myNISI | Common Insurance Terms

Accelerated Death Benefits
If your policy has an accelerated death benefits provision, it will pay you — under certain conditions — all or part of the policy death benefits while you are still alive. These conditions include proof that the policyholder is terminally ill with a life expectancy of less than 12 months, has a specified life-threatening disease or is in a long-term care facility such as a nursing home. If you have a group term life policy or certificate, the amount of accelerated benefit you may receive is limited by law to: the greater of $25,000 or 50 percent of the death benefit. By accepting an accelerated benefit payment, a person could be ruled ineligible for Medicaid or other government benefits. The proceeds also may be taxable.

Accidental Death & Dismemberment (AD&D) Benefits
A benefit (if issued) of a life insurance policy that provides additional benefits to be payable if an accident causes the loss of life or limb. If a policy includes an accidental death benefit, the cause of death will be examined to determine whether the Insured’s death meets the policy’s definition of accidental bodily injury.

Actively-at-Work Provision
A group insurance policy provision which requires that in order to be eligible for coverage, an employee must be actively at work for the employer for a minimum number of hours per week.

Actuary
A specialist in the mathematics of insurance who calculates rates, reserves, etc.

Admitted Assets
Assets permitted by state law to be included in an insurance company's annual statement. These assets are an important factor when regulators measure insurance company solvency. They include mortgages, stocks, bonds and real estate.

Agent
An individual who sells and services insurance policies.

Application
A form you fill out with information about you that an insurance company will use to decide whether to issue you a policy and how much to charge.

Assets
Assets refer to "all the available properties of every kind or possession of an insurance company that may be used to pay its debts." There are three classifications of assets: invested assets, all other assets and total admitted assets.

Invested Assets refer to things such as bonds, stocks, cash, and income-producing real estate.
All other assets refer to non-income producing possessions such as the building the company is in, office furniture and debts owed (usually in the form of deferred and unpaid premiums.)
Total Admitted Assets refer to everything a company owns.
All other + invested assets = Total Admitted Assets.

Some states by law do not permit insurance companies to claim certain goods and possessions, such as deferred and unpaid premiums, in the all other assets category, declaring them "nonadmissable."

Assignment
The transfer of all or part of a policy owner’s legal title and rights to a policy to another person or entity such as a bank. It is possible to change this type of transfer at a later date.

Bankdraft
Occurs when money is being automatically debited from a banking account to for insurance coverage.

Beneficiary
The person, persons or entity designated to receive the death benefits from a life insurance policy or annuity contract.

Broker
Insurance salesperson who searches the marketplace in the interest of clients, not insurance companies.

Broker-Agent
Independent insurance salesperson who represents particular insurers but may also function as a broker by searching the entire insurance market to place an applicant's coverage to maximize protection and minimize cost. This person is licensed as an agent and broker.

Cafeteria Plan
Internal Revenue Code Section 125 makes it possible for employers to offer their employees a choice between cash salary and a variety of nontaxable benefits (qualified benefits).

A qualified benefit is a benefit that does not defer compensation and which is excludable from an employee's gross income under a specific provision of the Code, without being subject to the principles of constructive receipt. Qualified benefits include health care, vision and dental care, group-term life insurance, disability, adoption assistance and certain other benefits.

Employers may also offer flexible spending accounts to employees under a cafeteria plan that provides coverage under which specified, incurred expenses may be reimbursed. These include health flexible spending accounts for expenses not reimbursed under any other health plan and dependent care assistance programs.

Cancellation
Termination of an insurance policy by the company or insured before the renewal date.

Cash Surrender Option
Nonforfeiture option, which specifies that the policy owner can cancel the coverage and receive the entire net cash value in a lump sum.

Cash Value
The amount of money, which the policy owner will receive as a refund if the policy owner cancels the coverage and returns the policy to the company. Also known as cash surrender value.

Claim
The demand for benefits as provided by the policy.

Claimant
A person who makes an insurance claim.

COBRA (Consolidated Omnibus Budget Reconciliation Act)
Federal law that generally applies to employers with 20 or more employees and requires each group medical expense insurance plan to allow employees and certain dependents to continue their group coverage for a stated period of time following a qualifying event that causes loss of group medical expense coverage.

Complaint
The formal mechanism to start an investigation of potential wrongdoings by insurers, agents and premium finance companies licensed and doing business.

Complaint History
Information collected or maintained by the Department of Insurance relating to the number of justified, verified as accurate, and documented as valid, complaints received against a particular insurer, agent or premium finance company and the disposition of the complaints.

Contingent Beneficiary
Another party or parties who will receive the proceeds if the primary beneficiary should predecease the person whose life is insured.

Contributory Insurance Plan
An insurance plan that requires the covered employees to contribute all or a portion of the cost of insurance.

