Glossary - Life & Health

CEASE AND DESIST ORDER

A legal order that means "stop doing whatever you are doing."

COST BASIS

A term used to describe the amount of money the insured has invested into a plan. Generally, taxes are paid on money earned over the cost basis.

CONTINGENT BENEFICIARY

Also known as a secondary beneficiary. The second person in line to receive the proceeds. This person will receive the money if the primary beneficiary is deceased or cannot be found.

ATTENDING PHYSICIANS STATEMENT

Also known as an APS. Information provided by health care practitioners/hospitals to insurance companies so that they can assess the insured's state of current or past health.

COMPREHENSIVE LONG-TERM CARE

An LTC policy that provides both institutional and non-institutional care.

AGENT'S APPOINTMENT

An agent is appointed to represent specific insurance companies.

DEDUCTIBLE

An amount of covered expenses that is paid by the insured before the insurer pays any money towards a claim.

COMMON DISASTER CLAUSE

Determines the order of death if the insured and primary beneficiary die at the same time.

CASH VALUE

In permanent policies, an accounting measurement specifying the amount of money that the policyholder can receive before the death of the insured (through loans or surrender).

COMMUNITY-BASED CARE

Includes Hospice, Respite and Adult Day Care.

BROKER

Represents the client in property and casualty insurance transactions.

ANNUAL RENEWABLE TERM

Temporary insurance with an annually increasing premium and a level death benefit

ASSUMED RATE OF INTEREST

This can have two meanings. The first is the rate of interest the insurance company uses to calculate the amount of money needed in its reserves to pay future obligations. The second meaning is the interest rate an agent uses on a computer illustration to show a person how a policy will theoretically perform.

ACCIDENTAL INJURY

To be covered under this definition the cause may be intentional, but the results must be unintentional and unforeseen. Also called the "results clause."

ACCIDENTAL MEANS

To be covered under this definition the cause of the accident must be unintentional and unforeseen

CONSERVATION

(1) The process of working with the client to keep a policy from lapsing or preventing replacement. (2) The attempt to prevent the liquidation of an insolvent insurer.

ACCIDENTAL DEATH & DISMEMBERMENT INSURANCE

A type of life and health insurance which pays a lump-sum benefit in the event of either the accidental death or dismemberment of the insured. Dismemberment is defined as an accidental loss of sight, hearing, speech or any two limbs.

AGREEMENT

All parties to the contract agree to everything in the contract

ACCELERATED DEATH BENEFIT RIDER

An optional benefit found in a life insurance policy whereby a percentage of the death benefit is paid to a terminally ill insured that is covered by the policy; the balance is then paid to the beneficiary upon death.

ACTIVITIES OF DAILY LIVING

Basic functions allowing independent living (e.g. eating, dressing etc.). Used by Long-Term Care insurers to determine if benefits are payable.

AVOIDANCE

Bypassing situations or circumstances that create risk. Also called "loss prevention."

BLANKET LIFE INSURANCE

Coverage for particular locations or organizations where the members change frequently. Usually purchased by schools, athletic teams, summer camps etc.

COORDINATION OF BENEFITS PROVISION (COB)

Determines which plan will be primary when more than one plan covers the insured

APPLICATION TO REDUCE PREMIUMS

Dividend option allowing the dividend to be used to offset premium payments.

CAPITAL SUM

Dollar amount payable, as a lump sum, in the case of dismemberment

CONDITIONAL CONTRACT

Insurance applied for, consideration (money) paid, but underwriting not complete or policy issued.

CALIFORNIA LIFE AND HEALTH INSURANCE GUARANTEE ASSOCIATION

Life and disability insurance companies admitted in the State of California must participate in this organization. Within limitations, it protects the consumer if a member insurer becomes insolvent.

BUSINESS CONTINUATION AGREEMENT/BUY SELL AGREEMENTS

Life or disability insurance plans used to provide money to transfer the ownership of a business after a partner or the original owner have died or become disabled

COMMISSION

Money that is paid to an agent for selling an insurance company's policies.

APPARENT AUTHORITY

The appearance of authority based on unauthorized actions on the part of the agent that have been reinforced by the insurer.

CONSIDERATION

The exchange of value in the contract.

CONCEALMENT

Withholding material information.

ANNUITY UNITS

Phrase used to describe Accumulation Units (see above) once the annuity payout begins.

ATTAINED AGE

The insured's age at any particular point in time. For example, the current chronological age.

