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The pre-licensing texts we develop are State specific. They are not industry generic texts developed in large quantities for multi-state use. All law and regulatory information is included in each text. Our text and course developers are experienced insurance professionals, educators and trainers with more than 100 years of collective experience.
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GLOSSARY OF HEALTH INSURANCE TERMS
ACCIDENTAL BODILY INJURY — Bodily injury resulting from an accidental causes.
ACCIDENTAL MEANS — An unforeseen, unexpected and unintended cause of an accident that results in an injury. The cause of the action and the result must not be intentional or there will be no coverage.
ADHESION — Insurance policies are contracts of adhesion since they are drafted by the insurer and offered to the insured without the possibility of a material modification. If it is later determined that the language in the contract is ambiguous, courts usually rule in favor of the insured.
ADMISSION CERTIFICATION — A utilization review procedure for assessing an individual’s physical and psychological condition and whether that condition requires admission to a hospital or other inpatient facility.
ADULT DAY CARE — Daytime services provided which will allow an elderly adult to function in his or her own home rather than an inpatient facility.
ADVERSE SELECTION — Also referred to as anti-selection, this is the tendency of more bad risks than good risks to purchase insurance coverage from an insurer. Poorer risks or less desirable insureds tend to seek or continue insurance to a greater extent than better risks.
AGE LIMITS — This involves minimum or maximum age limits for insuring of new applicants or for renewing policies.
ALEATORY — A legal description for a contract where the consideration and the subject of the agreement (i.e. premium versus benefit) involve unequal values.
ALLOCATED BENEFITS — A provision that pays specific expenses according to rates set in a schedule in the policy.
AMBULATORY CARE FACILITY — A health care facility that is contained within or in close proximity to a hospital; and provides diagnostic or medical services including minor surgery on an outpatient basis.
ANCILLARY BENEFITS — These are miscellaneous hospital charges including drugs, anesthetics, ambulance charges, operating room charges, medicines, bandages, x-rays and diagnostic testing charges.
ANNUITANT -- The individual whose life the annuity is based. If the annuity is paid out for a lifetime, the annuitant's age is used to determine the payments. The annuitant is the person who normally receives the annuity payment; however that may or may not be the case.
ANNUITY SURRENDER CHARGE -- A fee charged by the insurance company for a partial or full withdrawal of funds made during a specified period after the annuity is funded. Contract language determines the size of the fee and the length of surrender charge period. Annuity surrender charges are intended to discourage the movement of funds for the defined period, allowing the insurance company to recover their setup and administration costs.
ANNUITIZATION -- The period for which annuity benefits are paid.
APPLICATION -- The statement of information given when a person applies for life, health, or disability insurance. The insurance company's underwriter uses this information as a basis in determining whether the applicant qualifies for acceptance under the company's guidelines. Applications are attached to and made a part of allindividual contracts.
ATTENDING PHYSICIAN STATEMENTS -- Known as APS, these are used when the application or medical examinier's report reveals conditions or situations, past or present, about which more information is desired. Because of Physician-Patient confidentiality, the applicant must sign an authorization, which allows the physician to release information to the insurance company underwriter.
BACKDATING -- Making the effective date of a policy earlier than the application date. Backdating is used to make the issue age lower than at applicant's real age in order to get a lower premium. State laws normally limit the time to which policies can be backdated to six months. Backdating is not allowed to variable contracts due to the nature of the investment.
BLANKET POLICY — Covers a number of individuals who are exposed to the same hazards, such as members of an athletic team.
BLUE CROSS — An independent, nonprofit (or in some States “for profit”) membership association providing protection against the costs of hospital care in a limited geographical area. Provides coverage for hospital costs.
BLUE SHIELD — An independent, nonprofit (or in some States “for profit”) membership association providing protection against the costs of surgery and other items of medical care in a limited geographical area. Provides coverage for physician’s fees.
BUSINESS INSURANCE — A policy whose principal purpose is to provide reimbursement to an employer for the time lost by a key employee who is disabled.
