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finance 401

insurance

QuestionAnswer
Traditional net cost method: Traditional method of determining cost to an insured of a life insurance policy, determined by subtracting the total dividends received and cash value at the end of a period from the total premiums paid during that period.
Interest-adjusted method: Method of determining cost to an insured of a life insurance policy that considers the time cost of money by applying an interest factor to each element of cost. See also Net payment cost index; Surrender cost index.
Surrender cost index: Method of measuring the cost of an insurance policy to an insured if the policy is surrendered at the end of some specified time period. The time value of money is taken into consideration.
Net payment cost index: Method of measuring the cost of an insurance policy to an insured if death occurs at the end of some specified time period. The time value of money is taken into consideration.
Certified Financial Planner (CFP): Professional who has attained a high degree of technical competency in financial planning and has passed a series of professional examinations.
Chartered Financial Consultant (ChFC): An individual who has attained a high degree of technical competency in the fields of financial planning, investments, and life and health insurance and has passed eight professional examinations administered by The American College.
Chartered Life Underwriter (CLU): An individual who has attained a high degree of technical competency in the fields of life and health insurance and has passed eight professional examinations administered by The American College.
Benefit period: A period of time, typically one to three years, during which major medical benefits are paid after the deductible is satisfied. When the benefit period ends, the insured must then satisfy a new deductible in order to establish a new benefit period.
Calendar-year deductible: Amount payable by an insured during a calendar year before a group or individual health insurance policy begins to pay for medical expenses.
Coinsurance provision: Common provision in commercial property insurance contracts that requires the insured to maintain insurance on the property at a stated percentage of its actual cash value or its replacement cost.
Elimination period (waiting period): Waiting period in health insurance during which benefits are not paid. Also a period of time that must be met before disability benefits are payable.
Grace period: Period of time during which a policyowner may pay an overdue life insurance premium without causing the policy to lapse.
Guaranteed renewable: Continuance provision of a health insurance policy under which the company guarantees to renew the policy to a stated age, and whose renewal is at the insured's option. Premiums can be increased for broad classes of insureds.
Health savings account (HSA): A tax-exempt trust or custodial account established exclusively for the purpose of paying qualified medical expenses of the account beneficiary who is covered under a high-deductible health insurance plan. HSAs receive favorable tax treatment.
Long-term-care insurance: A form of health insurance that pays a daily benefit for medical or custodial care received in a nursing facility or hospital.
Major medical insurance: Health insurance designed to pay a large proportion of the covered expenses of a catastrophic illness or injury.
Noncancellable: Continuance provision in a health insurance policy stipulating that the policy cannot be cancelled, that the renewal is guaranteed to a stated age, and that the premium rates cannot be increased.
Optionally renewable policy: The insurer has the right to terminate a policy on any anniversary date, or in some cases, on a premium date.
Partial disability: Inability of the insured to perform one or more important duties of his or her occupation.
Preexisting condition: Physical or mental condition of an insured that existed prior to issuance of a policy.
Reasonable and customary charges: Payment of physicians' normal fees if they are reasonable and customary, such as a fee that does not exceed the 80th or 90th percentile for a similar procedure performed by physicians in the area.
Reinstatement provision: Provision of a health insurance policy that allows the insured to reinstate a lapsed policy by payment of premium either without an application or with an application.
Residual disability: Residual disability means that a proportionate disability-income benefit is paid to an insured whose earned income is reduced because of an accident or illness.
Stop-loss limit: Modification of the coinsurance provision in major medical plans that places a dollar limit on the maximum amount that an individual must pay.
Time limit on certain defenses provision: Provision in an individual health insurance policy that prohibits the company from canceling the policy or denying a claim on the basis of a preexisting condition or misstatement in the application
Total disability: Condition of an insured that makes him or her completely unable to perform all duties of the insured's own occupation or unable to perform the duties of any occupation for which the insured is reasonably fitted by training, education, and experience.
Waiver-of-premium provision: Benefit that can be added to a life insurance policy providing for waiver of all premiums coming due during a period of total disability of the insured.
Blue Cross plans: Typically nonprofit, community-oriented prepayment plans that provide health insurance coverage primarily for hospital services.
