Category: Term Definitions

When going about shopping for the right policy or making sure your policy protects you in the ways you need, it is important to understand insurance terms used. In educating yourself about the legal jargon employed by the insurance companies, you can be better prepared to combat an unfair claim payment or prevent your policy from being hijacked by vague language.

Below, courtesy of the University of Illinois, is a glossary of insurance terms, ranging from the letter D to F:

Deductible. The amount of covered charges an individual must pay before the insurance company begins payments. Insurance company can only require individual to pay 50% of the basic health services.

Depreciation. The decrease in the value of the property due to use, deterioration, or the passage of time.

Disability. Physical or mental handicap resulting from sickness or injury. It may be partial or total.

Disability income insurance. Insurance that provides periodic payments to replace income when an insured person is unable to work as a result of illness, injury, or disease.

Discharge planning. Under managed care, facilitates the transfer of a patient to a more cost-effective care facility after it is deemed that the patient no longer needs to remain in the hospital.

Dividend. A return of part of the premium to policyholders of insurance from a participating company when earnings exceed costs.

Double indemnity. An insurance policy clause that pays the beneficiary double the actual value of the contract in case of accidental death.

Dread disease insurance. A health insurance policy that protects against medical expenses resulting from a certain dreaded disease such as cancer.

Eligibility period. A specified length of time, frequently 31 days, following the eligibility date during which an individual member of a particular group is eligible to apply for insurance under a group life or health insurance policy without a medical exam.

Elimination period. The period of time before insurance benefits begin. Endorsement. A policy feature that increases the coverage of a standard insurance policy.

Endowment insurance. A plan of life insurance that pays a definite sum of money to the policyholder after a specified number of years. If the policyholder dies before the end of that time, the policy pays a beneficiary.

Exclusions. Specific conditions or circumstances listed in the policy for which the policy will not pay claims or benefits.

Face amount. The amount that a life insurance policy will pay at death or when the policy matures.

FAIR Plan. A program to provide homeowners insurance coverage to individuals who have been refused coverage by at least three insurance companies.

First-dollar Coverage. A hospital or surgical policy with no deductible.

Floater endorsement. An addition to a policy that adds coverage for specific personal property item(s) that are movable (such as jewelry).

Free-look period. The time you have to look at a policy and return it to the insurer for a full refund.

Full replacement policy. A homeowners policy that pays to replace, rebuild, or repair damaged property at the cost of replacing the property (up to the policy maximum).

When going about shopping for the right policy or making sure your policy protects you in the ways you need, it is important to understand insurance terms used. In educating yourself about the legal jargon employed by the insurance companies, you can be better prepared to combat an unfair claim payment or prevent your policy from being hijacked by vague language.

Below, courtesy of the University of Illinois, is a glossary of insurance terms from the letter C:

Case management. An approach designed to provide effective treatment to meet the specific needs of people with serious medical problems. Benefits not traditionally covered (for example, medical equipment) may be provided to promote cost-effectiveness.

Cash value (Cash surrender value). The amount available in cash to be borrowed against or obtained in cash if a life insurance policy is canceled.

Catastrophic. Caused by a great and sudden misfortune such as a serious accident or illness.

Chore Services. Minor household repairs, cleaning, meal preparation, and yardwork.

Chronic illness. An illness marked by long duration or frequent reoccurrence such as arthritis, diabetes, heart disease, asthma, and hypertension.

Claim. A formal notice to an insurance company requesting payment of an amount under the terms of a policy.

Coinsurance. A clause or provision that requires the insured to share in a certain percentage of medical expenses such as 80/20 or 90/10 (the insurance company pays 80%/90%; the insured pays 20%/10% of expenses), sometimes called co-insurance.

Collision insurance. Insurance to pay for damages to one’s own car in case of an accident.

Comprehensive auto insurance. Insurance to cover losses resulting from a stolen car or for repairs if the car is hit by a falling object or damaged by fire, flood, or vandals.

Comprehensive major medical insurance. A policy offering the coverage of both a basic and a major medical health insurance policy. It is characterized by a low deductible amount, a coinsurance feature, and high maximum benefits.

Convertible term insurance. Term insurance giving the consumer the right to exchange it for cash value insurance without a medical exam.

Coordination of Benefits (COB). The specific term used to describe how benefits will be paid when a consumer has more than one health insurance policy. The two policies combined cannot pay more than 100 percent of total allowable expenses.

Co-payment. An amount insured must pay in order to receive a service, which is not fully prepaid.

Cost sharing. Policy provisions that require individuals to pay, through deductibles and co-insurance, a portion of their health insurance expenses.

Covered expenses. Those specified expenses paid for under the terms of a specific policy.

Credit life insurance. Term life insurance issued through a lender or lending agency to repay the lending institution if the borrower dies.

Custodial Care. Assistance with bathing, dressing, eating, taking medicine, and similar personal needs. People without medical skills or training can provide custodial care.

Customary and reasonable. A charge that does not exceed the regular or normal charge for a given service in a locality where it is provided.

Understanding Terms Used in Insurance Claims
When going about shopping for the right policy or making sure your policy protects you in the ways you need, it is important to understand insurance terms used. In educating yourself about the legal jargon employed by the insurance companies, you can be better prepared to combat an unfair claim payment or prevent your policy from being hijacked by vague language.

Below, courtesy of the University of Illinois, is a glossary of insurance terms, ranging from the letter A to B:

Actuary. A person professionally trained to apply probability and statistics to the practical problems of insurance and related fields.

Accident insurance. A form of health insurance that insures against financial loss resulting from an accident.

Accidental death and dismemberment insurance. Insurance that pays the insured in the event of death or loss of limb or eye resulting from an accident.

Actual cash value. A claim settlement method in which the insured receives payment based on the current replacement cost of a damaged or lost item, less depreciation.
Acute care. Care that is usually short term and recuperative.

Adjustable life insurance. Insurance that lets the policyholder change the plan of insurance, raise or lower the face amount of the policy, increase or decrease the premium and lengthen or shorten the protection period.

Agent. A representative of one or more companies who sells insurance. Annuity. A contract that provides an income for a specified period of time.

Application. A signed request for insurance, giving information about the prospective policyholder.

Appurtenant structures. Buildings not attached to a house.

Assigned benefits. An arrangement whereby your physician accepts payment directly from the insurance company.

Assigned risk pool. A state program through which people, unable to get auto insurance elsewhere due to poor driving or accident records, can buy coverage at higher rates.

Automatic premium loan. A provision in a life insurance policy that any premium not paid by the end of the grace period (usually 31 days) is automatically paid by a policy loan if there is sufficient cash value.

Automobile insurance. Insurance that pays for loss to individuals or property from an auto accident, theft, or other perils specified in the insurance contract.

Beneficiary. The person named in a life insurance policy to receive the insurance proceeds at the death of the insured.

Blue Cross. An independent, mutual for profit membership corporation providing coverage for hospital care.

Blue Shield. An independent, mutual for profit membership corporation providing coverage for surgical and medical care.

Broker. A person who represents insurance buyers, not companies.