Glossary of Disability Insurance Terms

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

A

Actual Cash Value: The sum of money required to pay for damages or lost property, computed on the basis of their fair market value.

Actuary: A specialist in the mathematics of insurance who calculates rates, analyzes risks, sets reserves, etc.

Adjuster: An individual, usually representing the insurance company, who is responsible for investigating, evaluating and negotiating a policyholder’s claim. The adjuster also may calculate the amount of a loss and determine who is liable for damages.

Admitted Company: An insurance company authorized and licensed to do business in a given state. Age

Limits The ages below or above which the insurance company will not issue a given policy or renew a policy in force.

Annuity: (1) The amount of money payable yearly or at other regular intervals. (2) An agreement by an insurer to make periodic payments that continue during the survival of the annuitant (the beneficiary of the policy) or for a specified period.

Application: (APP) A form on which the prospective insured states facts requested by the insurance company and on the basis of which (together with any information from medical examiners, attending physicians, hospitals, investigations and the agent) the insurance company decides whether or not to accept the risk, modify the coverage offered or decline the risk.

Apportionment: The division of loss among insurance companies when two or more cover the same loss.

Arbitration: A hearing between two or more parties that is decided by a third party as a means of settling a dispute.

Assigned Risk: A risk that underwriters do not care to insure but are nonetheless assigned by the state because state law requires the insured be protected.

B

Bad Faith: The unreasonable delay or denial of a legitimate claim. If a policyholder’s claim has been unreasonably delayed or denied, bad faith law allows the insured to seek monetary damages for pain and suffering, consequential damages, punitive damages, etc.

Beneficiary: The person who may become eligible to receive, or is receiving, benefits under an insurance policy.

Broker: An individual or company who solicits, negotiates or procures insurance or the renewal or continuance thereof on behalf of insured’s or insurance companies.

Business Interruption Insurance: A type of policy that pays for loss of earnings, revenues, profits, etc., when operations are curtailed or suspended because of property loss.

C

Cancellation: Termination of an insurance contract by voluntary act of the insurance company or the insured, executed in accordance with provisions in the contract or by mutual agreement.

Capitation: A fixed amount of money per patient per year that medical providers receive to provide for all of their patients’ medical needs.

Carrier: An insurance company that “carries” the insurance; i.e., another name for an insurance company. (The terms “insurance company” and “insurer” are preferred because of the possible confusion of “carrier” with transportation terminology.)

Cash Value: The amount of cash that is due an insured who surrenders a life or (extremely rarely) a health policy. Such surrender with termination of all insurance benefits is often called “cashing out.”

Claim: The demand for benefits as provided by an insurance policy. Clause A term used to identify a particular part of a policy or endorsement.

Co-Insurance: An arrangement under which two or more insurance companies (or reinsurers) are each liable for a proportion of losses. In health insurance, a provision that the insured and insurance company will share covered losses in agreed proportion. In this context, the preferred term is “percentage participation.”

Co-Payment: The patient’s share of a healthcare bill. It usually is a small amount ($5 or $10 per office visit).

Collision Coverage: Insurance coverage, part of most automobile insurance policies, protecting an insured’s automobiles from damage resulting from collision with another object or automobile.

Commission: The portion of an insurance premium retained by the agent or broker as compensation for sales, service and distribution of insurance policies.

Community Rating: A method for establishing the level of healthcare insurance premiums for a given geographic area, such as an entire state. It is based on the average of actual or anticipated services used by all subscribers in that area. The intent of community rating, which is not always pure in its application, is to spread costs evenly among an entire population rather than set premiums according to individual or small group circumstances.

Comprehensive Health Insurance: A type of health insurance that combines the coverage of Major Medical and Basic Medical Expense contracts into one broad contract that provides coverage for almost all types of medical expense. The coverage is usually subject to a small deductible for some or all expenses and to a percentage participation clause (sometimes called co-insurance) applicable to all or some of the covered expenses.

Comprehensive Personal Liability Policy (CPL): A personal liability contract providing liability protection for numerous personal activities and situations.

Cost-Sharing: A provision in health insurance plans that requires the insured to pay a portion of his or her medical expenses, including co-payments, deductibles, etc.

Coverage: Scope of the protection provided under a contract of insurance.

Credit Insurance: Insurance on a debtor in favor of a lender intended to pay off a loan or the balance thereon if the insured dies or is disabled (usually called a “credit life” policy).

D

Declaration Page (Dec Sheet): The portion of an insurance policy containing a summary of the coverage and limits of insurance provided.

Decreasing Term Policy: A term policy outlining a decrease in benefits in accordance with a schedule.

