Glossary of Terms

Absolute Assignment:

An irrevocable transfer, from one person to another, of all ownership rights under an insurance policy.  See also Collateral Assignment.

Accident:

An unforeseen, unexpected, and unplanned event.

Accidental Bodily Injury:

Physical injury sustained resulting from the accident.

Accidental Death Benefit:

A benefit in addition to the face amount of a life insurance policy, payable if the insured dies as the result of an accident or, depending upon the policy definition of the term, as a result of accidental means. Sometimes referred to as “double indemnity”.

Act of God:

An accident or event arising out of natural causes without human intervention.

Actively at Work:

A requirement (a form of individual evidence of insurability) that an insured be at his or her usual place of employment on the date the insurance takes effect.  Since this definition is impractical for dependents, plans usually require that, if a dependent is hospital confined on the date the insurance would become effective, the effective date of insurance will be deferred until release from the hospital.

Actuary:

An accredited insurance mathematician who calculates premium rates, dividends, and reserves and prepares statistical studies and reports.

Administration:

The handling of all functions related to the operation of the group insurance plan once it becomes effective. The claim function may or may not be included.

Administrator:

The person who is appointed by a Court of Law to settle the estate of a person who has died without a valid will.

Adverse Selection:

The tendency of those who are poorer-than-average health risks to apply for or maintain insurance coverage. Also called anti-selection.

Agent / Insurance Advisor:

Authorised representatives who sells, services, or negotiates insurance contracts on behalf of the company.

Age of Majority:

The age at which a person has the legal capacity to enter into a contract.

Aggregate Limit:

The maximum dollar amount or total amount of coverage payable for a single loss, or multiple losses, during a policy period, or on a single event.

Amendment:

A formal document changing the provisions of an insurance policy.

Assignee:

The party to whom all or certain rights are transferred under an absolute or collateral assignment.

Assignee:

The party to whom all or certain rights are transferred under an absolute or collateral assignment.

Assignor:

The person who executes an assignment.

Assignment of Benefits:

A provision in a health benefits claim form by which the insured directs the insurance company to pay any benefits directly to the provider of care on whose charge the claim is based.

Automatic Premium Loan:

A policy loan authorised in advance by the policyholder and established by a life insurance company to pay a premium that remains unpaid at the end of the grace period.

Base Plan:

Any basic medical care plan that provided limited first-dollar hospital, surgical, or medical benefits, as contrasted with major medical benefit plans that provide comprehensive hospital, surgical and medical benefits.

Basic Coverage:

Refers to base plan benefits over which major medical benefits may be superimposed.

Benefit:

A term used to describe the amount to be paid to a claimant, assignee, or beneficiary upon the happening of an event.

Beneficiary:

The person to whom the proceeds of a life insurance policy are payable at the death of the insured.

Binding Receipt:

A form of premium receipt, which provides that life insurance, will be payable, subject to the terms of the receipt, if the proposed insured should die before a policy is issued or the application is denied. See also Conditional Receipt.

Bodily Injury:

Physical injury including sickness or disease to a person.

Broker:

A full time insurance specialist who advises and arranges insurance normally as an agent of the insured, and generally sells insurance of various kinds for several companies.

Cash Surrender Value:

A non-forfeiture option which allows the owner of a whole of life or endowment insurance policy to surrender the policy prior to the maturity of the policy as a death claim or matured endowment and received the entire cash value as a lump sum.

Claim:

A demand to the insurer by, or on behalf of, the insured person for the payment of benefits under a policy.

Claimant:

The insured or beneficiary exercising the right to receive benefits.

Clauses:

Specific statements on a policy document as regarding any aspects of basic or extended cover, a distinct condition, stimulation or provision. Usually they give explicit details on the exact nature of such cover and the limitations and conditions under which they are given.

Collateral Assignment:

The legal transfer of all or part of the ownership rights under an insurance policy as security for an indebtedness on condition that if the indebtedness is repaid, the rights so transferred will revert (return) to the person who made the assignment.

Conditions:

Terms or requirements to which the policy is subject.

