Would you like to receive the Freedom Connection?

To receive our monthly email newsletter containing news updates, general interest items, and Freedom Services staff profiles, please contact our Communications Department.

Glossary

The following list contains definitions of basic Standard Insurance Terms. Information contained is general in nature and is not designed or intended to be specific.

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

Accident Insurance: A form of health insurance against loss by bodily injury.

Accidental Death: Insurance coverage for death due to an accident.

Actuary: A person trained in the mathematics of insurance and risk management.

Additional Insured: A person or firm or corporation other than the named insured on a policy.

Adverse Selection: Selection against the insurance company; the tendency of more poor risks to buy and maintain insurance than good risks.

Agents: Two types of agents sell insurance: independent agents are self-employed business people who typically represent more than one insurance company and are paid on a commission basis; exclusive agents represent only one insurance company and may be salaried or work on a commission basis.

Annuity: A life insurance company contract that pays a periodic income benefit for a specified period of time.

Application: A signed statement by a prospective insured that becomes a part of the insurance contract.

Assignment: The passing of beneficial rights from one party to another.

Assigned Risk: A risk which, because of state law or otherwise, is handled through the state and assigned to companies.

Assumed Liability: Liability that would not rest upon a person except that they have accepted responsibility by contract. This is also known as contractual liability.

 

B

Basic Rate: The manual rate that is adjusted to compensate the individual circumstances of the risk.

Beneficiary: Designation by the owner of a life insurance policy indicating to whom the proceeds are to be paid upon the insured's death or when an endowment matures.

Brand Name Drug: A drug trademarked by a specific drug manufacturer. Brand name drugs tend to be more expense than generic drugs, though not always.

 

C

Cancelable Policy: A policy that may be terminated by the company or the insured by sending proper notification to the other party according to terms of the policy.

Carrier: An insurance company that "carries" the insurance. The terms "insurance company" or "insurer" are also used.

Cash Surrender Value: Money the policyholder is entitled to receive from the insurance company upon surrendering a life insurance policy containing a cash value clause.

Certificate of Creditable Coverage: A document provided by your health plan that verifies your coverage under that plan. Certificates of creditable coverage will usually be provided automatically when you leave a health plan. Also see Creditable Coverage.

Claim: A formal request for payment of a loss under an insurance contract or bond. The actual amount of the final settlement.

Claimant: One who seeks reimbursement for loss under the terms and conditions of the insurance contract.

Clause: A section or paragraph in an insurance policy that explains, defines or clarifies the conditions of coverage.

COBRA (Consolidated Omnibus Budget Reconciliation Act): A federal law which requires group health plans sponsored by employers with 20 or more employees to offer continuation of coverage to certain individuals and their dependents when they lose coverage under the group health plan. Also see State Continuation Coverage.

Coinsurance: In health insurance, a provision that the insured and insurance company will share covered losses in agreed proportion, usually a percentage.

Consumer Driven Health Care: Health plans that offer limited employer contributions, high deductibles and are usually teamed with tax-favored savings vehicles (HSA, HRA, FSA).

Continuous Coverage: Defined by HIPAA as health insurance coverage that is not interrupted by a break of 63 or more days in a row. Also see HIPAA.

Conversion Privilege: A right granted to certain group health insured members which allow them to obtain an individual policy (upon leaving the group) regardless of physical condition.

Copayment (Copay): The portion, usually a fixed dollar amount, of a medical bill that a patient pays. The insurer pays the rest.

Cover: A contract of insurance; to include within the coverage of a contract of insurance.

Coverage: The scope of protection provided under the contract of insurance.

Creditable Coverage: Health insurance coverage under any of the following: a group health plan; an individual health plan; Medicare; Medicaid; CHAMPUS (health coverage for military personnel, retirees, and dependents); the Federal Employees Health Benefits Program; Indian Health Service; the Peace Corps; or a state health insurance high risk pool. Previous Creditable Coverage can be applied to pre-existing condition waiting periods as stated in HIPAA legislation. Also see Continuous Coverage, Group Health Plan, and Individual Health Plan.

