A Consumers Insurance Glossary

Words and phrases used in the insurance industry

If viewing online, click a letter below to link to the corresponding section

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various government and insurance industry guides, reference books, and dictionaries. The definitions may vary under state law, federal law and common usage. Meanings and word usage may change over time or be redefined in insurance contracts. We hope this glossary will help you better understand insurance.

NOTE: Most of the terms, explanations and definitions in this glossary came from

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Actual Cash Value (refers to auto and homeowner insurance) The cost to

replace damaged or lost property with comparable or like property, minus depreciation.

evaluates and manages statistical information.

Actuary An insurance professional who analyzes, calculates rates and reserves, and Actuarial These are statistical calculations insurance companies use to decide

insurance rates and premiums. They are based on usage projections and costs for a defined risk in a specific insurance market. investigate or negotiate insurance claims on their behalf.

Adjuster Someone who is paid by the insurance company or the insured person to Administrative Costs Costs associated with running an insurance business, such
as utilization review, marketing, medical underwriting, agents commissions, premium collection, claims processing, insurer profit, quality assurance programs, and risk management.

Third-Party Administrator (see term Third-Party Administrator) provides services such as processing and paying health insurance claims for an employer. Commissioner authorizes and licenses to do business in Washington state.

Administrative Services Only (ASO) (refers to health insurance) When a Admitted Company An insurance company the Office of the Insurance

loss. They have a tendency to buy more insurance coverage than those who are at a lower

Adverse Selection This term is used for people who have an above average risk for

risk. For example, people with terminal illnesses will often try to buy large amounts of life insurance. all insurance agents must obtain an agent license from the Office of the Insurance Commissioner.

Agent A person who sells and services insurance policies. In Washington state, Annuity (refers to life insurance) This is a series of income payments made
to a customer at regular intervals by an insurance company in return for a premium or premiums the customer paid. There are many types of annuities, which offer various benefits.

Application (APP) An insurance form a potential customer fills out. Based on

the form, the insurance company decides whether or not to insure the customer, modify the coverage offered, or decline to cover the customer. An application without premium payment is a request for an offer. With a premium payment, it is an actual offer, unless the insurance company declines to issue a policy to the customer. cover the same loss. For example, assume someone insures their property for $10,000 with one insurance company, and they also insure it for $5,000 with a second insurance company. If a loss occurs, the first company pays two-thirds of the loss and the second company pays one-third.

Apportionment Dividing a loss proportionately among two or more insurers to

Washington uses to issue insurance coverage for people who cannot buy auto insurance. The Western Association of Automobile Insurance Plans administers the assigned risk plan in Washington state. The Plan assigns these drivers to insurance companies that do business in Washington based on how much auto insurance the company sells.

Assigned Risk (refers to auto insurance) This is a state-based program

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Basic Health Plan (BHP) (refers to health insurance) BHP is a subsidized

health insurance plan offered by the Washington State Health Care Authority to low income Washington state residents.

Beneficiary A person eligible to receive benefits under an insurance policy. Binder (Binding Receipt) (refers to auto and homeowner insurance) A
binder is proof of coverage for a specified time period prior to the company issuing someone the actual policy or requiring a premium payment. However, if the consumer

pays the premium with the application, the insurance company will issue a binder or binding receipt. write in the state.

Book of Business A term insurance agents use to describe the various policies they Broker A broker is different than an agent. Brokers do not represent a particular

company. They receive a commission or fee for finding you coverage or renewing your policy. In Washington state, all insurance brokers must obtain a broker license from the Office of the Insurance Commissioner. that pays for the loss of earnings when business operations are reduced or stopped due to a property loss, such as water damage, theft, or fire.

Business Interruption Insurance (refers to business insurance) A policy

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Cancelable An insurance contract that an insurance company or an insured person

can cancel at any time. Most insurance is cancelable. Exceptions include certain life insurance policies and health insurance. ends an insurance policy according to contract provisions or by mutual agreement.

Cancellation This is when an insurance company or an insured person voluntarily Capitation (refers to health insurance) A payment method insurance companies
use, such as Health Maintenance Organizations (HMOs), for health care services. The HMO pays the provider a fixed amount for each patient, regardless of the required treatment.

Carrier A company that sells insurance (also called an insurer). Carve-Out (refers to health insurance) Services separately designed and
contracted to an exclusive, independent provider by a managed care plan.

ensure cost-effective treatment.

Case Management (refers to health insurance) Coordinating patient care to Cash Surrender Value (refers to life insurance) The amount of cash due to the Centers for Medicare and Medicaid Services (CMS) (refers to health insurance) The U.S. federal agency that administers federal health financing and

insured person who requests the insurance company cancel their life insurance policy.

related regulatory programs, mainly Medicare, Medicaid, and Peer Review Organization programs. It is also the contracting agency for health carriers that provide Medicare managed care plans. Underwriters to insurance industry professionals after they successfully complete required exams and experience requirements.

Chartered Life Underwriter (CLU) A title given by the American College of Life Chartered Property and Casualty Underwriter (CPCU) A title given to an

insurance professional by the American Institute for Property and Liability Underwriters after they successfully complete a series of insurance-related exams and experience requirements.

