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Insurance Glossary

PLC Insurance

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Act of God top
An accident or event resulting from natural causes, without human intervention or agency, and one that could not have been prevented by reasonable foresight or care, e.g., lightning, wind, or storms. Flood and earthquake are not included in most policies, and must be added separately. Talk to your agent about what is covered or not.
Actual Cash Value top
The cost to replace damaged or lost property with comparable or like property, minus depreciation
Actual Charge top
The amount a physician or supplier actually bills for a particular medical services or supply.
Actuary top
An actuary is a health insurance carrier number cruncher responsible for determining what premiums the company needs to charge based in large part on claims paid versus amounts of premium generated. Their job is to make sure a block of business is priced to be profitable.
Acute Care top
Care for illness or injury that develops rapidly, has pronounced symptoms ad is finite in length. Traditional medical insurance, Medicare and Medicare supplements are designed to provide coverage for acute illness.
Adjuster top
Someone who is paid by the insurance company or the insured person to investigate or negotiate insurance claims on their behalf.
Admitting Privilege top
The right granted to a doctor to admit patients to a particular hospital.
Advance Directive top
An advance directive indicates the person designated to make medical decisions for you if you are unable physically or mentally to make those decisions yourself.
Adverse Selection top
A tendency which occurs when a person makes a decision based on his/her diminished health condition or frequency of needed treatment and is, therefore considered a poorer claims risk than most others in the group.
Advocacy top
Any activity done to help a person or group to get something the person or group needs or wants.
Affordable Care Act (ACA): top
The Patient Protection and Affordable Care Act (PPACA) – also known as the Affordable Care Act or ACA – is the landmark health reform legislation passed by the 111th Congress and signed into law by President Barack Obama in March 2010. The legislation includes a long list of health-related provisions that began taking effect in 2010 and will continue to be rolled out over the next four years. Key provisions are intended to extend coverage to millions of uninsured Americans, to implement measures that will lower health care costs and improve system efficiency, and to eliminate industry practices that include rescission and denial of coverage due to pre-existing condition
Agent top
icensed salespersons that represent one or more health insurance companies and presents their products to consumers.
Aggregate Amount (limit) top
Maximum amount of total losses for which a plan sponsor (employer) is liable for any one-plan year.
Alternate Care Benefit top
Payment for a special arrangement of services specifically designed to allow the person to reside in a setting other than a nursing facility (i.e. services to provide assistance, capital improvements such as a ramp, and/or durable medical support.
Alternate Care Facility top
(1) A hospice; or (2) a place that provides ongoing care to inpatients in one location and which (a) provides 24-hour care and services sufficient to support needs resulting from inability to perform activities of daily living or cognitive impairment; (b) has a trained and ready-to-respond employee to provide such care; (c) provides three meals a day and accommodates special dietary needs; (d) is appropriately licensed or accredited; (e) has formal arrangements for the services of a physician or nurse to provide emergency medical care; and (f) has appropriate procedures for handling administering drugs.
Ambulatory Care top
Medical services provided on an outpatient (non-hospitalized) basis. Services may include diagnosis, treatment, surgery, and rehabilitation.
Ancillary Services top
Health care services conducted by providers other than physicians and surgeons. These will usually include such services as physical therapy and home health care.
Annual Benefit Cap top
Maximum amount paid for specific medical services or total medical services.
Annuity top
This is a series of income payments made to a customer at regular intervals by an insurance company in return for a premium or premiums the customer paid. There are many types of annuities, which offer various benefits.
Apportionment top
Dividing a loss proportionately among two or more insurers to cover the same loss. For example, assume someone insures their property for $10,000 with one insurance company, and they also insure it for $5,000 with a second insurance company. If a loss occurs, the first company pays two-thirds of the loss and the second company pays one-third.
Associations top
Can offer group health insurance plans specially designed for their members and that give their members purchasing power because of the groups larger pool of enrollees.
Auto insurance top
If you own and operate commercial vehicles, make sure your fleet is appropriately insured. If you rarely use your personal vehicle for business reasons, your personal policy might include the necessary coverage. Check with your agent to make sure.
Balance Billing top
Specific deductible is the point at which the stop-loss insurance carrier begins to reimburse the employer based upon the individual's total of claims paid within a policy year. Also, the practice of medical care providers (such as doctors, hospital, or other medical practitioner) billing the insurer for full costs, then billing the insured for the portion of the bill which was not paid. Many Managed Care plans prohibit the use of balanced billing and may use sanctions against providers who balance the bill.
Beneficiary top
Is enrolled in a health insurance plan and receives benefits through those policies.
Benefit top
Refers to the amount payable by the insurance company to a claimant, assignee, or beneficiary when the insured suffers a loss.
Binder / Binding Receipt top
A binder is proof of coverage for a specified time period prior to the company issuing someone the actual policy or requiring a premium payment. However, if the consumer pays the premium with the application, the insurance company will issue a binder or “binding receipt.”
Brand-Name Drug top
Prescription drugs marketed with a specific brand name by the company that manufactures it, usually the company which develops and patents it. When patents run out, generic versions of many popular drugs are marketed at lower cost by other companies. Check your insurance plan to see if coverage differs between name-brand and their generic twins.
Broker top
Licensed insurance salesperson who obtains quotes and plan from multiple sources information for clients.
Business Interruption Insurance top
If you are unable to run your business due to a covered loss (fire, storm damage, vandalism, etc.), business interruption insurance will replace lost income, and pay ongoing expenses and the costs to set your business up in a temporary facility.
Businessowners Policy (BOP) top
A package policy that provides both property and liability coverage for eligible small businesses. Businessowners policies are written on special coverage forms that are generally very similar to their monoline property and liability form counterparts, but they typically have some unique features that make them especially advantageous for businesses that qualify.
Capitation top
Represents a set dollar limit that you or your employer pay to a health maintenance organization (HMO), regardless of how much you use (or don’t use) the services offered by the health maintenance provider.
