COMMONLY USED TERMS IN INSURANCE

Accidental Dismemberment and Loss of Use Benefit
Provides a cash amount, based on a schedule of benefits, should an accident result in dismemberment or loss of use of specific parts of the body.

Accidental Death Benefit
Grants employees’ beneficiaries the plan benefit should an accident result in the loss of life of your employees.

Assignment
The transfer of the ownership rights of a life insurance policy from one person to another.

Accident Weekly Income (AWI) Benefit
Provides a fixed weekly income in case of total disability due to an accident.

Aviation Hazard
The increased risk of death or injury resulting from participation in aviation, usually as a pilot. The presence of aviation hazard will often result in extra premium or the exclusion of certain benefits.

Antiselection
The tendency of individuals who believe they have a greater than average likelihood of loss to seek insurance protection to a greater extent than do those who believe they have an average or a less than average likelihood of loss.

Agent
An authorized and licensed representative of an insurance company who sells and services insurance policies. Agents represent the insurance company and typically only sell policies from that company.

Applicant
The person applying for the insurance policy. The applicant may be different from the proposed insured or the policy owner.

Actuary
An individual employed by an insurance company to calculate premium rates, reserves, dividends and other important figures using risk factors obtained from experience tables.

Accidental Permanent Total Disability Benefit
Provides a monthly cash benefit if the insured becomes total and permanent disability because of an accident.

Application
Forms required by the insurance company which the proposed insured completes when requesting coverage from an insurer.

Accident Medical Reimbursement (AMR) Benefit
Allows the insured to reimburse their medical expenses from accident-related causes, up to a maximum amount.

Attained Age
The age of an individual on a given date. Some insurance companies use attained age as a method of calculating insurance premiums.

Avocation
This refers to either an occupation or an activity the insured participates in.

Attending Physician's Statement (APS)
Information provided by a proposed insured's physician covering medical history and results of medical examinations. It is used to determine the appropriate underwriting classification for the proposed insured.

Accidental Dismemberment and Loss of Use Benefit
Provides a cash amount, based on a schedule of benefits, should an accident result in dismemberment or loss of use of specific parts of the body.

Backdating
A procedure used to make the effective date of a policy earlier than the application date. Backdating is commonly used to make the insurance age of the insured at policy issue lower than it actually is in an effort to receive a lower premium. Most policies can be backdated up to six months. Backdating is also commonly referred to as Saving Age.

Beneficiary
A person(s) designated by the policy owner to receive the proceeds of an insurance policy upon the death of the insured.

Benefit
For life insurance, it is the amount of money specified in a life insurance contract to be paid to the beneficiary upon the death of the insured. It is commonly referred to as the Death Benefit. For health insurance, it is the amount of money payable by a health plan for the cost of covered services, as defined in the insurance policy.

Cash Value
The savings element in some types or life insurance policies, which represents the policy owner’s interest in the policy. The cash value typically grows over time and often earns a rate of interest, depending on the type of policy. It can be borrowed by the insured or withdrawn when the policy is surrendered.

Covered Expenses
All medical services that are covered by an insurance policy. Some health insurance plans will have a list of medical services they do not cover. It would be wise to make sure you are not in need of any service excluded by any given health insurance plan.

Contingent Beneficiary
A person(s) designated by the policy owner to receive policy proceeds if the Primary Beneficiary is deceased at the time benefits become payable. This is often referred to as a secondary beneficiary.

Claim
Notification to an insurance company that payment of the benefit is due under the terms of the policy.

Coinsurance
A provision of a program by which the insured shares in the cost of covered services on a percentage basis. The health plan assumes only a certain percentage of the cost while the covered person pays the remainder. Coinsurance is usually paid after the insured meets the plan deductible. For example, a plan with 80/20 coinsurance means, after the deductible is paid by the insured, the insurance company will pay 80% of the remaining covered expenses up to a set amount and the insured will pay 20%.

Coordination of Benefits (COB)
When the covered person is covered by another plan or plans, the benefits under the policy and the other plan(s) will be coordinated so benefits from all sources do not exceed 100% of allowable medical expenses. This means one plan pays its full benefits first, then the other plan(s) pay(s).

Change of Beneficiary
A contract provision that allows the policy owner to change the beneficiary whenever desired, unless the beneficiary has been designated as irrevocable. Changes to an irrevocable beneficiary require written permission of the beneficiary.

Commissions
A fee or percentage of premium allowed to a salesperson or agent for services rendered.

Contestability Period
The time period during which the insurer is can deny a claim if it finds material misrepresentations were made in the application. This period usually covers the first two years a policy is in force. A policy becomes "incontestable" when the contestability period is over.