Conditional Receipts:

A premium receipt, is given to the applicant who pays all, or a specified portion, of the initial premium at the time he applies for life insurance. Such receipts generally provide that if the proposed insured is found to have been insurable as of a specified date (usually either the date of the application or of the medical examination, if later), a death claim arising prior to the insurance of a policy will be payable. Some conditional receipts provide for payment of a claim only if the application is approved prior to the death of the proposed insured.

Contestable Period:

That time allowed an insurer after a policy is issued to investigate possible misrepresentation in the application and contest the policy’s validity.

Coverage:

A major classification of benefits provided by a policy (e.g., short-term disability, major medical), or the amount of insurance or benefit stated in the policy for which an insured is eligible.

Covered Expenses:

Those specified health care expenses that an insurer will consider for payment under the terms of a health insurance policy.

Conversion Privilege:

The right given to an insured person under a group insurance contract to change coverage, without evidence of medical insurability, to an individual policy upon termination of the group coverage.

Convertible Term Policies:

Term insurance policies that gives the policyholder the right to convert the term policy to a permanent plan such as Whole of Life Insurance or endowment Insurance without supplying evidence of insurability.

Daily Benefit:

A specified daily maximum amount payable for room and board charges under a hospital or major medical benefits policy.

Dependent:

An insured’s spouse (wife or husband), not legally separated from the insured, and unmarried child(ren) who meet certain eligibility requirements and who are not otherwise insured under the same group policy. The precise definition of a dependent varies by insurer.

Disability Income Benefit:

A disability benefit provided under a health insurance contract or a rider attached to a life insurance policy, which provides an income of a specified amount at regular intervals, during any period in which the insured is disabled as defined in the policy.

Disability Waiver of Premium Benefit:

A disability benefit which provides that a policy of life or health insurance will be continued in force without payment of premiums during any period in which the insured is totally disabled as defined in the policy. During such periods, the premiums are said to waived by the company – that is, premiums are not required to be paid.

Double Indemnity:

See Accidental Death Benefit.

Effective Date:

Date the insurance cover begins or takes effect.

Eligibility Date:

The date on which a member of an insured group may apply for insurance.

Eligible Medical Expense:

A term describing the various types of expense the policy covers. The provision that describes these expenses commonly contains limitations applicable to certain of these expenses.

Eligibility:

The provisions of the group policy that state the requirements members of the group and/or their dependents must satisfy to become insured.

Endorsements:

Written evidence of changes made to the original insurance contract.

Endowment Insurance:

An insurance contract that pays an amount of insurance if the insured should die during a specified term.

Evidence of Insurability:

Any statement or proof of a person’s physical condition and/or other factual information affecting acceptability for insurance.

Exclusions / Exceptions:

Specified events that are not covered by the insurance policy.

Executor:

The person who is appointed by a Court of Law to carry out the provisions of the Will left by a deceased person. The Court will appoint a person who is designated in the Will to be the Executor, if that person is living, consents, and qualifies. See Administrator.

Face Amount:

The amount stated is the policy that is payable at the death of the insured or at the maturity of the contract, subject to adjustments for indebtedness, divided additional, additional benefits, etc. Also called “amount of insurance”.

Fixed Amount Option:

A settlement option under which the insurance company uses the policy proceeds plus interest to pay a specified sum at selected intervals for as long as the proceeds last.

Fixed Period Option:

A settlement option under which the insurance company pays the policy proceeds plus interest in instalments to a specified interval for a selection length of time.

Fraudulent Statement:

A statement that was made with the intent to deceive.

Gross Premium:

The total premium for a life insurance policy composed of the net premium plus a loading for expenses.

Group Insurance:

An arrangement for insuring a number of people under a single master insurance policy.  Guaranteed Insurability Rider A supplementary benefit rider that gives the policyholder the right to purchase addition insurance of the same type as the original insurance or specified dates for specified amount without supplying evidence of insurability.

Health Insurance:

A form of insurance benefits in the event of economic loss resulting from sickness or injury. It thus includes loss-of-time and all medical expenses reimbursement coverage. Sometimes referred to especially in legislative language, as “accident and health insurance”.

Incontestable Clause:

The provision in a group life and/or health insurance policy that prevents the insurance company from disputing the validity of certain coverage under specific insurance conditions after the policy has been in effect for a certain time (usually two years).