Carrier top
The insurance company or HMO offering a health plan.
Carve-Out top
Term used to describe certain services not included in capitated benefits that are paid for separately on a predetermined fee-for-service basis.
Case Management top
A system embraced by employers and insurance companies to ensure that individuals receive appropriate, reasonable health care services.
Cash Surrender Value top
The amount of cash due to the insured person who requests the insurance company cancel their life insurance policy.
Certificate of Insurance top
A printed description of the benefits and coverage provisions forming the contract between the carrier and the customer. It discloses what is covered, what is not, and dollar limits.
Claim top
A claim is a request by an individual (or his or her provider) to an individual’s insurance company for the insurance company to pay for services obtained from a health care professional.
Clause top
This identifies a specific part of a policy or endorsement.
Closed Panel top
Managed care plan that contracts with physicians on an exclusive basis that requires the insured to use a list of certain providers. The primary provider is responsible for all health care needs and refers to a specialty physician or hospitalization only when medically needed.
Coalitions top
An association of health care plan sponsors who pool their resources to negotiate with insurers or other health care payers and providers.
COBRA top
The Consolidated Omnibus Budget Reconciliation Act of 1985, federal legislation that allows you – if you work for an insured employer group of 20 or more employees – to continue to purchase health insurance for up to 18 months if you lose your job, or your employer-sponsored coverage is otherwise terminated.
Coinsurance top
efers to money that an individual is required to pay for services, after a deductible has been paid. In some health care plans, co-insurance is called “copayment.” Coinsurance is often specified by a percentage. For example, the employee pays 20 percent toward the charges for a service and the employer or insurance company pays 80 percent.
Collision Coverage top
This covers the physical damage to the insured person’s vehicle due to a collision with another object, such as another vehicle, a fence, building, etc.
Comprehensive Coverage top
This covers damage to an insured person’s car — except by collision. For example, this covers their car if a tree falls on it or someone vandalizes it.
Comprehensive Personal Liability Policy (CPL) top
This is a personal liability contract individuals may buy. A CPL provides liability insurance coverage for individual and family needs that may arise due to personal activities and situations, such as residential property ownership, pet ownership, sports activities, and many other everyday activities.
Contractor’s Bond top
Guarantees the performance of a contract and the payment of all related labor and material bills between a contractor and subcontractors, up to the stated bond amount. In situations where two bonds are required, contractors can obtain a performance bond (covers performance) and a payment bond (covers payment of labor and material).
Conversion Privilege top
A contractual right given to an insured person whose group coverage terminates so that person is able to convert to an individual policy without providing evidence of insurability.
Cooperatives / Insurance Cooperatives top
Proposed in the Senate as an alternative to a proposed government plan or public option. The cooperatives, which would have been structured as non-profits and owned by their members, would offer a network of health care providers or contract out for medical services. The concept championed by some Democrats would provide “seed money” for the cooperatives, which would then be sustained by customer premiums.
Copayment top
A predetermined (flat) fee that an individual pays for health care services, in addition to what the insurance covers. For example, some HMOs require a $10 copayment for each office visit, regardless of the type or level of services provided during the visit. Copayments are not usually specified by percentages.
Cost Sharing top
The sharing of costs between the payment of premium cost and medical expenses by the health care plan and its insured through employee contributions, deductibles, co-insurance and co-payments.
Coverage top
The different types of options selected and the benefits paid under a plan or insurance contract.
Credit for coverage top
May or may not apply when you switch employers or insurance plans. A pre-existing condition waiting period met under while you were under an employer’s (qualifying) coverage can be honored by your new plan, if any interruption in the coverage between the two plans meets state guidelines.
Credit Insurance top
An insurance policy that pays debts should the borrower lose his or her job, die, or become disabled (usually called “credit life” policy).
Declaration Page (Dec Sheet) top
The portion of an insurance policy that contains information about risk. It identifies the parties in the contract and the subject of coverage.
Deductible top
The amount an individual must pay for health care expenses before insurance (or a self-insured company) covers the costs. Often, insurance plans are based on yearly deductible amounts.
Denial of Claim top
The refusal of an insurance company or carrier to honor a request by an individual (or his or her provider) to pay for health care services obtained from a health care professional.
Dependent top
A person or persons relying on the policy holder for support may include the spouse and/or unmarried children (whether natural, adopted or step) of an insured.
Dependent Property top
This is property not owned, operated or controlled by you, but you are dependent on it for normal business operations. Dependent property coverage protects you from financial losses caused by problems that occur somewhere other than your business. For example, this coverage will help you if your business depends on outside vendors, suppliers, or power sources that can interrupt your business operations because they experience a loss.
Dependent Worker top
A worker in a family in which someone else has greater personal income.
Destroyed or Damaged Records Coverage top
If a covered loss destroys or damages business records, this insurance compensates the owner for his or her inability to collect income, and the cost to reproduce the records.
Difference in Conditions (DIC) Coverage top
DIC insurance provides coverage designed to close specific gaps in standard insurance policies and is usually available only for larger industrial or commercial risks. It allows coverage to be customized to extend to such exposures as water damage, flood, collapse, earthquake, landslide, etc., according to the insured’s needs. DIC coverage may be provided by means of a separate insurance policy or it may be added by endorsement to the basic policy.
Disability Income Insurance top
An insurance that provides periodic payments to replace income lost to an insured person when they cannot work due to sickness or injury.
Divestment top
In reference to eligibility for Medicaid, the disposal of resources at less than fair market value in order to qualify for benefits.
Durable Power of Attorney top
An individual's appointment of a representative to act on his or her behalf via a legal document that remains in effect of incapacity of the grantor.
Earned Premium top
The portion of an insurance premium that applies to the expired part of the policy term. Even though customers pay their premiums in advance, the insurance company does not fully earn the premium until their customers’ policy term expires.
Earthquake Coverage top
Insurance companies offer earthquake coverage as additional coverage to standard commercial property and casualty policies. Earthquake coverage is available in Washington state. It is expensive for masonry structures and business operations with high-risk inventory or equipment.
