Chapter 8 - The Insurance Plan

Universal Life Insurance

A form of cash value life insurance characterized by flexible premiums, flexible face amounts and the death benefit amounts, and unbundled product structures.

Variable Life Insurance

A form of cash value life insurance in which premiums are fixed, but the face amount and other values may vary, reflecting the performance of subaccounts selected by the policy owner

Variable Universal Life Insurance

A form of cash value life insurance that combines the premium and death benefit amount flexibility of universal life insurance with the investment flexibility and risk of variable life insurance. Also known as flexible variable life

Network

A group of physicians, hospitals, and ancillary services providers that a specific managed care plan has contracted with to deliver health care services to its plan members

Preferred Provider Organization

A health care benefit arrangement that provides incentives for members to use network providers, but also provides at least some coverage for services rendered by non-network providers

Health Maintenance Organization

A health care plan financing and delivery system that provides comprehensive health care services to plan members - often referred to a subscribers - in a particular geographic area; it typically requires subscribers to gain access to services through a primary care provider and use in-network providers

Unbundled Product Structure

A life insurance and annuity product design in which an insurer explicitly discloses various expense and benefit charges to customers and specifies the rate of investment return being credited to customers

Irrevocable Beneficiary

A life insurance policy beneficiary who has a vested interest in the policy proceeds even during the insured's lifetime because the policy owner has the right to change beneficiary designation only after obtaining the beneficiary's consent.

Revocable Beneficiary

A life insurance policy beneficiary who has no right to the policy proceeds during the insured's lifetime because the policy owner has the unrestricted right to change the beneficiary designation during the life of the insured.

Policy Loan

A loan a policyholder receives from an insurer using the cash value of a life insurance policy as security. When the policy's benefits are paid, the amount of any outstanding loan is deducted from the policy benefits.

Point-of-service Plan

A managed care plan under which plan members in need of medical care can choose, at the point of service, to seek care in-network or out-of-network

Managed Care

A method of integrating the financing and delivery of health care services within a system that manages the cost, accessibility, and quality of care

Group Insurance

A method of providing life or health insurance coverage for a group of people under one insurance contract

Insured

A person whose life, health, property, or income is insured by an insurance policy

Policy Dividend

A policyowner's share of an insurance company's divisible surplus

Prospectus

A written document describing specific aspects of a security being offered for sale that must contain most of the information included in the security issuer's registration statement on file with the Securities and Exchange Commission

Endorsement

An amendment or addition to an insurance contract that either expands or limits the benefits payable under or otherwise modifies the contract. Also known as a rider.

Cash Value

For life insurance, the savings element of a cash value life insurance policy

Property Insurance

Insurance that provides protection against financial loss from property damage and theft

Liability Insurance

Insurance that provides protection for the insured against financial responsibility for harming others or their property

Subaccount

One of several alternate pools of investments to which a policy owner or contract owner allocates the premiums paid and accumulated cash values or accumulation values

Beneficiary

1) For insurance, the person or legal entity the owner of an insurance policy names to receive the policy benefit if the event insured against occurs. 2) For estate planning, a person who inherits or is entitled by law or by the terms of a will to inherit the estate of another.

Premium

A specified amount of money the insurance company charges for the insurance coverage.

Coinsurance

A specified percentage of all allowable expenses that remain after the deductible has been paid under a medical expense insurance policy and that must be paid to the insured

Copayment

A specified, fixed amount health plan members must pay for specified services at the time the services are received

Risk Pool

A state-created, nonprofit association that provides medical expense coverage to state residents who are unable to obtain coverage elsewhere and typically does not require tax dollars for its operation because the costs are covered by the premiums paid by the insureds

Whole Life Insurance

A type of cash value life insurance that remains in effect until the insured dies as long as the premiums are paid when due, until the insured dies. Also known as flexible variable life.

Participating Policy

A type of insurance policy that allows policyowners to receive policy dividends

Package Policy

A type of insurance policy that provides two or more types of insurance such as property and liability, together in one policy

Cash Value Life Insurance

A type of insurance that provides coverage throughout the insured's lifetime and contains a savings element. Also know as permanent life insurance.

