plan is considered paid.)

interest option
An insurance option in which the policy proceeds are left on deposit for a set period of time and the interest from those proceeds is paid to the beneficiary. After the period of time has elapsed, the policy proceeds are paid.

interim insurance agreement 
An agreement that provides temporary insurance for a short period of time, such as during the period in which regular insurance is being written. Also called temporary insurance agreements.

internal replacement
Surrendering one insurance policy in order to buy another one from the same insurer.

interpleader
Claim settlement in which the insurance company turns the proceeds over to a court, with the understanding that the court should decide who is the proper recipient.

investigative consumer report
A consumer report that involves interviews with knowledgeable parties in order to gather information.

investment-sensitive insurance
Insurance in which the benefits are based on the insurer's investment earnings, generally with a guaranteed minimum.

involuntary plan termination
The termination of a pension plan by a party other than the plan sponsor, generally a governmental organization.

IRA (individual retirement account) 
A savings plan in which participants can make pretax deposits into an investment account.

irrevocable beneficiary
A beneficiary who cannot be removed later by the policyholder, without the beneficiary's consent.

issuing bank
A bank that sells and issues insurance policies in its own name.

J

joint and survivor annuity
Annuities in which payments are made to multiple annuitants and which continue until all annuitants are deceased.

joint and survivorship option
Insurance settlement option in which payments are made to multiple parties and continue until all parties are deceased.

joint whole-life insurance policy
A single insurance policy that covers two individuals and usually pays the proceeds when the first insured individual dies.

juvenile insurance policy
An insurance policy on a child.

K

Keogh Act (Self-Employed Individuals Tax Retirement Act of 1962)
A federal law allowing self-employed individuals to save money for retirement by depositing money in a government-approved account that is managed by a financial institution; similar to a Section 401(k) Plan.

key-person insurance
Insurance designed to protect a business firm against the loss of business income resulting from the disability or death of an employee in a significant position.

L

lapse
Termination of an insurance policy because premiums were not paid on time.

late-remittance offer
An offer by the insurance company to accept overdue premiums, even if past the grace period, without requiring additional applications or paperwork in order to reinstate a lapsed policy.

legal-actions provision
Restrictions in an insurance policy concerning when a claimant may sue to collect a disputed claim amount the minimum waiting period before suing is allowed and the cutoff point when it is no longer permitted.

length of stay
Amount of time spent in a hospital or other medical facility.

level-commission schedule
A commission schedule that has the same commission rate for all years of the policy.

level-premium annuity 
A deferred annuity in which equal premium payments are made over time, such as annually, until the benefit payments are to begin. 

level-premium system
Pricing system in which premiums remain the same for the life of the policy.

level premiums
Premiums that remain the same for the life of the policy.

level term insurance
Insurance in which the benefits remain the same over the specified period.

liability insurance
Insurance providing coverage for those who have been found to have legal responsibility for injuring others or their property.

life annuity
An annuity made for the length of the annuitant's life.

life annuity with period certain
A life annuity that will continue to pay the annuity to another person selected by the annuitant if the annuitant should die; these payments continue for the length of a pre-selected period.

life income option
An insurance option in which the beneficiary is paid in equal payments for the length of the beneficiary's life.

life insurance
Insurance that protects against economic loss by paying a specified sum to beneficiaries upon the death of the insured.

lifetime maximum
Under an insurance policy, the maximum amount paid for the insured while under the policy.

limit
Maximum amount a policy will pay.

limited-coverage policy
An insurance policy covering only specific illnesses, such as cancer.

limited-payment whole life insurance
Whole life insurance that does not require premiums to be paid during the entire life of the insured; premiums stop at a set point, but coverage remains.

living-benefit rider An insurance rider specifying that, under certain circumstances such as terminal illness, the insured can take a portion of the death benefit before death.

long-term-care policy
A benefits plan that provides a specific dollar benefit or a percentage of expenses charged for nursing home care, home health-care, and adult day care if a covered person suffers a loss of functional or cognitive capacity.

long-term disability
Disability lasting for an extended period of time as defined in the insurance policy.

long-term disability insurance
Insurance plans that provide income for an individual who has become disabled and is no longer able to work. The compensation provided is either a flat amount or based on a percentage of the regular income.

loss ratio
The ratio of claims to premiums (claims divided by premiums).

