Life Insurance and Health Insurance Terms and FAQs

click here for: Life Insurance terms A - C

Data Processing Insurance: Coverage for electronic media, computers, and other electronic data processing equipment. No coinsurance is applied to this type of coverage. Death Benefit: A life insurance payment made to a designated beneficiary upon the death of the insured. Declarations: Information such as name, description, and location of insured property, premiums payable, coverage amounts, are placed on what agents call the Declarations Page. Declination: The insurer's rejection of an insurance application. Deductible: The amount which a policyholder agrees to pay, per claim or per accident, toward the total amount of an insured loss. Deferred Annuity: An annuity deferring income payments to begin at some specified future date. Deferred Compensation: Arrangements by which compensation to employees for past or current services is postponed until some future date.

Defined Contribution Plan: A plan which the contribution rate is fixed and benefits to be received by employees after retirement depend upon the contributions and their earnings. Dental Insurance: An individual or group insurance plan that will pay for costs of normal dental care as well as damage to teeth from an accident. Dependent: An individual, usually a spouse or child, who depends on another for financial support and maintenance. Deposit Premium: The premium deposit paid when an application is made for an insurance policy. It is usually equal to the first month of estimated premium and is applied toward the total premium when billed.

Depreciation: The decrease of value in property over a period of time due to wear and tear or obsolescence. Direct Loss: Any financial loss that results directly from an insured peril. Direct Writer: An insurance industry term for which an insurance company uses their own sales employees to write insurance policies. Directors' and Officers' Liability Insurance: The protection of corporate directors and officers from liability arising out of errors in judgement, duty breachments, and any wrongful acts related to their organizations. Disability: A physical or mental impairment that limits major life activities of an individual. Disability Benefit: The payment, made usually monthly, payable to participants under a Disability Income policy or a provision of some other policy. Disability Income Insurance: A type of health insurance that provides a periodic payment to replace income when the insured is unable to work as a result of illness, injury, or disease. Disappearing Deductible: A deductible in an insurance contract that provides for a decreasing deductible amount as the size of the loss increases. Dismemberment: Loss of a body member (limbs), or use thereof, or loss of sight due to injury. Dismemberment Insurance: A type of health insurance that provides payment in case of loss by bodily injury of one or more body members (such as: hands or feet) or sight of one or both eyes. Disposable Personal Income: Personal income minus personal tax and nontax payments. This is the income available to people for spending and saving. Dividend: An amount returned to a policyholder by an insurance company out of its earnings. Dividend Additions: An option to where an insured can pay-up insurance purchased with a policy dividend and add to the face amount of the policy. Dollar Threshold: In the State of Florida, and other no-fault auto insurance states with the dollar threshold, this prevents individuals from suing in tort to recover for pain and suffering unless their medical expenses exceed a certain dollar amount. Domestic Insurer: An insurance company is considered a domestic company in the state in which it is incorporated. Double Indemnity: An insurance policy provision usually associated with death, which doubles payment of a designated benefit when specified causes or under specific circumstances occur. Driver Education Credit: A student discount or reduction in premium amount for which younger drivers become eligible on completion of a driver education course. These courses are available in most public school systems. Duplication of Benefits: A situation where identical or overlapping coverage of the same type exists between two or more health insurance plans. Dwelling Forms: An insurance policy designed to cover a dwelling and the personal property that is in it plus some additional coverage's. There are several forms available, check with us for your dwelling insurance needs.

Earned Income: An employment income earned while working at some occupation. Earned Premium: An amount of "used up" policy premium during the term of an insurance policy. Economic Loss: An estimated total cost, insured and uninsured, of mishaps (such as: vehicle accidents, work accidents, and fires); including such factors as property damage, funeral expenses, wage loss, insurance administration costs, and medical, hospital and legal costs. Effective Date: The date on which the insurance under a policy will begin. Eligibility Date: The date which an individual is eligible for benefits. Eligibility Period: A specified period of time during which an individual member of a particular group may enroll without evidence of insurability. Eligibility Requirements: This term could be defined as either: (1) conditions which an employee must satisfy to participate in a retirement plan, or (2) conditions which an employee must satisfy to obtain a retirement benefit. Eligible Dependent: A dependent of an insured that is eligible for benefits. Eligible Employee: A member of a group who has met the eligibility requirements under a group life or health insurance plan. Elimination Period: Two definitions: A period of time between the period of disability and the start of disability income insurance benefits, during which no benefits are payable. Employee Dishonesty Coverage Form: A commercial crime insurance form that covers the loss of money, securities, and other covered property because of a dishonest act of a covered employee. Endorsements: An additional piece of paper, not a part of the original insurance policy, in which certain terms and conditions, when attached to the original insurance policy, becomes a legal part of that contract. Endorsement: An amendment of an insurance policy that alters the provisions of the contract. Enrollment Card: A document signed by an employee as notice of their participation in the benefits of a group health insurance plan. Entire Contract Clause: A provision in insurance policy stating that the life insurance policy and attached application constitute the entire contract between the parties. Entity Purchase Agreement: Specifies the terms and conditions which the business will buy back a deceased's share of the business's ownership.