 

D

Declaration Page: The insurance policy page which lists the insurance company, its address, name of the policyholder, starting and ending dates of coverage and the actual coverage given in the contract, including the amounts.

Deductible: The amount of loss paid by the policyholder before the insurance policy benefits become payable.

Dental Insurance: Coverage for dental services under a group or individual insurance policy.

Dependent Care Reimbursement Account: A benefit plan that allows fees paid to have dependents cared for so you and your spouse (if married) can be at work or school. Expenses are reimbursed through this tax-favored account. Eligible dependents include children under age 13 or dependents over the age of 13 who are mentally or physically unable to care for themselves.

Disability: A condition that curtails to some degree a person's ability to carry on their normal pursuits. A disability may be partial or total, and temporary or permanent.

Disability Insurance: A type of insurance that pays a monthly income to the policyholder when he or she is unable to work because of illness or accident.

Disclosure: The duty of the insured and their broker to tell the Underwriter every material circumstance before acceptance of the risk.

 

E

Effective Date: The date on which an insurance policy goes into effect.

Eligible Expenses: These are expenses which the Plan will pay all or part of the cost.

Enrollment Period: The period all eligible employees and their dependents can sign up for coverage under an employer’s group health plan. Also see Group Health Plan and Special Enrollment Period.

ERISA (Employee Retirement Income Security Act of 1974): A federal law that established rules and regulations to govern private health and welfare plans.

Evidence of Insurability: Any statement of a person's physical condition, occupation, etc., affecting his acceptance for insurance.

Exclusions: Specified hazards a policy will not provide benefit payments for (often called Exceptions).

Experience: The loss record of an insured, class of coverage, or of an insurance company.

Experience Rating: Determination of the premium rate for an individual risk made partially or wholly on the basis of past claim experience.

Explanation of Benefits: A statement sent to insured that explains what services were or were not covered, and the amount the insurer or HMO paid for the services.

Exposure: State of being subject to the possibility of loss

 

F

Family and Medical Leave Act (FMLA): A federal law, applying to employers of 50 or more, that guarantees up to 12 weeks of job protected leave for certain employees when they need to take time off due to serious illness, to have or adopt a child, or to care for another family member. When you qualify for leave under FMLA, you can continue coverage under your group health plan.

Flexible Spending Account: A benefit plan that allows employees to deduct certain expenses from their pay prior to paying taxes. Insurance premiums, health care expenses not covered by insurance or any other plan and dependent care costs incurred while at work can be reimbursed.

Formulary Drugs: List of pharmaceuticals that the managed care organization or insurance carrier will cover.

Fully Insured Group Health Plan: Health insurance purchased by an employer from an insurance company. Also see Self-Insured Group Health Plan.

 

G

General Exclusion Clause: A clause that specifies risks are excluded, irrespective of the risks covered elsewhere in the wording.

Generic Drugs: Drugs approved by the Food and Drug Administration as having the same effectiveness, quality, safety, and strength as their brand name counterparts. Generic drugs generally cost less than brand name drugs.

Genetic Information: Information about family history or genetic test results indicating your risk of developing a health condition.

Good Faith: A basic principle of insurance. The insured and his broker must disclose and truly represent every material circumstance to the underwriter before acceptance of the risk. A breach of good faith entitles the Underwriter to void the contract.

Group Health Plan: Health insurance (usually sponsored by an employer, union or professional association) that covers at least 2 employees or the self-employed. Also see Fully Insured Group Health Plan and Self-Insured Group Health Plan.

Guaranteed Issue: A requirement that health plans must permit you to enroll regardless of your health status, age, gender or other factors that might predict your use of health services.

Guaranteed Renewability: A feature in health plans that means your coverage cannot be canceled because you get sick. HIPAA requires certain health plans to be guaranteed renewable.

 

H

Health Coverage Tax Credit (HCTC): A federal program that can help pay for eligible individuals' health plan premiums. Eligible individuals must be: receiving Trade Readjustment Allowance benefits (TRA); or will receive TRA benefits once unemployment benefits are exhausted; or receiving benefits under the Alternative Trade Adjustment Assistance (ATAA) program; or age 55 or older and receiving benefits from the Pension Benefit Guaranty Corporation (PBGC).