CAFETERIA PLANS — A benefit plan under which employees of a firm may select the benefits programs that best fits their needs. If the employee’s allocation is not used up, the employee may receive the difference in cash.
CANCELLABLE POLICY — A policy that may be terminated either by the policy owner or the insurer by notification to the other party in accordance with the terms of the policy.
CAPITAL SUM — This is the amount payable under accidental dismemberment coverage. It may be the amount payable for accidental loss of two members or both eyes (or one of each). An indemnity for the loss of one member or the sight of one eye is usually a percentage of the capital sum. In many policies the capital sum is 50% of the principal sum.
CATASTROPHE INSURANCE — Health policies that provide substantial benefits for serious, prolonged or expensive disabilities that cause enormous financial problems for the insured. Usually, this is called Major Medical Insurance.
CLASSIFICATION — The underwriting occupational category into which a risk is placed depending upon his or her susceptibility to injury or illness.
CLASSIFIED INSURANCE — A term applying to the writing of life or health insurance on substandard risks.
COBRA — The Consolidated Omnibus Budget Reconciliation Act of 1985 provided for the continuation of group health coverage when an employee was laid-off.
COINSURANCE (Percentage Participation) — A provision that specifies that the insurance company will pay only part of a loss and that requires the policy holder to pay the balance. For example, in the case of Major Medical Insurance, the insurer may be obliged to pay 80% of an insured's expenses in excess of the deductible amount, if any, and the insured is required to pay the other 20%.
COMMON CARRIER — An individual or concern engaged in the transportation of goods or persons in return for a fee.
COMPREHENSIVE MAJOR MEDICAL INSURANCE — A policy designed to provide protection offered by both a basic and a major medical policy. It is characterized by a low deductible amount, coinsurance clause and high maximum benefits.
COMPULSORY HEALTH INSURANCE — A plan of insurance under the supervision of a State or the Federal Government that requires protection for medical, hospital, surgical and disability benefits. Statutory Disability Benefit Laws are in effect in several States including but not limited to: New York, New Jersey, Rhode Island, California, and in Puerto Rico and Hawaii.
CONVERSION PRIVILEGE — The right granted the owner / insured to change his coverage from a group policy to individual policy. If a member of a group resigns, he or she is provided an opportunity to secure an individual policy within a specified period thereafter, regardless of whether or not he is in good health at that time (i.e. without insurability).
DECLINATION — An insurer’s rejection of an application for insurance.
DEDUCTIBLE — The amount of loss that must be absorbed by an insured before policy benefits become payable. The insurer pays benefits only for the loss in excess of the amount of the deductible.
DISABILITY — A physical condition that makes an insured incapable of performing one or more duties of his occupation, or, in the case of total disability, that prevents him from performing any other type of work for remuneration.
DISMEMBERMENT — Loss of hand, leg, arm or foot by severance through or above the wrist or ankle joints. It also includes the entire and irrevocable loss of sight of one or both eyes or loss of use (i.e. paralysis).
DOUBLE INDEMNITY — A clause for the payment of twice the regular benefit if an injury is sustained under certain specified circumstances. This is a more limited benefit than a double indemnity benefit under life insurance policies.
DUPLICATE COVERAGE — A term usually applied to benefits where an injury is covered by several policies with one or more insurers providing the same type of benefits. This may result in over insurance.
EARNED INCOME — Gross salary, wages, commissions and fees derived from active employment. This does not include unearned income, such as income from investments, rents, annuities or insurance policies.
ELECTIVE BENEFITS — An option in a disability policy that permits an insured to receive a lump sum benefit rather than receiving a periodic (i.e. monthly) payment.
ELIMINATION PERIOD — A period of time after the inception of a disability during which benefits are not payable. This provision is also referred to as a waiting period. An elimination period must be satisfied for each separate disability.
EXCEPTIONS — Provisions in the policy that eliminate coverage for specified losses or causes of loss. Also known as exclusions.
EXTENDED CARE FACILITY — A health care facility that is intended to offer care, including skilled nursing care, rehabilitation and convalescent care over a long period of time. This type of facility does not provide acute care.