Errors and Omissions Insurance: A liability insurance policy that provides protection against loss incurred by a client because of some negligent act, error, oversight, or omission by the insured. Estate: The assets and liabilities of a person left at death. Estate Planning: Developing a plan to transfer all of your property from one generation to the next or within a generation . Estoppel: Legal doctrine that prevents a person from denying the truth of a previous representation of fact, especially when such representation has been relied on by the one to whom the statement was made. Errors and Omissions Insurance: A form of insurance that indemnifies the insured for any loss sustained because of an error or oversight on his or her part. Evidence of Insurability: Any statement of proof of a person's physical condition and/or other factual information affecting his/her acceptance for insurance. Excess and Surplus Insurance: (1) Insurance to cover losses above a certain amount, with losses below that amount usually covered by a regular policy. (2) Insurance to cover an unusual or one-time risk, e.g., damage to a musician's hands or the multiple perils of a convention, for which coverage is unavailable in the normal market. (See also "Umbrella Liability" and "Surplus Lines.") Exclusions: The specific conditions or circumstances listed in the policy for which the policy will not provide benefit payments. Exclusive Agent: An agent who is employed by one and only one insurance company and who solicits business exclusively for that company. Exclusion Ratio: Portion of an annuity payment that is not subject to income tax when received. Expense Ratio: The ratio of a operating expenses to premiums. Experience Modification Factor: Used in workers compensation rating to reflect the degree to which a particular employer has experience that is better or worse that expected for that industry. Experience Rating: Process of determining the premium rate for a group risk, wholly or partially on the basis of that group's experience. Experience Refund: A provision in some group policies for the return of premium to the policyholder because of lower than anticipated claims. Extended Nonowned Coverage: Endorsement that can be added to an automobile insurance policy that covers the insured while driving any nonowned automobile on a regular basis. Extended Reporting Period: An additional period of time after policy expiration during which valid reported claims will be paid under a claims-made policy of liability insurance Extended Term Insurance: A form of insurance available as a nonforfeiture option. This provides the original amount of insurance for a limited period of time, normally 5, 10, 15, or 20 years. Extra Expense Insurance: Type of business income insurance that provides reimbursement to an insured for the extra expense incurred to continue a business operation when property had been damaged or destroyed by a covered peril.

Face Amount: An amount stated on the face (first page) that will be paid in case of death or at the maturity of the policy. Factory Mutual: A mutual insurance company insuring only properties that meet high underwriting standards. Facultative Reinsurance: Type of reinsurance in which the reinsurer can accept or reject any risk presented by an insurance company seeking reinsurance. Fair Rental Value: An amount payable to an insured homeowner for loss of rental income due to damage that makes the premises uninhabitable. Family Expense Policy: A policy which insures the medical expenses of both the policyholder and immediate dependents. Family Income Policy: A insurance policy that pays an income up to a specific period of time to the beneficiary after the death of the insured. Family Policy: A life insurance policy providing insurance on all or several family members in one contract, generally whole life insurance on the principal breadwinner and smaller amounts of term insurance on the other spouse and children. Farmowners-Ranchowners Policy: A package policy for a farm or a ranch, providing property and liability coverage's. Federal Crop Insurance: A comprehensive coverage at rates subsidized by the federal government for unavoidable crop losses. Federal Flood Insurance: A type or insurance sold by private insurers (with rates subsidized by the federal government) to persons who reside in flood zones and whose community joins the program and agrees to establish and enforce flood control and land-use measures. Fidelity Bond: A bond that will reimburse an employer for losses caused by dishonest or fraudulent acts of employees. Fiduciary: A person who holding the funds or property of another in trust. Financial Responsibility Law: A state law which may require motorists to furnish evidence, either before or after involvement in an auto accident of ability to pay for damages up to certain minimum dollar limits. Fire: Combustion accompanied by a flame or glow, which escapes normal confines to cause damage. Fire Legal Liability: Liability of a business or a person for damage caused by negligence to property of others. First Party Insurance: Insurance coverage which the policyholder collects compensation for losses from the insured's own insurer. Fixed Annuity: Annuity whose periodic payment is a guaranteed fixed amount. Fixed Period Installments: Life insurance settlement option in which the policy proceeds are paid out in fixed amounts. Floater: An insurance policy that covers property that can be moved from one location to another for both transportation perils and perils affecting property at a fixed location. Flood Insurance: Coverage against loss resulting from rising water. Forfeitures: Amounts contributed on behalf of terminated, non-vested participants. 401(k) Plan: A salary reduction plan that allows employees to contribute a portion of their salaries on a tax-deferred basis. Franchise Deductible: Deductible in which the insurer has no liability if the loss is under a certain amount, but once this amount is exceeded, the entire loss is paid in full. Franchise Insurance: A type of insurance in which individual polices are issued to the employees of a common employer or the members of an association. Fraternal Insurance: Insurance offered to a social organizations for their members. Fund: Money held in trust to pay pension benefits. Future Increase Option: An option that allows the insured to purchase additional disability income insurance at a specified future date without evidence of insurability.

