Key Terms

Actuaries are professionals who specialize in assessing and managing financial risk in the insurance industry. They use mathematical models and statistical analysis to evaluate the likelihood of events such as accidents, natural disasters, and illness, and then determine the cost of these events to the insurer. Actuaries also design insurance policies and set premium rates based on the risks associated with different types of coverage.

Adverse selection is a phenomenon in the insurance industry that occurs when policyholders who are at a higher risk of making a claim are more likely to purchase insurance than those who are at a lower risk. This can result in insurers facing a disproportionate number of high-risk policyholders, which can lead to higher claim payouts and increased costs for the insurer.

In insurance, the term "aleatory" refers to the fact that the outcome of an insurance contract is uncertain and depends on chance. Specifically, it means that the benefits or payments that a policyholder receives under an insurance contract depend on the occurrence of an uncertain event. This is in contrast to contracts that are considered "executory" - meaning that the benefits are not tied to a specific event but rather to the fulfillment of contractual obligations.

Basic medical insurance, also known as major medical insurance, is a type of health insurance that covers the cost of medical expenses associated with major illnesses or injuries. It is designed to provide coverage for high-cost medical treatments that can result in financial hardship for individuals and families. Basic medical insurance typically includes coverage for hospitalization, surgery, diagnostic tests, and other major medical expenses.

In the context of insurance, a "bind" or "binding authority" refers to the process of placing coverage with an insurer. Specifically, it is the act of entering into a legally binding agreement with an insurer to provide coverage for a particular risk or set of risks.

A cancellable health policy is a type of insurance policy that can be cancelled by the insurer at any time during the policy period. This means that the insurer can terminate the policy even if the policyholder has been paying premiums on time.

In insurance, a claim is a request made by the policyholder or the policyholder's beneficiary for compensation or reimbursement for a covered loss or expense. Essentially, a claim is a formal request for the insurance company to fulfill its obligations under the terms of the insurance policy.

A claims-made policy is a type of insurance policy that provides coverage for claims that are made while the policy is in force, regardless of when the incident that caused the claim occurred. This is in contrast to occurrence-based policies, which cover claims that arise from incidents that occurred during the policy period, regardless of when the claim is made.

Coinsurance, also known as percentage participation, is a cost-sharing mechanism in insurance where the policyholder and the insurance company share the cost of covered losses or expenses in a specified proportion. The policyholder pays a percentage of the total cost, and the insurance company pays the remaining percentage, up to the policy limit.

Community rating is a method used by insurance companies to determine the premium rates for health insurance policies based on the average risk of a group or community rather than the individual's risk. This means that everyone within a certain geographic area or demographic group pays the same premium regardless of their health status, age, gender, or other individual risk factors.

Compulsory states, also known as compulsory insurance, refer to states in the United States that require drivers to carry a minimum level of auto insurance coverage in order to operate a vehicle legally on the road. These laws are intended to ensure that drivers are financially responsible for any damages they may cause in an accident.

A contract of adhesion is a type of insurance contract in which one party, typically the insurer, has significantly more bargaining power than the other party, typically the policyholder. This type of contract is considered to be one-sided, as the policyholder typically has little to no input in negotiating the terms and conditions of the contract.

A contributory plan is an employee benefit plan where both the employer and the employee contribute to the cost of the plan. This type of plan is typically offered by employers as part of their employee benefits package and is designed to provide employees with additional benefits beyond their base salary.

A contributory plan eligibility period is a waiting period that employees must satisfy before becoming eligible to enroll in a contributory employee benefit plan. Contributory plans require both the employer and the employee to contribute to the cost of the plan, typically through payroll deductions.

Controlled business in insurance refers to the business that an insurance agent or broker places with the insurer that they are affiliated with. The term "controlled" implies that the agent or broker has some degree of control over the business that they place with their affiliated insurer.

Conversion privilege in insurance refers to the right of an individual to convert their group insurance policy to an individual policy, without the need to undergo medical underwriting or provide evidence of insurability. This privilege is typically provided to individuals who are covered under a group insurance plan, such as employees of a company or members of an association.

Coordination of benefits in insurance refers to a process in which two or more insurance policies work together to pay for a claim. It is designed to ensure that the total benefit paid by all the policies combined does not exceed the actual cost of the claim. Coordination of benefits is typically used when an individual is covered under multiple insurance policies, such as through their own policy and a spouse's policy, or through their own policy and a policy provided by their employer.