Conversion Privilege
The right to change (convert) insurance coverage from one type of policy to another. For example, the right to change from an individual term insurance policy to an individual whole life insurance policy.

Coverage
Protection under an insurance policy. In property insurance, coverage lists perils insured against, properties covered, locations covered, individuals insured, and the limits of indemnification. In life insurance, living and death benefits.

Death Benefit
Amount paid to the beneficiary upon the death of the insured.

Earned Premium
The portion of a policy premium that has been used to actually buy coverage, or that the insurance company has "earned." For instance, if you have a six-month policy that you paid for in advance, two months into the policy, there would be two months of earned premium. The remaining four months of premium is called unearned premium.

Effective Date
The date on which an insurance policy becomes effective.

Eligibility Date
The date on which an employee becomes eligible for insurance coverage. Note the employee's coverage may or may not be effective on this date. See policy for information on waiting periods.

Elimination Period
The number of consecutive days of disability before benefits are payable.

ERISA (Employee Retirement Income Security Act)
Federal law governing employee benefit plans.

Evidence of Insurability
To qualify you for a particular policy at a particular price, companies have the to ask you for information about your health and lifestyle. An insurance company will use this information–your evidence of insurability–in deciding if your application for insurance is acceptable and at what premium rate.

Exclusion
Provision in an insurance policy that indicates what is denied coverage.

Face Value
The initial amount of death benefit provided by the policy as shown on the face page of the contract. The actual death benefit may be higher or lower depending on the options selected, outstanding policy loans or premium owed.

Free Examination Period
Also known as "Free Look," it is the time period after a life insurance policy or an annuity is delivered during which the policy owner may review it and return it to the company for a full refund of the initial premium. Variable life policies are required to include a "free-look" provision.

Grace Period(s)
The time, usually 31 days, during which a policy remains in force after the premium is due but not paid. The policy lapses as of the day the premium was originally due unless the premium is paid before the end of the 31 days or the insured dies. This is not a "free-insurance" period.

Group Life Insurance
This type of life insurance provides coverage to a group of people under one contract. Most group contracts are sold to businesses that want to provide life insurance for their employees. Group life insurance also can be sold to associations to cover their members and to lending institutions to cover the amounts of their debtor loans. Most group policies are for term insurance. Generally, the business will be issued a master policy and each person in the group will receive a certificate of insurance.

HIPAA (Health Insurance Portability & Accountability Act of 1996, as amended)
Federal law that requires insurance companies to safeguard the privacy of their customers' protected health information and in some cases to provide continuity of coverage when changing employers.

Insurer
The insurance company.

Irrevocable Beneficiary
A named beneficiary whose rights to life insurance policy proceeds are vested and whose rights cannot be canceled by the policy owner unless the beneficiary consents.

Lapse
Termination of a policy due to non-payment of premiums.

Liability
Responsibility to another for one’s negligence.

Licensed
Indicates the company is incorporated (or chartered) in another state but is a licensed (admitted) insurer for this state to write specific lines of business for which it qualifies.

Long-Term Disability Insurance
Disability income coverage that provides a maximum benefit period of more than one year.

Loss
The amount an insurance company pays on a claim.

Loss History
Refers to an insured’s history of losses (claims) with other companies, or the company they are currently with. A company will consider "loss history" when underwriting a new policy or considering a renewal of an existing policy. Companies view "loss history" as an indication of an insured’s propensity for a claim in the future.

Mortality Charge
The cost of the insurance protection element of a universal life policy. This cost is based on the net amount at risk under the policy, the Insured’s risk classification at the time of policy purchase, and the Insured’s current age.

Mortality Expenses
The cost of the insurance protection based upon actuarial tables, which are based upon the incidence of death, by age, among given groups of people. This cost is based on the amount at risk under the policy, the insured’s risk classification at the time of policy purchase and the insured’s current age.

Net Cash Value
The cash value amount available to a policy owner after adjustments have been made to the cash surrender value to account for policy loans and dividends.

Non-Contributory Plan
An insurance plan that is paid in full by the employer.

Nonparticipating Policy
A life insurance policy that does not grant the policy owner the to policy dividends.

Non-Renewal
A decision by an insurance company not to renew a policy.

Paid-Up
This event occurs when a policy will not require any further premiums to keep the coverage in force.

Paid-Up Additions
Additional amounts of insurance purchased using dividends; these insurance amounts require no further premium payments.

Policy
The written contract effecting insurance, or the certificate thereof, by whatever name called, and including all clause, riders, endorsements, and papers attached thereto and made a part thereof.

Policy Loan
An advance made by a life insurance company to a policy owner. The advance is secured by the cash value of the policy.

Policy Owner
The person or party who owns an individual insurance policy. This person may be the insured, the beneficiary or another person. The policy owner usually is the one who pays the premium and is the only person who may make changes to a policy.

