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INSURANCE LEGAL GLOSSARY |
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Glossary of
Insurance Terms
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Accelerated Death
Benefit: A provision or rider that allows you (the policy owner) to
receive all or part of the benefits of your life insurance policy while you are
alive but living with a terminal illness. Depending on the insurance company
issuing the policy, and the policy form involved, these benefits are paid either
on diagnosis of a terminal illnesses, such as AIDS, certain organ transplants,
or upon a diagnosis that death within two years is almost certain. Some
companies permit payout of some of the face amount of the policy by way of
accelerated death benefits in the event of nursing home confinement or other
health conditions. The circumstances under which such benefits are available
varies from company to company, and the manner the payments are accounted for
also can vary, in some as an “advance” against the ultimate benefit to be
paid and in others as a loan, to be repaid, in some cases with interest, when
the face amount is paid out. Also known as “living benefits.”
Accelerated Endowment: A dividend option allowing
dividend accumulations to be applied to convert a life insurance policy into an
endowment, or to shorten the endowment term.
Accidental Death and
Dismemberment Coverage: Coverage that will pay you, your family
members, a set amount, under the terms of the policy, for certain serious
injuries or death resulting from an accident while in your car.
Accidental Death and
Dismemberment Insurance: A policy that pays the beneficiaries a fixed
death benefit but only if the insured person dies in or from a covered accident.
Sometimes the policies pay extra benefits if the death occurred while a
passenger on a common carrier, or while wearing a seatbelt. That is the
“accidental death” portion of the policy. The policy also pays the policy
owner a percentage of the face amount for the loss of an arm, leg, eye, etc. in
a covered accident; the percentage typically varies with the extent of
disablement or loss of bodily function, such as loss of one hand, 25%, one arm,
50%, both arms 100%, if the person loses the bodily parts or functions as a
result of a covered accident. It is important to determine what types of
accidents are covered and which are not. These policies are typically very
inexpensive as most deaths occur from illness or disease, not accidents.
Accidental Death
Benefit: A provision or rider to a life insurance policy that pays the
beneficiary more than the face amount (such as double) in case you, the insured,
die as a result of a covered accident, Formerly known as a “double
indemnity” rider, there are some forms that pay 3 times the face amount if the
accident occurred while a passenger on a commercial airline or other common
carrier.
Accumulation Value: A term used in Universal Life
policies to describe the total of all premiums paid and interest credited to the
account before deductions for any expenses, loans or surrenders.
Accumulations (or Accumulation Benefits): Percentage
additions to policy benefits when the contract is continuously renewed.
Actual Cash Value: An
amount equal to the cost of replacing a damaged item with a new one, minus
depreciation.
Actual Charge: The
charges for a particular service/treatment by a health care provider.
Actuary: An
expert trained in the mathematics of insurance and is responsible for the
calculation of reserves, premiums, and other values.
AD&D: See Accidental Death and Dismemberment
Insurance.
Additional
Insured or Additional Interest: A person or an organization, other than the
named insured or covered person, who is protected under the named insured's auto
policy. If an auto is leased, the leasing company may want to be listed as an
Additional Insured as well as a lien holder or loss payee. This protects the
leasing company if it's named in a lawsuit for an accident caused by a
policyholder.
Adjustable Life: A form of life insurance which
allows changes on the policy face amount, the amount of premium, period of
protection, and the length of the premium payment period. See also Flexible
Premium Adjustable Life Insurance Policy.
Adjustable Premium: The right of an insurer to
change the premium rate on classes of insureds, or blocks of business at the
time of policy renewal.
Adjuster: A
person who investigates and evaluates for an insurance carrier the damages
caused in an accident.
Administrative Expense
Charge: An amount charged by the insurer and/or administrator
(sometimes separately delineated) to pay the costs of administering the policy.
Administrative Services Only: The services provided
by an insurer, such as providing claim forms and processing claims, when the
insurer is not the party funding the loss payments. See also Self Funded Plan.
Age Change: The date which a person's age, for
insurance purposes, changes. In most Life Insurance contracts this is the date
midway between the insured's natural birth dates. Health insurers frequently use
the age of the previous birth date for rate determinations. On the date of age
change, a person's age may change to that of the last birth date, the nearer
birth date, or the next birth date, depending upon the way in which the rating
structure has been established by that particular insurer.
Agent: An
insurance salesperson who sells and services policies. An independent agent
usually represents two or more insurers in a sales and service capacity and is
paid on a commission basis. An exclusive agent or captive agent represents only
one company, usually on a commission basis.
Alternative Medicine: Some
medical techniques once considered outside the boundaries of standard practice
have become more accepted in recent years and may now be eligible for coverage.
Acupuncture, midwives, and osteopathic treatments are examples of formerly
excluded treatments that are now covered under many health insurance policies.
Amendment: An
attachment to a policy that modifies certain policy benefits.
American College: An educational institution within
the Life Insurance business. It confers the Chartered Life Underwriter
designation and is concerned with continuing agents' training and with research
and publication in areas related to the Life Insurance business. It also
sponsors specialty Life Insurance courses and offers a college degree in
financial services. It was formerly known as the American College of Life
Underwriters.