A corridor deductible in insurance is a type of health insurance policy that combines a high deductible health plan (HDHP) with a supplemental insurance policy. The corridor deductible is a range between the minimum deductible amount required for the HDHP and a higher deductible amount specified in the supplemental policy. The corridor deductible is designed to help individuals pay for healthcare expenses that fall within this range.

Death benefits for an employee's survivor is a type of insurance benefit that provides a lump-sum payment to the designated beneficiary(ies) of a deceased employee. The benefit is intended to help provide financial support to the employee's family or dependents in the event of the employee's death.

Declined risk in insurance refers to a situation where an insurance company denies coverage to an applicant due to their perceived high-risk profile. This means that the insurer considers the likelihood of a loss to be too high for them to take on the risk of providing coverage.

A deductible in insurance is an amount that the policyholder must pay out of pocket before their insurance coverage kicks in. In other words, the deductible is the portion of the loss that the policyholder is responsible for paying before the insurer is required to pay any benefits.

A deductible 'carry-over' is a feature in insurance policies that allows a policyholder to apply the amount of their deductible paid in the last few months of the policy year to the first few months of the following policy year. This feature is most commonly found in health insurance policies.

Demonstration plans in insurance refer to programs or projects that are designed to test new healthcare delivery models, payment systems, or benefits structures. These plans are usually implemented for a limited period of time and involve a specific group of people, such as a certain population or group of healthcare providers. The aim of demonstration plans is to assess the effectiveness of new approaches to healthcare delivery and payment, and to identify ways to improve the quality and affordability of healthcare.

Dental insurance is a type of insurance policy that provides coverage for dental care services, including preventive care, basic and major restorative procedures, and orthodontic treatment. Dental insurance policies may be offered by employers, purchased individually, or included as part of a health insurance plan.

Dependent coverage in insurance refers to the provision of insurance coverage for the dependents of the primary policyholder, such as their spouse, children, or other family members. Dependents can be covered under the same insurance plan as the primary policyholder, usually for an additional premium.

A dual choice provision is an insurance policy feature that allows the policyholder to choose between two different coverage options for a particular benefit. This provision is commonly found in group insurance plans, such as employer-sponsored health insurance plans. ‍

Eligibility and rate factors refer to the criteria used by insurance companies to determine whether an individual or group is eligible for coverage and the premiums that they will be charged.

In insurance, eligible members refer to individuals who are eligible to participate in an insurance plan or program. Eligibility criteria can vary depending on the type of insurance and the specific plan or program.

The Entire Contract Clause is a provision commonly found in insurance policies that specifies that the written policy, along with any attached endorsements, constitutes the entire agreement between the insurer and the policyholder. This clause serves to prevent disputes arising from oral representations or understandings that are not included in the written policy.

The Equal Costs / Equal Benefits Rule is a principle used in group insurance plans that requires the cost of the plan to be equal for all members, while the benefits provided by the plan are also equal for all members.

In insurance, estoppel refers to a legal doctrine that prevents an insurer from denying coverage to a policyholder based on its own actions or representations.

Expense loading in insurance refers to the additional amount charged by insurers to policyholders to cover their administrative expenses and other costs of doing business.

In insurance, the expense ratio is a financial metric that represents the amount of an insurer's expenses compared to its premium income. The expense ratio is calculated by dividing an insurer's expenses (including underwriting, policy issuance, and administrative costs) by its premium income. The resulting percentage represents the insurer's efficiency in managing its expenses.

In insurance, express authority refers to the authority given to an agent or broker in writing to perform specific acts or duties on behalf of the insurer. This type of authority is explicit and clearly stated, and it outlines the scope and limits of the agent's or broker's responsibilities.

First-dollar coverage in insurance refers to a type of insurance policy where the insurer agrees to cover the entire cost of the claim without requiring the policyholder to pay any deductible or coinsurance amount. In other words, the policyholder is not responsible for any out-of-pocket expenses before the insurer starts paying.

In insurance, a flat deductible is a specific type of deductible that is applied to certain types of insurance policies. A deductible is a specified amount of money that the policyholder is responsible for paying before the insurance coverage takes effect. With a flat deductible, the same amount is applied to each claim, regardless of the total amount of the claim.

The General Enrollment Period (GEP) is a period when individuals who didn't enroll in Medicare Part B during their Initial Enrollment Period (IEP) can enroll. The GEP occurs from January 1 to March 31 of each year, and coverage will start on July 1 of that year.