Effective Date top
The date your insurance coverage commences.
Eligible Expense(s) top
The portion of the medical care provider's services that are covered for payment under the terms of the health plan or insurance contract.
Elimination Period top
The number of days in which you receive covered care or services before benefits are payable.
Employee Assistance Programs (EAPS) top
Mental health counseling services that are sometimes offered by insurance companies or employers. Typically, individuals or employers do not have to directly pay for services provided through an employee assistance program.
Employer Mandate top
The new health reform legislation requires employers with 50 or more employees to provide health coverage to those employees and sets a minimum baseline of coverage and employer contributions. Employers who do not comply will face annual penalties based on the number of employees in the firm.
Employer Tax Credits / Small Business Health Care Tax Credits top
Provide a tax credit of up to 35 percent of small business premium costs in 2010 – with that rate increasing to 50 percent in 2014. Who’s eligible? Employers with fewer than 25 full-time workers and average annual wages less than $50,000.
Employer-Sponsored Health Insurance top
Of Americans who have health coverage, nearly 60 percent secure that coverage through an employer-sponsored plan, often called group health insurance. Millions take advantage of the coverage for reasons as obvious as employer responsibility for a significant portion of the health care expenses. Group health plans are also guaranteed issue, meaning that a carrier must cover all applicants whose employment qualifies them for coverage. In addition, employer-sponsored plans typically are able to include a range of plan options from HMO and PPO plan to additional coverage such as dental, life, short- and long-term disability.
Employer-Sponsored Health Plans top
These currently provide some level of health coverage for approximately 160 million Americans. Enrollee: health plan participant, member, or eligible individual in a managed care program.
Employment Practices Liability Insurance (EPLI) Coverage top
This type of coverage helps you defend against employment-related claims such as sexual harassment, age discrimination, or wrongful termination. Some policies offer legal assistance. Other policies may pay both legal costs and damages.
Endorsement top
A written form attached to the policy that changes the terms of the policy to fit special circumstances.
Evidence of Insurability top
A procedure used to review factors concerning a person's physical condition and medical history. From this information, the plan or insurance company evaluates whether the risk of the individual will be accepted and if they will offer coverage.
Exchange top
A health insurance exchange mechanism is a key provision of health reform legislation, established to provide a selection of competing providers, each offering different qualified plans.
Exclusion top
A provision within a health insurance policy that eliminates coverage for certain acts, property, types of damage or locations.
Exclusions top
Clauses in a health insurance contract that deny coverage for certain conditions, treatments, supplies or risks, such as cosmetic surgery. In home and auto contracts, exclusions from coverage may also include certain events or circumstances, such as drag racing, renting an insured vehicle to others, or flood or earthquake coverages.
Experience top
Refers to the history of actual claims paid for the contract period (see Paid Claims) or can refer to the history of claims incurred during a contract period.
Experience Rating top
A method insurers use to decide the amount of premium to charge customers based on the actual usage of large groups with like risks.
Experience-Rated top
Determination of premium or capitation rates for a group risk based wholly or partly on that group's previous cost and utilization experience.
Explanation of Benefits top
The insurance company’s written explanation regarding a claim, showing what they paid and what the client must pay. The document is sometimes accompanied by a benefits check.
Exposure top
The possibility of loss.
Face top
The first page of a policy.
Face Amount top
This is the death benefit stated on the first page of a life insurance policy.
Fee-for-Service top
A system of health insurance payment in which a doctor or other health care provider is paid a free for each particular service rendered.
Fiduciary top
Under ERISA, any person who exercises discretionary authority or control over a plan or plan assets.
Fixed Costs top
Refers to those costs which are payable monthly and which do not relate to actual claims paid or incurred, for example, premium and administration costs.
Fleet Coverage top
This multi-vehicle coverage applies to businesses that rely on a number of vehicles and need to insure them collectively.
Flexible Spending Accounts top
Special accounts typically funded by an employee's salary reduction to help pay certain expenses not covered by the employer's plan or insurance contract. The advantage of these accounts is that after-tax dollars are converted to before-tax dollars, thereby reducing the actual cost of expenses.
Floater top
A separate policy available to cover the value of goods beyond the coverage of a standard home/renters insurance policy including movable property such as jewelry or sports equipment.
Flood coverage top
This is coverage for damage caused by floods. It is not included in ordinary homeowner and commercial policies. Flood insurance, which also covers damage caused by mudslides, is available through the National Flood Insurance Program (NFIP) at 1-800-427-4661. Contact your agent for more information.
Foreign-Product Liability Coverage top
This business-related coverage applies to losses that occur due to difficulties with providing or obtaining items that foreign suppliers manufacture.
Form top
This is an insurance policy, or the riders and endorsements attached to it.
Formulary top
List of preferred pharmaceutical products to be used by a managed care plan's network physicians. Formularies are based on evaluations of the efficacy, safety, and cost effectiveness.
Fraud top
Deception or artifice used to cheat or intentionally mislead. This is closely related to misrepresentation and concealment. Proof of fraudulent acts by an insured in procuring insurance may lead to a denial of coverage and voiding of the policy by the insurer. As a loss exposure, certain types of fraud can be insured by a commercial crime insurance policy.
GAP Coverage top
If an auto is totaled by an insurance company, this pays the difference between the current market value of the owner’s car and the amount they still owe the lender.
General Liability and Property Coverage top
Liability insurance protects businesses when they are legally liable for someone’s injury or property damage. The insurer pays the damages, and funds and handles the business’ legal defense. Property insurance covers a business’ physical assets, such as buildings, equipment, furnishings, fixtures, inventory, etc.
Generic Drug top
nce a company’s patent on a brand-name prescription drug has expired, other drug companies are allowed to sell the same drug under a generic label. Generic drugs are less expensive, and most prescription and health plans reward clients for choosing generic drugs.
