Health Insurance Glossary

Life is hard enough without more big words.
 Leave the guesswork to your 360º broker.

Accidental Death and Dismemberment (AD&D) Rider:
A supplement to many life insurance policies that provides an additional cash benefit to the insured or his/her beneficiaries if an accident causes either the death of the insured or causes the insured to lose any two limbs or the sight in both eyes.

Agent: In insurance, the person authorized to represent the insurer in negotiating, servicing or effecting insurance policies. An Agent usually represents one company, as opposed to a Broker who represents multiple companies.

Annual Out-of-Pocket Maximum: A dollar amount set by the plan that puts a cap on the amount of money the insured must pay out of his or her own pocket for covered expenses over the course of a calendar year.

Applicant: The party applying for an insurance policy.

Application: A printed form developed by an insurer that includes questions about the prospective insured and the desired insurance coverage and limits.

Assigned Risk: A risk insured through a pool of insurers and assigned to a specific insurer. These risks are generally considered undesirable by underwriters, but due to state law or otherwise, they must be insured.
Beneficiary: Any person, persons, or other entity designated to receive the policy benefits upon the death of the policyholder.

Broker: A marketing specialist who represents insurance organizations and who deals with either agents or companies in arranging for the coverage required by the customer. Brokers don’t charge any extra fees. The Insurance Company pays his commission. He costs the consumer nothing and saves tons of time.

Buy-Sell Agreements: Agreement that a deceased business owner's interest will be sold and purchased at a predetermined price or at a price according to a predetermined formula.

Calendar Year Deductible: The amount of health care expenses that the insured person must pay before insurance payments for covered eligible expenses.

Cancellation: The discontinuance of an insurance policy before its normal expiration date, by either the insured or the company.

Cash Value (cash surrender value): The cash amount payable to a life insurance policy owner in the event of termination or cancellation of the policy before its maturity or the insured event.

Certificate of Insurance: A statement of coverage issued to an individual insured under a group insurance contract, outlining the insurance benefits and principal provisions applicable to the member.

Claim: A person's request for payment from an insurer for a loss covered by the insurance policy.

COBRA (Consolidated Omnibus Budget Reconciliation Act): COBRA requires organizations with 20 or more employees to offer the continuation of group health benefits (Medical, Dental, Vision, and Medical Reimbursement Account) to employees (and covered dependents) upon experiencing a "Qualifying Event," such as termination.

Co-insurance Provision: A specified percentage of the cost of treatment the insured is required to pay for all covered medical expenses remaining after the policy's deductible has been met. A lot of people think that all they pay is the premium and the deductible and they forget about co-insurance. Ask your broker to explain how it works.

Commission: The amount of money, usually a percentage of the premiums paid to an insurance agent for selling an insurance policy. Paid by the Insurance Company; not the insured.

Conditions: The part of your insurance policy that states the obligations of the person insured and those of the insurance company.

Contingent Beneficiary: In a life insurance policy, the person designated to receive the policy benefits if the primary beneficiary dies before the insured.

Conversion Privilege: The right to convert or change insurance coverage from an individual term insurance policy to an individual whole life insurance policy.

Convertible Term Life Insurance: A type of term life insurance that offers the policy owner the option to exchange the term policy for a form of permanent insurance.

Copay: The fee you pay up front for certain medical services or for each prescription.

Creditable Coverage
: The pre-existing condition exclusion is reduced one month for every month that a person had coverage in a previous qualifying plan as long as the gap in coverage between the previous plan and the new plan is 63 days or less.

Declination: The insurer's refusal to insure an individual after careful evaluation of the application for insurance and any other pertinent factors.

Deductibles: The portion of the loss that the policyholder agrees to pay out of pocket, before the insurance company pays the amount they are obligated to cover.

Dependent: A person for whom the insured has some legal obligation to — usually the spouse or children.

Double Indemnity: A provision in a life insurance policy that will double the face amount of the policy is payable if the death of the insured is the result of an accident.

Emergency Room Visit: A visit to a hospital for treatment of an accidental injury or for emergency medical care.

Exclusions and Limitations: Conditions, situations and services not covered by the health plan policy.

Face Amount: The amount stated in the life insurance policy as the death benefit.

