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ABSOLUTE ASSIGNMENT
An irrevocable transfer of complete ownership of a life insurance policy or an annuity from one party to another. Contrast with collateral assignment. (See Assignment )
ACCELERATED DEATH BENEFITS
A life insurance policy option that provides policy proceeds to insured individuals over their lifetimes, in the event of a terminal illness. This is in lieu of a traditional policy that pays beneficiaries after the insured’s death. Such benefits kick in if the insured becomes terminally ill, needs extreme medical intervention, or must reside in a nursing home. The payments made while the insured is living are deducted from any death benefits paid to beneficiaries.
ACCESS
Right to enter or use health care services.
ACCIDENT AND HEALTH INSURANCE
Coverage for accidental injury, accidental death, and related health expenses. Benefits will pay for preventative services, medical expenses and catastrophic care, with limits.
ACCIDENTAL DEATH AND DISMEMBERMENT (AD&D) BENEFIT
A supplementary life insurance policy benefit that provides for an amount of money in addition to the policy’s basic death benefit. This additional amount is payable if the insured dies as the result of an accident or if the insured loses any two limbs or the sight in both eyes as the result of an accident.
ACCIDENTAL DEATH BENEFIT (ADB)
A supplementary life insurance policy benefit that provides a death benefit in addition to the policy’s basic death benefit if the insured’s death occurs as the result of an accident. (See Double indemnity benefit )
ACCOUNT RECEIVABLES
See Receivables
ACCUMULATION AT INTEREST DIVIDEND OPTION
An option, available to the owners of participating insurance policies, that allows a policy owner to leave policy dividends on deposit with the insurer and earn interest. (See Dividend )
ACTUAL CASH VALUE
A form of insurance that pays damages equal to the replacement value of damaged property minus depreciation. (See Replacement cost )
ABSOLUTE ASSIGNMENT
An irrevocable transfer of complete ownership of a life insurance policy or an annuity from one party to another. Contrast with collateral assignment. (See Assignment )
ACCELERATED DEATH BENEFITS
A life insurance policy option that provides policy proceeds to insured individuals over their lifetimes, in the event of a terminal illness. This is in lieu of a traditional policy that pays beneficiaries after the insured’s death. Such benefits kick in if the insured becomes terminally ill, needs extreme medical intervention, or must reside in a nursing home. The payments made while the insured is living are deducted from any death benefits paid to beneficiaries.
ACCIDENT AND HEALTH INSURANCE
Coverage for accidental injury, accidental death, and related health expenses. Benefits will pay for preventative services, medical expenses and catastrophic care, with limits.
ACCIDENTAL DEATH AND DISMEMBERMENT (AD&D) BENEFIT
A supplementary life insurance policy benefit that provides for an amount of money in addition to the policy’s basic death benefit. This additional amount is payable if the insured dies as the result of an accident or if the insured loses any two limbs or the sight in both eyes as the result of an accident.
ACCIDENTAL DEATH BENEFIT (ADB)
A supplementary life insurance policy benefit that provides a death benefit in addition to the policy’s basic death benefit if the insured’s death occurs as the result of an accident. (See Double indemnity benefit )
ACCOUNT RECEIVABLES
See Receivables
ACCUMULATION AT INTEREST DIVIDEND OPTION*
An option, available to the owners of participating insurance policies, that allows a policy owner to leave policy dividends on deposit with the insurer and earn interest. (See Dividend )
ACQUISITION COST
The cost to an insurer to acquire new business. It includes costs such as underwriting the risk, issuing a new policy, paying commissions and overhead or office expenses.
ACTIVITIES OF DAILY LIVING (ADLs)
Everyday activities which are used to measure an individual's ability to function independently. ADLs define the disability in long term care insurance. The loss of some number of ADLs is an insuring or triggering event in all long term care policies. Carriers have established six or seven standard activities (most use six) of daily living (eating, bathing, dressing, toileting, continence, transferring, ambulating) for any LTC policy that purports to cover home care in it's provisions. A loss of 2 of 6 or 2 of 7 of the ADLs will qualify an insured for benefits. ADLs and the loss necessary to trigger benefits may vary from state to state. Additionally, despite standardization, companies choose to define the inability to perform an ADL differently.