ANNUITY PERIOD

The period during which payments are made to the annuitant.

ANNUITANT

The person who owns and/or receives the payout from an annuity.

BENEFICIARY

The person who receives the proceeds or benefits from the insurance policy.

COMPETENT PARTIES

The persons entering into the contract are able to understand its meaning and intent (i.e. are sane, sober and at least age sixteen nearest birthday).

COST-OF-LIVING-ADJUSTMENT RIDER (COLA)

A benefit that is added to policies to increase the basic coverage to keep up with inflation

ADMINISTRATOR

A certified person who collects premium and/or adjusts and settles life or health insurance claims.

CONVERSION PRIVILEGE

A clause in an insurance contract that allows the insured to change their current insurance to another plan, usually without evidence of insurability.

CLASS BENEFICIARY DESIGNATION

A clearly defined group of people who will receive the proceeds of a policy (for example, children of the insured).

COBRA

A federal act that allows for the continuation of group health plans by employees or dependents who lose their coverage through termination, reduced hours, death, divorce etc. The act applies to employers with 20 or more employees.

ANNUITY

A financial contract that systematically liquidates an accumulated sum of money as an income stream.

COMMERCIAL INSURER

A for-profit company providing insurance to the public.

CREDIT DISABILITY INSURANCE

A form of disability insurance that is used to pay off a debt on the death or disability of the insured.

CREDIT LIFE INSURANCE

A form of term life insurance that is used to pay off a debt on the death or disability of the insured.

CONTRACT (INSURANCE)

A legal document that outlines the rights and responsibilities of the insurer, the insured and the policyholder.

AGENT

A person who acts on behalf of another person or corporation. In insurance, an agent represents the insurer.

24-HOUR COVERAGE

A plan that combines Workers' Compensation and non-occupational health insurance to provide coverage for on and off the job injuries and illness.

CANCELLABLE

A policy that can be terminated by the insurer.

ABSOLUTE ASSIGNMENT

A process available in a life insurance policy that totally and irrevocably transfers all rights and privileges of ownership to another party.

CASE MANAGEMENT

A process using a manager to coordinate legal and economic issues including healthcare, home healthcare and long-term custodial care.

BUYER'S GUIDE

A publication given to the client that provides an overview of an insurance product in plain English.

AGENCY

A relationship in which one person is authorized to represent or act for another person or corporation.

CORPORATE PENSION PLAN

A retirement plan that a business makes available to its employees, usually either as a defined contribution or defined benefit plan.

CO-PAYMENT

A sum of money paid by the insured to the provider of health services.

COMMISSIONER'S STANDARD ORDINARY MORTALITY TABLE

A table devised by actuaries that predict the number of people per 1,000 of the population dying each year.

CURRENTLY INSURED

A term used in Social Security. A worker must have at least six credits earned during a three-year period which ends with the calendar quarter in which the covered person died, became eligible for retirement benefits or became disabled.

ADJUSTABLE LIFE

A type of life insurance policy in which the policy owner is able to adjust the death benefit up and/or down in order to meet changing needs and objectives.

DEFERRED ANNUITY

An annuity that accumulates money on a tax-deferred basis. It may be paid out as a monthly income at some future date.

CASH REFUND ANNUITY

An annuity that guarantees the return of principal to the beneficiary if the annuitant dies before receiving the full payout.

ANNUITY CERTAIN

An annuity that provides income for a specified period of time.

ALEATORIC

An element of chance or uncertainty in the outcome of an insurance contract.

ALIEN INSURER

An insurance company incorporated and governed by laws of a foreign nation.

ADMITTED INSURER

An insurance company that has met the statutory requirements of a particular state and is therefore allowed to transact insurance in that state.

ADVERSE SELECTION

An insurer selecting a higher than normal number of uninsurable or substandard risks for insurance coverage.

CONTESTABLE PERIOD

During the first two years of the policy, if the insurer finds any reason to dispute the information on the application or other underwriting information, they can either rescind the policy or deny the claim. See "incontestability."

APPLICATION

Form(s) containing information provided by the applicant or insured. The application becomes part of the entire contract

BASIC MEDICAL EXPENSE POLICY

Generally, refers to three types of coverage: Basic Hospital Expense including Miscellaneous Hospital Expenses, Surgical Expense and Miscellaneous Medical Expense.

BINDING RECEIPT

Guarantees coverage after the initial premium is paid, even if the proposed insured is found to be uninsurable.