Blue Shield plans: Typically nonprofit prepayment plans that provide health insurance coverage mainly for physicians's services.
Cafeteria plan: Generic term for an employee benefit plan that allows employees to select among the various group life, medical expense, disability, dental, and other plans that best meet their specific needs. Also called flexible benefit plans.
Calendar-year deductible: Amount payable by an insured during a calendar year before a group or individual health insurance policy begins to pay for medical expenses.
Capitation fee: A method of payment in managed care plans by which a physician or hospital receives a fixed annual payment for each plan member regardless of the frequency type or type of service provided.
Coinsurance provision: Common provision in commercial property insurance contracts that requires the insured to maintain insurance on the property at a stated percentage of its actual cash value or its replacement cost.
Comprehensive major medical insurance: Type of group plan combining basic plan benefits and major medical insurance in one policy.
Contributory plan: Group life, health, or pension plan in which the employees pay part of the premiums.
Coordination-of-benefits provision: Provision in a group medical expense plan that prevents over-insurance and duplication of benefits when one person is covered under more than one group plan.
Corridor deductible: Major medical plan deductible that integrates a basic plan with a supplemental group major medical expense policy.
Defined-contribution plan: Type of pension plan in which the contribution rate is fixed but the retirement benefit is variable.
Experience rating: (1) Method of rating group life and health insurance plans that uses the loss experience of the group to determine the premiums to be charged. (2) As applied to property and liability insurance, the class or manual rate is adjusted upward
Group life insurance: Life insurance provided on a number of persons in a single master contract. Physical examinations are not required, and certificates of insurance are issued to members of the group as evidence of insurance.
Group term life insurance: Most common form of group life insurance. Yearly renewable term insurance on employees during their working careers.
Group universal life products (GULP): Universal life insurance plans sold to members of a group, such as individual employees of an employer.GULP expense charges are generally lower than those assessed against individual policies.
Health maintenance organization (HMO): Organized system of health care that provides comprehensive health services to its members for a fixed prepaid fee.
Health savings account (HSA): A tax-exempt trust or custodial account established exclusively for the purpose of paying qualified medical expenses of the account beneficiary who is covered under a high-deductible health insurance plan. HSAs receive favorable tax treatment.
Hospital expense insurance: Individual health insurance that pays for medical expenses incurred while in a hospital.
Major medical insurance: Health insurance designed to pay a large proportion of the covered expenses of a catastrophic illness or injury.
Managed care: A generic name for medical expense plans that provide covered services to the members in a cost-effective manner.
Master contract: Formed between the insurer and group policy-owner for the benefit of the individual members.
Noncontributory plan: Employer pays the entire cost of a group insurance or private pension plan. All eligible employees are covered.
Nonoccupational disability: The accident or illness must occur off the job.
Point-of-service plan (POS): Establishes a network of preferred providers. If patients see a preferred provider, they pay little or nothing. Outside provider care is covered, but at a substantially higher deductible and copayment.
Preexisting condition: Physical or mental condition of an insured that existed prior to issuance of a policy.
Probationary period: Waiting period of one to six months required of an employee before he or she is allowed to participate in a group insurance plan.
Reasonable and customary charges: Payment of physicians' normal fees if they are reasonable and customary, such as a fee that does not exceed the 80th or 90th percentile for a similar procedure performed by physicians in the area.
Self-insurance: Retention program in which the employer self-funds or pays part or all of its losses.
Service benefits: Health insurance benefits that pay hospital charges or payment for care received by the insured directly to the hospital or providers of care. The plan provides service rather than cash benefits to the insured.
Stop-loss limit: Modification of the coinsurance provision in major medical plans that places a dollar limit on the maximum amount that an individual must pay.
Supplemental major medical insurance: Group health insurance plan that supplements the benefits provided by a basic medical expense plan. It provides more comprehensive benefits with higher limits and is designed for a catastrophic loss.
Surgical expense insurance: Health insurance that provides for payment of physicians' fees for surgical operations performed in a hospital or elsewhere.
Assumption-of-risk: Defense against a negligence claim that bars recovery for damages if a person understands and recognizes the danger inherent in a particular activity or occupation.