Claim A demand made by an insured person for payment of benefits as described in

their insurance policy.

Clause This identifies a specific part of a policy or endorsement. Closed Formulary (refers to health insurance) In some health plans, doctors Co-Insurance (refers to health and homeowner insurance) In health
must order only patient prescription drugs listed on the health plans formulary (also see term drug formulary).

insurance, it means the insured person and the insurance company share losses in agreed proportion. Also known as percentage participation. In managed health care, it refers to the portion of the cost of care for which the insured person is responsible. This often applies after the insured person meets a specified deductible. In homeowner insurance, the insured person shares proportionally in losses when the amount of insurance is less than a specified percentage of the property insured.

physical damage to the insured persons vehicle due to a collision with another object, such as another vehicle, a fence, building, etc.

Collision Coverage (refers to auto and business insurance) This covers the Commission This is the portion of the premium the agent or broker keeps as
compensation for sales, service, and distribution of insurance policies.

Community Rating (refers to health insurance) A method state insurance

regulators use to establish premiums for health insurance. There are two types of community rating. Pure community rating uses one average for all subscribers. Semicommunity rating allows other limited factors to help determine rates, such as age, family size, and geographical location.

applies to all of those eligible in a subscriber group, regardless of the number of claimed dependents. This is common among plans purchased by large employer groups.

Composite Rate (refers to health insurance) A health insurance premium that Comprehensive Coverage (refers to auto insurance) This covers damage to an
insured persons car except by collision. For example, this covers their car if a tree falls on it or someone vandalizes it.

Comprehensive Major Medical. This is a form of health insurance that provides coverage for most types of medical expenses. Most employer health plans are comprehensive. A health plan that covers only hospital inpatient charges is not comprehensive.

Comprehensive Health Insurance (refers to health insurance) Also called

liability insurance coverage for individual and family needs that may arise due to personal activities and situations, such as residential property ownership, pet ownership, sports activities, and many other everyday activities. conducted by an insurance company during a patients hospital stay or treatment.

Comprehensive Personal Liability Policy (CPL) (refers to homeowner insurance) This is a personal liability contract individuals may buy. A CPL provides

Concurrent Review (refers to health insurance) This is the usage review Conditional Receipt (refers to life insurance) An insurance premium receipt

that specifies conditions the applicant must first satisfy before the insurance company will accept the applicant for coverage. If the applicant meets the conditions, the coverage becomes effective as of the date on the receipt.

of a contract and the payment of all related labor and material bills between a contractor and subcontractors, up to the stated bond amount. In situations where two bonds are required, contractors can obtain a performance bond (covers performance) and a payment bond (covers payment of labor and material).

Contractors Bond (refers to business insurance) Guarantees the performance

Coordination of Benefits (COB) (refers to health insurance) This

determines the amount payable by each insurer when the insured person is covered under two or more group health plans. Total reimbursement should not exceed 100 percent of the cost of care.

health care bill. It usually is a small amount, such as $5 or $10 per office visit.

Copayment (refers to health insurance) A copayment is a patients share of a Cost Sharing (refers to health insurance) When the consumer must pay out-ofpocket to receive health care. This also can occur when an insured person pays a portion of the monthly premium for his or her health insurance.

of health care buyers more to make up for the underpayment of others. insurance contract.

Cost Shifting (refers to health insurance) When an insurer charges one group Coverage The scope of protection provided to the insured person under an Credentialing (refers to health insurance) A process health insurance

companies use to examine and verify the medical qualifications of health care providers who want to participate in a Preferred Provider Organization (PPO) or Health Maintenance Organization (HMO) network.

Credit Insurance (refers to auto, business and homeowner insurance) An

insurance policy that pays debts should the borrower lose his or her job, die, or become disabled (usually called credit life policy).

Creditable (refers to health insurance) Any previous health coverage a new plan
will allow a person to use to shorten his or her pre-existing condition waiting period.

Corporate owned life insurance Life or disability insurance to cover a key

employee whose death or disability would cause the employer financial loss. The policy is owned by and payable to the employer.

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It identifies the parties in the contract and the subject of coverage.

Declaration Page (Dec Sheet) (refers to auto, business, and homeowner insurance) The portion of an insurance policy that contains information about risk. Decreasing Term Policy (refers to life insurance) Generally, this is a rider Deductible The dollar amount an insured person must pay for covered charges

attached to cash value policies or other term policies. The protection decreases each year or month in accordance with a schedule. It is also sold as a Mortgage Protection policy. during a calendar year before the plan starts paying claims. Only charges outlined in the plan that the insurer would normally pay get applied to the deductible.

Deferred Annuity (refers to life insurance) An annuity in which the benefits

begin at some designated future date.

Dependent property (refers to business insurance) This is property not

owned, operated or controlled by the business owner; however, he or she depends upon it for normal business operations. Dependent property protects the business owner from

financial losses caused by problems that occur elsewhere, such as with another vendor or supplier who suffers a loss. covered loss destroys or damages business records, this insurance compensates the owner for his or her inability to collect income, and the cost to reproduce the records.