Clause
An article or added provision in a life insurance contract.

Death Benefit
The amount of coverage that is paid to the designated beneficiary(s) of a life insurance policy upon the insured's death.

Double Indemnity
The payment of twice the basic benefit in the event of loss resulting from a specific cause or under specific circumstances. This is commonly referred to as an Accidental Death Benefit.

Dependent
An individual other than a health plan subscriber who is eligible to receive health care services under the subscriber's contract. Generally, dependents are limited to the subscriber's spouse and minor children.

Deductible
The amount of out-of-pocket expenses that must be paid for health services by the insured person before the health plan benefit payment begins. This is usually based on a calendar year.

Effective Date
The date an insurance policy goes into effect. This is sometimes referred to as the Policy Date.

Employer Contribution
The total amount of premium an employer is required to pay for each employee covered under the employer offered group health insurance coverage. An employer is usually required to contribute at least 50% of each enrolled employee's premium. Employers are usually only required to contribute to the employee cost and not the cost for an employee's dependents.

Endorsement
Used to clarify or make revisions to particular provisions of a health or life insurance policy.

Examiner
A health care professional designated to provide medical exams on insurance applicants.

Expiration Date
The date on which an insurance policy ceases to provide coverage on the insured.

Electronic Funds Transfer (EFT)
An arrangement in which premium payments are drawn from an insured's bank account. This is also referred as Auto-Draft or Pre-Arranged Withdrawal (PAW or PAC).

Explanation of Benefits
A statement sent by a health plan to a covered person who files a claim. The explanation of benefits (EOB) lists the services provided, the amount billed, and the payment made. The EOB statement must also explain why a claim was or was not paid, and provide information about the individual's rights of appeal.

Evidence of Insurability
Factual information used by insurance companies to determine an applicant'ss qualification for insurance. Examples of information used may include paramedical exams, medical records, application statements, and motor vehicle reports among others.

Estate Planning
The planning for the administration of an estate upon the death of an individual. Estate planning typically involves establishing wills and/or trusts to minimize the loss of estate value due to estate taxes and is often funded with life insurance.

Exclusions
Specific conditions or circumstances listed in an insurance policy for which the policy will not provide benefit payments.

Employee Participation
An insurance company will usually require a certain percentage of eligible employees to participate in the employer offered group health insurance plan. This percentage varies by company and by group size. If this percentage is not met the insurance company may not offer coverage.

Face Amount
The amount of coverage provided by a life insurance policy. This is also referred to as Coverage Amount or Insurance Coverage.

Flying Coverage Benefit
Provides a cash benefit if the insured suffers any loss as a regular passenger of any commercial flight.

Final Expenses
Expenses incurred at the time of a person's death including funeral costs, probate costs, current liabilities and taxes.

Free Look Period
The period of time in which a policy owner has the legal right to examine a newly issued policy and return it for a full refund of premium if not satisfied for any reason. The period of time varies by state and is usually between 10 and 30 days with 10 being the most common.

Fixed Benefit
An insurance policy benefit that remains the same and does not change.

Grace Period
The period of time between a premium's due date and the date the policy will lapse if the premium remains unpaid. This period is usually 30 days. If the insured dies during the grace period, the unpaid premium is deducted from the policy proceeds.

Guaranteed Issue Offer (GIO)
An insurance policy provision that allows a certain amount of insurance or type of insurance to be issued without medical evidence of insurability.

Guaranteed Insurability
An insurance policy provision that allows the insured to buy additional fixed amounts of life insurance at fixed time intervals without evidence of insurability.

Group Life Insurance
A life insurance policy issued to a group of people, usually through an employer, union or association.

Hazardous Activities
These are activities that, if participated in may make you ineligible for coverage from the insurance carrier. Examples include, but are not limited to scuba diving, jet, snow, and water skiing, snowboarding, hang gliding, skydiving, paragliding, bungee jumping, mountain climbing, and amateur racing. Be sure to check the specific insurance company details and / or brochure for exact specifics.

Hospice
A program that provides care to the terminally ill.

Home Office
The headquarters of an insurance company.

Hospital Income Benefit (HIB)
Provides the employee daily a fixed amount of cash when hospitalized due to an accident.

Health Maintenance Organization (HMO)
A legal entity that provides or arranges for a comprehensive range of basic and supplemental health care services. HMOs typically have a network of providers from which the insured must seek services. HMOs also tend to have lower out-of-pocket expenses than traditional insurance plans.

HIV Consent Form
A required form completed by the applicant and submitted with the application for insurance. The form discloses to the applicant that the insurance company may test for the presence of HIV in the applicant's blood. By signing, the applicant acknowledges this and provides authorization for the test.

