Glossary

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IMPORTANT NOTE: The following are general insurance industry terms and explanations. Many of the terms are used in insurance policies. In those cases, only the policy terms, definitions, and provisions will apply. Therefore, we urge you to read your policy or certificate of insurance carefully. Thank you for choosing Indigo.

Select a letter to jump to that alphabetical section of the glossary or scroll to browse the entire list of terms.

A B C D E F G H I J K L M N O P Q R S T U V W X Y Z


A

Accelerated Death Benefits

If your policy has an accelerated death benefits provision it will pay you, under certain conditions, all or part of the policy death benefits while you are still alive. These conditions include proof that the policyholder is terminally ill as defined by the policy provisions. By accepting an accelerated benefit payment, a person could be ruled ineligible for Medicaid or other government benefits. The proceeds may also be taxable.

Accident or Injury

Accidental bodily injury sustained by the insured person which is the direct cause of the loss, independent of disease or bodily infirmity, or any other cause.

Accidental Death & Dismemberment (AD&D) Benefits

A benefit (if issued) of a life insurance policy that provides additional benefits to be payable if a covered accident causes the loss of life or limb. If a policy includes an accidental death benefit, the cause of death will be examined to determine whether the insured's death meets the policy's definition of accidental bodily injury.

Actively-at-Work Provision

A group insurance policy provision which requires that in order to be eligible for coverage, an employee must actively be at work for the employer for a minimum number of hours per week.

Actuary

A specialist in the mathematics of insurance who calculates rates, reserves, etc. (In most other countries these individuals are known as "mathematicians.")

Admitted Assets

Assets permitted by state law to be included in an insurance company's annual statement. These assets are an important factor when regulators measure insurance company solvency. They include mortgages, stocks, bonds, and real estate.

Agent

An individual who sells and services insurance policies.

Anniversary Date or Renewal Date of Flexible Benefits Plan

The anniversary of your Flexible Benefits Plan issue date or other date on which the plan renews.

Annual Salary

An employee's annual base rate of pay, excluding any overtime pay, bonuses, or other extra pay. If the employee's pay is from commissions, his/her annual salary will be based on his/her average commissions for the previous 12 months.

Application

Document completed by a group policyholder which sets forth the eligible classes, the amounts of insurance, and other relevant information pertaining to the plan of insurance for which the policyholder applied. The application is attached to and forms a part of the policy. Also, the document completed by individuals which sets forth the individual's identifying and coverage information and beneficiary designation.

Assignment

The transfer of all or part of a policy owner's legal title and rights to a policy to another person or entity such as a bank or funeral home. It is possible to change this type of transfer at a later date.

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B

Bank Draft

Occurs when money is being automatically debited from a banking account in payment of premiums for insurance coverage.

Beneficiary

The person, persons, or entity designated by an insured person to receive insurance policy proceeds.

Benefit

The amount payable by an insurer to a claimant, assignee, or beneficiary.

Benefit Period

The length of time specified in a policy during which benefits will be paid to the disabled insured.

Broker

Insurance salesperson who acts on behalf of clients, not insurance companies.

Broker-Agent

Independent insurance salesperson that represents particular insurers but may also function as a broker who acts on behalf of a client to place coverage that maximizes protection and minimizes cost. This person is licensed as an agent and broker.

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C

Cafeteria Plan

Internal Revenue Code Section 125 makes it possible for employers to offer their employees a choice between cash salary and a variety of nontaxable benefits (qualified benefits). A qualified benefit is a benefit that does not defer compensation and which is excludable from an employee's gross income under a specific provision of Code 125, without being subject to the principles of constructive receipt. Qualified benefits include health care, vision and dental care, group term life insurance, disability, adoption assistance, and certain other benefits. Employers may also offer flexible spending accounts (FSA) to employees under a cafeteria plan that provides coverage under which specified, incurred expenses may be reimbursed. These include health flexible spending accounts for expenses not reimbursed under any other health plan and dependent care assistance programs.

Cancellation

Termination of an insurance policy by the company or insured.

Claim

The demand for benefits as provided by an insurance policy.

Claimant

Insured or beneficiary who files a claim for benefits.

Class

The category into which insureds are placed in order to determine the amount of coverage for which they are eligible under the policy.

COBRA (Consolidated Omnibus Budget Reconciliation Act)

A federal law that generally applies to employers with 20 or more employees and requires each group medical expense insurance plan to allow employees and certain dependents to continue their group coverage for a stated period of time following a qualifying event that causes loss of group medical expense coverage.

Contingent Beneficiary

Another party or parties who will receive the proceeds if the primary beneficiary should predecease the person whose life is insured.

Contributory Insurance Plan

An insurance plan that requires the covered employees to contribute all or a portion of the cost of insurance.

Conversion Privilege

The right to change (convert) insurance coverage from one type of policy to another. For example, the right to change from group term life insurance coverage to an individual whole life insurance policy.