Health Insurance: Protection against the costs of hospital and medical care arising from an illness or injury (sometimes called Accident & Sickness Insurance).

Health Plan Year: That period during which your health plan coverage is in effect. Group health plans can begin at the start of any month.

Health Reimbursement Arrangement (HRA): An employee benefit plan designed to help offset unreimbursed health care expenses incurred by the employee (and dependents). The employer provides funds. After the expenses are incurred, the employee submits a claim for reimbursement.

Health Savings Account (HSA): A tax favored savings account that must be used with a qualified high deductible health insurance policy. The savings account can be used to pay for medical, dental, prescription drugs, eyewear and other IRS qualified medical expenses.

Health Status: Refers to your medical condition (both physical and mental illnesses), claims experience, receipt of health care, medical history, genetic information, evidence of insurability (including conditions arising out of acts of domestic violence) and disability. Also see Genetic Information.

High-Deductible Health Plan (HDHP): A health plan product that provides insurance coverage. Health Savings Account and Medical Savings Account legislation have specific requirements for a HDHP to be “qualified.”

HIPAA (Health Insurance Portability and Accountability Act): Legislation designed to help people buy and keep health insurance, even when they have serious health conditions.

HIPAA Eligible: Status you attain once you have had 18 months of continuous creditable health coverage. To be HIPAA eligible, you also must have used up any COBRA or state continuation coverage; you must not be eligible for Medicare or Medicaid; you must not have other health insurance; and you must apply for individual health insurance within 63 days of losing your prior creditable coverage. Also see COBRA, Continuous Coverage, Creditable Coverage, and State Continuation Coverage.

Health Maintenance Organization (HMO): A type of health insurance plan that provides health care within their network for a monthly payment set in advance.

Hold-Harmless Agreement: A contractual arrangement where one party assumes the liability inherent in a situation relieving the other party of responsibility.

 

I

In-Network: "In-network" refers to health care professionals and facilities that are members of the provider network. They are usually listed as "participating providers" in membership materials.

Indemnify: To restore the victim of a loss in whole or in part by payment, repair or replacement.

Independent Contractor: One who agrees to perform according to a contract and who is not an employee.

Individual Health Plan: Policies purchased by individuals who are not connected to an employer group.

Insurable Risk: A risk which meets most of the following requisites: the loss insured against must be defined; it must be accidental; it must be large enough to cause hardship to the insured; it must belong to a homogenous group of risks large enough to make losses predictable; it must not be subject to the same loss at the same time as a large number of other risks; the insurance company must be able to determine a reasonable cost for the insurance; the insurance company must be able to calculate the chance of loss.

Insurance: A system to protect persons, groups or businesses against the risks of financial loss by transferring the risks to a large group who agree to share the financial losses in exchange for premium payments.

Insured: The person whose risk is transferred and shared; the party the insurer agrees to indemnify for losses, provide benefits for, or render services to.

Insurer: The company or group offering protection through the sale of an insurance policy to an insured; the party to an insurance agreement who undertakes to indemnify for losses, provide benefits, or render services.

 

J

 

 

K

Known Loss: A loss known to one or both parties when a broker and Underwriter are negotiating to place insurance.

 

L

Large Group Health Plan: A plan with more than 50 employees on the plan.

Late Enrollment: Enrollment in a health plan at a time other than at the open or special enrollment period. If you are admitted as a late enrollee, you may be subject to a longer pre-existing condition exclusion period. Also see Special Enrollment Period.

Liability: The responsibility of one person to another, enforceable in law.

Life insurance: Protection against the death of the insured in the form of payment to a designated beneficiary, typically a family member or business.

Lifetime Maximum Limits: The maximum amount of money that the insurer will pay for care over the member’s lifetime.

Long-Term Insurance (LTC): Protection against the costs of health services provided in non-hospital facilities for chronically ill or disabled individuals. May include custodial care, maintenance or rehabilitation care for chronic, debilitating conditions.