Glass Coverage top
Commercial insurance packages may or may not include glass breakage. If they don’t include glass coverage you may have the option to buy special glass-breakage coverage for operations that present a special risk. For example, if you own a building with a lot of expensive exterior glass, this policy covers you if the glass is broken due to theft or vandalism.
Global Fees top
Negotiated fees that are all-inclusive (one fee is paid for the entire range of services provided for a specific episode or episode of care).
Grace Period top
Time period that follows the premium due date when the coverage and policy remain in force.
Group Health Insurance top
Coverage through an employer or other entity that covers all individuals in the group.
Guaranteed Insurability Rider (GIR) top
A contract provision a life insurance policy owner buys from an insurance company. It gives the policy owner the right to buy an additional amount of life insurance at one or more specified “option dates,” without providing new evidence of insurability at that time. For example, a person could buy a $100,000 life insurance policy with a Guaranteed Insurability Rider (GIR). The GIR would allow the person to buy $50,000 of additional insurance on the fifth and tenth year policy anniversary without providing medical information.
Guaranteed Issue top
Refers to health insurance coverage that is guaranteed to be issued to applicants regardless of their health status, age, or income – and guarantees that the policy will be renewed as long as the policy holder continues to pay the policy premium.
Guaranteed Renewable top
The insured's right to continue an in-force policy by the timely payment of premiums. The insurance company cannot change the coverage or refuse to renew the coverage for other than non-payment of premiums (includes health conditions and/or marital or employment status).
Health Alliances top
Health Alliances or Health Insurance Purchasing Cooperatives (HIPCs) are groups or entities whose primary purpose is to negotiate with health plans to provide coverage at competitive prices to members of the alliance.
Health Care Decision Counseling top
Services, sometimes provided by insurance companies or employers, that help individuals weigh the benefits, risks and costs of medical tests and treatments. Unlike case management, health care decision counseling is non-judgmental. The goal of health care decision counseling is to help individuals make more informed choices about their health and medical care needs, and to help them make decisions that are right for the individual’s unique set of circumstances.
Health Care Prepayment Plan (HCPP): top
HCFA program allowing managed care groups that organize, finance, and deliver Medicare Part B services be reimbursed for such services on a reasonable cost basis.
Health Choices Administration top
Health reform legislation called for the creation of the Health Choices Administration, a federal agency that would oversee its provisions, including the establishment of health plan benefit standards, establishment and operation of the health insurance exchanges, and administration of individual affordability credits or subsidies. The commission’s additional responsibilities would include prevention of abuses within the Health Insurance Exchange system.
Health Insurance Exchange top
A mechanism is a key provision of health reform legislation, established to provide a selection of competing providers, each offering different qualified plans. All qualified plans must meet standards established and enforced by the Health Choices Administration. For instance, participating plans will not be allowed to discriminate against applicants based on health history (pre-existing conditions) or future risk. Competition between the plan providers would, in theory, encourage the providers to improve the quality and pricing of offered plans.
Health Insurance Purchasing Cooperatives (HIPCS) top
See Health Alliances
Health Maintenance Organizations top
Represent “pre-paid” or “capitated” insurance plans in which individuals or their employers pay a fixed monthly fee for services instead of a separate charge for each visit or service. The monthly fees remain the same, regardless of types or levels of services provided. Services are provided by physicians who are employed by, or under contract with, the HMO. HMOs vary in design. Depending on the type of the HMO, services may be provided in a central facility or in a physician’s own office (as with IPAs.)
Homeowner Policy top
An insurance policy to cover a homeowner’s house, other structures on their property, and personal contents against losses caused by such things as windstorms, fire, or theft. This type of policy also includes liability coverage.
In-Network top
Refers to providers or health care facilities that are part of a health plan’s network of providers with which it has negotiated a discount. Insured individuals usually pay less when using an in-network provider, because those networks provide services at lower cost to the insurance companies with which they have contracts.
Indemnify top
This provides payment, repair, or replacement to a victim of loss.
Indemnity Health Insurance Plans / Fee-for-Service top
These are the types of plans that primarily existed before the rise of HMOs, IPAs, and PPOs. With indemnity plans, the individual pays a pre-determined percentage of the cost of health care services, and the insurance company (or self-insured employer) pays the other percentage. For example, an individual might pay 20 percent for services and the insurance company pays 80 percent. The fees for services are defined by the providers and vary from physician to physician. Indemnity health plans offer individuals the freedom to choose their health care professionals.
Independent Practice Associations (IPAs) top
Similar to HMOs, except that individuals receive care in a physician’s own office, rather than in an HMO facility.
Individual Affordability Credits top
are included in the health reform legislation to help ensure the goals of the legislation’s individual mandate. Legislation provides premium subsidies on a sliding scale to eligible individuals and families with incomes up to four times the federal poverty level to help them purchase coverage through the health insurance exchanges.
Individual Health Insurance top
Health insurance coverage on an individual, not group, basis. The premium is usually higher for an individual health insurance plan than for a group policy, but you may not qualify for a group plan.
Individual Mandate top
The individual mandate provision of the recently passed health reform legislation requires citizens to have insurance coverage that meets minimum standards set as part of health insurance exchanges, including guaranteed access to affordable coverage, essential benefits and other consumer protections. The legislation imposes a tax penalty on individuals – with some exceptions– who do not purchase coverage.
Individual Subsidies / Individual Affordability Credits top
Included in the health reform legislation to help ensure the goals of the legislation’s individual mandate. Legislation provides premium subsidies on a sliding scale to eligible individuals and families with incomes up to four times the federal poverty level to help them purchase coverage through the health insurance exchanges.
Installment Refund Annuity top
A type of annuity policy that guarantees if a policyholder dies before receiving payments equal to the amount they paid to establish the annuity, the insurer will refund the difference to the beneficiary in equal installments.
Insurable Interest top
For homeowner insurance, this is when a person has a legal financial interest in the property that is the subject of the insurance. For life insurance, this is the financial interest one person (the beneficiary) has in the person covered by the life insurance policy.