M

maintenance expenses
Costs involved in maintaining a policy, including processing, making dividend payments, and the time customer-service personnel spend assisting policyholders.

major-medical insurance
Medical insurance covering the majority of expenses associated with illness or injury.

managed care
A system of medical care that attempts to reduce costs while providing quality care under the control of the insurance company. (HMOs and PPOs are examples of managed care.)

mandated benefit
A benefit required by state or federal law that must be included in an insurance policy.

manual rates
Preset rates used for broad groups when there is no history concerning a particular insured group.

master policy
The contract between an insurance company and a group-insurance policyholder that provides insurance for more than one person. 

matching contributions
Contributions by the employer made to an employee-benefits plan, such as a 401(k), that match the employee contributions at a set percentage.

material fact
Any relevant fact related to underwriting decisions concerning policies.

material misrepresentation
False statements by an applicant or policyholder that affect whether or not the insurer will accept the risk and issue a policy.

matured endowment
An endowment insurance policy that is payable due to having reached the end of its term.

maximum benefit
The largest benefit amount available to a plan participant. IRS regulations determine this amount.

maximum benefit period
Maximum period of time during which benefits are paid.

maximum dollar limit
Maximum amount of money that will be paid for claims during a set period of time (one year, lifetime, etc.).

Medicaid
A governmental program that provides medical coverage for people under 65 who meet certain requirements.

medical application
An insurance application requiring medical tests or an examination.

medical-expense insurance
Health insurance covering all or a portion of medical expenses.

medical report
A physician's report on the insured's health.

Medicare
A governmental program providing medical coverage for people 65 and over who meet certain requirements.

Medicare supplement
Supplemental medical-expense coverage providing benefits for expenses not covered by Medicare.

minimum deposit arrangement
A system in which the policyholder can apply the initial year's cash value of an insurance policy to the premium amount of that same year.

minimum service requirement
Requirements that employees be employed for a set amount of time before being eligible to join a group plan.

misquote
An error in estimating the insurance premium.

misrepresentation
False or misleading statements on the part of the insurance company or the applicant to sway the other into accepting a policy.

misstatement-of-age provision
A provision in an insurance policy that delineates the results if it is learned that the insured has misstated their age in the application. (Age is often a significant factor in the calculation of premiums and benefits.)

mode of premium payment
The timing in which premiums are paid, such as monthly or annually.

modified net premiums
Net premiums that do not remain the same throughout the life of the policy. (They are generally lower in the first year.)

modified premium life insurance
A method generally used in whole life insurance in which the premiums for the first few years are lower than normal, and the premiums for the years following are higher than normal.

money purchase pension plan
A pension plan in which the participant contributes a set percentage of income. Benefits equal the contributions plus gains from investment.

monthly outstanding balance method
A method of paying the premium in monthly installments.

moral hazard
Risk that an applicant for insurance will intentionally lie or conceal information that is pertinent to the policy.

morbidity 
Illness or disability. 

morbidity rate
The likelihood that an individual in a specific group will become ill or suffer a disability. (This is used to determine premiums for that specific group.)

morbidity table
A chart showing morbidity rates generally based upon age.

mortality curve
The difference in mortality rates related to age (often shown as a line graph).

mortality experience
The actual number of deaths for a particular group.

mortality rate
The frequency of death within a particular group.

mortality table
The difference in mortality rates related to age (often shown as a chart).

mortgage-redemption insurance
Insurance that pays the remaining mortgage on the insured's home in case of death.

multi-employer plan
Pension or other benefits plans involving more than one employer, so that if an employee moves to another employer in the plan, their coverage continues unabated.

multi-employer trust
Insurance plans that cover the employees of multiple employers.

mutual-benefit method
A method of funding life insurance in which the members of a group are each charged an equal fee upon the death of one member to cover the death benefit. (This is rarely used now except for some fraternal orders.)

mutual insurance company
An insurance company owned by the policyholders instead of stockholders or other individuals.

N

NAIC (National Association of Insurance Commissioners)
An association of state insurance commissioners established in order to create consistent insurance regulations.

National Association of Insurance Commissioners 
See
NAIC

national brokerage houses
Independent companies that provide advice in risk management and employee benefits.