Look Back: The maximum length of time immediately prior to enrolling in a health plan, which can be examined for evidence of pre-existing conditions. Also see Pre-existing Condition.

 

M

Malpractice Insurance: A professional liability coverage that insures physicians and other specialists against suits alleging their negligence.

Managed Care Plans: A health insurance plan that can limit coverage to health care provided by doctors or hospitals that work for or contract with the plan. Often managed care plans will require you to get permission (a "referral") from your family doctor before you get care from a specialist in their network.

Material Fact: Anything affecting an insurance contract significant enough to change the agreement between the insurance company and the policyholder.

Maximum Out-of-Pocket Expenses: The highest amount you may pay each year for eligible medical expenses. Once this maximum is reached the Plan pays 100% of eligible expenses.

Medicaid: A federal/state program that helps pay for health care for disabled and low-income families with children.  All states have Medicaid programs though eligibility levels and covered benefits will vary.

Medical Flexible Spending Account: A Medical Reimbursement Account allows you to set aside part of your salary each pay period on a pretax basis to pay for out-of-pocket medical, dental and vision care expenses not covered by a benefits plan.

Medically Necessary: Services or supplies necessary for and appropriate to the diagnosis, treatment, cure or relief of a health condition, illness, injury, disease within generally accepted standards of medical care in the community, not solely for the convenience of the insured, the insured’s family or the provider.

Medicare: A federal health care program for people age 65 and over, and for the disabled.

Medigap: Insurance coverage sold by private insurers to supplement federal insurance benefits and expenses not covered under the federal Medicare program.

Mini COBRA: State benefit continuation laws similar to the Federal COBRA Law. Also see COBRA and State Continuation Coverage.

Minimum Premium: The smallest premium an insurance company will accept for writing a particular policy or bond for a designated period.

Misrepresentation: An incorrect statement made about a material fact that, if made deliberately and with intent to deceive, could cause the insurance contract to become null and void.

 

N

Named Insured: Any person, firm or corporation, or any member thereof, specifically designated by name as insured(s) in a policy.

Negligence: Failure to use the degree of care expected from a reasonable and prudent person.

Network: A group of providers (physicians, hospitals, pharmacies and other health care providers) that contract with a health care organization to provide services to its members.

Nondiscrimination: Federal and state laws mandating that coverage under a group health plan cannot be denied or restricted, nor can a higher premium be charged based on your health status. Also see Group Health Plan and Health Status.

Nonformulary Drugs: Drugs not listed on your medical plan’s formulary listing. Nonformulary drugs often include more expensive or newer brand name drugs or uncommonly prescribed drugs.

Notice of Loss: Written notice of a loss to the insurance company as outlined in the conditions of the insurance policy.

 

O

Occurrence Coverage: A policy providing liability coverage only for injury or loss that occurs during the policy period, regardless of when the claim is actually made.

Open-Access Plan: A health plan that allows enrollees to see any provider within the network without a referral from a primary care provider.

Out-of-Network: Health care professionals and facilities that are not members of a contracted provider network.

Out-of-Pocket Maximum: Total dollar amount an insured will be required to pay for covered medical services during a specified period, such as one year.

Over-the-Counter (OTC): Drugs or medications that are available without a prescription.

 

P

Package Policy: An insurance policy including two or more types of coverage in the same contract.

Payroll Audit: An examination of the insured's payroll records by a representative of the insurance company to determine the premium due on a policy.

Pension Benefit Guaranty Corporation (PBGC): A federal government corporation that guarantees payment of basic pension benefits earned by workers and retirees participating in private sector defined benefit pension plans.

Policy: A contract effecting insurance including all causes, riders, endorsements and papers attached.

Policy Period: The period during which the policy contract affords protection.

Post-Tax Benefits: Benefits that are paid for with post-tax dollars.

Precertification Authorization: An insurance requirement that physicians submit a treatment plan and an estimated bill prior to providing treatment. This allows the insurer to evaluate the appropriateness of the procedures, and lets the insured and the physician know in advance which procedures are covered and what benefits will be paid.

