Insurance Glossary-confused about what all those terms mean? Find out how to communicate effectively about insurance

Insurance Glossary

Accelerated Benefits
Riders on life insurance policies which allow the life insurance policy's death benefits to be used to offset expenses incurred in a convalescent or nursing home facility.


Accident Insurance

A form of insurance against loss by accidental bodily injury to the insured.



Accidental Death and Dismemberment

A policy or a provision in a Disability Income policy which pays either a specified amount or a multiple of the weekly disability benefit if the insured dies, loses his or her sight, or loses two limbs as the result of an accident. A lesser amount is payable for the loss of one eye, arm, leg, hand, or foot.



Accidental Death Benefit

An extra benefit which generally equals the face of the contract or principal sum, payable in addition to other benefits in the event of death as the result of an accident. See also Double Indemnity and Multiple Indemnity.



Accidental Death Insurance

A form that provides payment if the death of the insured results from an accident. It is often combined with Dismemberment Insurance in a form called Accidental Death and Dismemberment. See also Accidental Death and Dismemberment.



Additional Drug Benefit List

Prescription drugs listed as commonly prescribed by physicians for patients' long-term use. Subject to review and change by the health plan involved. Also called drug maintenance list.



Additional Monthly Benefit

Riders added to disability income policies to provide additional benefits during the first year of a claim while the insured is waiting for Social Security benefits to begin.



Adjusted Average Per Capita Cost (AAPCC)

The estimated average cost of Medicare benefits established on a per county basis _ factors include age, sex, Medicaid, institutional status, disability, and end stage renal disease status. Used to determine payments to cost contractors for Medicare benefits.



Aftercare

Individualized patient services required after hospitalization or rehabilitation.



Adjuster
An individual employed by a property/casualty insurer to evaluate losses and settle policyholder claims. These adjusters differ from public adjusters, who negotiate with insurers on behalf of policyholders, and receive a portion of a claims settlement. Independent adjusters are independent contractors who adjust claims for different insurance companies.



Agent
Insurance is sold by two types of agents: independent agents, who are self-employed, represent several insurance companies and are paid on commission, and exclusive or captive agents, who represent only one insurance company and are either salaried or work on commission. Insurance companies that use exclusive or captive agents are called direct writers.



Aggregate Indemnity

A maximum dollar amount that may be collected by the claimant for any disability, for any period of disability, or under the policy as a whole.



Allocated Benefits

Payments authorized for specific purposes with a maximum specified for each. In hospital policies, for instance, there may be scheduled benefits for X-rays, drugs, dressings, and other specified expenses.



Allowable Costs

Charges which qualify as covered expenses.



Alternative Delivery Systems

Systems which cover health care costs, other than on the usual fee-for-service basis. Could include HMOs, IPAs, PPOs, etc.



Alternative Dispute Resolution (ADR)
Alternative to going to court to settle disputes. Methods include arbitration, where disputing parties agree to be bound to the decision of an independent third party, and mediation, where a third party tries to arrange a settlement between the two sides.



Ancillary

Additional services (other than room and board charges) such as X-rays, anesthesia, lab work, etc. Fees charged for ancillary care such as X-rays, anesthesia, and lab work. This term may also be used to describe the charge made by a pharmacy for prescriptions which exceed the health insurance plan's maximum allowable cost (MAC).



Appraisal
A survey to determine a property’s insurable value, or the amount of a loss.



Arbitration
Procedure in which an insurance company and the insured or a vendor agree to settle a claim dispute by accepting a decision made by a third party.



Assigned Risk Plans
Facilities through which drivers can obtain auto insurance if they are unable to buy it in the regular or voluntary market. These are the most well-known type of residual auto insurance market, which exist in every state. In an assigned risk plan, all insurers selling auto insurance in the state are assigned these drivers to insure, based on the amount of insurance they sell in the regular market.