Coverage

Protection under an insurance policy. In life insurance, coverage lists living and death benefits.

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D

Death Benefit

Amount paid to the beneficiary upon the death of the insured.

Dependent

Employee's legal spouse and/or any unmarried children of the insured, whether natural or adopted, who are within the age limits and eligibility requirements as described in the group application and group policy provisions.

Dependent Life Insurance

Insurance benefit paid in the event of the death of an insured dependent any time from any cause.

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E

Effective Date

The date that insurance coverage goes into effect.

Eligibility Date

The date on which an employee becomes eligible for insurance coverage. Note: the employee's coverage may or may not be effective on this date. See policy for information on waiting periods, eligibility, and effective dates.

Elimination Period

The number of consecutive days of total disability that must pass before benefits are payable.

ERISA (Employee Retirement Income Security Act)

Federal law governing employee benefit plans.

Evidence of Insurability

To qualify for a particular policy at a particular price, companies have the right to ask you for information about your health and lifestyle. An insurance company will use this information—your evidence of insurability—in deciding if your application for insurance is acceptable and at what premium rate.

Exclusion

The provision in an insurance policy that indicates what is denied coverage and/or benefits.

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F

Face Value

The amount of death benefit provided by the policy as shown on the schedule of benefits.

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G

Group Insurance

An arrangement for insuring a number of people (employees) under a single, master insurance policy.

Group Life Insurance

This type of life insurance provides coverage to a group of people under one contract. Most group contracts are sold to businesses that want to provide life insurance for their employees. Group life insurance also can be sold to associations to cover their members and to lending institutions to cover the amounts of their debtor loans. Most group policies are for term insurance. Generally, the business will be issued a master policy and each person in the group will receive a certificate of insurance.

Group Policyholder

The legal entity to which the master policy is issued.

Guarantee Issue Amount (GI)

Guaranteed amount of coverage issued.

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H

HIPAA (Health Insurance Portability & Accountability Act of 1996, as amended)

Federal law that requires insurance companies to safeguard the privacy of their customers' protected health information and in some cases provide continuity of coverage when changing employers.

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I

Injury

Bodily injury resulting from a covered accident, which is the direct cause of the loss independent of disease or bodily infirmity or any other cause.

Insurance

A plan of risk management that, for a price, offers the insured an opportunity to share the costs of possible economic loss through an entity called an insurer.

Insured

The person (employee, dependent, or group member) who is covered for insurance under the group policy and to whom, or on behalf of whom, the insurer agrees to pay benefits.

Insurer

The insurance company.

Interpleader

This is a procedure when conflicting claims are made on a life insurance policy by two or more people. Using this procedure the insurance company pays the policy proceeds to a court, stating the company cannot determine the correct party to whom the proceeds should be paid. The court then makes a determination as to the rightful beneficiary.

Irrevocable Beneficiary

A named beneficiary whose rights to life insurance policy proceeds are vested and whose rights cannot be canceled by the policy owner unless the beneficiary consents.

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L

Lapse

Termination of a policy due to non-payment of premiums.

Liability

Responsibility to another for one's negligence.

Limitations

See "Exclusions."

Licensed

Indicates the company is incorporated (or chartered) in another state but is a licensed (admitted) insurer for this state to write specific lines of business for which it qualifies.

Long Term Disability Insurance (LTD)

Disability income coverage that provides a benefit for total disability upon exhaustion of an elimination period, which is usually 180 days, but may be less dependent on the group LTD policy.

Loss

The amount an insurance company pays on a claim.

Loss History

Refers to the insured's history of losses (claims) with other companies or the company they are currently with. A company will consider "loss history" when underwriting a new policy or considering the renewal of an existing policy. Companies view "loss history" as an indication of the insured's propensity for a claim in the future.

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M

Material and Substantial Duties

Duties that are normally required for the performance of the insured's regular occupation and cannot be reasonably omitted or modified.

Material Misrepresentation

The failure to disclose a material fact of an applicant's personal or medical history on an insurance policy application form. If the company had access to the correct information at the time of application, the company might not have agreed to accept the application. Discovery of a material misrepresentation during the policy's contestable period usually results in rescission of the coverage.

Medical Provider

Medical practitioner licensed to treat illness and acting within the scope of that license.

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N

National Association of Insurance Commissioners (NAIC)

Association of state insurance commissioners whose purpose is to promote uniformity of insurance regulation, monitor insurance solvency, and develop model laws for passage by state legislatures.

Non-Contributory Plan

An insurance plan that is paid-in-full by the employer.

Non-Renewal

The decision by an insurance company not to renew a policy.

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P

Partial Disability or Partially Disabled

The insured is working, but as a result of an injury or sickness which caused total disability, the insured is able to perform one or more, but not all, of the material and substantial duties of his/her occupation on a full-time or part-time basis, or is able to perform all of the material and substantial duties of his/her occupation on a part time basis and is earning less than 80% of his/her pre-disability earnings at the time that partial disability employment begins.