Average indexed monthly earnings (AIME): Under the OASDI program, the person's actual earnings are indexed to determine his or her primary insurance amount (PIA).
Contributory negligence: Common law defense blocking an injured person from recovering damages if he or she has contributed in any way to the accident.
Currently insured: Status of a covered person under the Old-Age, Survivors, and Disability Insurance (OASDI) program who has at least six credits out of the last thirteen quarters, ending with the quarter of death, disability, or entitlement to retirement benefits.
Diagnosis-related groups (DRGs): Method for reimbursing hospitals under the Medicare program. Under this system, a flat, uniform amount is paid to each hospital for the same type of medical care or treatment.
Disability-insured: Status of an individual who is insured for disability benefits under the Old-Age, Survivors, and Disability Insurance (OASDI) program.
Earnings test (retirement test): Test under the Old-Age, Survivors, and Disability Insurance (OASDI) program that reduces monthly benefits to those persons who have annual earned income in excess of the maximum allowed.
Exclusive remedy doctrine: Doctrine in workers compensation insurance that states that workers compensation benefits should be the exclusive or sole source of recovery for workers who have a job-related accident or disease; doctrine has been eroded by legal decisions.
Fully insured: Insured status of a covered person under the Old-Age, Survivors, and Disability Insurance (OASDI) program. To be fully insured for retirement benefits, 40 credits are required.
Hospital Insurance (Part A): Part A of Medicare that covers inpatient hospital care, skilled nursing facility care, home health care services, and hospice care for Medicare beneficiaries.
Liability without fault: Principle on which workers compensation is based, holding the employer absolutely liable for occupational injuries or disease suffered by workers, regardless of who is at fault.
Supplementary Medical Insurance: Part B of the Medicare program that covers physicians' fees and other related medical services. Most eligible Medicare recipients are automatically included unless they voluntarily refuse this coverage.
Primary insurance amount (PIA): Monthly cash benefit paid to a retired worker at the full retirement age, or to a disabled worker eligible for benefits under the Old-Age, Survivors, and Disability Insurance (OASDI) program.
Primary insurance amount (PIA): Monthly cash benefit paid to a retired worker at the full retirement age, or to a disabled worker eligible for benefits under the Old-Age, Survivors, and Disability Insurance (OASDI) program.
Workers compensation insurance: Insurance that covers payment of all workers compensation and other benefits that the employer must legally provide to covered employees who are occupationally disabled.
Appraisal clause: Used when the insured and insurer agree that the loss is covered, but the amount of the loss is in dispute.
Fair rental value: Amount payable to an insured homeowner for loss of rental income due to damage that makes the premises uninhabitable.
Guaranteed replacement cost: In the event of a total loss, the insurer agrees to replace the home exactly as it was before the loss even though the replacement cost exceeds the amount of insurance stated in the policy. Homeowners 2 policy (broad form):
Homeowners 3 policy (special form): Homeowners insurance policy that covers the dwelling and other structures on a risk-of-direct-loss basis and personal property on a named-perils basis. Personal liability insurance is also provided.
Homeowners 4 policy (contents broad form): Homeowners insurance policy that applies to tenants renting a home or apartment. Covers the tenant's personal property and provides personal liability insurance.
Homeowners 5 policy (comprehensive form): Homeowners insurance policy that provides open perils coverage ("all risks coverage") on both the building and personal property. The dwelling, other structures, and personal property are insured against the risk of direct physical loss to property.
Homeowners 6 policy (unit-owners form): Homeowners insurance policy that covers personal property of insured owners of condominium units and cooperative apartments on a broad form, named-perils basis. Personal liability insurance is also provided.
Homeowners 8 policy (modified coverage form): Homeowner policy that is designed for older homes. Dwelling and other structures are indemnified on the basis of repair cost using common construction materials and methods. Personal liability insurance is also provided.
Proximate cause: Factor causing damage to property for which there is an unbroken chain of events between the occurrence of an insured peril and damage or destruction of the property.
Replacement-cost insurance: Property insurance by which the insured is indemnified on the basis of replacement cost with no deduction for depreciation.
Created by: julian86