Auto Insurance Policy
There are basically six different types of coverage. Some may be required by law. Others are optional. They are: (1) Bodily injury liability, for injuries the policyholder causes to someone else. (2) Medical payments or Personal Injury Protection (PIP) for treatment of injuries to the driver and passengers of the policyholder’s car. (3) Property damage liability, for damage the policyholder causes to someone else’s property. (4) Collision, for damage to the policyholder’s car from a collision. (50 Comprehensive, for damage to the policyholder’s car not involving a collision with another car (including damage from fire, explosions, earthquakes, floods, and riots), and theft. (6) Uninsured motorists coverage, for costs resulting from an accident involving a hit-and-run driver or a driver who does not have insurance.



Auto Insurance Premium
The price an insurance company charges for coverage, based on the frequency and cost of potential accidents, theft and other losses. Prices vary from company to company, as with any product or service. Premiums also vary depending on the amount and type of coverage purchased; the make and model of the car; and the insured’s driving record, years of driving and the number of miles the car is driven per year. Other factors taken into account include the driver’s age and gender, where the car is most likely to be driven and the times of day – rush hour in an urban neighborhood or leisure-time driving in rural areas, for example. Some insurance companies may also use credit history-related information.

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Benefit Levels

The maximum amount a person is entitled to receive for a particular service or services as spelled out in the contract with a health plan or insurer.



Benefit Package

A description of what services the insurer or health plan offers to those covered under the terms of a health insurance contract.



Blanket Insurance

A contract of Health Insurance that covers all of a class of persons not individually identified in the contract.



Blanket Medical Expense

A policy or provision in a Health Insurance contract that pays all medical costs, including hospitalization, drugs, and treatments, without limitation on any item except possibly for a maximum aggregate benefit under the policy. It is often written with an initial deductible amount.



Bodily Injury Coverage
This coverage is one of the most important types of coverage in your auto insurance policy. It helps you pay for an injured person's medical expenses and lost wages if you're at fault in a car accident. Bodily injury coverage can also help protect you in the event of a related lawsuit. Covered costs are subject to the limits you choose when you buy your auto insurance policy. Most states require you to have bodily injury coverage as a part of your auto insurance policy.



Capitation (CAP)

A rate paid, usually monthly, to a health care provider. In return, the provider agrees to deliver the health services agreed upon to any covered person.



Carry Over Provision

In major medical policies, allowing an insured who has submitted no claims during the year to apply any medical expenses incurred in the last three months of the year toward the new calendar year's deductible.



Cestui Que Vie

The person whose life measures the duration of a trust, gift, estate, or insurance contract. Thus, in Life and Health Insurance it is the person on whose life or health the policy is written, commonly called the insured, policyholder, or policy owner.



Civilian Health and Medical Program of the Uniformed Services (CHAMPUS)

Part of the Uniformed Services Health Benefits Program which supplements the medical care available for families of active, deceased, and retired military personnel.



Closed Access

A situation where covered insureds must select one primary care physician. That physician is the only one allowed to refer the patient to other health care providers within the plan. Also called Closed Panel or Gatekeeper model.



COBRA

Consolidated Omnibus Budget Reconciliation Act - Legislation providing for a continuation of group health care benefits under the group plan for a period of time when benefits would otherwise terminate. Continuation rights apply to enrolled persons and their dependents. Coverage may be continued for up to 18 months if the insured person terminates employment or is no longer eligible. Coverage may be continued for up to 36 months in nearly all other cases, such as loss of dependent eligibility because of death of the enrolled person, divorce, or attainment of the limiting age.



Coinsurance Clause

A provision stating that the insured and the insurer will share all losses covered by the policy in a proportion agreed upon in advance, i.e., 80-20 would mean that the insurer would pay 80% and the insured would pay 20% of all losses. See also Percentage Participation.



Collision Coverage:
Collision coverage pays for damages to your covered auto that are caused by an impact with another vehicle, stationary object, or moving object. Usually, the most your collision coverage will pay is the actual cash value (ACV) of the vehicle. ACV reflects the value of your vehicle at the time of the accident. Collision coverage comes with a deductible, which is the amount you agree to pay out of your pocket before your collision coverage takes over.


Collision Deductible Waiver:
In states where it's available, you have to buy the collision deductible waiver in conjunction with your collision coverage. The collision deductible waiver pays your collision deductible if your insured car is involved in an accident in which an uninsured motorist is held legally responsible.



Composite Rate

One rate for all members of the group regardless of their status as single or members of a family.