National Organization of Life and Health Guaranty Associations
See
NOLHGA.

needs analysis
Analyzing the customer to determine his or her insurance needs.

net premium
The amount of money that must be collected in order to meet the benefits to be paid.

net single premium
The amount of money that must be collected at the time of issue in order to meet the benefits to be paid later (present value of expected benefits).

NOLHGA (National Organization of Life and Health Guaranty Associations)
An organization made up of state guaranty associations that provides information and resolves issues resulting from the insolvency of insurers licensed in multiple states.

nonadmitted reinsurer
A
reinsurer who is not licensed to operate in a specific area.

noncancellable and guaranteed-renewable policy
An insurance policy in which the insurance company can neither raise premiums nor terminate the policy.

noncontributory group insurance
Group insurance in which the entire premium is paid by the group policyholder, and participants pay no portion of the insurance premium.

noncontributory plan
A plan in which all contributions are made by the sponsor and nothing is paid by the individual participants.

nonelective contributions
Non matching employer contributions to a group plan, such as a 401(k).

nonmedical application
An insurance application that does not require a medical examination.

nonmedical supplement
A supplemental report outlining the applicant's health history.

nonparticipating policy
A policy or annuity in which the policyholder does not receive dividends.

nonqualified annuity
An annuity funded with money that has already been taxed.

nonqualified deferred compensation plan
Benefits plan that does not meet the legal requirements to be pretaxed like a qualified plan.

nonretroactive disability benefits
Disability benefits that are paid only after a set length of time following the time the disability occurred.

normal cost
The amount needed to cover a single year of retirement benefits for a plan participant or for a plan itself.

normal retirement age
The age at which a participant can retire and receive full benefits.

numerical rating system
A system of ranking risk in which numerical values are assigned to various factors according to their impact on mortality.

O

occupation class
A group of occupations that present a similar level of risk.

option
Any choice or decision that policyholders can make concerning settlements, dividends, or other aspects of the policy.

optionally renewable policy
An insurance policy that can be renewed only if the insurer chooses to do so.

ordinary life insurance
Life insurance with monthly premiums and unlimited (within reason or legal constraints) maximum death benefits.

outliers
Patients with unique conditions or illnesses that cannot be classified under the standard groups.

out-of-pocket maximum
A preset amount that the plan participant must pay before the insurance company pays 100% of the expenses.

outpatient
Healthcare services that do not involve an overnight stay in a hospital or other medical facility.

overinsurance 
Coverage exceeding the probable loss to which it applies. 

overinsurance provision
Provisions stating that, in some cases, benefits will be reduced if a condition of overinsurance exists.

overlined A situation in which an insurance company has accepted a level of insurance above its capacity at a certain risk level.

P

paid-up policy
An insurance policy that still provides benefits even though all premiums have been paid.

paramedical report
Any medical report created by medical personnel other than a physician. (They are often used as part of an insurance application.)

partial disability
A disability that affects some but not all duties or that affects the amount of time the individual can work (from full-time to part-time).

partial disability benefit 
A benefit, generally a portion of the full disability amount, paid when the insured suffers a partial disability. Also called residual disability benefit

partial-plan termination
Termination of an employee-benefits plan or pension for some participants but not all.

partial-surrender provision
A provision in an insurance policy that allows the policyholder to take a certain amount of cash from the policy's cash value, thus decreasing the cash value. Also called a withdrawal provision.

participating policy
An insurance policy in which dividends are paid to the policyholder.

past service
The amount of service an employee gives before a pension plan is instituted or before the employee enrolled.

payee
The person to whom benefits are payable.

payroll-deduction plan
Premium payment plan in which the premium amount is deducted from the employee's paycheck.

PCP (primary-care provider)  
The healthcare professional who is the first source for overseeing an individual's medical needs. (The PCP refers the individual to specialists or hospitals as needed.)

peer review group
Local groups of physicians or medical experts who promote ethical practices in their industry.

pension
Income paid to a person who has retired for the remainder of their life.