COMPREHENSIVE MEDICAL EXPENSE

Health insurance that covers catastrophic and minor health problems. Combines Basic and Major medical insurance into one contract. After first dollar benefits are exhausted, a corridor deductible is paid by the insured, then the insurer and insured pay the remaining claim on a shared basis up to the out-of-pocket limit.

COMMISSIONER OF INSURANCE

In California, an elected person who oversees all the responsibilities of the Department of Insurance.

CORRIDOR DEDUCTIBLE

In a Comprehensive plan, a sum of money that the insured pays on a health claim after the insurer has paid for the basic benefits but before the Major Medical portion of the policy pays.

CONTRACT FUND

In a Universal Life policy, the account into which premiums are paid and mortality and expense costs are subtracted. The remainder is credited with current interest rates.

CONTRACT RATE

In a Universal Life policy, the minimum current interest that the policy allows.

CONTRIBUTORY PLAN

In group insurance, the employer requires that the employee help pay for their benefit plan (a contribution).

COINSURANCE CLAUSE

In health insurance, a percentage that the insured must pay toward the cost of a claim after the deductible is satisfied.

CONDITIONAL RECEIPT/COVERING NOTE

Obligates the insurance company to pay a death claim if the proposed insured dies during the underwriting process (assuming the policy would have been issued normally).

ADULT DAY CARE

Part-time institutional care for an elderly person who lives at home.

CAPITATION

Process of determining how much money is paid to the medical providers/hospitals based on the number of people who could use medical services, not the actual number who do. The providers receive a fixed "per head" fee per month. They receive the same amount of money no matter how many patients they treat.

CONSUMER REPORT

Report of information compiled by a third party for use of underwriting departments to establish insurability. It reports on the insured's credit, character, reputation or habits.

BLUE CROSS AND BLUE SHIELD ASSOCIATION

Service provider offering a variety of plans (HMO, PPO etc.) and operating on a franchise basis

COLLATERAL ASSIGNMENT

Temporarily giving up some rights in the contract for a specific period of time or a specific purpose (e.g. as security for a loan).

DECREASING TERM INSURANCE

Temporary insurance with a reducing death benefit and a level premium. It is usually used to cover a loan or mortgage.

CANCELLATION

Terminating a policy

ACCUMULATION UNITS

The accounting measure that is used by insurance companies to determine the annuitant's ownership interest in a variable annuity. It is based on the value of the underlying securities in relation to the amount deposited.

CONTRACT OF ADHESION

The contract is drawn up by the insurer and the policyholder adheres to it. This means that, if there are any ambiguities in the wording of the contact, the courts will generally rule in favor of the policyholder.

AMOUNT AT RISK

The difference between the death benefit and the cash value of a life insurance policy.

ADVERSE UNDERWRITING DECISION

The insurer treats the applicant as a higher than average risk resulting in rejection/declination, substandard rating or cancellation during the contestability period.

ACCUMULATION PERIOD

The period of time after funds are deposited into an annuity in either a lump-sum or a series of payments, during which earnings/interest are credited to the principal on a tax-deferred basis.

BLACKOUT PERIOD

The period of time when no Social Security income is paid to the surviving worker's spouse. This period is reached when the youngest child of the worker reaches a limiting age and lasts until the surviving spouse is age 60.

ASSIGNMENT

The transfer of rights under the insurance policy to another person or company.

ACTUARY

These are the statisticians and mathematicians in an insurance company that calculate the probability of a loss, the expected severity and frequency of losses, and the cost of insuring the loss.

AUTOMATIC PREMIUM LOAN

This option is only available on policies that have a cash value. It is used to prevent an unintentional lapse of coverage. At the end of the grace period, if there is enough cash value to pay the premium due, a loan is made from the cash value to pay the policy premium. This process will continue every premium due date until the cash value is exhausted

CONTINUOUS PREMIUM WHOLE LIFE

Traditional form of Whole Life insurance with premiums payable until age 100 or death. Also known as Straight Whole Life.

CERTIFICATE OF INSURANCE

Used in Group Insurance. A document that verifies the insured is covered by insurance.

CONDITIONALLY RENEWABLE

Used in health insurance, policy is automatically renewable, but the insurer can cancel the policy based on conditions outlined in the contract.

COLD LEAD ADVERTISING

Using advertising to contact persons the agent does not know

CLAIM

When the insured submits paperwork to the insurance company to be reimbursed for a financial loss.