ACTUAL CASH VALUE
A form of insurance that pays damages equal to the replacement value of damaged property minus depreciation. (See Replacement cost )
ACTUAL CHARGE
The amount a physician or supplier actually bills for a particular medical services or supply.
ACTUARY
An insurance professional skilled in the analysis, evaluation and management of statistical information. Evaluates insurance firms’ reserves, determines rates and rating methods, and determines other business and financial risks.
ACUTE CARE
Care for illness or injury that develops rapidly, has pronounced symptoms ad is finite in length. Traditional medical insurance, Medicare and Medicare supplements are designed to provide coverage for acute illness.
ADDITIONAL LIVING EXPENSES
Extra charges covered by homeowners policies over and above the policyholder’s customary living expenses. They kick in when the insured requires temporary shelter due to damage by a covered peril that makes the home temporarily uninhabitable.
ADDITIONAL TERM INSURANCE OPTION
An option available to owners of participating insurance policies under which the insurer uses a policy dividend as a net single premium to purchase one-year term insurance on the insured’s life. Also known as fifth dividend option. (See Dividend, Policy dividend options )
ADJUSTABLE LIFE INSURANCE
A form of life insurance that allows policy owners to vary the type of coverage provided by their policies as their insurance needs change.
ADJUSTED AVERAGE PER CAPITA COST (AAPCC)
Health Care Financing Administration (HCFA) basis of payment to HMOs and CMPs.
ADJUSTED COMMUNITY RATE (ACR)
Uniform capitation rate that is charged to all enrollees in a plan based on adjustments for risk factors such as age and sex.
ADJUSTER
An individual employed by a property/casualty insurer to evaluate losses and settle policyholder claims. These adjusters differ from public adjusters, who negotiate with insurers on behalf of policyholders, and receive a portion of a claims settlement. Independent adjusters are independent contractors who adjust claims for different insurance companies.
ADMINISTRATIVE SERVICES ONLY (ASO)
A type of contract with an insurance company or a third-party administrator that provides an employer with administrative services. It does not provide coverage for risk of insurance protection. The usual expenses covered include claims processing, plan design advice and printing benefit booklets. These contracts are usually entered into by large employers who can afford the risk of providing insurance protection with their own money.
ADMINISTRATOR
A person who is designated to be responsible for the proper operation and administration of a plan. When the plan sponsor does not designate a person for this duty, the ERISA considers the pan sponsor to be the plan administrator.
ADMITTED ASSETS
Assets recognized and accepted by state insurance laws in determining the solvency of insurers and reinsurers. To make it easier to assess an insurance company’s financial position, state statutory accounting rules do not permit certain assets to be included on the balance sheet. Only assets that can be easily sold in the event of liquidation or borrowed against, and receivables for which payment can be reasonably anticipated, are included in admitted assets. (See Assets )
ADMITTED COMPANY
An insurance company licensed and authorized to do business in a particular state.
ADULT DAY CARE
Social, recreational and/or rehabilitative services provided for persons who benefit from daytime supervision. An alternative between care in the home or in a institution.
ADVERSE SELECTION
The tendency of those exposed to a higher risk to seek more insurance coverage than those at a lower risk. Insurers react either by charging higher premiums or not insuring at all, as in the case of floods. (Flood insurance is provided by the federal government but sold mostly through the private market.) In the case of natural disasters, such as earthquakes, adverse selection concentrates risk instead of spreading it. Insurance works best when risk is shared among large numbers of policyholders.
AFFINITY SALES
Selling insurance through groups such as professional and business associations.
AFTERMARKET PARTS
See Crash parts; Generic auto parts
AGEISM
Prejudice against people because of their age
AGENCY COMPANIES
Companies that market and sell products via independent agents.