Pension Benefit Guaranty Corporation
The organization that insures benefits in defined benefit pension plans and guarantees that benefits will be paid regardless of what happens to the pension fund.

pension fund
The institution that manages the assets used to pay pensions, or the assets themselves.

per-capita beneficiary designation
A group of beneficiaries among whom only those who survive the insured will collect on policy proceeds.

per-cause deductible
A deductible that must be met for each separate illness or injury before insurance benefits are paid.

per-cause maximum
The maximum amount of money a medical-expense policy will pay for any particular illness or injury.

peril
The cause of damages or a loss, such as a flood or theft.

period certain
The period of time during which an insurance company guarantees that benefits will continue to be paid.

permanent and total disability
A medical condition that prevents any return to employment.

per stirpes beneficiary designation
A system under which the beneficiary's descendants will receive the beneficiary's share of the insurance proceeds, if the beneficiary dies before the insured.

physical examination provision
A provision that allows the insurer to have the insured examined by a doctor of the insurer's choice at the insurer's expense.

plan document
A document outlining the terms of an employee-benefits plan.

plan participant
An individual taking part in a plan who shares in the responsibilities and benefits listed in the plan.

plan sponsor
The party that maintains a plan, such as a pension plan.

point-of-service program (POS)
Healthcare delivery method offered as an option of an employer's indemnity program in which employees coordinate their healthcare needs through a primary-care physician.

policy
A written contract of insurance.

policy anniversary
The annual anniversary of the date on which a policy was issued.

policy fee
An additional cost added to the premium to cover expenses. It is a set fee that is not based on policy size.

policyholder
The party or individual who owns an insurance policy (contract).

policy limit
The maximum amount a policy will pay.

policy loan
A loan made to a policyholder by the insurer and secured by the policy's cash value.

policy proceeds
The amount of benefits the beneficiary receives after all adjustments, fees, and other factors are taken into consideration.

policy provisions
Statements describing the operation of the policy.

policy summary
A summary of the policy, containing any data required by law, that is given to the applicant during the application process.

policy year
A single year, beginning when the policy is issued.

pooling
The combination of several small groups into one large group for insurance purposes, such as obtaining lower premiums or more group benefits.

portability
The ability to transfer benefits from one plan to another or from one employer to another.

portfolio
The collection of products offered by an insurance company.

POS.
See
point-of-service program.

post notice
A requirement under the Fair Credit Reporting Act that if an insurance company makes an adverse decision concerning an applicant based on information obtained from a consumer reporting agency, they must notify the applicant of this.

power of agency 
The agent's right to act on behalf of an insurer. 

PPO (preferred provider organization)
A managed-care system in which the insured can choose from a network of healthcare providers for medical attention, or the insured can go outside the group. A discounted fee is available for insureds who use the listed healthcare providers.

pre-admission review
Prior authorization from the insurer is required before an insured can be admitted to a hospital, except in emergency situations. 

pre-admission certification
Written approval by the insurance company or representative for an insured to be admitted to a hospital or other medical facility.

pre-authorized payment system
A form of payment in which the insured authorizes both the bank and the insurance company to allow automatic withdrawals of an account in order to pay premiums.

predetermination of benefits provision
A provision stating that in situations in which costs will exceed a certain amount, the medical provider must submit treatment plans to the insurer before any services are undertaken in order to determine what amount is payable by the insurance plan.

preexisting condition
A medical condition that existed prior to obtaining insurance.

preexisting-conditions provision
A provision in an insurance plan that states that medical expenses relating to preexisting conditions will not be covered until the insured has been enrolled in the plan for a certain length of time.

preference beneficiary clause
A clause stating that if no specific beneficiary exists, all benefits will be paid in a preset order according to lists of individuals within the policy.

preferred provider organization 
See
PPO.  

preferred risk class
A risk class whose expected mortality is below that of the standard risk class.

premium
Payment charged by an insurance company to establish and maintain an insurance policy.

premium deposits
Funds deposited with the insurance company to cover future premiums.   

premium-reduction option
An insurance option in which dividends are applied toward premiums to reduce their amounts.

pre-notice
A requirement under the Fair Credit Reporting Act stating that insurance companies must inform applicants that consumer reports on them may be produced.

presumptive disability
A condition, such as total blindness, that automatically results in the individual being classified as totally disabled.

prima facie rate
Standard premium rates suggested by government regulators.

primary beneficiary
The beneficiary with the first right to collect on policy benefits.

primary-care provider
See
PCP.

principal
The person or group authorizing another, the agent, to act on their behalf.

proceeds
The money the insurance company pays for insurance policies or annuities.

providers
The physicians, nurses, hospitals, and others who perform healthcare services.

proximate cause of death
The event that is responsible for the death in question.