Insurance top
A contract to transfer risk from individuals to an insurance company. In exchange for a premium, the insurance company agrees to pay for losses covered under the terms of the policy.
Insurance Cooperatives / Cooperatives top
Proposed in the Senate as an alternative to a proposed government plan or public option. The cooperatives, which would have been structured as non-profits and owned by their members, would offer a network of health care providers or contract out for medical services. The concept championed by some Democrats would provide “seed money” for the cooperatives, which would then be sustained by customer premiums.
Insurance Exchange top
A health insurance exchange mechanism is a key provision of health reform legislation, established to provide a selection of competing providers, each offering different qualified plans. All qualified plans must meet standards established and enforced by the Health Choices Administration. For instance, participating plans will not be allowed to discriminate against applicants based on health history (pre-existing conditions) or future risk. Competition between the plan providers would, in theory, encourage the providers to improve the quality and pricing of offered plans.
Insurance Policy top
This is the entire written insurance contract.
Insured top
The individual or party who the insurance company agrees to cover for losses, or provide benefits or service.
Integrated Coverage top
Combinations of HMOs, indemnity plans, or PPO's into one health care plan.
Lagged Claims top
The time between when service is incurred and when it is submitted and processed for payment.
Lapse top
Termination of insurance coverage for failure to pay premiums.
Length of Stay (LOS) top
Refers to the length of stay. It is a term used by insurance companies, case managers and/or employers to describe the amount of time an individual stays in a hospital or in-patient facility.
Level Premium Insurance top
A life insurance premium that remains at the same dollar amount throughout the life of the policy.
Liability Insurance top
Coverage that pays for any loss if the insured person is legally liable for bodily injury to others or damage to someone’s property.
Liability Limits top
The dollar amount beyond which a liability insurance company does not protect the insured on a particular policy.
Life Insurance top
A contract between a person and a life insurance company that provides coverage in the event the person dies. Life insurance policies may include endowment benefits, additional benefits in the event the insured person loses an arm or leg due to an accident, or in the event of a disability. Life insurance policies also may offer annuities. Insurance agents or brokers can suggest various types of life insurance to protect your company. You can also buy key-person life insurance. This insurance pays the company upon the death of a key person, usually an owner or senior executive, to help the company deal financially with the loss or their expertise.
Lifetime Maximum Benefit / Maximum Lifetime Benefit / Lifetime Aggregate top
The maximum amount a health plan will pay in benefits to an insured individual during that individual’s lifetime.
Limit of Liability top
The maximum dollar amount an insurance company agrees to pay the insured person in case of loss.
Limitations top
A limit on the amount of benefits paid out for a particular covered expense, as disclosed on the Certificate of Insurance.
Limits top
The maximum amount of benefit the insurance company will pay for a given situation or occurrence. Limits also include the ages below or above what an insurance company will not issue a new policy, or continue a policy.
Long-Term Care Policy top
Insurance policies that cover specified services for a specified period of time. Long-term care policies (and their prices) vary significantly. Covered services often include nursing care, home health care services, and custodial care.
Long-Term Disability top
Typically, a disability is the limitation of normal physical, mental, and social activities that lasts longer than two years. Noteeach individual insurance policy defines the terms “long-term” and “disability.”
Long-Term Disability Insurance top
Pays an insured a percentage of their monthly earnings if they become disabled.
Managed Care top
A medical delivery system that attempts to manage the quality and cost of medical services that individuals receive. Most managed care systems offer HMOs and PPOs that individuals are encouraged to use for their health care services. Some managed care plans attempt to improve health quality, by emphasizing prevention of disease. Recent statistics show that about 90 percent of the insured populations uses some form of managed care.
Mandated Benefits top
Health care coverage required by state and federal law to be included in health insurance contracts.
Maturity top
The date the face amount of a life insurance policy is due.
Maximum Dollar Limit top
The maximum amount of money that an insurance company (or self-insured company) will pay for claims within a specific time period. Maximum dollar limits vary greatly. They may be based on or specified in terms of types of illnesses or types of services. Sometimes they are specified in terms of lifetime, sometimes for a year.
Medicaid top
A health insurance program for low-income individuals who cannot otherwise afford Medicare or other commercial health insurance plans. Medicaid is funded in part by the government and by the state where the enrollee lives.
Medical Underwriting top
A process used by insurance companies to evaluate whether to accept an applicant for health coverage and/or to determine the premium rate for the policy.
Medicare top
The federal health insurance program created to provide health coverage for Americans aged 65 and older and later expanded to cover younger people who have permanent disabilities or who have been diagnosed with end-stage renal disease or amyotrophic lateral sclerosis (ALS).
Medicare Part A (Hospital Insurance) top
Helps pay for medically necessary inpatient care in a hospital, skilled nursing facility or psychiatric hospital, and for hospice and home health care.
Medicare Part B (Medical Insurance) top
Helps pay for medically necessary physician services and many other medical services and supplies not covered by Part A.
Medicare-Approved Amount top
Medicare has a fee schedule that list the dollar amount that Medicare considers to be the reasonable charge for the services provided by a doctor that Medicare approves for a covered service provided by a doctor is the lesser of the Medicare fee schedule amount for a particular service or the amount charged by the doctor.
Medigap Insurance Policies top
Medigap insurance is offered by private insurance companies, not the government. It is not the same as Medicare or Medicaid. These policies are designed to pay for some of the costs that Medicare does not cover.
Multiple Employer Trust (MET) top
A trust consisting of multiple small employers in the same industry, formed for the purpose of purchasing group health insurance or establishing a self-funded plan at a lower cost than would be available to each of the employers individually.
National Flood Insurance Program (NFIP) top
A program offered by the U.S. government’s Federal Emergency Management Administration that pools policy premiums throughout the United States. It is backed by the federal government and offers reasonable rates to the public for flood damage coverage.
Negotiated Fees top
Managed care plans and providers mutually agree on set fees for each service. This negotiated rate is usually based on services defined by the Current Procedural Terminology (CPT) codes, generally at a discount from what the provider would usually charge. Providers cannot charge more than this fee.