General policy exclusions in insurance refer to situations or conditions that are not covered by an insurance policy. These exclusions are explicitly stated in the policy documents and limit the insurance company's liability in case of a claim related to a particular event or condition.

In insurance, the gross annual premium refers to the total amount of premium paid by the policyholder for coverage over a one-year period before any deductions or credits are applied. It includes the base premium as well as any additional charges, such as fees for optional riders or increased coverage limits.

A group health plan sponsor is an organization that establishes and maintains a group health insurance plan for its employees. The group health plan sponsor can be an employer, a union, or another organization that provides health insurance to its members.

Group insurance is a type of insurance policy that provides coverage to a group of people, typically offered through an employer or other organization.

Group Insurance Premium Rates refer to the cost of an insurance policy paid by the policyholder for the coverage of a group of individuals. The premium rates for group insurance policies are typically lower than those for individual policies because the risk is spread across a larger pool of people

Group Long-Term Care (LTC) Coverage is a type of insurance that provides coverage for a group of people who require long-term care services, such as nursing home care or home health care.

Group risk selection in insurance refers to the process by which an insurer selects the groups of individuals it wishes to insure, based on various factors such as age, gender, health status, occupation, and other risk factors.

Guaranteed Issue is a provision in insurance that guarantees an applicant's acceptance into a health insurance plan regardless of their health status or medical history. In other words, the insurer cannot deny coverage to an individual based on pre-existing conditions, current health status, or other risk factors.

Hospital Indemnity Insurance, also known as Hospital Income Insurance, is a type of insurance that pays a predetermined amount of money for each day you are confined to a hospital.

An Impairment Rider is an optional provision added to an insurance policy that provides additional coverage for a specific pre-existing condition or impairment. It is designed to help individuals who may have a pre-existing medical condition that would otherwise exclude them from coverage or result in higher premiums.

In insurance, implied authority refers to an agent's authority to act beyond their express or written authority, as long as such actions are reasonably necessary to carry out their duties and responsibilities.

Indemnity is a term used in insurance to refer to the payment of compensation for a loss or damage suffered by an individual. In insurance, an indemnity policy is a type of policy that reimburses policyholders for losses that they have incurred.

An indemnity contract in insurance is an agreement between an insurer and an insured party, in which the insurer promises to reimburse the insured party for any losses or damages that they may incur.

The Initial Enrollment Period (IEP) in insurance refers to the period during which individuals are first eligible to enroll in a particular health insurance plan, such as Medicare or a private health insurance policy. It is typically a seven-month period that begins three months before the individual's 65th birthday and ends three months after their birthday month.

An initial premium in insurance refers to the first payment made by the policyholder to the insurance company when purchasing an insurance policy. This payment is usually made in advance of the coverage period and serves as a binding agreement between the policyholder and the insurer.

Insurable interest in insurance refers to the relationship between the policyholder and the insured object, which must exist at the time the policy is purchased. It is the legal right to insure something or someone based on the potential financial loss that would occur if the object or person is damaged or lost. The concept of insurable interest is an important principle of insurance and helps prevent fraud and speculation. 

An insurance policy is a legally binding contract between an insurance company and the policyholder. It outlines the terms and conditions of coverage, including what is covered, what is excluded, and how claims are handled. The policy also includes details on premiums, deductibles, and limits of liability.

Insurance policy underwriting is the process of evaluating and assessing the risk of an applicant and determining whether to offer insurance coverage to that person.

An integrated deductible is a type of health insurance plan design that combines deductibles for both medical and prescription drug expenses

In insurance, an irrevocable beneficiary is a beneficiary who has been designated to receive the proceeds of an insurance policy and whose rights to receive those proceeds cannot be changed without their consent.

In insurance, the loss ratio is the ratio of the total amount of claims paid out by an insurance company to the total amount of premiums collected. It is a measure of the profitability of an insurance company's underwriting activities.

Major Medical Insurance is a type of health insurance policy that offers broad coverage for a wide range of medical expenses, including hospitalization, surgery, and other high-cost medical treatments.

Managed care is a system of healthcare delivery that aims to improve quality, reduce costs, and increase efficiency by managing the healthcare of its members through various means, such as preventive care and coordination of services.

The Medical Information Bureau (MIB) is a not-for-profit organization that collects and stores medical information on behalf of its member insurance companies. The MIB is used by insurance companies as a tool to assess an applicant's risk and eligibility for life, health, and disability insurance. The MIB maintains a database of medical information that is accessed by member companies when an individual applies for insurance coverage.

