Insurance Terms

We know the language used by the insurance industry can be confusing. That’s why we want to make sure that you clearly understand your options and know precisely what you’re paying for. If you do not see a term, please e-mail us.

A

Accident - A sudden and unexpected event, which occurs at a specific time and place. In easy-to-read policies, an accident is also defined as a loss, which occurs over a period of time.

Act of God - An event of nature over which humans have little or no control, such as earthquake, lightning, flood, landslide, tornado, etc. Liability policies usually exclude Acts of God.

Activities fo Daily Living - Activities individuals must do every day such as moving about, getting dressed, eating, bathing, ect.

Actuary - An individual trained in mathematics, statistics and accounting specialties. In an insurance company, an Actuary is responsible for rate determinations and reserve & dividend calculations.

Agent - The state-licensed professional who represents the insurance company in the sale and servicing of insurance. The direct link between the insurance company and the policyholder.

Application - A questionnaire which is filled out by both an agent and the prospect seeking insurance. The form contains rating and underwriting information.

Assignment - A claim to a provider or medical supplier to receive payments.

Attained Age - The age of the insured at a determined date.

Attending Phsician's Statement (APS) - A Statement usually obtained from the applicant's doctor.

B

Basic Hospital Expense Insurance - Coverage that provides benefits for room, borard and miscellaneous hospital expenses for a certain number of days during a hsopital stay.

Beneficiary - The person who receives the proceeds from the policy when the insured dies.

Benefit Period - The length of time over which the insurance benefits will be paid for each illness, disability or hospital stay.

Burden of Proof - Generally, the party who affirmatively alleges a fact must prove evidence to support it. In tort cases, the burden of proving liability and damages rests with the plaintiff.

Buyers Guide - A booklet that describes insurance policies and concepts, and provides general information to help an applicant make an informed decision.

C

Cafeteria Plan - A selection of health care benefits from which an employeemay choose the ones that he/she needs.

Cash Surrender Value – Also known as Cash Payment Option.  Once it has met certain requirements, a permanent life insurance policy can be surrendered by the policy holder and receives the cash value amount that investments have brought, minus any loans against the policy.

Cash Value – A permanent life insurance policy has a cash value, an amount of money that grows tax-deferred as premiums are paid, and can be used as collateral for a loan.  The cash value is not the face amount given to a beneficiary upon the insured’s death.

Claim - A request for payment of the benefits provided by an insurance contract.

Conditions - The portion of an insurance contract which sets forth the rights and duties of the insured and the insurance company.

Comprehensive Major Medical - A combination of basic coverage and major medical coverage that features olw deductibles, high maximum benefits, and coinsurance.

Co-payment - An arrangement in which an insured must pay a specified amount for services "up front" and the provider pays the remainder of the cost.

Credit Life Insurance – Coverage for borrowers, such as for credit cards or auto loans, who wish to cover the amount of debt remaining should they die before the loan is repaid.

D

Deductible - Usually, a dollar amount the insured must pay on each loss to which the deductible applies. The insurance company pays the remainder of each covered loss up to the policy limits.

Disability Insurance - Line of insurance which includes coverages that are designed to protect the insured against a loss of income resulting form injury or sickness.

E

Eligibility Period - The period of time in which an employee may enroll in a group health care plan without having to provide evidence of insurability.

Elimination Period - A Waiting period that is imposed on the insured from the onset of disability until benefit payments begin.

Enrollment Period - The amount of time an employee has to sign up for a contributory group health plan.

Errors and Omissions - A Professional Liability coverage which protects the insured against liability for committing an error or omission in performance of professional duties. An insurance agent would carry such coverage.

Exclusions - The section of the insurance policy which lists property, perils, persons, or situations which are not covered under the policy.

Explanation of Benefits (EBO) - A statement that outlines what services were rendered, how much the insurer paid, and how much the insured was billed.

F

Face Amount – The amount payable to the beneficiary of a life insurance policy should the insured die while the policy is in effect.

Flexible Spending Account (FSA) - A salary reduction cafeteria plan that uses employee funds to provide various types of health care benefits.

G

Group Disability Insurance - A type of insurance that covers a group of individuals against loss of pay due to accident or sickness.

Group Health Insurance - Health coverage provided to members of a group.

Group Life Insurance – Life insurance provided through a group, such as a union or company.  Insurers may disregard the risks of each individual within the group, so health screenings may not be required for group life insurance.

H

Health Insurance - Protection against loss due to sickness or bodily injury.

I

Insurable Interest - Any actual, lawful, and substantial economic interest in the safety or preservation of the subject of the insurance from loss, destruction or pecuniary damage or impairment. Relationship or condition such that loss or destruction of life or property would cause a financial loss. A claim may be paid only when an insurable interest exists.

Insurance - A contract or device for transferring risk from a person, business or organization to an insurance company that agrees, in exchange for a premium, to pay for losses through an accumulation of premiums.

J

K

L

Long Term Care – A health plan usually purchased for retirement that provides for the possibility of future medical needs, and includes services like nursing home expenses and at-home health care.

M

Mutual Company - Insurance company owned by its policyholders. Policyholders share in profits made by the company through dividends or reductions in future premiums.

N

Negligence - Failure to do what a reasonably prudent individual would ordinarily do under the circumstances of a particular case, or doing what a prudent person would not have done. The failure to exercise that degree of care that the law requires to protect others from an unreasonable risk of harm. Negligence may involve acts of omission, commission, or both. Lack of due care. Breach of duty owed.

O

Ordinary Life Insurance – Also called Whole life Insurance. (See Whole Life)

P

Power of Attorney - The written instrument by which the authority of one person to act in the place and stead of another as his or her attorney in fact is set forth. Authority given a person or corporation, called an attorney in fact, to act for the obligate another to a specific extent.

Primary Insurance - When two or more coverages or polices apply to the same loss, the one which pays first, up to its limits of liability or the amount of the loss, whichever is less.

R

S

Settlement Options – Refers to the choices a life insurance beneficiary has when the death benefit is not paid in one lump sum.

T

Term Life Insurance - Life insurance that expires after a term, or period of time.  Term insurance only provides coverage if the insured dies while the policy is active.  No payments are made if the term expires and the insured is living.

U

Underwriting - The insurance function which researches and evaluates insurance applications to decide which are acceptable to the company as insureds.

Universal Life Insurance – A flexible, permanent, adjustable life insurance plan, that has cash value built into it after premiums paid reach a certain point.  After that the policy holder has some ability to adjust the premium amount or the death benefit amount, win limits.

V

Variable Life Insurance – Similar to Universal Life insurance, Variable Life insurance allows the policy holder more say in the investment of premiums in stocks, bonds, and other types of investments.  Death benefits (and cash value) may vary according to the success of investments, but premiums usually remain level.

W

Waiting Period - Time between the beginning of a disability and the start of disability insurance beneftis.

Whole Life Insurance – A permanent life insurance plan that guarantees the cost of the premium, the amount of the death benefit, and the amount of the cash value, guaranteed for the insured’s life, as long as premiums are paid on time and the insured does not surrender the policy.  

Workers Compensation Insurance - Insurance which covers an employer_s obligations under Workers Compensation laws, and which makes the employer responsible for stated damages in the event of a work-related injury or illness. Workers Compensation coverage also includes separate coverage for Employers Liability.

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