Network / Mixed-Model HMO top
A group of doctors, hospitals and other health care providers contracted to provide services to insurance companies customers for less than their usual fees. Provider networks can cover a large geographic market or a wide range of health care services. Insured individuals typically pay less for using a network provider.
Network Providers top
Limited grouping or panels of providers in a managed care arrangement with several delivery points. Enrollees may be required to use only network providers or may have financing liability for using non-network providers for medical services.
Non-Forfeiture Values top
Those values in a life or long-term care insurance policy that the policy owner does not forfeit – even if he or she stops paying premiums.
Non-Network Providers top
Non-contracted or unapproved health providers who are outside a managed care arrangement.
Non-Profit Cooperatives / Insurance Cooperatives top
Proposed in the Senate as an alternative to a proposed government plan. The cooperatives, which would be structured as non-profits and owned by their members, could offer a network of health care providers or contract out for medical services. The concept championed by some Democrats would provide “seed money” for the cooperatives, which would then be sustained by customer premiums.
Non-Standard Market top
This auto insurance market includes young drivers with less experience, drivers with multiple tickets or accidents, and drivers with reckless or drunk driving histories.
Open-Ended HMOs top
HMOs which allow enrolled individuals to use out-of-plan providers and still receive partial or full coverage and payment for the professional’s services under a traditional indemnity plan.
Ordinance or Law Coverage top
1) Coverage for loss to the undamaged portion of the building. Pays for the loss of value of an undamaged portion of the existing building which must be demolished and/or removed to conform with municipal ordinance, code, etc.   2) Demolition cost   Pays for the cost of demolition of the undamaged portions of the building necessitated by the enforcement of building, zoning or land use ordinance or law.   3) Increased cost of construction  Pays for any increased expenses incurred to replace the building with one conforming to building laws or ordinances, or to repair the damaged building so that it meets the specifications of current building laws or ordinances.
Ordinary Life top
A whole life insurance policy in which the insured person pays the premiums continuously as long as they live. It’s also called Straight Life.
Out-of-Plan / Out-of-Network top
This phrase usually refers to physicians, hospitals or other health care providers who are considered nonparticipants in an insurance plan (usually an HMO or PPO). Depending on an individual’s health insurance plan, expenses incurred by services provided by out-of-plan health professionals may not be covered, or covered only in part by an individual’s insurance company.
Out-of-Pocket Maximum top
A predetermined limited amount of money that an individual must pay out of their own savings, before an insurance company or (self-insured employer) will pay 100 percent for an individual’s health care expenses.
Outpatient top
An individual (patient) who receives health care services (such as surgery) on an outpatient basis, meaning they do not stay overnight in a hospital or inpatient facility. Many insurance companies have identified a list of tests and procedures (including surgery) that will not be covered (paid for) unless they are performed on an outpatient basis. The term outpatient is also used synonymously with ambulatory to describe health care facilities where procedures are performed.
The total claims payment made by the plan or insurance company. It does not include any employee cost sharing or provider discounts.
This is a life insurance term, in which the policy owner paid all required premiums, but the policy has not yet matured (by either death or endowment). For example, in a 10-year payment policy, after the policy owner completes the 10-year premium-paying period, the policy will continue to cover the insured person for the rest of his or her life.
Partial Capitation Risk Contracts top
State Medicaid contracts with HMOs or similar managed care organizations that accept risk for a defined set of services (for example, physician services and laboratory, x-ray, or clinic services). Other services are reimbursed on a fee-for-services basis.
Participating Provider top
A provider who has agreed to contract with a managed care program to provide eligible services to covered persons.
Patient Protection and Affordable Care Act (PPACA) / Affordable Care Act (ACA) top
Health reform legislation passed by the 111th Congress and signed into law by President Barack Obama in March 2010. The legislation includes a long list of health-related provisions that began taking effect in 2010 and will continue to be rolled out over the next four years. Key provisions are intended to extend coverage to millions of uninsured Americans, to implement measures that will lower health care costs and improve system efficiency, and to eliminate industry practices that include rescission and denial of coverage due to pre-existing conditions.
Peril top
The cause of a possible loss.
Personal Injury Protection (PIP) top
This is insurance coverage for medical and other expenses, such as wage loss and funeral expenses that result from an auto accident – no matter who is at fault. Auto insurance companies must offer PIP to consumers. If consumers do not want it, they must reject it in writing.
Personal Liability top
Responsibility for the damage or loss to someone’s property or bodily injury of someone.
Personal Property top
Property not considered real property, such as automobiles, clothing, and furnishings.
Plan Administration top
Supervising the details and routine activities of installing and running a health plan, such as answering questions, enrolling individuals, billing and collecting premiums, and similar duties.
Point of Service Plans (POS) top
Combination of HMO and PPO features. They provide a comprehensive set of health benefits and offer a full range of health services much the same as the HMO. However, the member does not have to choose how to receive services until they need them. The member can then opt to use the defined managed care program, or can go out-of-plan for services but pay the difference for non-plan benefits (e.g. 100 percent coverage for managed care Vs. 80 percent coverage out-of-plan).
Policy Dividend top
Most common in life insurance policies, this is a partial return of the premium. It represents the difference between the premium charged and the company’s actual cost of coverage during the term of the insurance policy.
Policy Owner top
The person who may exercise the rights and privileges in the insurance policy. This person may or may not be the insured.
Policyholder top
The person who has possession of the policy.
Pool / Pooling top
Used by insurance companies to combine all premiums, claims and expenses in order to spread the risk of insurance coverage. This process ensures that small employers will not be singled out and unfairly assessed with a large rate increase due to unanticipated medical catastrophic claims of insured employee(s).
Portability top
Provides access to continuous health insurance coverage so the insured does not lose coverage due to any change in health or personal status (such as employment, marriage, or divorce).