Incontestability Clause
A life insurance policy provision that states after the policy has been in force for a specified period of time, the company cannot deny a claim based on a material misrepresentation made in the application. The typical period of time for the clause is two years.

Inpatient Services
Services rendered to a person who is admitted to a hospital for medical care, is assigned a bed designated for routine, special, psychiatric, or rehabilitation care, and occupies the bed for 24 hours or more.

Insurance Policy
The physical, written document issued by an insurance company to the policy owner. The insurance policy represents the written contract between the insurance company and the policy owner.

Issue Date
The actual date an insurance policy is issued. This may also be the effective date of the policy.

Insurance
A system for reducing risk by transferring the risks of several individual entities to one entity, such as an insurance company. Each individual entity contributes monetarily (premiums) to cover the risk assumed by the insurance company.

Insurance Company
A company that provides insurance coverage through the issuance of insurance policies. This is also referred to as the Insurer.

Irrevocable Beneficiary
A type of beneficiary designation that cannot be changed without the written consent of the beneficiary.

Insured
The individual covered by an insurance policy.

Insurability
General acceptability by an insurance company of an applicant for insurance based on underwriting review, which may include items such as the applicant's current health status, medical history and driving record among others.

Insurable Interest
The existence of potential financial loss on the part of the policy owner and/or beneficiary(s) in the event of the death of the insured. The policy owner and any beneficiaries must have an insurable interest.

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Lapse
The termination of an insurance policy due to non-payment of premium.

Living Benefit
A benefit that provides for the payment of a portion of the death benefit prior to an insured's death should the insured be diagnosed as terminally ill. The specific requirements vary by company. This is commonly called an Accelerated Death Benefit.

Lump Sum
The primary method of the settlement of a life insurance policy. The policy proceeds are paid to the beneficiary(s) all at once rather than in installment payments.

Lifetime Assured Coverage (LAC) Benefit
The total amount of medical costs per insured that the insurance company would pay for covered expenses. A lifetime benefit of Php 1,000,000 means the insurance company will pay their portion of all medical expenses for the life of the policy up to Php 1,000,000.

Life Expectancy
The average number of years of life remaining for persons of a given age according to a particular mortality table.

Lapse Notice
The notice provided in writing to the policy owner that the policy has lapsed.

Length of Coverage
The length of time you will be covered by an insurance policy. Length of coverage is typically applied to term life insurance products.

Material Misrepresentation
A statement made by an applicant or proposed insured in the policy's application which is not factually correct. If the truth had been disclosed, the insurance company would not have issued the policy, would have issued it differently, or would have issued it with limited benefits or a higher premium.

Misrepresentation
The act of making, issuing, circulating, or causing to be issued or circulated any written or verbal statement that does not accurately represent the correct policy terms.

Mortality Table
A table or chart listing the probabilities of death occurring at various ages. This is often used by insurance companies to establish rating and underwriting guidelines.

Medical Examination
An exam completed by a physician. The exam may be required as a part of medical underwriting.

Mutual Insurance Company
An insurance company which is owned by its policyowners. Net earnings and savings of the company are distributed to the policy owners in the form of dividends.

Moral Hazard
A condition of morals or habits that could affect and individual's insurability.

Mortality
The frequency of deaths in proportion to a specific population.

Mortality Rate
The number of deaths in a group of people, usually expressed as deaths per thousand.

Mode of payment
The term of premium payments for an insurance policy. Typical modes include monthly, quarterly, semi-annual and annual.

Member
An individual or dependent who is enrolled in and covered by a managed health care plan. Also referred to as an Enrollee, Beneficiary, Participant, Covered Person, Subscriber, and Eligible Individual.

Medical Information Bureau (MIB)
A service that compiles medical information and application history of individuals who have applied for insurance in the past. Most insurance companies check an applicant's MIB report during underwriting.

Non-Contributory
A group benefit plan typically through an employer, in which the employer pays all of the premiums.

Non-Tobacco/Non-Smoker
A rating class assigned to an insurance policy in which the insured has been classified as a non-user of tobacco and/or nicotine products.

Occupational Hazards
Hazards associated with an insured's occupation that increase the possibility of injury, illness or death. Such hazards may have an impact on the insurability of an applicant.

Optional Coverage
These types of coverages are usually purchased and added to the base policy. Also known as riders or supplementary benefits. Examples include, but are not limited to waiver of premium, critical illness benefit, hospitalization benefit, accidental death & disability (AD&D), etc.