Comprehensive Coverage
This coverage pays for accidental damage to your auto that is caused by reasons other than a collision, such as fire, theft, vandalism, riots, hail and windstorms. Comprehensive coverage comes with a deductible.



Comprehensive Major Medical

A plan of insurance which has a low deductible, high maximum benefits, and a coinsurance feature. It is a combination of basic coverage and major medical coverage which has virtually replaced separate hospital, surgical and medical policies with each having its own deductible requirements. Also see Major Medical Insurance.



Conditional Binding Receipt

This is the more exact terminology for what is often called a binding receipt. It provides that if a premium accompanies an application, the coverage will be in force from the date of application or medical examination, if any, whichever is later, provided the insurer would have issued the coverage on the basis of the facts revealed on the application, medical examination and other usual sources of underwriting information. A Life and Health Insurance policy without a conditional binding receipt is not effective until it is delivered to the insured and the premium is paid.



Conditionally Renewable

A contract that provides that the insured may renew it to a stated date or an advanced age, subject to the right of the insurer to decline renewal only under conditions stated in the contract.



Coordination of Benefits (COB)

A group policy provision which helps determine the primary carrier in situations where an insured is covered by more than one policy. This provision prevents an insured from receiving claims overpayments.



Copay

This is an arrangement where the covered person pays a specified amount for various services and the health care provider pays the remainder. The covered person usually must pay his or her share when the service is rendered. Similar to coinsurance, except that coinsurance is usually a percentage of certain charges where the co-payment is a dollar amount.



Copay Provision

Often used with major medical policies. The copay provision states what percentage of a claim the company will pay and what percentage the insured will pay. For example, an 80 percent copay provision would provide that the insurer pay 80 percent of claims and the insured pay 20 percent.



Corridor Deductible

A Major Medical deductible that provides for a deductible, or "corridor," after the full payment of basic hospital and medical expenses up to a stated amount. In the event of further expenses, payment is on the basis of participation or coinsurance, such as 80%-20% or 85%-15%, and the deductible is that portion paid by the insured.



Covered Expenses

Health care expenses incurred by an insured or covered person that qualify for reimbursement under the terms of a policy contract.



Credit Health Insurance

A group disability income insurance contract whereby a creditor is protected in the event of the total disability of a debtor. The policy will pay benefits equal to the monthly installment of the debtor.



Credit Insurance

Insurance on a debtor in favor of a creditor to pay off the balance due on a loan in the event of the death or disability of the debtor. Liability Insurance for abnormal loss from bad debts.



Deductible Carryover Credit

During the last three months of a calendar year, charges incurred for health services can be used to satisfy the deductible for the following calendar year. These credits may be applied whether or not the prior calendar year's deductible had been met.



Dependent Coverage

Insurance coverage on the head of a family which is extended to his or her dependents, including only the lawful spouse and unmarried children who are not yet employed on a full-time basis. "Children" may be step, foster, and adopted, as well as natural. Certain age restrictions on children usually apply.



Disability Income Insurance

A form of health insurance that provides periodic payments to replace income, actually or presumptively lost, when the insured is unable to work as a result of sickness or injury.



Dismemberment Benefit

The benefits payable for various types of dismemberment. See also Accidental Death and Dismemberment and Multiple Indemnity.



Drug Formular

A schedule of prescription drugs approved for use which will be covered by the plan and dispensed through participating pharmacies.



Duplication of Benefits

A situation where identical or overlapping coverage exists between two or more insurance companies or service organizations.



Eligibility Period

(1) The period of time during which potential members of a Group Life or Health program may enroll without providing evidence of insurability. (2) The period of time under a Major Medical policy during which reimbursable expenses may be accrued.



Elimination Period

A loosely used term, sometimes designating the probationary period, but most often designating the waiting period in a Health Insurance policy. See also Probationary Period and Waiting Period.



Emergency Accident Benefit

A group medical benefit which reimburses the insured for expenses incurred for emergency treatment of accidents.



Emergency Road Service Coverage
Emergency Road Service is an optional type of car insurance coverage that helps you pay for towing if your car becomes disabled.



Evidence of Insurability

The statement of information needed for the underwriting of an insurance policy.



Exclusive Provider Organization (EPO)

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