General Agency System: A type of life insurance marketing system in which the general agent is an independent businessperson who represents only one insurer. General Average: In ocean marine insurance, a loss incurred for the common good that is shared by all parties to the venture. General Liability Insurance: The insurance coverage that pertains to claims arising out of the insured's liability for injuries or damage caused by ownership of property, manufacturing operations, contracting operations, sale or distribution of products, and the operation of machinery, as well as professional services. Glass Insurance: A commercial insurance policy used to insure plate glass, lettering, frames, and ornamentation. Good Student Discount: The reduction of an automobile premium for a young driver who ranks in the upper percent of their class. Grace Period: The specified period after a premium payment is due, in which the policyholder may make such payment, and during which the protection of the policy continues. Gross Estate: All of the assets and liabilities owned at death. Gross Negligence: Intentional failure to perform a duty, reckless disregard of the consequences as affecting the life or property of another Gross Premium: Insurance premium paid by the policyholder. Group Annuity: A pension plan providing annuities at retirement to a group of people under a master contract. Group Annuity Contract: A contract issued by a life insurance company that may be used as the funding instrument for benefits to be made in accordance with a pension plan. A master contract provides that the group of persons participating in the plan will receive annuities during retirement. Individual certificates stating coverage are usually issued to members of the group. Group Contract: A contract of insurance made with an employer or other entity that covers a group of persons identified as individuals within an entity. Group Health Insurance: Health insurance written on a number of people under a single master policy, issued to their employer or to an association with which they are affiliated. Group Life Insurance: Life insurance usually without medical examination, on a group of people under a master policy. Group Permanent Plan: A type of pension plan which cash value life insurance is issued on a group basis and cash values in each policy are used to pay retirement benefits when a worker retires. Group Term Life Insurance: The most common form of group life insurance. Yearly renewable term insurance on employees during their working careers. Guaranteed Renewable Contract: An insurance contract that the insured has the right to continue in force by the timely payment of premiums to a specified age. During this period of time the insurer has no right to make any change in any provision of the contract while the contract is in force, except that the insurer may make changes in premium rate by classes. Guardian: A court appointed person who takes care of the affairs of another.

Health Insurance: An insurance policy that provides payment for benefits of a covered sickness or injury. Included under this definition are various types of insurance such as: accident insurance, disability insurance, medical expense insurance, and accidental death and dismemberment insurance. Health Maintenance Organization (HMO): An HMO is a prepaid medical service plan that provides a wide range of comprehensive health care services for a specified group (members) or individuals at a fixed periodic payment. High-Risk Automobile Insurer: A insurance company that specializes in insuring motorists who have poor driving records. Hold-Harmless Clause: A clause written into an insurance policy which one party agrees to release another party from any legal liability. Homeowners Policy: A package policy providing home owners with a broad range of property and liability coverage's. Hospice: A health care facility providing medical care and support services for terminally ill persons. Hospital Expense Insurance: A health insurance policy that covers daily hospital room and board charges and some miscellaneous hospital expenses. Hospital Miscellaneous Services: Any services other than room and board (and general nursing services) provided by a hospital during hospital confinement. Included are such items as: X- ray examinations, laboratory tests, medicines, surgical dressings, anesthetics (including the administration of), and use of operating room. Hull Insurance: A class of ocean marine insurance that covers physical damage to the ship or vessel insured. Usually, written on an "all-risks" basis. Also can provide physical damage insurance on a aircraft, similar to collision insurance in an automobile policy. Human Life Value: A method of determining Life insurance needs by taking into account a person's income, expenses, remaining years of earning, and the depreciation of money over time.

