Below are several terms and definitions that you will come across when looking at various insurance-related material.
Terms and Definitions
Activities of Daily Living
There are 6 of them: Bathing, preparing/eating meals, moving, getting out of bed, dressing, and using the toilet. Daily Living Activities are often associated within Long Term Care and Disability insurance policies as "triggers" to start a policy.
Independent Agent: An agent that represents at least two different insurance carriers.
Broker Agent: An agent who searches the entire insurance market to place an applicant's coverage to maximize protection and minimize cost. This definition best describes the agents of MAZ Insurance.
Career Agent (Or Captive Agent): An agent who represents only one insurance carrier.
The person, charity, church, or entity that receives the benefit payment when the insured dies (life insurance) or becomes disabled (disability insurance).
In disability insurance, this is the time frame in which the insured is guaranteed to receive the payments (ex. 2 years, 5 years, until age 65, etc).
Permanent life insurance policies have a personal cash value that grows inside the policy. The owner is free to use this money for whatever he/she feels necessary. Certain tax advantages may exist as well.
A demand made by the insured, or the insured's beneficiary, for payment of the benefits as provided by the policy.
All insurance companies have a company financial rating (usually provided by Standard & Poor's and/or A.M. Best). A good rating signifies the insurance company's ability to pay the insurance policy should the time arrive. Any company with a rating of at least an "A" is usually very good.
An important life insurance feature that the majority of people don't realize exists. A conversion options allows someone to convert a term policy into a permanent policy WITHOUT proving insurability.
In health insurance, it is a predetermined, flat fee that an individual will pay for healthcare services (ie. $25 for a doctor's visit).
The scope of protection provided by an insurance policy.
Amount of money paid, by the insured, before the insurance carrier begins to cover the insured's cost.
In disability insurance, this is the time frame between when you are first disabled, and when you begin to receive your payments (ex. 30 days, 60 days, etc.)
Health Maintenance Organization. Includes a network of providers, however, every HMO plan must choose a primary care physician, which acts as the "gatekeeper" to the rest of the network.
Health Savings Account. Combines a high deductible health insurance plan with a tax-favored savings account. Money left in the savings account earns interest and is yours to keep.
This is whom the policy is written for. Typically, this is also the owner. Once this person dies or becomes disabled, the beneficiary will receive the benefit.
In disability insurance, it is a contract provision that allows policyholders to collect benefits if they are still working, but cannot work in their original occupation. For most policies, this is an additional rider that can be added at the time of the application.
This person is almost always the insured, and has total control over the policy. However, this may not be the case for business owners.
In health insurance, it is a pre-determined amount of money that an individual must pay before the insurance carrier will pay 100% of the healthcare expenses.
The written contract effecting insurance, or the certificate thereof, by whatever name called, and including all clause, riders, endorsements, and papers attached.
Preferred Provider Organization. This organization is composed of physicians, hospitals, and other providers which provides health care services at a reduced fee.
A coverage limitation included in many health insurance policies which states that certain physical or mental conditions, either previously diagnosed or which would normally be expected to require treatment prior to issue, will not be covered under the new policy for a specified period of time.
The price of the insurance protection for a specified risk for a specified period of time.
The automatic re-establishment of in-force status effected by the payment of another premium.
In disability insurance, a benefit paid when you suffer a loss of income due to a covered disability or if loss of income persists. This is typically in the form of a rider that can be added to your policy at the time of the application.
With life insurance, it is a fee charged to a policy holder when a life insurance policy or annuity is surrendered for its cash value.
The individual trained in evaluation risks and determining premiums, rates and coverages. This person is separate from an agent.
The process of selecting risks for insurance and classifying them according to their degrees of insurability so that appropriate rates may be assigned. The process also includes rejection of those risks that do not qualify. Agents are not part of this process.
For a complete listing of definitions, please click on AM Best's Glossary of Terms.