FEE FOR SERVICE — A billing method for health services where the provider charges separately for each service rendered. Many doctors and health clinics bill in this manner.
FIDUCIARY — This is an individual occupying a position of special trust and confidence, usually one holding the funds or items of value of another under personal care, custody or control.
FRANCHISE POLICY — An individual policy written to cover a group of persons that does not qualify for true group insurance. The benefits may vary slightly within the group.
GRACE PERIOD — A specified period, generally 30 days, following the policy’s premium due date, in which a policy owner may make payment. During this period, coverage remains in force. If the premium is not paid by the policy owner during the grace period the policy will lapse.
GUARANTEED RENEWABLE — The option to renew coverage to a specified age or for life. The insurer has the right to increase the premiums applicable to an entire class of policyholders. This is a renewability provision that may be included in a disability income policy.
HEALTH INDEMNITY PLAN — A type of health insurance policy (usually group insurance) in which an insured is reimbursed by the insurer after paying his or her own medical expenses, less any deductible or coinsurance amounts.
HEALTH INSURANCE — A broad term covering the various forms of insurance relating to the health of persons. It includes such coverages as accident, sickness, disability, hospital and medical expenses. This type of insurance is also referred to as Accident and Sickness Insurance.
HOSPITAL BENEFITS — Benefits payable for charges incurred while the insured is confined to or treated in a hospital.
HOSPITAL EXPENSE INSURANCE — A policy covering benefits subject to a specified daily maximum for a specified period of time while the insured is confined to a hospital. It also provides a limited allowance up to a specified amount for miscellaneous hospital expenses such as operating rooms, anesthesia, diagnostic testing and other covered expenses.
INCONTESTABLE CLAUSE (Time limit on certain defenses) — A provision that makes the policy indisputable regarding the statements made by the applicant on the application after a specified period of time has elapsed (i.e. two years). In health insurance, this is known as the “time limit on certain defenses” provision.
INDIVIDUAL INSURANCE — Insurance owned by an individual.
INJURY INDEPENDENT OF ALL OTHER MEANS — An injury resulting from an accident, provided that the accident was not caused by an illness.
INPATIENT — A person who is confined to a hospital.
KEY PERSON LIFE INSURANCE — Also known as key employee life, this is an insurance plan purchased by an employer to cover a valuable employee.
LAPSE — This means that insurance coverage terminates as a result of the policy owner failing to pay an owned premium by the end of the grace period.
LEVEL TERM LIFE INSURANCE — A term life insurance policy characterized by a level death benefit every time coverage is renewed. The premium will increase at each renewal as well. Coverage is usually renewable up to a specified age such as 70.
LIMITED POLICIES — Those that restrict benefits to specified accidents or diseases, such as travel policies, dread disease policies (i.e. cancer only), ticket policies, accident only policies and others.
LOSS OF INCOME BENEFITS — Income benefits payable to the insured because he is unable to work due to an insured disability.
LOSS OF INCOME INSURANCE — Policies that provide benefits to help replace an insured's earned income lost as a result of a covered illness or accident.
MAJOR MEDICAL EXPENSE INSURANCE — Policies especially designed to help offset the medical expenses resulting from catastrophic or prolonged illnesses or injuries. Generally, they provide benefit payments of 80% of all types of covered medical expenses above a certain amount first paid by the insured and up to the maximum limit of liability provided by the policy.
MALINGERING — Intentionally prolonging a disability in order to collect greater insurance benefits.
MEDICAID — A State and Federally funded medical assistance program for eligible needy persons due to insufficient assets.
MEDICARE — A federal program of health insurance and medical care for eligible persons who are 65 years of age or over. It consists of Part A, Hospital expenses and Part B, Supplementary medical insurance (SMI).
MISCELLANEOUS EXPENSES — Also referred to as ancillary charges, there are hospital charges other than room and board and other hospital charges.
MORBIDITY TABLE — This table demonstrates the incidence and extent of disability that may be expected from a given group of persons. This table is used in the computation of rates. It is comparable to a Mortality Table used in connection with life insurance.