AGENT
Licensed by the state, performs the functions for sole proprietors and small businesses that Human Resource Departments do for larger businesses, gathers census data, prepares proposals, makes presentations to businesses, explains benefits to employers, and employees, does field underwriting when required, delivers policies and certificates, assists in handling claims, performs other related tasks required by the employer or sole proprietor.
AID TO FAMILIES WITH DEPENDENT CHILDREN (AFDC)
Public assistance program that provides payment to families with children 18 years of age and under who have an income below a defined poverty line.
ALEATORY CONTRACT
A contract in which one party provides something of value to another party in exchange for a conditional promise, which is a promise that the other party will perform a stated act upon the occurrence of an uncertain event. Insurance contracts are aleatory because the policyowner pays premiums to the insurer, and in return the insurer promises to pay benefits if the event insured against occurs. Contrast with commutative contract.
ALIEN INSURANCE COMPANY
An insurance company incorporated under the laws of a foreign country, as opposed to a “foreign” insurance company which does business in states outside its own.
ALLIED LINES
Property insurance that is usually bought in conjunction with fire insurance; it includes wind, water damage and vandalism coverage.
ALTERNATIVE CARE BENEFIT
payment for a special arrangement of services specifically designed to allow the person to reside in a setting other than a nursing facility (i.e. services to provide assistance, capital improvements such as a ramp, and/or durable medical equipment.
ALTERNATIVE CARE FACILITY
(1) A hospice; or (2) a place that provides ongoing care to inpatients in one location and which (a) provides 24-hour care and services sufficient to support needs resulting from inability to perform activities of daily living or cognitive impairment; (b) has a trained and ready-to-respond employee to provide such care; (c) provides three meals a day and accommodates special dietary needs; (d) is appropriately licensed or accredited; (e) has formal arrangements for the services of a physician or nurse to provide emergency medical care; and (f) has appropriate procedures for handling administering drugs.
ALTERNATIVE DISPUTE RESOLUTION / ADR
An alternative to going to court to settle disputes. Methods include arbitration, where disputing parties agree to be bound to the decision of an independent third party, and mediation, where a third party tries to arrange a settlement between the two sides.
ALTERNATIVE MARKETS
Nontraditional mechanisms used to finance risk. This includes captives, which are insurers owned by one or more non-insurers to provide owners with coverage. Risk-retention groups, formed by members of similar professions or businesses to obtain liability insurance and selfinsurance, are also included.
ALZHEIMER'S DISEASE
A form of organic dementia resulting in premature mental deterioration, first described in 1906 by German neurologist, Alois Alzheimer. In California, as well as most of the rest of the United States, Alzheimer's Disease is considered a cognitive impairment, thus triggering benefits under long term care insurance policy.
AMBULATORY CARE
Medical services provided on an outpatient (non-hospitalized) basis. Services may include diagnosis, treatment, surgery, and rehabilitation.
ANCILLARY SERVICES
Health care services conducted by providers other than physicians and surgeons. These will usually include such services as physical therapy and home health care.
ANNUAL ANNUITY CONTRACT FEE
Covers the cost of administering an annuity contract.
ANNUAL BENEFIT CAP
Maximum amount paid for specific medical services or total medical services.
ANNUAL STATEMENT
Summary of an insurer’s or reinsurer’s financial operations for a particular year, including a balance sheet. It is filed with the state insurance department of each jurisdiction in which the company is licensed to conduct business.
ANNUITANT
The person who receives the income from an annuity contract. Usually the owner of the contract or his or her spouse.
ANNUITIZATION
The conversion of the account balance of a deferred annuity contract to income payments.
ANNUITY
A life insurance product that pays periodic income benefits for a specific period of time or over the course of the annuitant’s lifetime. There are two basic types of annuities: deferred and immediate. Deferred annuities allow assets to grow tax-deferred over time before being converted to payments to the annuitant. Immediate annuities allow payments to begin within about a year of purchase.