Pre-Admission Certification top
Also called pre-certification review, or pre-admission review. Approval by a case manager or insurance company representative (usually a nurse) for a person to be admitted to a hospital or in-patient facility, granted prior to the admittance. Pre-admission certification often must be obtained by the individual. Sometimes, however, physicians will contact the appropriate individual. The goal of pre-admission certification is to ensure that individuals are not exposed to inappropriate health care services (services that are medically unnecessary).
Pre-Admission Review top
A review of an individual’s health care status or condition, prior to an individual being admitted to an inpatient health care facility, such as a hospital. Pre-admission reviews are often conducted by case managers or insurance company representatives (usually nurses) in cooperation with the individual, his or her physician or health care provider, and hospitals.
Pre-Admission Testing top
Medical tests that are completed for an individual prior to being admitted to a hospital or inpatient health care facility.
Pre-Authorization top
Previous approval required for referral to a specialist or non-emergency health care services.
Pre-Certification top
Utilization management program that requires the individual or provider to notify the insurer before hospitalization or surgical procedure. Notification allows the insurer to authorize payment and to recommend alternate courses of action.
Pre-Existing Condition top
A medical condition that is excluded from coverage by an insurance company because the condition was believed to exist prior to the individual obtaining a policy from the particular insurance company.
Preferred Market top
This auto insurance market features the lowest premiums. It is available to low-risk drivers with exceptional driving records.
Preferred Provider Organization (PPO) top
A preferred provider organization (PPO) is a managed care organization of health providers who contract with an insurer or third-party administrator (TPA) to provide health insurance coverage to policy holders represented by the insurer or TPA. Policy holders receive substantial discounts from health care providers who are partnered with the PPO. If policy holders use a physician outside the PPO plan, they typically pay more for the medical care.
Preferred Risk top
This typically refers to drivers who statistically have fewer accidents than average. Insurance companies take into account factors such as age, gender, or a clean driving record. These drivers are usually eligible for a reduced rate.
Premium top
The dollar amount an insured person pays to the insurance company to cover the cost of insurance.
Premiums top
Periodic payment to keep an insurance policy in force.
Prevailing Charges top
Amounts charged by health care providers that are consistent with charges from similar providers for identical or similar services in a given locale.
Preventive Medicine top
Wellness and health promotion services that are part of the basic benefits package of a managed health care plan.
Primary Care Provider (PCP) top
A health care professional (usually a physician) who is responsible for monitoring an individual’s overall health care needs. Typically, a PCP serves as a “quarterback” for an individual’s medical care, referring the individual to more specialized physicians for specialist care.
Private Health Insurance top
Insurance plans marketed by the private health insurance industry – currently dominates the U.S. health care landscape, with approximately two-thirds of the non-elderly population covered by private health insurance. Coverage includes policies obtained through employer-sponsored insurance, with approximately 62 percent of non-elderly Americans receiving insurance provided as a benefit of employment.
Pro Rata top
Dividing the premium proportionately between the insured person and the insurance company based on how long the insurance policy was in force.
Producer top
A term applied to an agent, solicitor, or other person who sells insurance.
Proof of Loss top
A formal statement made by the insured person to the insurance company about a loss. The purpose is to provide the company with sufficient information about the loss to help it decide its liability under the policy.
Provider top
A term used for health professionals who provide health care services. Sometimes, the term refers only to physicians. Often, however, the term also refers to other health care professionals such as hospitals, nurse practitioners, chiropractors, physical therapists, and others offering specialized health care services.
Public Option / Public Plan top
Also referred to as a public plan – is a provision within health reform legislation (H.R. 3200) moving through Congress that would create a qualified health benefit plan to compete with other plans that qualify for health insurance exchanges. The public plan would be subject to the same requirements – regarding benefit levels, provider networks, consumer protections and cost sharing – that would apply to other plans within the exchanges. The legislation stipulates that a public plan would be financed through premium revenues and that initially, provider rates would be set at Medicare rates. After three years, a new process would be imposed to set rates.
Readmission top
Patient admission to a hospital for the same or similar diagnosis as a previous, recent admission. Often used as a measure of inappropriate discharge or treatment from the first admission.
Reasonable and Customary Fees top
The average fee charged by a particular type of health care practitioner within a geographic area. The term is often used by medical plans as the amount of money they will approve for a specific test or procedure. If the fees are higher than the approved amount, the individual receiving the service is responsible for paying the difference. Sometimes, however, if an individual questions his or her physician about the fee, the provider will reduce the charge to the amount that the insurance company has defined as reasonable and customary.
Rebating top
The practice (illegal in most states) of giving an insurance applicant anything of value as an inducement to purchase or renew an insurance policy.
Referral top
Primary care physician-directed transfer of a patient to a specialty physician or specialty care.
Reinsurance top
The transfer of part of the insurance risk to another insurer or insurers--self-funded plans generally buy specific and/or aggregate stop-loss coverage to cover losses in excess of certain limits (also known as excess loss coverage).
Replacement Cost top
The cost to replace property without deducting depreciation.
Rescission top
An insurance industry practice in which an insurer takes action retroactively to cancel a policy holder’s coverage by citing omissions or errors in the customer’s application, even if the policy holder has been diligently keeping their policy current. As of September 2010, rescission is no longer allowed except where fraud is proven.
Rider top
A modification made to a Certificate of Insurance regarding the clauses and provisions of a policy (usually adding or excluding coverage).
Risk top
The chance of loss, the degree of probability of loss or the amount of possible loss to the insuring company. For an individual, risk represents such probabilities as the likelihood of surgical complications, medications’ side effects, exposure to infection, or the chance of suffering a medical problem because of a lifestyle or other choice. For example, an individual increases his or her risk of getting cancer if he or she chooses to smoke cigarettes.
Risk Sharing top
Apportionment of chance of incurring financial loss by insurers, managed care organization, and health care providers.
Schedule top
For health insurance, it’s a list of specific items a policy covers, such as surgical procedures, therapy, or additional expenses. For property-related insurance, it’s a list of items covered under one policy, such as various buildings, animals, and other property.