Q

qualified annuity
A form of annuity in which the money funding the annuity is deductible from the gross income.

qualified domestic-relations order
A settlement in which a portion of a pension plan or other employee-benefits plan is assigned to an alternate payee due to issues arising from alimony, child support, or other domestic matter.

qualified joint and survivor (QJ&S) annuity
An annuity in which benefits continue to the spouse of the plan participant even after the death of the participant. These continuing benefits are often at a lesser rate than the original annuity benefits.

qualified plan
Employee-benefits plans that meet federal requirements allowing them tax advantages.

quote Estimates of the cost of insurance, based on the initial information given by the applicant.

R

rate making
The calculation of premium rates.

rate of return method
A method of comparing insurance policy costs by calculating the interest rate.

rated policy
An insurance policy issued to an individual with above-average losses. (These policies often have higher premiums or certain exclusions that are not standard.)

reasonable-and-customary fees
The standard fees charged by physicians, hospitals, or other healthcare providers. (These are often used as a base for what an insurance plan will or will not cover.)

recording method
A method of changing the beneficiary of an insurance policy simply by notifying the insurance company in writing.

recovery benefit
A benefit paid if an insured suffers a loss of income after returning to work due to the earlier disability.

refund annuity
An annuity guaranteeing that at minimum the price of the annuity will be paid out.

reinstatement
Restoring a lapsed policy and putting it back into force.

reinstatement provision
A provision stating the requirements the policyholder must meet in order to have a policy put back into force if it has been terminated as a result of not paying the premiums.

reinsurance
Transactions in which one insurance company buys insurance from another company to help cover all or part of the risks in the insurance policy.

reinsurance treaty
The agreement between the reinsurer and the
ceding company.

reinsurer
The insurance company that accepts the risk in a reinsurance deal. Also called the assuming company.

relative value schedule
A schedule describing the cost of medical procedures as a unit rather than a dollar amount. (A procedure with a value of 50, for example, would be more expensive than a procedure with a value of 40.)

renewal premiums
Premiums payable after the initial premium.

renewal provision
An insurance provision stating the guidelines that a policyholder must meet to continue insurance coverage at the end of the initial term, and what actions must be taken to do so.

replacement
Surrendering an insurance policy in order to purchase a different insurance policy.

replacement cost
The cost to replace an insured item.

representation
Statements by insurance applicants as to some past or existing fact or circumstance. Such statements must be true to the best of the applicant's knowledge and belief, but are not warranted as exact in every detail.

rescission
The attempt by an insurer to void a policy due to material misrepresentation on the insurance application.

residual disability benefit
See
partial disability benefit.

resisted claim
A claim the insurer refuses to pay, but which is still being contested.

result clause
A war-hazard exclusion in which benefits will not be paid for losses resulting from war or related acts.

retention
In reinsurance, the amount of risk the ceding company retains.

retention limit
The maximum amount of insurance an insurance company will carry before ceding part of the risk to a reinsurer.

retired lives reserve
A fund used to provide employees with group life insurance after they retire.

retroactive disability benefit
Disability benefits that are payable beginning at the time of disability, but whose initial payment occurs after the elimination period has expired.

retro premium 
A premium rate set at the beginning of the payment period but paid at the end only if claim experience justifies it. This is in addition to a smaller base premium that is paid at the beginning of the payment period. 

revocable beneficiary
A beneficiary that can be dropped as beneficiary at any time by the policyholder before the insured's death.

rider
A policy amendment used to change coverage. Also called an endorsement.

risk
The chance of loss to the insurance company, such as the insured being more likely to develop lung cancer because of smoking.

risk class
A group of insured individuals who are of similar risk for the insurance company, such as nonsmokers, substandard, etc.

S

second opinion
A medical opinion provided by a second physician or medical expert after first receiving an opinion on the medical issue by another physician or medical expert.

secondary beneficiary
The party who will receive insurance proceeds should the beneficiary die before the insured person. Also called contingent beneficiary.

Section 401(k) Plan
A tax-deferred investment plan generally used for retirement purposes. Also called a Cash or Deferred Arrangement (CODA).

self-administered group insurance plan
A group insurance plan in which the policyholder performs administrative functions, such as record keeping, request processing, and address changes, instead of the insurer.