NON-CANCELLABLE — A policy that an insurer is not permitted to terminate or amend during its term except for non-payment of a premium. Generally, the renewal of the policy is guaranteed at the option of the insured up to a specified age and at a fixed premium. Also referred to as non-cancellable and guaranteed renewable.
NON-CONFINING SICKNESS — An illness that prevents the insured from working, but that does not confine him to his home, a hospital or sanitarium.
NON-DISABLING INJURY — One that requires medical care but does not result in a loss of time from work.
NON-OCCUPATIONAL POLICY — A policy which insures a person against off-the-job accidents or sickness.
OPTIONAL RENEWABLE POLICIES — Policies that are renewable at the option of the insurer.
OUTPATIENT — One who receives care at a clinic or hospital without being confined to that institution as a patient.
OVERHEAD EXPENSE INSURANCE — Insurance that provides coverage for rent, utilities, the cost of labor (i.e. employee salary) and other business overhead expenses when the primary business owner becomes disabled.
OVERINSURANCE — An excessive amount of insurance carried by an insured that might tempt him to prolong his period of disability (i.e., malingering).
PARTIAL DISABILITY — An illness or injury that prevents an insured from performing one or more of his or her occupational duties. Usually this benefit pays 50% of the total disability benefit for a specified period (i.e. 6 months).
POLICY PERIOD — Also known as “policy term,” this is the period for which a premium is paid and coverage is provided.
PRE-EXISTING CONDITION — An injury occurring, sickness contracted or physical condition that existed prior to the issuance or inception of a health policy.
PRINCIPAL SUM — The label given for the death benefit paid by accidental death coverage.
PROBATIONARY PERIOD — A specified number of days after the date of the issuance of the policy, during which coverage is not afforded for sickness. Sickness protection does not become effective until after the end of such probationary period. Sickness contracted during the probationary period is not covered regardless of the duration of such disability. A probationary period is a one-time event, whereas an elimination period may occur upon each separate disability.
RECURRENT DISABILITY CLAUSE — A provision that specifies a period of time during which the recurrence of a condition is considered a continuation of a prior period of disability or hospital confinement.
RELATION OF EARNINGS TO INSURANCE — A provision in the policy that permits the insurer to reduce the monthly income disability benefits payable if the insured's total income from benefits exceeds either his current monthly earnings or his average monthly earnings during the two-year period immediately preceding the disability.
RIDER — A legal attachment amending a policy. Additional benefits or a reduction in benefits are often incorporated in policies by the attachment of either a benefit or an exclusion rider.
SCHEDULE — A list of maximum amounts payable, usually for surgical operations or dismemberments.
SERVICE BENEFITS — Those benefits that are received in the form of specified hospital or medical care rather than in terms of cash amounts.
SPECIAL CLASS — An applicant who cannot qualify for a standard policy, but may secure one with a rider waiving the payment for a loss involving certain existing health impairments. He or she may be required to pay a higher premium or to accept a policy of a type other than the one for which he has applied.
SURGICAL EXPENSE INSURANCE — A policy that provides benefits to pay for the cost of surgical procedures.
SURGICAL SCHEDULE — A list of benefit limits that are payable for various types of surgical procedures with the respective maximum payable based upon the severity of the procedures.
TIME LIMIT ON CERTAIN DEFENSES — A required Uniform Provision that prohibits an insurer from contesting statements on an application for health insurance (i.e., two years).
TRAVEL ACCIDENT INSURANCE — Provides benefits for accidental injury while traveling, usually on a common carrier. This is a type of limited policy.
WAITING PERIOD — The duration of time between the beginning of insured's disability and the commencement of the period for which benefits are payable. Another term to describe an elimination period.
WAIVER — A legal concept that waives the liability of the insurer for certain disabilities or injuries ordinarily covered in the policy.
WAIVER OF PREMIUM — A provision included in some policies that exempts the insured from the payment of premiums after he has been totally disabled for a period of at least 90 consecutive days. This varies from the life insurance waiver, which is 180 days.
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