Medical expense benefits refer to the coverage provided by health insurance policies that pay for medical expenses incurred by the policyholder. These benefits can cover a wide range of medical services, including hospital stays, doctor visits, prescription drugs, diagnostic tests, and other medical treatments.

In insurance, the morbidity rate refers to the frequency of illness or disease within a particular population. More specifically, it is the rate at which individuals within a specific group become ill or develop a particular disease over a given period of time. The morbidity rate is an important factor in determining insurance rates and policies.

Mortality rate in insurance is the measure of the number of deaths in a specific population over a particular period. It is a critical factor in determining the risk associated with a life insurance policy and is used to calculate the premiums charged by insurers.

Mortality and morbidity tables are statistical tools used by insurance companies to estimate the probability of death or illness among a given group of people. These tables provide a way for insurers to assess the risks associated with providing coverage to individuals or groups, and to determine appropriate premiums.

In the context of insurance, net premium refers to the actual amount paid by the policyholder to an insurer in exchange for coverage, after adjustments have been made for various factors such as expenses, risks, and expected losses.

A non-contributory plan eligibility period is a waiting period that employees must satisfy before becoming eligible for coverage under a non-contributory insurance plan. During this period, employees do not contribute any premiums towards the insurance policy. Here are some key features of a non-contributory plan eligibility period:

Non-occupational coverage in insurance refers to insurance policies that provide benefits for accidents or illnesses that occur outside of the workplace. These types of policies are designed to cover individuals for injuries or illnesses that occur during their personal time, such as while playing sports or engaging in other leisure activities.

Non-routine dental care refers to dental procedures that are not considered preventive or routine in nature. These procedures are typically more complex and may require specialized skills or equipment. Examples of non-routine dental care include root canals, oral surgery, dentures, and crowns.

A non-cancellable health policy is a type of insurance policy that provides coverage for an individual's medical expenses and guarantees that the policy will not be cancelled by the insurer, except in certain limited circumstances.

A non-contributory plan in insurance is a group insurance plan where the employer pays the full cost of the plan for its employees without requiring any contribution from them. In other words, the employees do not have to pay any premiums or make any contributions towards the plan.

n insurance, a non-medical application is a type of insurance application that does not require the applicant to undergo a medical examination as part of the underwriting process. Instead, the insurer will make a determination based on information provided by the applicant, such as their age, gender, medical history, lifestyle, occupation, and other factors that may affect their risk profile. 

Non-public personal information (NPI) refers to any sensitive information about an individual that is not available to the general public. In the context of insurance, NPI can include a person's Social Security number, date of birth, medical records, financial information, and other personally identifiable information. 

An occurrence policy is a type of insurance policy that provides coverage for claims that arise from incidents or events that occur during the policy period, regardless of when the claims are actually made. This means that even if a claim is made years after the policy has expired, if the incident occurred during the policy period, it would still be covered.

In insurance, partial disability refers to a condition where an individual can perform some, but not all of their job duties, due to an illness or injury. Typically, partial disability benefits are paid as a percentage of the total disability benefits and are intended to provide financial support to the individual while they recover and return to work.

In insurance, a physical hazard is any tangible characteristic of property, people, or activities that increases the probability of loss due to a peril. These hazards are related to the physical condition of the property or people and can contribute to the likelihood and severity of a loss.

Pre-admission certification, also known as pre-authorization or pre-certification, is a process in insurance where a healthcare service or treatment plan needs to be approved in advance by the insurance provider. The process helps to ensure that the proposed medical service or treatment is medically necessary, appropriate, and covered under the policy terms.

A pre-existing condition in insurance refers to any medical condition, injury, or illness that a person has before they enroll in a health insurance plan. Pre-existing conditions can range from chronic conditions such as diabetes, asthma, or heart disease, to more acute conditions such as a recent surgery or injury.

In insurance, a preferred risk is an individual, property, or group that is considered less risky to insure than average. As a result, they are eligible for lower premiums or more favorable policy terms than those offered to higher-risk individuals or groups.

In insurance, a premium is the amount of money an insured person or organization pays to an insurance company for coverage under a policy. It is typically paid either on a monthly, quarterly, or annual basis. The premium charged by the insurance company is based on the risk factors associated with the insured person or organization. The higher the risk, the higher the premium.

In insurance, a premium mode refers to the frequency at which the policyholder pays their insurance premiums. This can include options such as monthly, quarterly, semi-annually, and annually. The premium mode affects the total amount of premium paid, as some insurers offer discounts for choosing a less frequent premium mode.