Pre-existing Condition (Group Health Plans): Any condition (either physical or mental) for which medical advice, diagnosis, care or treatment was recommended or received within the period immediately preceding enrollment in a health plan. Pregnancy cannot be counted as a pre-existing condition. Newborns, newly adopted children and children placed for adoption covered within 30 days cannot be subject to pre-existing condition exclusions.

Pre-existing Condition (Individual Health Plans): Any condition for which medical advice or treatment was recommended or received within a specified period immediately preceding the effective date of individual health insurance policy. Pregnancy and genetic information may be treated as a pre-existing condition.

Pre-existing Condition Exclusion Period: The time during which a health plan will not pay for covered care relating to a pre-existing condition. Also see Pre-Existing Condition.

Preferred Provider Organization (PPO): A group of health care providers that contract with an employer or insurance company to provide medical care to a specified group of patients.

Premium: The payment for an insurance policy, usually paid periodically (annually, semi-annually, quarterly or monthly).

Pretax Benefits: Benefits paid for with pretax dollars (before taxes are calculated). Pretax benefits lower your taxable income.

Primary Care Physicians: Physicians who practice medicine in the areas of family practice, internal medicine, pediatrics and OB/GYN.

 

Q

Qualified High Deductible Health Plan: A high deductible health plan that meets requirements of Health Savings Account or Medical Savings Account legislation.

Qualified Plan: A plan that allows contributions by the employer to be deductible from employees’ taxable income, and provides employees' future benefits not be considered as taxable income in the year they are made.

Qualified Status Change: A life event (e.g., getting married, divorced, or having or adopting a child), which allows you to make certain changes to your medical and insurance benefit coverages, under IRS regulations.

 

R

Rebate: A reduction of a premium.

Reimbursement: Payment of money related to the amount of loss to the insured upon the occurrence of a defined loss.

Reinstatement: Putting a lapsed policy back in force.

Reinsurance: An insurance company procures insurance from another insurer to protect against loss or liability from the original insurance.

Retroactive Date: Date on a "claims made" liability policy that triggers the beginning of insurance coverage.

Rider: An endorsement to an insurance policy that modifies clauses and provisions of the policy, adding or excluding coverage(s).

Risk: The term is used to define causes of loss covered by a policy.

 

S

Schedule: A list of specified amounts payable for surgical procedures, dismemberments, ancillary expenses or the like in health insurance policies.

Self-Insured Group Health Plan: Plans set up by employers who set aside funds to pay their employees’ health claims. Self-insured plans are regulated by the U.S. Department of Labor.

Small Group Health Plan: Plans with at least two, but no more than 50 eligible employees.

Special Enrollment Period: A time, triggered by certain specific events including family status changes, during which you and your dependents must be permitted to sign up for coverage under a group health plan. Special enrollment periods must last at least 30 days. Also see Late Enrollment.

Specified Disease Insurance: A policy that provides stated benefits, usually of large amounts, toward the expense of treatment of the disease or diseases named in the policy.

State Continuation Coverage: State enacted benefit continuation laws similar to COBRA. Also see COBRA, Mini COBRA.

Stop Loss: Any provision in a policy designed to limit a company's loss at a given point. A type of reinsurance designed to transfer the loss from the ceding company to the reinsurer at a predetermined point.

Subrogation: The legal process by which an insurance company seeks from a third party who may have caused the loss, recovery of the amount paid to the insured.

 

T

Tail: This term has been used to describe both the exposure that exists after expiration of a policy and the coverage that may be purchased to cover that exposure.

Temporary Assistance for Needy Families (TANF): A federal program that provides benefits to low-income families with children.

Term Insurance: Life insurance issued for a stated temporary period of time.

Trade Adjustment Assistance (TAA) Program: A federal program that provides aid to workers who lose their job or whose hours of work and wages are reduced as a result of increased imports. The TAA Program offers benefits and re-employment services.

 

U

U.S. Department of Labor: A department of the federal government that regulates labor issues including employer provided health benefit plans.

Under-Insurance: A condition in which not enough insurance is carried to cover the insurable value.