Grace Period: The specified length of time, after a Life or Health premium payment is due in which the insured may make the payment and keep the policy in force. (Usually 30 days.)

Guaranteed Renewable Policy: A health insurance policy that the insurer is required to renew – as long as premiums are paid – at least until the insured attains the age limit specified in the policy, or the policy is cancelled by the insured. The insurer may increase the premium rate for any class of guaranteed renewable policies.

HIPPA - Health Insurance Portability and Accountability Act of 1996: Under this federal law, group health plans cannot deny coverage based solely on an individual's health status; also gives employees who change or lose jobs better access to health coverage, guarantees renewability and availability to certain employees and limits exclusions for pre-existing conditions.

HMO (Health Maintenance Organization): A health care financing and delivery system that provides comprehensive health care for subscribing members in a particular geographic area using managed care techniques with a specified network of physicians.

HSA (Health Savings Account): A federal tax-deductible savings account set up at a financial institution for payment of qualified medical expenses; must be used in conjunction with a high-deductible health plan. Unspent dollars aggregate year over year just as an IRA or 401k. Check our our recent article on HDHPs.

Incontestable Clause: A life insurance policy wording that provides a time limit (e.g. two years) on the insurer's right to dispute a policy's validity based on material misstatements in the application.

Insurable Interest: Any interest a person has in property that is the subject of insurance, so that damage to this property would cause the insured a financial loss.

Insurance Company: An organization that has been chartered by a governmental entity to transact the business of insurance. Also known as the Insurer or the Carrier. You might work through an agency or other third party to select your insurance, but the Insurance Company is the one who pays out your coverage.

Insured: A person or organization covered by an insurance policy, including the "named insured" and any other parties for whom protection is provided under the policy terms. In some cases you might be asked, “Who is the insured?” Well, the whole family might be insured, but they are asking who is the family member that works for the company where you signed up for coverage. If you have individual insurance, you’d just clarity that you have individual insurance and not a company policy.

Insurer: The party to the insurance contract who promises to pay losses or benefits. Also, any corporation engaged primarily in the business of furnishing insurance to the public. Also known as the Carrier or, simply, the Insurance Company.

Irrevocable Beneficiary: A named beneficiary whose rights to life insurance policy proceeds cannot be canceled or changed by the policy owner unless the beneficiary consents.

Key Employee
: Insurance Protection of a business against financial loss caused by the death or disablement of a vital member of the company, usually individuals possessing special managerial or technical skill or expertise. Also called key executive insurance.

Lapse: Termination of a policy due to nonpayment of premiums.

Liability: A legal obligation to compensate a person harmed by one's acts or omissions.

Liability Coverage: Insurance that provides compensation for a harm or wrong to a third party for which an insured is legally obligated to pay.

Life Insurance: Insurance that pays a specified sum of money to designated beneficiaries if the insured person dies during the policy term.

Lifetime Maximum: The maximum amount of money a plan will pay towards healthcare services over the course of the insured's lifetime. It’s a big number unless you end up with a critical illness; then it gets used up fast. A critical illness supplemental plan will help pay the deductible toward that max and possibly cover other expenses.

Network: A group of doctors, hospitals and other health-care providers contracting with a health plan, usually to provide care at special rates and to handle paperwork with the health plan.

Non-Formulary Drugs: Drugs that have not yet been reviewed or have been denied formulary status, typically because they offer no extra benefit over the drugs already on a plan's formulary list; often require a higher copayment.

Out-of-Network: Health care services received outside the HMO, POS or PPO network. For instance, if you’re on vacation and crash into the dock on your jet ski, your medical bills in Grand Lake are probably out of network.

Out-of-Pocket Expense: (OOP) Any medical care costs not covered by insurance, which must be paid by the insured. Total OOP max would be your deductible plus your OOP max.

Paid-up Policy: An in-force life insurance policy for which no further premium payments are required.

Permanent Insurance: A general term for ordinary life and whole life insurance policies that remain in effect as long as their premiums are paid.

Policy: The written forms that make up the insurance contract between an insured and insurer. A policy includes the terms and conditions of the coverage, the perils insured or excluded, etc.

Policyholder: The person who buys insurance. The one who contracts the policy and pays the bill.

