Alabama Life & Health Terms

Life insurance

A contract (or policy) that will pay a stated amount to a beneficiary upon death of the insured.

Cancellable

A renewability provision with a Health insurance contract that allows the insurance company, at its option, to terminate or renew the policy

Alien Insurer

An insurance company organized and incorporated outside the United States, that is organized under laws of a foreign nation

Ambulatory Surgery/Care

Performed on an outpatient basis

Attained age

The current or present age of the insured

Class Designation

A beneficiary designation that does not specify beneficiaries by name, but rather by a group or class. For example, a policyowner names "All my children" as beneficiaries to the life insurance proceeds.

Aleatory

A contract condition where one party may obtain greater value under the agreement than the other party; an insurance contract has this "chance" or possibly unequal element.

Contract of Adhesion

A contract offered by one party- the insurance company- on a take-it-or-leave-it basis; insurance contract will be interpreted in favor of the policy owner since the insurer chose the language; one writer

Annuity

A contract offered by the life insurance industry that provides stipulated payments at regular intervals (usually monthly) for (1) the lifetime of the annuitant or (2) a specified length of time

Conditional Contract

A contract that is in force only if certain obligations are met or events have occurred

Accumulation at Interest

A dividend option that leaves the policy dividends with the insurance company to invest and earn interest.

Cafeteria Plan

A employee benefit plan that allows employees to select among various group programs and insurance plans that best meet their specific needs; aka flexible benefit plan

Application

A form supplied by the insurance company that is completed by the agent (& possibly a medical examiner) while questioning the applicant; the agent and applicant sign it; it is then submitted to the underwriting department for review; attached to the policy if issued

Contributory Plan

A group insurance policy where the policy owner (the employer) and insureds (employees) share the cost of the plan; generally, insurance companies will require that 75% or more of all eligible employees to participate

Basic Medical Expense

A health insurance policy that only covers outpatient physician services and procedures; provides first dollar benefits by the insurer, but low coverage limits

Basic Hospital Expense

A health insurance policy that only covers room and board if the insured stays overnight in a hospital and the miscellaneous expenses (testing, x-rays, lab work) that occur because of that stay; first dollar benefits by the insurer, but low coverage limits

Basic Surgical Expense

A health insurance policy that only covers surgeries, surgeons and anesthesiologists; provides first dollar benefits by the insurer, but low coverage limits

Dread Disease Policy

A health insurance policy that provides coverage only for a specified named illness, such as a cancer policy. Sometimes called a limited risk policy.

Conditionally renewable

A health insurance provision that allows renewability if certain stated conditions are met by the insured, such as full-time employment to age 65

Catastrophe (Catastrophic) Insurance

A health policy that provides substantial benefits if the insured has a prolonged, serious and expensive disability or illness.

Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA)

A law that extends group Health insurance coverage for terminated employees and dependents for up to 18 or 36 months

Custodial Care

A level of care assisting someone with the activities of daily living; the caregiver does not need medical training, but a doctor orders the care; aka personal or residential care

Accidental Death Benefit Rider/Double indemnity

A life insurance policy rider that provides fir ab additional death benefit if the insured dies by reason of accident.

Aviation Clause

A limitation or exclusion of coverage for private aircraft; fare-paying passengers and commercial crew members do not have this exclusion in their life policies

Activities of daily living (ADLs)

A long term care policy will use these activities (bathing, dressing, eating, mobility, etc.) as a guide to assess dependency.

Commission

A percentage of premium paid by the insurance company to the agent (producer) as compensation for selling an insurance policy

Blackout Period

A period of time when Social Security survivor benefits are not available to the surviving spouse and/or children

Contestable Period

A period of time, usually the first two years the policy is in force, in which the insurance company can contest a claim based on misstatements or omissions on the application

Agent

A person licensed by the state insurance authority to sell insurance products; represents the insurance company in all transactions

Disability

A physical or mental impairment caused by sickness or accident that limits a person's ability to do work.

Common Disaster Provision

A policy condition designed to protect the contingent beneficiary or provide an alternative beneficiary in the event that both the insured and primary beneficiary die as a result of a common accident

Dividend

A policy owner's share of divisible surplus (profit after expenses have been met shared equitably by policy owners) paid by a participating policy; sometimes called policy dividends

Business Health Insurance

A policy purchased and owned by a business to indemnify the business in case of disability or sickness of a key employee.

