Insurance Terms

Admitted Company
An insurance company authorized to do business in California.

A licensed person or organization authorized to sell insurance by or on behalf of an insurance company.

A licensed person or organization paid by you to look for insurance on your behalf.

The termination of insurance coverage during the policy period. Flat cancellation is the cancellation of a policy as of its effective date, without any premium charge.

Insurance company or HMO insuring the health plan.

Notice to an insurer that under the terms of a policy, a loss maybe covered.

The first or third party. That is any person who asserts right of recovery.
COBRA (Consolidated Omnibus Budget Reconciliation Act)
Federal legislation that requires group health plans to provide health plan members the opportunity to purchase continued coverage in the event their insurance is terminated. Applies only to employer groups with 20 or more employees.

Credit Life Insurance
Insurance issued to a creditor (lender) to cover the life of a debtor (borrower) for an outstanding loan.

The company refuses to accept the request for insurance coverage.

The amount of the loss which the insured is responsible to pay before benefits from the insurance company are payable. You may choose a higher deductible to lower your premium.

Usually the spouse and unmarried children (adopted, step or natural) of an employee.

Disability Insurance
Health insurance that provides income payments to the insured wage earner when income is interrupted or terminated because of illness, sickness, or accident.

Amendment to the policy used to add or delete coverage. Also referred to as a “rider.”

Explanation of Benefits (EOB)
A carrier’s written response to a claim for benefits. Sometimes accompanied by a benefits check.

Certain causes and conditions, listed in the policy, which are not covered.

Expiration Date
The date on which the policy ends.

Face Amount
The dollar amount to be paid to the beneficiary when the insured dies. It does not include other amounts that may be paid from insurance purchased with dividends or any policy riders.

Grace Perios
A period (usually 31 days) after the premium due date, during which an overdue premium may be paid without penalty. The policy remains in force throughout this period.

Group Insurance
An insurance contract made with an employer or other entity that covers individuals in the group.

Guaranteed Insurability
An option that permits the policy holder to buy additional stated amounts of life insurance at stated times in the future without evidence of insurability.

Health Insurance
A policy that will pay specifies sums for medical expenses or treatments. Health policies can offer many options and vary in their approaches to coverage.

Health Maintenance Organization (HMO)
An alternative to commercial insurance that stresses preventive care, early diagnosis and treatment on an outpatient basis. HMOs are licensed by the state to provide care for enrollees by contracting with specific health care providers to provide specified benefits. Many HMOs require enrollees to see a particular primary care physician (PCP) who will refer them to a specialist if deemed necessary.

The policyholder – the person(s) protected in case of a loss or claim.

The insurance company.

Life Insurance
A policy that will pay a specified sum to beneficiaries upon the death of the insured.

Maximum amount a policy will pay either overall or under a particular coverage.

Long Term Disability (LTD)
Insurance which pays employees a percentage of monthly earnings in the event of disability.

Out-Of-Pocket Maximum
The total of an insured individual’s co-insurance payments and co-payments.

The written contract of insurance.

Policy Limit
The maximum amount a policy will pay, either overall or under a particular coverage.

The amount of money an insurance company charges for insurance coverage.

Pre-Existing Condition
An illness, injury or condition for which the insured individual received medical advice, treatment, services or supplies; had diagnostic tests done or recommended; had medicines prescribed or recommended; or had symptoms of typically within 12 months (time periods may vary depending on state laws) prior to the effective date of insurance coverage.

Preferred Provider Organization (PPO)
A network or panel of physicians and hospitals that agrees to discount its normal fees in exchange for a high volume of patients. The insured individual can choose from among the physicians on the panel.

An estimate of the cost of insurance, based on information supplied to the insurance company by the applicant.

The restoring of a lapsed policy to full force and effect. The reinstatement may be effective after the cancellation date, creating a lapse of coverage. Some companies require evidence of insurability and payment of past due premiums plus interest.

Usually known as an endorsement, a rider is an amendment to the policy used to add or delete coverage.

Small Employer Group
Groups with 1 ­to 50 employees. The definition of small employer group may vary between states.

The process of selecting applicants for insurance and classifying them according to their degrees of insurability so that the appropriate premium rates may be charged. The process includes rejection of unacceptable risks.

Waiting Period
A period of time set forth in a policy which must pass before some or all coverages begin.

Workers Compensation Insurance
Coverage providing four types of benefits (medical care, death, disability, and rehabilitation) for employee job-related injuries or diseases as a matter of right (without regard to fault).

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