Self-Employed Individuals Tax Retirement Act of 1962
See

self-insured group insurance
Group insurance in which the group sponsor rather than the insurance company is responsible for paying claims.

settlement
An action that eliminates the responsibility of the insurer toward the payee. (Generally it involves the payment of all benefits.)

settlement agreement
The agreement as to how policy proceeds will be paid to the beneficiary.

settlement option payments
Disbursement of benefits in multiple payments rather than in a lump sum.

settlement options
Options given to the policyholder or beneficiary as to how the policy proceeds will be paid.

short-form reinstatement application
A reinstatement application asking only enough questions to determine if major changes in the insured's condition have occurred.

short-term disability
Injury or illness that disables an individual for a temporary length of time.

short-term disability insurance
Insurance that provides benefits, often as a portion of salary, during a period of short-term disability.

simplified employee pension
A pension plan in which employer contributions go into an IRA owned by the individual instead of a group pension plan.

simultaneous death act
A law stating that if a beneficiary and an insured die at the same time, it is assumed that the beneficiary died first.

single-premium annuity
An annuity purchased with a single premium payment.

single-premium method
Method of paying the entire premium at once, either in a lump sum or as additional principal to a loan.

single-purchase annuity contract
A contract with a single premium used to purchase annuities for all participants in a terminating pension plan.

small-group insurance plan
Group insurance, usually covering less than 25 people, that is designed to be simpler to underwrite than the typical group plan.

social-insurance supplement policy
Medical-expense insurance designed to supplement benefits provided by the government.

Social Security
A federal program providing retirement income, disability coverage, and healthcare to qualified individuals.

sole-proprietorship insurance
Insurance on the life of a sole proprietor of a business, designed to counter the potential loss of income to the owner's family following death or disability.

specified-expense coverage
Insurance that covers specific topics such as dental-expense coverage.

spendthrift trust clause
An insurance provision protecting policy proceeds held by the insurer from creditors of the beneficiary.

split-dollar insurance plan 
A form of employee benefits in which the employee has individual life insurance that is partially paid for by the employer. 

spouse and children's insurance rider
An insurance rider that provides a degree of coverage for a spouse and children as well as the insured.

stand-alone dental
An insurance plan providing dental coverage only.

stand-alone life
An insurance plan providing life insurance only.

stand-alone Rx/ stand-alone prescription
An insurance plan providing prescription-drug coverage only.

Standard Nonforfeiture Law
State law stating what the minimum benefits a life-insurance policy can have.

standard plan termination
The termination of a plan that has sufficient funds to pay for any and all benefits the participants may be entitled to.

standard premium rate
The premium rate for a person considered to be average in the chance of experiencing a loss.

standard risk class
A class of individuals considered to be average in the chance of experiencing a loss.

stock-repurchase insurance
Insurance used to repurchase company stock from a deceased stockholder.

stop-loss provision
An insurance provision stating that the insurance company will pay all expenses after a set amount of out-of-pocket expenses has been paid.

straight-life annuity
An annuity that lasts for the length of the annuitant's life and stops all payments at the time of death. 

straight-life income option
An insurance option that states that benefit payments will be made to the beneficiary until the beneficiary dies and that at that time all payments cease.

straight-life insurance
Life insurance in which the premiums are paid until death. Also called continuous premium life insurance.

substandard premium rate
A premium rate, generally higher than a standard premium, charged on a substandard risk.

substandard risk class
A risk class with a greater chance of loss than the average person.

suicide clause
An insurance provision that states that no benefits will be paid if the insured dies as a result of suicide. (This is often limited to a set period of time following the issue of the insurance policy.)

superimposed major-medical plan
A medical plan used in conjunction with basic medical plans that provides coverage if expenses exceed what is covered by the basic plans.

supplemental group life insurance
Group life insurance providing additional coverage over the basic coverage of existing group plans.

supplemental major-medical insurance
Medical insurance providing additional coverage over the basic coverage of existing medical insurance.

supplementary-benefit rider
An insurance rider providing additional benefits.

surcharge
Any extra charge applied by the insurer.

surgical schedule
A schedule listing maximum benefits payable for different surgical procedures.

surrender
To cancel an insurance policy before its maturity date.

surrender charge
A fee charged when the policy is surrendered for its cash value.

survivor income benefit insurance
Life insurance that provides income benefits to a survivor (often limited to a spouse or children).

survivorship clause
In life insurance, a provision requiring that the beneficiary survive the owner of the policy by a set amount of time in order to receive the benefits.

survivorship life insurance
Life insurance covering two people that does not pay benefits until both have died.