Deductible: A provision or clause in an insurance policy that the first given number of dollars or percentage of expenses shall be paid by the policyholder before the insurance coverage kicks in.

Deferred Annuity: An annuity that pays income benefits at a designated future date, as opposed to an “immediate annuity,” which pays benefits at once.

Depreciation: is the loss in value from all causes, including age, wear and tear.

E

Earned Premium: The portion of a premium for which the policy protection has already been given.

Elimination Period: A loosely-used term sometimes designating the “probationary period” or “waiting period” between the incurrence of a disability and the date benefits begin.

Endorsement: A form attached to an insurance policy bearing the language necessary to change the terms of the policy to fit special circumstances.

Exclusions: Items for which no benefits are payable in an insurance policy.

Experience: The loss record of a policyholder, an insurance company or a class of coverage.

Earned Premium: The portion of a premium for which the policy protection has already been given.

Elimination Period: A loosely-used term sometimes designating the “probationary period” or “waiting period” between the incurrence of a disability and the date benefits begin.

Endorsement: A form attached to an insurance policy bearing the language necessary to change the terms of the policy to fit special circumstances.

ERISA Acronym: for a federal law called the Employee Retirement Income Security Act. Enacted in 1974 to protect employee pensions and retirement plans, the law, preempts all state remedies, to recover general and punitive damages when insurance has been obtained through employment.

ERISA: does not apply to government and church employees, those who coverage was transferred from Medicare, or those who purchase their insurance directly from a health insurer. Exclusions Items for which no benefits are payable in an insurance policy.

Experience: The loss record of a policyholder, an insurance company or a class of coverage.

Extended Replacement Coverage: allows a policyholder to replace what they lost at today’s prices, even if the cost exceeds the limits stated oh the Dec Page, up to a set extended percentage limit

F

Face Amount: In a life insurance policy, the death benefit stated on the first page of the policy. Fee-for-Service Traditional health care coverage wherein the patient or insurance company is billed for each test or service performed. Fiduciary One who occupies a position of special trust and confidence and therefore upon whom the law places special obligations.

G

Gag Clause/Gag Rule: A provision in some managed care insurance contracts that forbids doctors from discussing with patients all available treatment options or from disclosing financial incentives they may receive by limiting or denying care.

Gatekeeper: In an HMO, the primary care doctor who coordinates all of a patient’s necessary diagnostic testing and specialty referrals.

General Agent: An insurance company representative in a given territory. A true general agent is an independent contractor compensated on a commission basis. In practice, in the life and health fields, the general agent may receive certain expense subsidies from the company for office operation and training of new agents.

Grace Period: The period of time (usually one month) after a premium due date during which the insurance policy remains in force without penalty even though the premium has yet to be paid.

Group Contract: A contract of insurance made with an employer or other entity that covers a group of persons by virtue of their relationship to the entity. A group contract may be for life insurance, health insurance or an annuity.

Guaranteed Insurability Rider: In a health or life insurance policy, an attached rider that permits the insured to purchase additional insurance on one or more specified “option dates” without providing new evidence of insurability at that time.

Guaranteed Renewable: A contract that the insured has the right to continue, by the timely payment of premiums, for a substantial period of time, during which the insurance company may not make any change in the contract other than to the premium rate for general classes of policyholders.

Guaranteed Replacement Cost Coverage: entitles the policyholder to a guaranteed replacement of lost or damaged items, regardless of their cost.

H

Health Maintenance Organization (HMO): A legal entity that provides a set of health services to its members in a geographic area. HMOs are reimbursed through a pre-determined, fixed, periodic prepayment made by or on behalf of each subscriber without regard to the amount of actual services provided.

Homeowners Policy: A “package” or multi-line policy providing the protection needed by most homeowners. The policy provides coverage for losses including but not limited to, fire, water, wind, theft and liability insurance. Coverage is provided for repair/replacement building, contents and additional living expenses. Hospital Benefits payable when an insured is hospitalized

I

Indemnify: To restore the victim of a loss, in whole or in part, by payment, repair or replacement.

Insurable Interest: A legal interest in another person’s life or health or in the protection of property from injury, loss, destruction or pecuniary damage.

Insured: The party to an insurance agreement to whom, or on behalf of whom, the insurance company agrees to indemnify for losses, provide benefits or render service.

J

Joint Life Policy: A life insurance policy that pays out when the first of two or more covered persons die.

L

Lapse: Termination of an insurance policy due to failure to pay the premium.

Level Premium: Insurance Life insurance, the premium for which remains at the same level for the duration of the policy.

Liability Insurance: Insurance that pays and renders service on behalf of an insured for losses arising out of his responsibility, negligence, contractual assumptions, etc.