American Council of Life Insurance, Inc.: An
association made up of several previously independent insurance groups. It is
concerned with legislative matters, intercompany communications, and the
exchange of information.
American Experience Table of Mortality: A statement
of expected mortality rates based upon data accumulated in 1868 from a large
number of insured persons. This table was widely used by life insurers until the
1950s to establish rates.
American Life Convention: A former association of
Life companies; now part of the American Council of Life Insurance. See American
Council of Life Insurance, Inc.
Amount at Risk: The difference between the face
amount of a Whole Life Insurance contract and the cash value which it has built
up. The net amount at risk declines throughout the life of the contract, while
the policy reserve increases along with the cash value. It is the amount the
insurer would have to draw from its own funds rather than the policy reserve
were the contract to become a death claim.
Annual Limits: Are
maximums on the dollar amounts the plan will pay for any given year.
Annual Payment Annuity: An annuity which was
purchased by the payment of annual premiums for a specified period of time.
Anti-Theft
Device: Devices designed either to reduce the chance an auto will be
vandalized or stolen, or assist in its recovery. Examples include car alarms,
keyless entry, starter disablers, motion detectors, parts of the vehicle etched
with the Vehicle Identification Number, and recovery systems.
Application: A
signed request for life insurance giving information about the prospective
policyholder, including age, sex, and if the policy is subject to underwriting,
typically it also asks a series of health related questions. A false statement
by the applicant for life insurance makes the policy “voidable” within the
first two years of issue, or “contestable” if the insured dies within the
first two years.
Approved Charge: The
dollar amount which your insurer bases its payments and your co-payments.
Arbitration: A
determination made by impartial persons (often experts) as to the value of
property or the extent of damage. In arbitration the proceeding is typically far
less formal that a court proceeding, but the decision of the arbitrator is
final, absent fraud. Arbitration is typically used as an alternative to formal
court-based litigation in which the determination is made by a judge and/or jury
operating according to all legal rules.
Armstrong Investigation: A study authorized by the
New York state legislature in 1905 which reviewed the operations and practices
of Life insurers operating in the state. Numerous changes in policy forms and
investment practices came from the study and were eventually reflected in other
state codes.
Asset Share Value: The value of a book of business
to an insurer, assuming that the business has been in force long enough to show
true mortality rates. This value must be known by the insurer in order to make
rates and also in order to sell the business. If assets share values do not grow
properly, either the rates have been too low or expenses too high.
Assigned Risk Plan: A
state-supervised insurance plan for people who are unable to obtain insurance
coverage in the regular market. The cost of this insurance is substantially
higher.
Assigned
Risk: A risk not ordinarily acceptable to insurers which is, according to
state law, assigned to insurers participating in a plan in which the insurers
agree to accept their share of these risks.
Assignment: Giving
rights and benefits under your insurance policy to someone else.
Assignment: The transfer of the ownership rights of
a Life Insurance policy from one person to another. The term also refers to the
document that effects the transfer.
Assignments of
Benefits: The insured allows a hospital or doctor to collect your
health insurance benefits directly from your insurance company.
Associated Group
Plans: Fully insured plans issued to employee groups, including those
formed by labor unions, nonprofit membership corporations, etc.
Association Group Insurance: Technically, group
insurance issued to an association rather than to an employer or a union.
Association of Life Insurance Council: An
organization of Life company attorneys which seeks to increase knowledge in
areas of the law affecting Life Insurance.
Assumed Interest Rate:
The minimum interest rate on a variable life insurance policy.
At-Fault: Responsible
for an accident.
Attained Age: The age an insured has reached on a
given date.
Automatic Premium Loan: A provision in a Life policy
authorizing the insurer to use the loan value to pay any premiums still due at
the end of the grace period.
Automatic Reinsurance: This form of reinsurance,
also known as Treaty Reinsurance, is one whereby an insurer must cede that
portion of a risk that is above the limit established by contract, and the
re-insurer must accept all risks ceded to it.
Automobile
Insurance: A form of insurance that protects against losses involving autos.
Different types are available depending on the needs and wants of those buying
policies. Examples of coverage types include: bodily injury liability, property
damage liability, medical payments, and collision and comprehensive coverage for
physical damage to the insured's vehicle.
Aviation Accident Insurance: A form of insurance
which protects individuals as passengers or pilots, usually on scheduled
aircraft, or which covers the flight travel of the employees of a company under
a master policy.
Aviation Hazard: The extra hazard of death or injury
resulting from participation in aeronautics, usually as other than a fare-paying
passenger in licensed aircraft. This generally requires an extra premium rating
or waiver of certain benefits or coverage.
DISCLAIMER: The
information contained within this personal injury site is of a general nature
and is not meant to be a restatement of any rules of law. Your
use of this site does not create an attorney-client
relationship. You should hire an attorney to obtain legal
advice for your specific case.
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Consultwebs.com, Inc., All rights reserved. Personal
Injury Law
Glossary.
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