Insurability:

Refers to the physical, moral, occupational, and financial status of a risk and its acceptability to the insurer.

Insurable Interest:

In life insurance, a person’s or party’s interest whether financial or emotional, in the continuing life of the insured.

A beneficiary has an insurable interest in the life of the persons insured if he has a reasonable expectation of benefit from the continuance of the insured’s life or of suffering a loss if the insured should die.

Insurance Certificate:

A document issued to provide evidence of the existence of insurance.

Insurance Policy:

The written evidence of the contract between an insurance company and Insured.

Insured:

The person and dependent(s) covered for insurance under a policy and to whom, or on behalf of whom, the insurer agrees to pay benefits.

Insurer:

An entity authorised to issue insurance contracts/policies.

Interest Option:

The settlement option under which the proceeds are temporarily left on deposit with the Insurance Company and the interest earned on these proceeds are paid to the beneficiary/payee at the mode selected.

Irrevocable Beneficiary:

A beneficiary whose interest cannot be cancelled without his or her consent.

Judgement:

A final decision rendered by a Court of Law.

Joint Life Policy:

A contract insuring the lives of two or more persons, providing for payment of the proceeds on the death of the first insured to die, with insurance provided on a limited basis, if any, to the survivor. Under present-day joint life policies, the survivor may have a right to purchase an equal amount of insurance, without evidence of insurability, during a limited period of time following the death of the first insured.

Juvenile Insurance:

Life insurance written on the lives of children under a specified aged. A parent or parents usually own this insurance.

Key-Person Insurance:

Life insurance purchased by a business on the life of an employee whose continued participation in the business is necessary to the firm’s success and whose death or disability would result in a financial loss to the company.

Level Term Insurance:

A term insurance policy that provides a death benefit that remains the same over the duration of the policy.

Limitation:

A provision that sets a cap on specific coverage.

Major Medical Insurance:

A form of health insurance that provides benefits for most types of medical expense up to a high maximum benefit. Such contracts may contain internal limits and usually are subject to deductibles and coinsurance.

Master Policy/Contract:

The policy issued to a group policyholder setting forth the provisions of the group insurance plan.

Maturity Value:

The amount payable under an endowment insurance contract if the insured person is living at the end of the specified endowment period. Also, the amount payable under a whole life insurance policy if the insured lives to the last age of the mortality table on which the values of the contract were based.

Maximum Daily Hospital Benefit:

The maximum amount payable for hospital room and board per day of hospital confinement.

Morbidity Table:

A statistical table showing the rate of sickness and injury occurring among given groups of people categorised by age.

Mortality Table:

A statistical table showing, the rate of death among a given group of people categorized by age.

Net Amount at Risk:

The difference between the face amount of a policy-the death benefit and the policy’s reserves at the end of a policy year.

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.

Net Policy Proceeds:

Proceeds remaining after any overdue premiums and any outstanding policy loans and interest have been deducted.

Net Premium:

The premium calculated using a specified mortality table and a given rate of interest, but without allowance for expenses.

Non-Cancellable Policy:

A health insurance policy which the policy owner has the right to continue in force to a specified age, such as 60 or 65, by paying premiums as they fall due or within the grace period, and with respect to which the insurer has not reserved the right to increase premium rates.

Non-contributory Plan:

A group insurance plan under which the employer does not require employees to share in its cost.

Non-Forfeiture Options:

The various ways in which a policyholder may apply the cash value of the policy.

Non-Forfeiture Provisions:

Provisions required to be included in any long-term, whole of life, or endowment life insurance contract, guaranteeing at least minimum values to the policy owner who has paid premiums long enough to establish an equity in the policy.

Non-participating Polices:

Policies under which policyholders are not entitled to policy dividends.

Notice of Claim:

A written notice to the insurer by an insured claiming a covered loss.

Option:

Most life insurance policies provide options with respect to settlement arrangements, dividends and non-forfeiture values.

Ordinary Life Insurance:

One of the broad classes of life insurance (the others are group and industrial). The term “ordinary” is also used to refer to continuous premium, whole of life contracts.

Out-of-Pocket Expense:

Those medical expenses that an insured must pay that are not covered under the group contract.