Liability Limits: The sum beyond which a liability insurance company does not protect the insured on a particular policy.

Life Insurance: An argument between an insurance company and the policyholder to pay a specified amount to a designated beneficiary on the insured’s death.

Lifetime Policy: A policy guaranteed renewable or non-cancelable to age 65 (or sometimes later), or a policy paying disability benefits for life.

Limit of Liability: The maximum amount that an insurance company agrees to pay in case of loss.

Long-Term Disability: A disability that last longer than 12 weeks on average. It also describes a form of group disability insurance with benefits for more than the customary 12 to 26 weeks of disability, reaching five years on average.

Loss Ratio: The percentage of losses to premiums, usually losses incurred to premiums earned. The amount of the premium dollar returned to the insured as claims payments and other benefits.

M

Major Hospitalization: Policy or Insurance A type of health insurance that provides benefits for most of the costs of hospitalization up to a limit and subject to a deductible. Such policies may contain internal maximum limits and percentage participation clauses. They are distinguished from major medical insurance by the fact that they pay only in the event of hospitalization.

Major Medical Insurance: A type of health insurance that provides benefits for most types of medical expenses incurred up to a limit and subject to a deductible. Such contracts may contain internal limits and a percentage participation clause (sometimes called a co-insurance clause). A major medical policy pays expenses both in and out of the hospital.

Managed Care: A health care coverage system in which all medical treatment and payments are approved or denied by the insurer.

Mandated Benefits: Benefits mandated by the state for inclusion in any major medical coverage. These may include mammograms, automatic coverage of newborn or adopted children, home/hospice treatment options and others.

Maturity: The date at which the face value of a life insurance policy comes due either by reason of death or endowment.

Medicare: A government-sponsored health insurance program for the elderly and disabled.

Morbidity Sickness: A morbidity table shows the incidence of sickness. Mortality Death. A mortality table shows the incidence of death.

N

NAIC: National Association of Insurance Commissioners. An association of state insurance commissioners active in discussions of regulatory problems and in the formation and recommendation of uniform practices and legislation.

NALU: National Association of Life Underwriters. An organization of life insurance agents with state and local associations throughout the country.

O

Open Enrollment: A specified period of time during which individuals may enroll or change their benefits program.

P

Paid-Up: Describes life insurance on which all premiums have been paid but that has not yet matured by death or endowment.

Plaintiff: The party who brings a civil action, complains or sues and is so named on the record.

Portability: A provision in an insurance contract that allows the insured to retain benefits upon change of job.

Pre-Certification: The process of obtaining pre-approval for a medical treatment.

Pre-Existing Condition: A condition of health or physical condition that existed before a health policy was issued. Generally, for an insurer to deem a condition pre-existing, the insured must have seen a doctor and been diagnosed for the condition prior to the policy taking effect.

Pre-Paid Hospital Service Plan: The common name for a Health Maintenance Organization (HMO) plan. It provides comprehensive health care for members who pay a flat fee for services, including outpatient or hospital treatment.

Preferred Risk: An insurance classification indicating a risk that is superior to the average risk on which a given rate has been calculated. Such risks are usually eligible for a reduced rate.

Premium: The periodic amount of money paid to keep a policy in force.

Premiums: for a whole life policy may be paid for the whole life or for a limited period, during which a higher premium pays up the policy.

Primary Care: Basic or general healthcare often administered by a family physician. Depending on the situation, patients also may receive primary care from a nurse, a paramedic or other healthcare provider. Managed care systems try to resolve as many health problems as possible at this level.

Producer Term: commonly applied to an agent, solicitor or other person who sells insurance, producing business for an insurance company and generating a commission for himself.

Proof of Loss: A formal statement made by the insured to the insurance company regarding a loss. The purpose of the proof of loss is to place before the company sufficient information concerning the loss to enable it to determine its liability under the policy or bond.

Punitive Damages: A monetary award to deter or punish a company for its fraudulent, oppressive or malicious behavior.

R

Rating Bureau: An organization that classifies and promulgates rates and in some cases compiles data and measures hazards of individual risks in term of rates in a given territory.

Replacement Cost: The cost of replacing property. Rescission

Canceling: an insurance policy due to nondisclosure of a material fact or misrepresentation of a material fact on an insurance application.

Rider: An amendment attached to a policy that modifies the conditions of the policy by expanding or decreasing its benefits or excluding certain conditions from coverage.

Risk: The chance of loss. Also, a person or thing insured.

T

Third-Party Claims: Claims made against another person’s insurance company. For example, a person sues a condominium owner’s insurer when he sustains injuries due to a faulty balcony.