Prepaid plans in insurance are health plans that require the payment of a fixed amount in advance to cover specific medical services. These plans are often used as an alternative to traditional health insurance and are particularly popular among people who don't have employer-sponsored insurance or who can't afford the premiums for traditional insurance plans.

Prescription drug coverage is a type of health insurance policy that covers the cost of prescription drugs. It can be a standalone policy or included as part of a comprehensive health insurance plan.

Presumption of disability is a legal term that is commonly used in disability insurance policies. It refers to the assumption made by an insurance company that an insured person is disabled, based on certain qualifying events or conditions. The presumption of disability may be triggered by specific events, such as a catastrophic injury or illness, or by the occurrence of certain medical conditions.

Primary Insurance Amount (PIA) is a term used in Social Security to refer to the amount of money a person is entitled to receive as their monthly retirement, disability, or survivor benefit.

In insurance, a primary insurer is the insurance company that directly provides insurance coverage to an individual or entity, as opposed to a reinsurer who provides insurance to the insurance company.

In insurance, the term "principal" can refer to different things depending on the context.

The Principal Sum, also known as the Death Benefit, is the amount of money paid to the beneficiary of a life insurance policy upon the death of the insured. This is the amount agreed upon by the insured and the insurance company at the time the policy is issued.

Prior Acts Coverage, also known as Retroactive Coverage, is an insurance policy provision that covers incidents or claims that occurred before the policy's effective date, but were discovered or filed during the policy period. This coverage is particularly relevant for claims-made policies, which only provide coverage for claims that are made during the policy period, as opposed to occurrence-based policies, which provide coverage for incidents that occurred during the policy period regardless of when the claim is made.

A recurrent disability in insurance refers to a situation where an insured person has already received benefits for a disability and later experiences a recurrence of the same or related disability. Recurrent disabilities are typically covered under disability insurance policies, which provide financial protection to policyholders who are unable to work due to illness or injury.

Rehabilitation benefits in insurance refer to the coverage provided for various medical and vocational rehabilitation services needed to help an individual recover from an injury or illness. These benefits are designed to help an insured person get back to their daily activities as quickly as possible, by providing them with the necessary care and support.

A reimbursement approach in insurance refers to the method by which an insurance company pays its policyholders for the covered expenses incurred. Under this approach, the policyholder is responsible for paying the healthcare provider upfront, and then submits a claim to the insurance company for reimbursement.

Reinsurance refers to the practice of an insurance company transferring a portion of the risk it assumes in exchange for a premium payment to another insurance company, known as a reinsurer. In other words, reinsurance is a way for insurance companies to mitigate their risk by sharing it with another company.

A reinsurance agreement is a contract between an insurance company and a reinsurer that transfers some of the risk of loss from the insurer to the reinsurer. The reinsurer agrees to pay the insurer for a portion of the losses the insurer incurs in exchange for a premium.

A reinsurer is an insurance company that provides coverage to other insurance companies, known as ceding companies, to help manage their risks. Reinsurers essentially insure the risk that the ceding company has taken on, which helps the ceding company to spread its risk and stabilize its underwriting results. Reinsurers may provide coverage for a specific type of risk, such as catastrophe coverage, or may offer more general coverage.

In insurance, reserves refer to the funds that insurance companies set aside to cover expected future claim payments. These reserves are a crucial aspect of an insurer's financial stability and solvency, ensuring that the company has sufficient funds to meet its obligations to policyholders.

In insurance, a retroactive date is a specified date on or before which an insured event must have occurred in order to be covered by an insurance policy. In other words, the retroactive date sets the beginning of the period for which the policy will provide coverage.

In insurance, a revocable beneficiary is a beneficiary of a life insurance policy or annuity contract whose designation as a beneficiary can be changed by the policy owner or contract holder at any time without the beneficiary's consent. This means that the policy owner has the flexibility to change the beneficiary designation if their circumstances change or if they want to leave the death benefit to someone else.

In insurance, the right of assignment refers to the policy owner's ability to transfer their ownership rights in the policy to another individual or entity. This allows the policy owner to sell, gift, or assign their policy to another party, who then becomes the new owner of the policy and assumes all the rights and obligations that come with it.

Routine dental care, also known as preventive care, refers to dental services that are meant to maintain oral health and prevent dental problems. These services are typically covered by dental insurance plans and include regular check-ups, cleanings, and x-rays.