Participating Policies:

Policies under which policyholders are entitled to share in the surplus earnings of the company through policy dividends.

Paid-up Policy:

A life insurance under which no further premiums are payable but under which the insurance coverage continues in effect.

Payee:

The person to whom benefits are payable under a supplementary contract.

Physician’s Expense:

Insurance coverage that provides benefits toward the cost of such services as doctor’s fees.

Policy:

The written instrument issued to the applicant, which expresses the insurance contract between the company and the applicant.

Policy Anniversary:

The anniversary date on which the policy was issued.

Policy Loan:

An advance made by a life insurance company to a policy owner, on the latter’s request, secured by the cash value of the policy.

Policy Reserve:

The money, which the insurance company has promised to pay in future claims.

Pre-Existing Condition:

A mental or physical problem suffered by an insured prior to the effective date of insurance coverage.

Premium:

The payment, or one of several payments, establishing and keeping a life insurance policy in force.

Present Value:

The single sum which, together with interest at a specified rate, will equal a stated sum at a given future date or a series of sums at specified future dates.

Primary Beneficiary:

The person who has first rights to receive policy proceeds when they become payable.

Principal:

In agency law, the party to a contract who authorizes an agent to act on its behalf.

Premium:

The payment that a policyholders makes to own an insurance policy.

Proceeds:

The amount of money payable under a policy at the death of an insured or at the maturity of a policy.

Proof of Loss:

Documentary evidence required by an insurer to prove a valid claim exists, usually consisting of a claim form completed by the insured and the insured’s attending physician. Medical expense insurance claims also require itemised bills.

Proposer:

The prospective insured that is the party proposing to effect the insurance.

Proposal Form:

A form presented for completion to the party seeking insurance cover. It forms the basis of the contract between the proposer and the insurance company.

Rated Policy:

A policy that is issued at higher than the standard premium rate because the insured does not meet the company’s insurability requirements for standard.

Renewable Term Ins.:

Term insurance that may be renewed for another term of the same length usually subject to an upper age limit beyond which renewal will not be permitted.

Reserve:

An amount set aside by the insurance company as a liability in the financial statement to provide for future obligations to policyholders.

Revocable Beneficiary:

A beneficiary whose rights are subject to the rights of the policy owner to revoke or change the beneficiary designation and to exercise any ownership rights under the policy without the beneficiary’s consent.

Rider:

A special policy provision or group of provisions which may be added to a policy to expand or limit the benefits otherwise payable. Examples of benefits often added to basic policy by rider are the accidental death benefit and waiver of premiums for disability benefit.

Settlement Option:

A choice given to the policyholder (or, in some cases, the beneficiary) with respect to how the sum payable under a life insurance contract will be disbursed. Usually any substantial sum, whether as an endowment, death benefit, or cash surrender benefit, may be settled under any of several alternative methods.

Standard Premium Rate:

The premium rate changed for insuring a person classified as having an average or less-than-average likelihood of a loss.

Substandard Prem. Rate:

The premium rate changed for insuring a person classified as having a greater than average likelihood of a loss.

Suicide Clause:

Policy wording which specified that if the insured takes his or her own life within a specified period after the policy has been issued the policy proceeds would not be paid.

Sum Assured:

The maximum amount that an insurer will pay out in the event of a claim.

Term Insurance:

Life insurance under which the benefit is payable only if the insured dies during a specified period of time or term, nothing being payable if he survives to the end of the term.

Underwriters:

Employees at an insurance company responsible for evaluating and classifying the potential degree of risk represented by proposed insureds.

Vested Interest:

An interest that a person cannot be deprived of without giving his consent.

Waiting Period:

The time a person must wait from the date of entry into an eligible class or application for coverage to the date the insurance is effective.

Waiver of Premium:

A provision under which payment of premiums is waived (that is, not required) on and after the occurrence of a contingency, such as the insured’s becoming totally and permanently disabled.

Whole of Life Insurance:

Life insurance under which the coverage remains in force during the insured’s entire lifetime, provided premiums are paid as specified in the policy.

Yearly Renewal Term:

Term Life Insurance that allows the policyholder the right to continue the coverage at the end of each year for a specified number of years or until the insured reaches the age specifies in the contract.