Outpatient Surgery
Surgery performed in a facility or center devoted primarily to the performance of one day or same day surgery without anticipation of the overnight say of patients.

Orphan
A policy owner who is not currently being serviced by the writing agent.

Outpatient
A patient who received medical services at a health facility without being admitted to the facility for an overnight stay.

Paid-Up Insurance
An insurance policy that does not require future premium payments to provide the death benefit of the insured person.

Proposed Insured
The person named in a life insurance application as the person whose life is to be covered by the insurance.

Premium Mode
The frequency of premium payments elected by the policy owner. Typical premium modes include monthly, quarterly, semi-annual and annual.

Payment Mode

Most insurance companies allow you to choose from the following payment modes:
Annually
Semi-annually
Quarterly
Monthly

Provision
A statement or clause, found in an insurance policy, to establish some term of the contract.

Pool
A method of distributing insurance risk in which the individual participants share overall risk with the other participants.

Paramedical Exam/Paramed Exam
A brief physical examination the insurer typically requires of applicants during the underwriting process. The exam is usually performed by a registered nurse at a time and location convenient to the applicant. The exam usually consists of measurements (e.g. height/weight, blood pressure, and heart rate), body fluid samples (e.g. urine, blood) and a medical history questionnaire. The insurance company pays for the exam.

Preferred Rating Class
One of the best premium rate classes available on life insurance policies for applicants that are determined by underwriting to be in better than average health.

Policyowner
The individual who owns an insurance policy and who has all contractual rights related to the insurance policy. The policy owner may or may not be the same person as the insured, payor or beneficiary.

Premium Notice
A notice from an insurance company to a policy owner that a premium will be due on a given date.

Policy Loan
A loan from the insurance company to the policy owner secured by the policy's cash value.

Policy
The written document issued by an insurance company to a policy owner. The policy represents the insurance contract between the insurance company and the policy owner.

Pre-Existing Condition
A physical and/or mental condition of an insured person that existed prior to the issuance of his or her insurance policy or that existed prior to issuance and for which treatment was received.

Proceeds
The amount payable under the terms of a life insurance policy upon the insured's death or upon the maturity of an endowment.

Policy Fee
A charge for policy administration expenses incurred by the insurance company. The policy fee is usually included in the premium.

Prescription
A written order or refill notice issued by a licensed medical professional for drugs which are only available through a pharmacy.

Premium Rate Class
The appropriate price category to which an applicant qualifies according to an insurance company's underwriting guidelines. Common rate classes are, Preferred, Standard and Substandard.

Premium Rate
The price per unit of insurance.

Premium Receipt
The receipt given a policy owner for the payment of a premium.

Premium
The amount of money to be paid by the policy owner to the insurance company for the benefits provided under an insurance policy.

Primary Beneficiary
The person(s) designated by the policy owner to which the proceeds of a life insurance policy will be paid upon the death of the insured.

Policy Anniversary
The anniversary of the date of issue as shown in the policy.

Policy Date
The date the insurance policy becomes effective.

Payor
The person making premium payments on a policy.

Permanent Life Insurance
The type of life insurance that may provide coverage for the insured's entire lifetime. Permanent life insurance policies may include cash value accounts, policy loans, surrender options/fees, etc. Examples are Whole Life Insurance and Universal Life Insurance. Most term life insurance policies can be converted to permanent life insurance policies.

Quote
The estimated premium amount for an applicant based on several factors including type of insurance, coverage amount, length of coverage, age, gender, health and medical history, family history, build and approximate rating class. All quotes are preliminary estimates with final rates determined by insurance company underwriting.

Rating Class
The appropriate price category to which an applicant qualifies according to an insurance company's underwriting guidelines. Common rate classes are Preferred Plus, Preferred, Standard Plus, Standard and Substandard.

Risk
The probability of injury, illness or death associated with an insured.

Rebating
The act of giving something of value to an applicant by the agent/broker in return for purchasing a life insurance policy (e.g. sharing commissions). Rebating is illegal in most states.

Renewal Bonus
Increases the basic accident for five consecutive years upon renewal.

Rate Banding
The process of grouping term life insurance death benefit amounts. The rate per thousand typically changes at certain death benefit levels or band breaks.

Reinstatement
A policy provision that allows a policy to be restored from a lapsed status. This is usually allowed during the 31 days following the expiration of an insurance policy's grace period.

Rate Per Thousand
The price per unit (or Php 1,000) of death benefit. Term life insurance premiums are calculated by multiplying the rates per thousand of death benefit, then adding the policy fee.

Reserve
The amount of money an insurance company holds which, with future premiums and an assumed rate of interest, will pay all contractual obligations as they become due. Insurance company reserves are an important factor used to establish a company's industry ratings.