Adjustable Life Insurance

A policy that allows changes or adjustments to the policy face amount, the amount of premium, and the period of protection and the type of coverage.

Blanket Health Policy

A policy that covers a number of insureds exposed to the same hazards or risks, such as members of an athletic team or campers

Accidental Death and Dismemberment (AD&D)

A policy that provides payment if the insured dies from an accident, accidentally severs a limb or accidentally and permanently loses eyesight.

Credit Accident and Health Insurance

A policy that will pay an outstanding debt if the insured becomes totally disabled.

Credit Life Insurance

A policy that will pay the outstanding loan balance of a debt if the insured dies

Claim

A request for payment of a loss which may be covered by an insurance contract

Competent Party

A requirement that both parties understand the contract and agree to it in order for the contract to be enforceable; a policy owner must be of legal age

Cost of Living Rider (COLA- cost of living adjustment)

A rider that automatically increases the benefit of a policy (typically linked to the CPI- consumer price index) to offset the effects of inflation

Co-payment

A set amount of money that managed care plan member must pay at the time the member see a medical provider

Currently Insured

A status of limited eligibility under Social Security that provides only death benefits.

Automatic Premium Loan Provision

A stipulation that authorizes the insurance company to pay any defaulted premium from the Cash Value of a life policy; the insurance company will treat this as a policy loan

Critical Illness Insurance

A supplemental health policy that pays a lump sum in the event the insured is diagnosed with a critical illness such as cancer, heart attack or stroke. The benefit can be used to pay for medical care, daily living expenses or any other costs associated with the critical illness

Convertible Term

A term life policy that may be exchanged to a permanent life policy without evidence of insurability

Buy-Sell Agreement

A type of business continuation plan that gives a remaining business owner the predetermined legal right to purchase a deceased owner's interest at a predetermined price; proceeds to purchase the deceased owner's interest come from a life insurance policy

Disability Buy-Sell Agreement

A type of business continuation plan that gives a remaining business owner the predetermined legal right to purchase a disabled owner's interest at a predetermined price; proceeds to purchase the disabled owner's interest come from a disability income policy

Consumer-Driven Health Plan

A type of health benefit plan in which the insureds select their health care providers, manage their health expenses and assume more control in protecting their health.

Disability income insurance

A type of health insurance policy that replaces the insured's income if he or she becomes disabled and unable to work; sometimes called loss of income insurance

Collateral Assignment

A type of policy assignment under which the assignee (person to whom the policy is assigned) receives partial control over the policy and also partial rights to its benefits. This is used by policy owners to secure a loan. Also called temporary assignment

Annually Renewable Term (ART)

A type of term insurance that provides coverage for one year, then automatically renews at the end of the policy year for another year without evidence of insurability

Decreasing Term Insurance

A type of term life insurance usually sold in connection with a debt or loan to protect the lender in case the borrower (insured) dies before the loan is repaid; the face amount if the policy is tied to the loan and is reduced as the debt is paid off; at the expiration if the term, the face amount is 0

Comprehensive Major Medical Expense

A type of traditional medical expense insurance designed to reimburse the policy owner for out-of-pocket medical expenses. It characterized by typically low deductibles ($100-$500), coinsurance and stop loss limits.

Apparent Authority

Actions taken by a producer that a reasonable person could believe were authorized by the insurance company the producer represents

Contract

An agreement (offer & acceptance) between two parties that have the legal capacity to so so and have exchanged valuable consideration

Deferred Annuity

An annuity contract that will not pay income benefits until a later date (usually when an annuitant reaches retirement age).

Cash Refund Annuity

An annuity settlement option that offers an additional guarantee to pay a beneficiary if not all premiums were returned to the annuitant as income payments

Business Continuation Plan

An arrangement among business partners or owners that provides for the continuation of the business in the event of death or disability of one of the owners.

Counteroffer

An initial offer that is not accepted, but negotiated by the second party; the alternate offer usually involves additional premium to be paid for the coverage requested

Domestic Insurer

An insurance company organization and incorporated in a state and selling policies to residents of that state.

Doctrine of Reasonable Expectations

An insurance policy should do what the policy owner could reasonably expect it to do, like deliver its promise of indemnity

Admitted Compant

An insurer that has been authorized to do business in a state.

Conditions

Another term for policy provisions or terms

Do not call list

Consumers who have registered their private telephone numbers with a national registry in an attempt to stop most telemarketing calls. Exemptions include a business (such as an insurance company) that has as established relationship with the consumer.