Policy Period
The period a policy is in force, from the beginning or effective date to the expiration date.

Pre-existing Condition Limitation/Exclusion
A policy provision found in most disability and health insurance policies that limits or excludes benefits until the insured has been covered under the policy for a specified length of time.

Premium
The payment or one of the regular periodical payments a policyholder is required to make for an insurance policy. The amount of money which the policyholder agrees to pay to the insurance company for the policy of insurance.

Protected Health Information (PHI)
Any information whether oral or recorded in any form or medium that is created or received by a health care provider, health plan, public health authority, employer, life insurer, school or university, or health care clearinghouse; and relates to the past, present or future physical or mental health or condition of an individual; the provision of health care to an individual; or the past, present or future payment for the provision of health care to an individual.

Providers
Doctors and hospitals or those who are providing a medical/dental service.

Refund
Amount of money being returned to the policyholder.

Reinstatement
The process by which a life insurance company puts back in force a policy which had lapsed because of nonpayment of renewal premiums.

Reinsurance
An agreement between two or more insurance companies by which the risk of loss is proportioned. Thus the risk of loss is spread and a disproportionately large loss under a single policy does not fall on one company. Acceptance by an insurer, called a reinsurer, of all or part of the risk of loss of another insurer.

Rescind
To take away or remove. To annul so as to restore the involved parties to the positions they would have occupied had there been no contract.

Return Premium
The premium returned to an insured for canceling or amending a policy.

Rider
A written agreement attached to the policy expanding or limiting the benefits otherwise payable under the policy. Same as an "endorsement."

Short-Term Disability Income Coverage
Disability income coverage that provides a maximum benefit period of up to one year.

Single-Premium Whole Life Policy
A type of limited-payment policy that requires only one premium payment.

Surrender Charges
Charges that are deducted if your life insurance policy or annuity is cashed in (surrendered). These charges also are deducted if you borrow money on your policy or if your policy lapses for non-payment.

State of Domicile
The state in which the company is incorporated or chartered. The company is also licensed (admitted) under the state's insurance statutes for those lines of business for which it qualifies.

Third Party Administrator (TPA)
An organization that performs managerial and clerical functions related to an employee benefit insurance plan by an individual or committee that is not an original party to the benefit plan.

Underwriter
The person who reviews an application for insurance and decides if the applicant is acceptable and at what premium rate.

Underwriting
The process an insurance company uses to decide whether to accept or reject an application for a policy.

Underwriting Guide
Underwriting guide, also call underwriting manual, underwriting guidelines, or manual of underwriting policy. Regardless of its name, the guide details the underwriting practices of the insurance company and provides specific guidance as to how underwriters should analyze all of the various types of applicants they might encounter.

Unearned Premium
The insured’s remaining premium equity in his policy; that part of the policy premium that has not been "used up."

Universal Life Insurance
The key characteristic of universal life insurance is flexibility. Within limits, you can choose the amount of insurance and the premium you wish to pay. The policy will stay in force as long as the policy value is sufficient to pay the costs and expenses of the policy. The policy value is "interest-sensitive," which means that it varies in accordance with the general financial climate. Lowering the death benefit and raising the premium will increase the growth rate of your policy. The opposite also is true. Raising the death benefit and lowering the premium will slow the growth of your policy. If insufficient premiums are paid, the policy could lapse without value before the maturity date is reached. (The maturity date is the time your policy ceases and cash surrender value would be payable if the policyholder is still living.) Therefore, it is your responsibility to pay consistently a premium that is high enough to ensure that your policy’s value will be adequate to pay the monthly cost of the policy. The company is required to send you an annual report and also to notify you if you are in danger of losing your policy due to insufficient value.

Usual and Customary & Reasonable (UCR) Fees
These fees may be based on: rates usually charged by physicians and providers in your area; rate averages compiled by independent rating services; or rate averages compiled by the insurance company and represent the maximum dollar amount of given covered expense the insurer considers eligible under a medical expense policy.

Waiting Period
The number of days an employee must meet prior to becoming eligible for insurance coverage.

Whole Life Insurance
Whole life insurance policies are one type of cash value insurance. Whole life policies offer protection through a lifetime — that is, for a person's "whole life." From the day you buy the policy, you pay a scheduled premium. The scheduled premium may be level or may increase after a fixed time period, but it will not change from the amount(s) shown in the policy schedule. It is important that you look at the policy schedule to be sure you understand what your premium payments will be and that you can afford them over time. This premium is based on your age at the time of purchase. Initially, it will be higher than the premium paid for a term policy, but you are likely to end up paying less in premiums when you are older, if you keep the policy for a long time. Part of each premium payment will go to cash value growth, part for the death benefit and part for expenses (such as commissions and administrative costs). There is no need to renew whole life policies. As long as you pay your premium when due, your coverage will continue in force throughout your life.