Immediate Annuity: An annuity providing payment to begin immediately. Incontestable Clause: A clause which provides that the insurer may not contest the validity of the contract after it has been in force for a period of years. Indemnification: The compensation to the victim of a loss, in whole or in part, by payment, repair, or replacement. Independent Agent: An independent agent is a business person who represents two or more insurance companies in a sales and service capacity and who is paid on a commission basis. Independent Agency System: The type of property and liability insurance marketing system, sometimes called the American agency system, in which the agent is an independent businessperson representing several companies. Individual Contract: A contract of insurance made with an individual called the insured, which normally covers such individual and, in certain instances, members of their family. Individual Deductible: The amount that an insured and each person of his or her family covered by the policy must pay before a group or individual medical insurance policy begins to pay for medical expenses. Individual Insurance: An insurance policy which will provide protection to the policyholder and / or family. Individual Retirement Account (IRA): A qualified account which an individual (under age 70) can make annual contributions of of earnings up to to a certain dollar limit. Industrial Life Insurance: Life insurance issued in small amounts, usually less than $1,000, with premiums payable on a weekly or monthly basis. Inflation-Guard Endorsement: Endorsement added to a homeowners policy to increase (periodically) the face amount of insurance of the dwelling and other policy coverage's by a specified percentage. Initial Reserve: For life insurance, the reserve at the beginning of any policy year. Inland Marine Insurance: A broad form of insurance, generally covering articles in transit as well as bridges, tunnels and other means of transportation and communication. Also covering goods in transit, excluding ocean voyages, it includes numerous "floater" policies, such as: personal effects, personal property, jewelry, furs, fine arts, and other items. Innkeepers Legal Liability: A coverage for motel and hotel operators, protecting them from the legal liability they have for the property of guests. In-Patient: A patient admitted to a hospital or other medical facility. Insolvent: Not having sufficient financial resources to meet financial obligations. Insurability: The accepting of the insurer an applicant for insurance. Insurable Risk: The conditions that make a risk insurable are: (1) It must be accidental, (2) The loss must be defined, (3) The peril insured against must produce a definite loss and hardship not under the control of the insured, (4) There must be a large number of exposures subject to the same perils, (5) The loss must be calculable and the cost of insuring must be economically feasible, (6) The peril must be unlikely to affect all insureds simultaneously, and (7) The loss produced by a risk must be definite and have a potential to be financially serious. Insurance: A system under which individuals, businesses, and other organizations or entities, in exchange for payment of a sum of money (called a premium), are guaranteed compensation for losses resulting from certain perils under specified conditions in a contract. Insurance Company: An organization chartered to operate as an insurer. Insurance Commissioner: The top insurance regulatory official in a state. Insured: A person or organization, covered by an insurance policy, including the "named insured" and any other parties for whom protection is provided under the policy. Insurer: The party to the insurance contract who promises to pay losses or benefits, or any corporation engaged primarily in the business of furnishing insurance to the public. Insuring Agreement: The part of a insurance contract stating the promises of the insurer. Insuring Clause: A clause which sets forth the type of loss being covered by the insurance policy and the parties to the insurance contract. Interest: Money paid for the use of money. Intestate: Dying without a will, thus allowing the probate court to appoint an administrator of the estate.. Investment Income: The portion of a company's income which is derived from its investments, including interest and dividends on stocks and bonds. Irrevocable Beneficiary: Beneficiary designation allowing no change to be made in the beneficiary of an insurance policy without the consent of the named beneficiary. Irrevocable Trust: A type of trust that cannot be revoked by the creator.