Certificate of Creditable Coverage

Documentation issued by a group health care plan to an employee for presentation to a new group plan to verify previous coverage especially for a preexisting condition.

Consideration

Exchange of values between parties to complete a contract; premium is paid by the policy owner & the insurer promises to pay according to the policy

Divisible Surplus

Extra money resulting from the insurance company's savings in mortality, interest earnings and/or reductions in operational expenses which can be divided equitably among the company's policy holders or stockholders

Affordable Care Act of 2010

Federal program that has affected preexisting conditions, continuation of insurance for children to age 26, and a host of other Health-insurance related coverage provisions.

Conditional Receipt

Given to potential policy owners at time of application and initial premium payment. It allows for the earliest possible coverage if the policy is approved subject to underwriting and any other stated conditions on the receipt.

Certificate of Insurance/ group certificate

Issued by group contracts (typically employer groups) that summarizes coverage to insured employees.

Coordination of Benefits Provision

It prevents duplication of benefits within multiple group Health insurance coverage; limits coverage to 100% of the expenses covered and designates that order of benefits payable by the group carriers

Death Benefit

Life insurance policy proceeds paid to the beneficiary upon death of the insured.

Actuary

Mathematician hired by an insurance company to apply probabilities and statistical analysis to risks and premiums

Customary and Reasonable Expectations

Medical expenses that are paid by the insurance company that do not specify a set dollar amount, but instead bases payment upon similar chargers for a like service in the same geographic area; changes in excess can be denied; sometimes called usual, customary and reasonable (UCR) expense

Capitation

Method of payment for health services in which the medical provider is paid a fixed amount for each patient without regard to the actual number or nature of services provided; common payment method for an HMO's primary care physicians

Agreement

One party's offer is accepted by another party' both parties agree to the terms of the contract

Blue Cross

Service organization that geographically provides protection against the cost of hospitalization; pays benefits directly to the participating hospitals

Blue Shield

Service organization that geographically provides protection against the cost of surgeries and other medical care; pays directly to the participating medical providers

Business Overhead Expense Insurance

Specialized use of disability income insurance that pays routine, necessary overhead expenses of a business if the business owner becomes disabled.

Cash Surrender Value

The amount of equity (cash value) available if the policy owner surrenders their permanent life insurance.

Cash Value

The amount of equity (ownership) or cash accumulation in a permanent life insurance policy

Deductible

The amount of loss paid by the policy owner before the Health insurance policy pays the claim

Capital Sum

The benefit provided for accidental dismemberment or accidental blindness.

Effective Date

The date the insurance policy begins or goes into effect

Concealment

The deliberate withholding of information in order to financially gain, such as obtaining an insurance policy or receiving payment on a claim under false pretense

Carrier

The insurance company that indemnifies the insured

Assignment

The legal transfer of a policy owner's rights in an insurance policy to another party; can be partial or absolute

Consideration Clause

The part of the insurance contract that sets forth the amount, renewal and frequency of premium payments by the policy owner

Applicant

The person applying for the insurance policy who could also be the insured and/or policyowner

Beneficiary

The recipient of a life or accident policy payable upon the death of the insured (primary and contingent)

Contingent Beneficiary; secondary or tertiary beneficiary

The recipient of a life or accident policy payable upon the death of the insured and no primary beneficiary is named or alive

Adverse Selection

The tendency of insureds who present a higher probability of loss to purchase or renew insurance more often than those who present a lower probability of loss; anti-selection

Eligibility Period

The time during which employees enroll in the group insurance plan without providing evidence of insurability; this is after an employer probationary period has been met

Coinsurance

Under major medical expense insurance, the company insures a percentage of the potential loss and the policy owner pays the remaining percentage; for example, 80/20 means that the company pays 80% of the loss (after deductible) and the policy owner oayd 20% of the loss; aka percentage participation

Elimination Period

With a disability income policy, it's the period of time beginning with the insured's disability and the start of disability income benefits paid; it's a waiting period to receive policy benefits

Accumulation Period

With an annuity, it is the period of time, usually before retirement and withdrawals, that the annuitant is paying premium that accumulates interest tax-deferred.

Corridor Deductible

With supplemental major medical expense, it is an amount that is paid by the policy owner after the insurer first pays the basic plan portion when covered expenses are submitted

Consent

Written approval or permission to be insured by another party

Acceptance

one part's agreement to the offer of another party; usually takes place when the policy is issued.