Policy

The written contract effecting insurance, or the certificate thereof, by whatever name called, and including all clauses, riders, endorsements, and papers attached thereto, and made a part thereof.

Policyholder

The person, firm, or institution named on the face of the policy. Policyholder also means any covered subsidiaries or affiliates set forth on the face of the policy.

Policy Owner

The person or party who owns an individual insurance policy. This person may be the insured, the beneficiary, or another person. The policy owner usually is the one who pays the premium and is the only person who may make changes to a policy.

Policy Period

The period a policy is in force, from the effective date to the expiration date.

Pre-Disability Earnings

The insured's monthly rate of earnings from the employer effective immediately prior to the date total disability begins. Basic monthly earnings include all earnings before any reductions. It does not include bonuses, overtime pay, and extra compensation other than commissions. Commissions will be averaged over the 12-month period prior to the date that total disability begins.

Pre-Existing Condition

A sickness or injury for which the insured received medical treatment, consultation, care, services (including diagnostic measures), or took prescribed drugs or medicines prior to his/her effective date of coverage.

Pre-Existing Condition Limitation/Exclusion

A policy provision found in most disability and health insurance policies that limits or excludes benefits until the insured has been covered under the policy for a specified length of time.

Premium

The payment or one of the regular periodical payments a policyholder is required to make for an insurance policy. The amount of money that the policyholder agrees to pay to the insurance company for the policy of insurance.

Premium Conversion

A flexible benefit program that allows payroll deduction of eligible insurance premiums on a pre-tax basis.

Protected Health Information (PHI)

Any information whether oral or recorded in any form or medium that is created or received by a health care provider, health plan, public health authority, employer, life insurer, school or university, or health care clearinghouse; and relates to the past, present, or future physical or mental health or condition of an individual; the provision of health care to an individual; or the past, present, or future payment for the provision of health care to an individual.

Providers

Doctors, hospitals, or those who are providing a medical/dental service.

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Q

Qualified Benefit

See "Cafeteria Plan."

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R

Recurrent Disability

Allows continuation of long term disability benefits if the insured returns to work for less than a specified time period and is again disabled by the same or related causes, unless the insured received the maximum benefits for the first period of total disability.

Regular Occupation

Occupation routinely performed when a disability begins.

Reinstatement

The process by which a life insurance company puts in force a policy that lapsed because of nonpayment of renewal premiums.

Rescind

To take away or remove. To annul so as to restore the involved parties to the positions they would have occupied had there been no contract. (See "Material Misrepresentation.")

Return of Premium

The premium returned to an insured for canceling or amending a policy.

Rider

A written agreement attached to the policy expanding or limiting the benefits otherwise payable under the policy. Also known as an "endorsement."

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S

Seat Belt Benefit

Benefit paid, if coverage is included in the policy, if the insured suffers loss of life as the result of a covered accident which occurs while the insured is driving or riding in an automobile provided that the automobile is equipped with seat belts and the seat belt was in actual use and properly fastened at the time of the accident.

Short Term Disability Income Coverage (STD)

Disability income coverage that provides a benefit after an elimination period.

Sickness

A disease or illness, including pregnancy.

Suicide Clause

Life insurance policy wording that specifies that the proceeds of the policy will be limited to the amount of premiums paid if the insured takes his/her own life within a specified period of time after the policy's date of issue.

Supplemental Life

Life insurance sold in conjunction with basic group term life coverage.

State of Domicile

The state in which the insurance company is incorporated or chartered. The company is also licensed (admitted) under the state's insurance statutes for those lines of business for which it qualifies.

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T

Total Disability or Totally Disabled

An employee is totally disabled if he/she is completely unable to perform all of the material duties of his/her regular occupation at his/her customary place of work and is under the regular care of a physician.

A dependent is totally disabled if he/she is unable to engage in any of the usual and customary duties and activities of a person of like age and sex who is free of any physical or mental disease or disorder.

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U

Underwriter

The person who reviews an application for insurance and determines, based on the insurer's underwriting guide, if the applicant is acceptable and at what premium rate.

Underwriting

The process an insurance company uses to decide whether to accept or reject an application for a policy.

Underwriting Guide

Underwriting guide, also called an underwriting manual, underwriting guidelines, or manual of underwriting policy. The guide details the underwriting practices of the insurance company and provides specific guidance as to how underwriters should analyze the various types of applicants they encounter.

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W

Waiting Period

The number of days an employee must meet prior to becoming eligible for insurance coverage.

Waiver of Premium (Extended Life Insurance Benefits)

Waiver of premium, sometimes referred to as Extended Life Insurance Benefits, allows group term life coverage to be continued without premium payment while the employee is totally disabled. Such total disability must begin before a certain age, usually 60, and ends in accordance with the policy terms. Waiver of premium does not apply to accidental death or dismemberment coverage. However, some policies may also waive premiums for disability coverage.

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