Policy owner: An individual with an ownership interest in an insurance policy.

Policy Period: The amount of time an insurance contract or policy lasts.

PPO (Preferred Provider Organization): An organization where medical providers are under contract to an insurance company or health plan to provide care at a discounted or negotiated rate.

Premium: The price for insurance coverage as described in the insurance policy for a specific period of time, paid in increments, usually monthly.

Primary Beneficiary: The person designated as the first to receive the proceeds of a life insurance policy upon the death of the insured.

Primary Care Physician
(PCP): A general or family practitioner who serves as the insured's personal physician and first contact with a managed care system.

Public Option: A public health insurance option is a federally proposed health insurance plan in America's Affordable Health Choices Act of 2009 (H.R. 3200) as a Qualified Health Benefit Plan.

Rate: The pricing factor upon which the insurance buyer's premium is based. Rates change, so just because it’s in writing does not guarantee it’s current.

Rated Policy: Sometimes called an "extra-risk" policy, an insurance policy issued at a higher-than-standard premium rate to cover the extra risk where, for example, an insured is a smoker.

Renewable Term Life Insurance: A renewable life policy permits the owner of the policy to automatically renew the policy beyond its original term by acceptance of a premium for a new policy term without evidence of insurability.

Return of Premium (ROP): A type of life insurance policy that returns the premiums you've paid over a fixed term if the coverage is never used.

Revocable Beneficiary: A life insurance policy whose designation as beneficiary can be revoked or changed by the policy owner at any time prior to the insured's death.

Riders: An addition to an insurance policy that becomes a part of the contract. A rider usually excludes coverage for a certain condition based on past medical history. That allows a kid who gets asthma to get insurance for all the other things that a kids needs coverage for, like doctors visits and broken arms, but not the asthma.

Risk: Jeff’s favorite board game. In insurance, the possibility or chance of loss or injury.

Stop-Loss Provision: A major medical policy provision under which the insurer will pay 100% of the insured's eligible medical expenses after the insured has incurred a specified amount of out-of-pocket expenses in deductible and coinsurance payments.

Term Insurance: Life insurance under which the benefit is payable only if the insured dies during a specified period. If the insured survives beyond that period, coverage ceases and there is no refund. This type of policy does not build up any cash or nonforfeiture values.

Underwriter: Depending on how this term is used, it can mean one of two things: (a) A company that receives the premiums and accepts responsibility for the fulfillment of the policy contract; (b) the company employee who decides whether or not the company should assume a particular risk; (c) the agent who sells the policy.

Underwriting: The process of reviewing applications for coverage. Applications that are accepted are then classified by the underwriter according to the type and degree of risk.
Uninsurable Risk: An event that insurance won’t cover because of excessive risk, like mountain climbing above 14,000 feet or spraying forest fires from a twin engine plane.

Universal Life: This type of life insurance policy offers a flexible premium, two-part contract containing renewable term insurance and a cash value account that generally earns interest at a higher rate than a traditional policy. The interest rate varies. Premiums are deposited in the cash value accounts after the company deducts its fee and a monthly cost for the term coverage.

Urgent Care: This term generally applies to one of many emergency medical facilities that are privately owned and not connected to a hospital. Many people will go to an Urgent Care facility when a medical urgency arises which necessitates immediate care, but has not reached the level of extreme emergency. Smaller injuries will get faster attention in an Urgent Care facility than in a crowded ER.

Plans handle these visits differently, so it’s a good idea to become familiar with the Urgent Care facility near you, how they handle your insurance and whether they participate in your plan. Our first grader needed stitches from an accident on the playground. The Urgent Care facility near our home was very quick and caring; they even gave her a stuffed elephant. They also offered a cash discount for paying for the service in whole up front; to this day we call that stuffed animal the $200 elephant! If you have a supplemental accident plan, the payout will cover your ER or urgent care visit and likely any follow up visits related to your injury. It covers the elephant too.

Usual, Customary and Reasonable Fee: Big words talking about the maximum dollar amount of a covered expense that is considered eligible for reimbursement under a major medical policy.

Waiver: An agreement attached to a policy that exempts from coverage certain disabilities or injuries that otherwise would be covered by the policy.

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