Rated Policy
A policy issued at a substandard rating class based on underwriting guidelines.

Referral
A recommendation by a physician and/or managed care plan for a covered person to be evaluated and/or treated by a different physician.

Risk Classification
The process by which underwriting determines the risk associated with an applicant and assigns an appropriate rating class to the policy.

Rider
A special provision attached to a policy that either expands or restricts the benefits of the policy. Exclusion riders typically exclude certain conditions from coverage.

Renewal
The process of continuing a policy by paying the premium due.

Revocable Beneficiary
A type of beneficiary designation that can be changed without the beneficiary's consent.

Reasonable and Customary Fee
The average fee charged by a particular type of health care practitioner within a geographic area.

Renewable Term Insurance
Term life insurance that may be renewed for another term without evidence of insurability.

Secondary Beneficiary
A person(s) designated by the policy owner to receive policy proceeds if the Primary Beneficiary is deceased at the time benefits become payable. This is often referred to as a contingent beneficiary.

Surrender
The cancellation of a life insurance policy.

Standard Rating Class
The premium rate class available on life insurance policies for applicants that are determined by underwriting to be of average health.

Second-To-Die Life Insurance
A type of life insurance policy that insures the lives of two people, typically a husband and wife. The death benefit proceeds are payable upon the second death.

Special Compassionate Benefit (SCB)
Pays a percentage of the coverage amount in case of loss of life which was not caused by an accident.

Standard Risk
An average risk as determined by underwriting.

Stop Loss
The total dollar amount up to which you share medical costs with the insurance company. For example, if the stop loss is $5,000 and your share is 20%, you pay $1,000 and the company pays 100% thereafter up to the lifetime benefit.

Sub-Standard Risk
A below average risk as determined by underwriting. Insurance policies can be issued to individuals with sub-standard risk and are referred to as table rated or modified.

Suicide Clause
A life insurance policy provision that states if the insured dies by suicide within a certain period of time from the date of issue (usually two years) the amount payable would be limited to the total premiums paid minus any policy loans or outstanding premiums.

Settlement
The process of receiving the proceeds from a life insurance policy.

Term Conversion
A policy provision that allows a term life insurance policy to be converted to a permanent life policy offered by the company for a specified period of time. Usually the insured can convert to a permanent policy at the same amount of coverage without providing evidence of insurability.

Third-Party Owner
A policy owner who is not the insured.

Term Life Insurance
A life insurance product that provides death benefit protection for a specified period of time. The policy pays benefits only if the insured dies during the term.

Tobacco
Examples include, but are not limited to cigarettes, cigars, chewing tobacco, and snuff. Use of these products can have an impact on the rating class you receive.

Twisting
The illegal practice of inducing a policy owner to replace a policy by providing inaccurate, incomplete or misleading information.

Underwriter
The individual or team within a life insurance company who is trained to evaluate the insurability and determine the classification of applicants for insurance protection.

Underwriting
The process of evaluating applications for insurance based on an established set of guidelines. Underwriting determines the risk associated with an applicant and either assigns the appropriate rating class for the policy or declines to offer a policy.

Usual, customary and Reasonable (UCR)
Usual Fee: The fee usually charged for a given service by an individual provider to his or her private patient, that is, his or her own usual fee. Customary Fee, the range of usual fees charged by providers of similar training and experience in an area. Reasonable Fee, a fee that meets the two previous criteria or, in the opinion of the responsible medical or dental association's review committee, is justifiable considering the special circumstances of the particular case in question.

Universal Life Insurance
A type of permanent life insurance that combines term life insurance and an investment feature into one contract. Universal Life insurance policies generally offer flexible premium payments.

Uninsurable Risk
An individual who is not acceptable for insurance due to excessive risk related to current health, medical history, occupation, avocations, etc.

Variable Life Insurance
A variation of permanent life insurance that offers cash values that fluctuate based on the performance of the underlying mutual funds in the investment account.

Waiver of Premium Rider (WP)
An optional policy rider that provides for the continuation of life insurance coverage without further premium payments if the insured becomes totally disabled.

Whole Life Insurance
A type of permanent life insurance which provides a level death benefit upon the insured's death, or a cash endowment upon policy maturity that is equal to the death benefit. Whole life insurance policies also accumulate cash values.

War Clause
A provision in a life insurance policy excluding the liability of an insurance company if the insured's death is the direct result of a war.

Yearly Renewable Term (YRT)
A type of term life insurance policy that provides a level death benefit with premiums that increase each year with the insured's age. YRT is also referred to as annually renewable term.