T

temporary insurance agreements
See interim insurance agreements.

temporary life annuity
A series of payments, structured like an annuity, that continues for a limited amount of time.

termination expenses
The cost of processing death-benefit claims and the subsequent payouts.

term insurance
Insurance in which the benefit is payable only if the loss occurs during a specific period of time.

testamentary disposition
The use of a will to determine who the beneficiary is.

third-party administrator
A group that administers an insurance policy but that is not responsible for paying any claims.

third-party insurance
Insurance coverage applied for by someone other than the proposed insured.

total disability
A disability in which the individual is unable to perform any of the essential duties of the position previously held, or any position for which training, education, and experience exist.

triple indemnity
A form of accidental death coverage that pays triple the normal benefit if the death occurred while a passenger on a public system such as a bus or airplane.

trust fund plan
A pension plan in which all contributions are sent to a trustee who then invests the contributions and makes any benefit payments.

U

ultimate cost
The total net cost of a pension plan over the life of the plan.

unallocated funding
Group benefits-plan funding in which the funds are held as a whole and not allocated to specific participants.

unbundled insurance product
Insurance policies in which the factors used to calculate premiums and cash values are identified separately.

unclaimed benefits
Benefits for which no beneficiary or payee can be located. (State law governs how these situations are handled.)

underwriter
The person who performs the underwriting function or an organization that ensures money is available for policies that must be paid.

underwriting
The process of selecting insurance applicants and classifying them based on their risk, so proper premiums can be charged.

underwriting department
The department in an insurance company that performs the underwriting function.

underwriting impairments
Factors that increase risk above normal.

underwriting requirements
Set guidelines, which may include medical records or personal history, that state what is required to determine an individual's insurability.

uninsurable risk class
Individuals who cannot gain insurance due to the high level of risk associated with them.

unit-benefit formula
A system for figuring benefits for a pension plan based on years of service.

usual, customary, and reasonable expenses
Regular charges for a particular medical service.

utilization review
A form of claims review in which the insurance company analyzes a case to determine if the treatment given is appropriate or necessary.

V

valuation mortality tables
Mortality tables used as an industry standard rather than the mortality tables used by separate insurance companies.

valued contract
A contract, such as an insurance contract, in which the benefit amounts are established in advance.

variable annuity
An annuity in which the benefit payment is not guaranteed or specified, and, therefore, may change over time.

variable life insurance
Life insurance, generally with a minimum guaranteed death benefit, in which the benefits and cash value can change based on the investment accounts' performance.

vested benefit
In benefit plans where a participant accrues benefits as a result of time spent in the plan, vested benefits are those benefits now available due to the length of time the participant has been enrolled.

void contract
A contract that is not valid for any reason, including legal issues.

W

waiting period
A period of time that must pass before insurance coverage begins, benefits are qualified for, or entrance into a plan is permitted.

waiver-of-deductible provision
A waiver of the initial deductible if injuries are caused by an accident.

waiver-of-premium-for-disability (WP) benefit
A promise by the insurer to stop collecting premiums from the insured for the entire period the insured is injured and unable to work.

war exclusion provision
Insurance policy provisions that decrease or eliminate benefits if death is a result of war or military service.

weekly indemnity plan
A form of short-term disability that pays a percentage of weekly earnings to the insured.

whole life annuity
A series of payments made on a regular schedule over the entire life of the payee.

whole life insurance
Life insurance that remains in effect for the entire life of the insured.

withdrawal
A voluntary cancellation of a policy by the insured.

withdrawal provision
See
partial surrender provision.

workers' compensation
Government-mandated insurance for employees and their dependents if the employee suffers a job-related injury, disease, or death.

 

 

Y

yearly renewable term (YRT) insurance
Term life insurance that allows the policyholder to renew each year regardless of circumstances or conditions for a specified time period.

year of service
Defined under ERISA, a 12-month period during which an employee works at least 1,000 hours for the employer.