Second Option top
It is a medical opinion provided by a second physician or medical expert, when one physician provides a diagnosis or recommends surgery to an individual. Individuals are encouraged to obtain second opinions whenever a physician recommends surgery or presents an individual with a serious medical diagnosis.
Second Surgical Option top
These are now standard benefits in many health insurance plans. It is an opinion provided by a second physician, when one physician recommends surgery to an individual.
Self-Insurers top
Employers, businesses, and other entities that chose to assume the responsibilities of an insurance company to insure their beneficiaries.
Short-Term Disability top
An injury or illness that keeps a person from working for a short time. The definition of short-term disability (and the time period over which coverage extends) differs among insurance companies and employers. Short-term disability insurance coverage is designed to protect an individual’s full or partial wages during a time of injury or illness (that is not work-related) that would prohibit the individual from working.
Short-Term Health Insurance top
Temporary coverage for an individual for a short period of time, usually from 30 days to six months.
Single-Payer System top
A health care system in which one entity – a single payer – collects all health care fees and pays for all health care costs.
Small Employer Group top
Generally means groups with 1-99 employees. The definition may vary between states.
Socialized medicine top
A health care system in which the government owns and operates health care facilities and employs the health care professionals, thus also paying for all health care services. Examples abroad include the British National Health Service, and national health systems in countries such as Finland and Spain, but NOT including Canada’s Medicare system (which is publicly funded but which does not own all of the health facilities).
Special Limits top
The limitation in a homeowner’s policy about losses for specific items, such as gold and silver bullion, currency, securities, letters of credit, manuscripts, passports, tickets, stamps, boats, trailers, firearms, and silver and goldware. To cover these items, the homeowner must buy additional coverage.
Stand-alone Dental Plan top
This plan type provides dental coverage only.
Stand-alone Life Insurance Plan top
This plan type provides life insurance only.
Stand-alone Prescription Plan top
This plan type provides prescription drug coverage only.
Standard Market top
This auto insurance market refers to the average driver who uses family-type cars and has a reasonably good driving record.
State Mandated Benefits top
When a state passes laws requiring that health insurance plans include specific benefits.
Stop-Loss top
The dollar amount of claims filed for eligible expenses at which point you’ve paid 100 percent of your out-of-pocket and the insurance begins to pay at 100 percent. Stop-loss is reached when an insured individual has paid the deductible and reached the out-of-pocket maximum amount of co-insurance.
Student Health Insurance top
In recent years, many colleges have begun requiring proof of health insurance for students. Coverage options include insurance through family policies and coverage through school-sponsored student health plans, now offered by more than 80 percent of public four-year colleges. Students may also seek coverage through an employer’s plan if they’re employed full time, or they can purchase their own individual health insurance plan from a licensed health insurance provider. And, depending on the state in which a student resides, the student may also be eligible for coverage by a state-sponsored risk pool, a program that provides coverage for individuals denied insurance by private insurers because of their health condition.
Subrogation top
This allows the insurance company to recover the payment it made to the person it insures from the person responsible for the damages or their insurance company.
Subsidies / Individual Subsidies / Individual Affordability Credits top
Included in the health reform legislation to help ensure the goals of the legislation’s individual mandate. Legislation provides premium subsidies on a sliding scale to eligible individuals and families with incomes up to four times the federal poverty level to help them purchase coverage through the health insurance exchanges.
Supplementary Coverage top
Insurance to help cover those parts of Medicare Part B that are non-reimbursable.
Surplus Line top
Coverage a consumer buys from an unlicensed insurance company because it’s unavailable from an insurance company licensed in the state.
Term top
The period of time that an insurance policy is issued.
The Health Insurance Portability and Accountability Act of 1996 (HIPAA) top
Allows persons to qualify immediately for comparable health insurance coverage when they change their employment or relationships. It also creates the authority to mandate the use of standards for the electronic exchange of health care data; to specify what medical and administrative code sets should be used within those standards; to require the use of national identification systems for health care patients, providers, payers (or plans), and employers (or sponsors); and to specify the types of measures required to protect the security and privacy of personally identifiable health care.
Triple Option Plan top
An employer plan that usually offers an insured an opportunity to choose between an indemnity HMO or PPO level of benefits at time of claim.
Unbundled top
Health services or benefits that are a stand-alone or carved-out benefit under a separate contract or bill.
Unbundling top
To increase the reimbursement paid by a plan or insurance contract, each medical procedure is billed under a separate code as a separate item, instead of part of one overall procedure.
Underwriter top
The company that assumes responsibility for the risk, issues insurance policies and receives premiums.
Unearned Premium top
This is the part of an advance insurance premium payment that has not yet been used for coverage written. For example, if an insured person has an annual premium, at the end of the first month of the premium period, 11 months of his or her premium would still be “unearned.”
Uninsured/Underinsured Motorist (UIM) top
This coverage protects an insured driver from losses due to another driver, who doesn’t have auto insurance, or who is not fully covered. Auto insurance companies must offer UIM as part of an auto insurance policy. Consumers who do not want the coverage must sign a waiver.
Usual, Customary and Reasonable (UCR) / Covered Expenses top
An amount customarily charged for or covered for similar services and supplies which are medically necessary, recommended by a doctor, or required for treatment.
Whole Life top
A life insurance policy that runs for the whole life of the person covered under the policy until death. Policyholders may pay premiums for a whole life policy for their entire life or for a limited period at a higher premium.
Workers Compensation Insurance top
Programs mandated by the states, which requires employers to provide liability insurance coverage and pay benefits to dependents of employees killed to compensate for work related injuries or disabilities.
Wrap-Around Coverage top
Programs of HMOs that, in some states, were prevented by state law from taking on financial risk for out-of-plan care and joined with insurers to cover the out-of-plan portion of care. Such programs led to the development of point-of-service (POS) plans.
Write top
In the insurance industry, this means to insure. It also means to underwrite or to sell insurance policies.

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