Term Life Insurance

A type of life insurance that provides coverage for a period specified in the policy and that provides a death benefit only if the insured dies during the specified period. If the insured survives until the end of the period, coverage ceases without value.

Automobile Insurance

A type of personal property insurance that protects an insured from financial losses arising from operation of a vehicle

Homeowners Insurance

A type of personal property insurance that provided property and liability insurance to protect an insured from financial losses resulting from damage to the insured's home and/or its contents or resulting from being held liable for the losses of others suffered while on the insured's property

Actual Cash Value Insurance

A type of property insurance that pays the insured an amount equal to the replacement cost of the property minus an amount for depreciation

Replacement Cost Insurance

A type of property insurance that pays the insured the full cost of replacing the lost or damaged property, subject to a maximum amount

Long-Term Care Insurance

A type of supplemental medical expense health insurance that provides benefits for medical and other services to insureds who, because of their advanced age, cognitive impairment, or the effects of a chronic illness or injury, need constant care in their own homes or in a qualified nursing facility

Option B Plan

A universal life insurance policy that provides a death benefit that, at any given time, is equal to the policy's face amount plus the amount of the policy's cash value. Also know as an Option 2 Plan

Option A Plan

A universal life insurance policy that provides a level death benefit amount, which is always equal to the policy's face amount. Also known as an Option 1 Plan

Bodily Injury

Bodily harm, illness, or disease

Indemnity Benefit

Contractual benefits that are based on the actual amount of an insured's financial loss. In traditional medical expense insurance plans, insureds are reimbursed for the covered medical expenses they incur up to a maximum dollar amount. Also know as reimbursement benefits.

Individual Insurance

Insurance that is issued to provide life or health insurance for a named person and may provide coverage for the named person's immediate family or a second named person

Property Damage

Damage to, destruction of, or loss of use of property

Primary Care Provider

In a managed care plan, a physician or other health care provider who coordinates the member's medical care and treatment. Also know as primary care physician.

Uninsured Motorists Coverage

Insurance covering an insured driver and her passengers for bodily injuries and, in some states, property damage incurred in an accident caused by a driver who, contrary to legal requirements, carries no liability insurance

Professional Liability Insurance

Insurance covering individuals who provide professional services, such as physicians and lawyers, from losses they incur as a result of being held responsible for losses of their clients.

Underinsured Motorists Coverage

Insurance protecting the insured and his passengers when the other driver has coverage, but that coverage is inadequate to cover the insured's injuries

Physical Damage Insurance

Insurance that covers losses the insured incurs due to damage to his covered automobile caused by collision or other perils.

Comprehensive Personal Liability Insurance

Liability insurance covering insureds from liability losses they incur that are not the result of practicing their profession or operating a vehicle

Umbrella Liability Insurance

Liability insurance providing additional liability coverage over and above that provided by a homeowners, automobile, or comprehensive personal liability policy

Major Medical Expense Coverage

Medical expense insurance that provides substantial benefits for 1) basic hospital, surgical, and physician expenses, 2) additional medical services related to illness or injuries, and 3) preventive care

Collision Insurance

Physical damage insurance that covers an insured for losses to his vehicle caused by a collision, regardless of whether the insured was at fault

Comprehensive Insurance

Physical damage insurance that covers an insured for losses to his vehicle caused by perils other than collision, such as theft and hail

Agreed Value Insurance

Property insurance that pays the insured an amount agreed upon by the insured and the insurer at the time of policy issue

Primary Beneficiary

The party designated to receive the policy proceeds following the death of the insured. Also known as first beneficiary.

Contingent Beneficiary

The party designated to receive the proceeds of a life insurance policy following the insured's death if the primary beneficiary dies before the insured. Also known as the second beneficiary

Applicant

The person or business that applies for an insurance policy.

Policyowner

The person or other entity that enters into a contract of insurance with an insurer and actually owns the insurance policy

Personal Risk

The risk of economic loss associated with death, poor health, injury, and outliving one's economic resources

Liability Risk

The risk of economic loss resulting from a person being held responsible for harming others or their property.

Property Damage Risk

The risk of economic loss resulting from damage to or loss of a person's property

Policy Term

The specified period of time during which a term life policy provides coverage