Legal Reserve: The minimum reserve which an insurance company must keep to meet future claims and obligations, as calculated under their state insurance code. Level Premium: A premium which remains unchanged throughout the life of a policy, example: level term insurance and long term care insurance. Level Premium Life Insurance: Life insurance for which the premium remains the same from year to year. Liability: Any legally enforceable act or obligation. Liability Insurance: Insurance covering the legal liability of the insured resulting from injuries to a third party to their body or damage to their property. Liability Limits: The maximum sums listed on a liability policy which an insurance company provides protection. License and Permit Bond: A type of surety bond guaranteeing that a person bonded will comply with all laws and regulations that govern their activities. Life Annuity: A series of payments which once begun, continue throughout the remaining lifetime of the annuitant but not beyond. Life Expectancy: The average number of years of life remaining for a group of persons of a given age. Life Income: A life insurance settlement option in which the policy proceeds are paid during the lifetime of the beneficiary. Life Insurance: Insurance providing payment of a specified amount on the insured's death, either to his or her estate or to a designated beneficiary. Life Insurance in Force: The total sum of the face amount, plus dividend additions, of life insurance polices outstanding at a given time. Lifetime Disability Benefit: A disability benefit to replace income lost by an insured person as long as they are totally disabled, even for a lifetime. Limited Policy: A contract which covers only certain specified diseases or accidents. Liquidation: The dissolving of a company by selling its assets for cash. Liquor Liability Insurance: Provides protection for the owners of an establishment that sells alcoholic beverages against liability arising out of accidents caused by intoxicated customers. Living Benefits Rider: A rider that allows insureds to add Long Term Care benefits to a life insurance policy. Living Trust: A trust created while the creator of the trust is living. Long-Term Care: The care of broad-ranged maintenance and health services to the chronically ill or disabled. Services may be provided on an inpatient (rehabilitation facility, nursing home, mental hospital), outpatient, or at-home basis. Most long term care premiums are level. Long-Term Disability Insurance: Insurance to provide a reasonable replacement of a portion of an employee's earned income lost through serious illness or injury during the normal work career. Loss: The reduction in the value of an insured's property caused by a covered peril. Loss Control: Any actions intended to reduce the frequency or severity of losses. Loss Payable Clause: A mean of protecting a mortgagee's interest in property by directing the insurer to make a loss payment to the mortgagee in the event of a loss. Loss Prevention: A measure which reduces the probability of a particular loss but does not eliminate completely all possibility of that loss Loss Ratio: The ratio of claims to premiums. Loss Reserve: An amount set up as the estimated cost of a claim.

Mail Order Insurer: An insurance company that sells insurance policies through the mail, or other mass media, eliminating a need for agents. Maintenance Bond: A bond that guarantees against defects in workmanship or materials for a stated period of time after the acceptance of the completed work. Major Medical Insurance: Health insurance that provides benefits for major illness and injury. Usually characterized by a large benefit maximum ranging up to $5,000,000.00, or no limit. This insurance, above an initial deductible, reimburses the major part of charges for hospital, doctor, private nurses, medical appliances, prescribed out-of-hospital treatment, drugs, and medicines. Malpractice: Improper care, conduct, or treatment by a physician, hospital, or other provider of health care. Malpractice Insurance: Coverage for a professional practitioner, such as a doctor or a lawyer, against liability claims resulting from alleged malpractice while professional services were performed. Managed Care: A health care system that delivers appropriate health care services to covered individuals by arrangements with selected providers. Manual Rate: The premium rate developed for a group insurance coverage from standard rate tables normally referred to as its rate manual. Marine Insurance: A form of insurance primarily concerned with means of transportation and communication, and with goods in transit. Marital Deduction: A reduction of an estate for estate tax purposes, which is available if the decedent is survived by his or her spouse. Master Policy: Two definitions: (1) An insurance policy that is issued to an employer or trustee, establishing a group insurance plan for designated members of an eligible group, or (2) A property insurance policy issued to an insured who may issue certificates of insurance to cover properly of others. McCarran-Ferguson Act: The Federal Law passed in 1945 stating that continued regulation of the insurance industry by the states is in the public interest and that federal antitrust laws apply to insurance only to the extent that the industry is not regulated by state law. Medicaid: State programs of public assistance to persons whose income and resources are insufficient to pay for health care. Medical Examination: An examination given by a qualified physician to determine to the insurability of an applicant. Medical Expense Insurance: A type of health insurance that provides benefits for expenses incurred for medical care, such as: expenses of physicians, hospital, nursing, and related health services, and supplies. Medical Payments Insurance: A coverage, available in various automobile and liability insurance policies, in which the insurer agrees to reimburse the insured and others, without regard for liability. Medicare: The United States federal government program of Hospital Insurance (Part A) and Supplementary Medical Insurance (Part B) protection provided under the Social Security Act. Miscellaneous Expenses: Any expenses in connection with hospital insurance, hospital charges other than room and board, such as X-rays, drugs, laboratory fees, etc. Misrepresentation: A false, incorrect, or incomplete statement of a material fact, made in the application for a policy. Mode of Premium Payment: The frequency which premiums are paid monthly, quarterly, semiannually, or annually. Moral Hazard: A hazard arising from any nonphysical, personal characteristic of a risk that increases the possibility of loss. Morbidity: Relative incidence of a disease. Morbidity Tables: Actuarial statistics showing the frequency and duration of a sickness. Mortality Table: A table showing how many members of a group, starting at a certain age, will be alive at each succeeding age. Multi-Peril Policy: A package policy which provides protection against a number of separate perils in one contract. Mutual Insurance Company: An insurance company in which the ownership and control is vested in the policyholders and a portion of surplus earnings returns to the policy holders.

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