ANNUITY ACCUMULATION PHASE OR PERIOD
The period during which the owner of a deferred annuity makes payments to build up assets.
ANNUITY ADMINISTRATIVE CHARGES
Covers the cost of customer services for owners of variable annuities.
ANNUITY BENEFICIARY
In certain types of annuities, a person who receives annuity contract payments if the annuity owner or annuitant dies while payments are still due.
ANNUITY CERTAIN
A type of annuity contract that pays periodic income benefits for a stated period of time, regardless of whether the annuitant lives or dies. Also known as period certain annuity. Contrast with straight life annuity. (See Payout options )
ANNUITY CONTRACT
An agreement similar to an insurance policy for other insurance products such as auto insurance.
ANNUITY CONTRACT OWNER
The person or entity that purchases an annuity and has all rights to the contract. Usually, but not always, the annuitant (the person who receives incomes from the contract).
ANNUITY COST
A monetary amount that is equal to the present value of future periodic income payments under an annuity. (See Gross annuity cost, Income date, Net annuity cost )
ANNUITY DATE
See Income date
ANNUITY DEATH BENEFITS
The guarantee that if an annuity contract owner dies before annuitization (the switchover from the savings to the payment phase) the beneficiary will receive the value of the annuity that is due.
ANNUITY INSURANCE CHARGES
Covers administrative and mortality and expense risk costs.
ANNUITY INVESTMENT MANAGEMENT FEE
The fee paid for the management of variable annuity invested assets.
ANNUITY ISSUER
The insurance company that issues the annuity.
ANNUITY PROSPECTUS
Legal document providing detailed information about variable annuity contracts. Must be offered to each prospective buyer.
ANNUITY PURCHASE RATE
The cost of an annuity based on such factors as the age and gender of the contract owner.
ANTISELECTION
The tendency of individuals who suspect or know they are more likely than average to experience loss to apply for or renew insurance to a greater extent than people who lack such knowledge of probable loss. Also known as adverse selection and selection against the company.
ANTITRUST LAWS
Laws that prohibit companies from working as a group to set prices, restrict supplies or stop competition in the marketplace. The insurance industry is subject to state antitrust laws but has a limited exemption from federal antitrust laws. This exemption, set out in the McCarran- Ferguson Act, permits insurers to jointly develop common insurance forms and share loss data to help them price policies.
APPORTIONMENT
The dividing of a loss proportionately among two or more insurers that cover the same loss.
APPRAISAL
A survey to determine a property’s insurable value, or the amount of a loss.
APPROVED AMOUNT
The amount Medicare determines is reasonable for a service covered under Medicare Part B. It may be less than the actual charge. For many services, including physician services, the approved amount is taken from a fee schedule that assigns a dollar value to all Medicare-covered services that are paid under that fee schedule.
ARBITRATION
Procedure in which an insurance company and the insured or a vendor agree to settle a claim dispute by accepting a decision made by a third party.
ARSON
The deliberate setting of a fire.
A-SHARE VARIABLE ANNUITY
A form of variable annuity contract where the contract holder pays sales charges up front rather than eventually having to pay a surrender charge.
ASSESSMENT
A determination of physical and/or medical status by a health professional based on established medical guidelines. The assessment is a central component in home care coverage's and the payment of home care claims. Upon the triggering of benefits, due either to the loss of some number or activities of daily living or a cognitive impairment, an assessment is performed by a multidisciplinary team. This "team" usually spearheaded by the insured's physician, determines the level of functional incapacity and develops a plan of care that will be followed in assisting the insured in the performing the ADLs and IADLs (instrumental activities of daily living).
ASSIGNMENT OF BENEFITS
When the insured authorizes the insurer or claims payer to pay benefits directly to the medical care provider.
ASSISTED LIVING
A non-medical institution providing room, board, laundry, some form of personal care and usually recreational and social services. Licensed by state departments of social services, these facilities exist under several names including domiciliary care facility,, sheltered house, board and care, community based residential care facilities and alternate care facilities.
ASO
A type of contract with an insurance company or a third party administrator that provides an employer with administrative service. It can include coverage for a certain amount of claims risk. The usual administrative expenses include claims processing, plan design advice and printing benefit booklets. Large employers who can afford the risk of providing insurance protection with their own money usually enter into these contracts.
ASSET-BACKED SECURITIES
Bonds that represent pools of loans of similar types, duration and interest rates. Almost any loan with regular repayments of principal and interest can be securitized, from auto loans and equipment leases to credit card receivables and mortgages.
ASSETS
Property owned, in this case by an insurance company, including stocks, bonds and real estate. Insurance accounting is concerned with solvency and the ability to pay claims. State insurance laws therefore require a conservative valuation of assets, prohibiting insurance companies from listing assets on their balance sheets whose values are uncertain, such as furniture, fixtures, debit balances and accounts receivable that are more than 90 days past due. (See Admitted assets )
ASSIGNED RISK PLANS
Facilities through which drivers can obtain auto insurance if they are unable to buy it in the regular or voluntary market. These are the most well-known type of residual auto insurance market, which exist in every state. In an assigned risk plan, all insurers selling auto insurance in the state are assigned these drivers to insure, based on the amount of insurance they sell in the regular market. (See Residual market )
ASSIGNMENT
An agreement under which one party—the assignor—transfers some or all of his ownership rights in a particular property, such as a life insurance policy or an annuity contract, to another party—the assignee. (See Absolute assignment, Collateral assignment )
ASSOCIATION GROUP
A type of group that generally is eligible for group insurance and that consists of members of an association of individuals formed for a purpose other than to obtain insurance coverage, such as teachers’ associations and physicians’ associations.
ATTACHMENT POINT
For aggregate stop-loss insurance, it is the point at which the stop-loss insurance carriers begin to reimburse the employer based upon the cumulative total of claims paid within a policy year.
AUTHORIZATIONS
Consent or endorsement by a primary care physician for patient referral to ancillary services and specialists.
AUTO INSURANCE POLICY
There are basically six different types of coverages. Some may be required by law. Others are optional. They are:
Bodily injury liability, for injuries the policyholder causes to someone else.
Medical payments or Personal Injury Protection (PIP) for treatment of injuries to the driver and passengers of the policyholder’s car.
Property damage liability, for damage the policyholder causes to someone else’s property.
Collision, for damage to the policyholder’s car from a collision.
Comprehensive, for damage to the policyholder’s car not involving a collision with another car (including damage from fire, explosions, earthquakes, floods, and riots), and theft.
Uninsured motorists coverage, for costs resulting from an accident involving a hit-and-run driver or a driver who does not have insurance.
AUTO INSURANCE PREMIUM
The price an insurance company charges for coverage, based on the frequency and cost of potential accidents, theft and other losses. Prices vary from company to company, as with any product or service.
Premiums also vary depending on the amount and type of coverage purchased; the make and model of the car; and the insured’s driving record, years of driving and the number of miles the car is driven per year. Other factors taken into account include the driver’s age and gender, where the car is most likely to be driven and the times of day—rush hour in an urban neighborhood or leisure time driving in rural areas, for example. Some insurance companies may also use credit history related information. (See Insurance score )
AVERAGE LENGTH OF STAY
One measure of use of health facilities, reported as an average number of inpatient days spent in a hospital or other health care facility per admission or discharge. It is calculated as follows: total number of days in the facility for all admissions during a particular period divided by the number of admissions during the same period. Average lengths of stay vary and are measured by age, specific diagnosis, or sources of payment.
AVIATION INSURANCE
Commercial airlines hold property insurance on airplanes and liability insurance for negligent acts that result in injury or property damage to passengers or others. Damage is covered on the ground and in the air. The policy limits the geographical area and individual pilots covered. An insurance professional skilled in the analysis, evaluation and management of statistical information. Evaluates insurance firms’ reserves, determines rates and rating methods, and determines other business and financial risks.