Destroyed or damaged records coverage (refers to business insurance) If a Diagnosis-Related Groups (DRG) (refers to health insurance) A

classification system used by Medicare to group patients according to diagnosis, type of treatment, age, and other relevant criteria. Under the payment system, Medicare pays hospitals a set fee for treating patients in a single DRG category, no matter what the actual cost of care for the person. health insurance companies must cover womens direct access to female-related health care services, such as mammograms, general exams, and preventative care.

Direct Access (refers to health insurance) Under a 1995 Washington state law, Direct Writer An insurance company that sells its policies through salaried Disability Income Insurance (refers to disability insurance) An insurance
that provides periodic payments to replace income lost to an insured person when they cannot work due to sickness or injury.

employees (licensed agents) who represent it exclusively.

drugs and their proper doses that a health plan covers.

Drug Formulary (refers to health insurance) A list of selected prescription

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Earned Premium The portion of an insurance premium that applies to the expired
part of the policy term. Even though customers pay their premiums in advance, the insurance company does not fully earn the premium until their customers policy term expires.

Earthquake Coverage (refers to business and homeowner insurance)

Insurance companies offer earthquake coverage as additional coverage to standard commercial property and casualty policies. Earthquake coverage is available in Washington state. It is expensive for masonry structures and business operations with high-risk inventory or equipment.

term that refers to the waiting period or probationary period in long-term care and

Elimination Period (refers to disability and long-term care insurance) A

disability insurance policies. For example, for long-term care policies, this is the number of days a person must spend in a nursing home before the insurance company will start paying benefits.

Employee Retirement Income Security Act (ERISA) (refers to health insurance) This law, which deals primarily with pensions and retirement plans,

includes a section exempting self-funded employer and union health plans from state regulation.

Employment Practices Coverage (refers to business insurance) This type

of coverage helps business owners defend against employment-related claims, such as sexual harassment, age discrimination, or wrongful termination. Some policies offer legal assistance. Other policies may pay both legal costs and damages.

policy to fit special circumstances.

Endorsement A written form attached to the policy that changes the terms of the Endowment Insurance (refers to life insurance) A form of life insurance

payable to the insured person if they are living at the end of the endowment period, or to a beneficiary if the insured person dies before the endowment date. contract that deny coverage for certain conditions, treatments, supplies or risks, such as cosmetic surgery. In home and auto contracts, exclusions from coverage may also include certain events or circumstances, such as drag racing, renting an insured vehicle to others, or flood or earthquake coverages.

Exclusions (refers to any insurance contract) Clauses in a health insurance

Experience The loss record of an insured person, a class of coverage (such as auto or
homeowner insurance), or an insurance companys loss experience (the total number of claims). charge customers based on the actual usage of large groups with like risks.

Experience Rating A method insurers use to decide the amount of premium to Exposure The possibility of loss.

F F F Face The first page of a policy.

first page of a life insurance policy.

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Face Amount (refers to life insurance) This is the death benefit stated on the

maintenance organizations (HMOs) that meet certain federal requirements designed to protect consumers. To qualify, HMOs must provide a broad range of basic health services, and meet standards of financial solvency and quality of care. The U.S. Department of Health and Human Services (DHHS) administers the qualification process.

Federally Qualified HMOs (refers to health insurance) These are health

Fee A charge or price for professional services.

discuss their charges with patients prior to treatment.

Fee Disclosure (refers to health insurance) This is when doctors and caregivers Fee-for-Service (refers to health insurance) This is the traditional payment Fiduciary (refers to health insurance) Someone who is responsible for the

method in U.S. health care. The health care provider charges the patient according to a fee schedule they set for each service and procedure they provide.

administration of a group health insurance plan or an Employee Retirement Income Security Act (ERISA) plan or someone who has discretionary authority over plan assets and claim payments. The federal ERISA law imposes various duties on fiduciaries about the use of their powers. For example, the plan fiduciary must protect plan assets, and administer claims for the exclusive purpose of providing benefits to plan participants. contract with Medicare to pay Part A and some Part B bills for Medicare clients.

Fiscal Intermediary (refers to health insurance) A private company that has a Fleet Coverage (refers to business insurance) This multi-vehicle coverage Foreign-Product Liability Coverage (refers to business insurance) This Form This is an insurance policy, or the riders and endorsements attached to it.
health care plan covers.

applies to businesses that rely on a number of vehicles and need to insure them collectively.

business-related coverage applies to losses that occur due to difficulties with providing or obtaining items that foreign suppliers manufacture.

Formulary (refers to health insurance) A published list of prescription drugs a Fraternal An insurance company organized under a special section of the state

insurance code, characterized by a lodge or social system, such as an Elks or Moose Lodge. It only issues insurance to members.

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GAP Coverage (refers to auto insurance) If an auto is totaled by an insurance Gatekeeper (refers to health insurance) A primary care doctor who is

company, this pays the difference between the current market value of the owners car and the amount they still owe the lender.

responsible for overseeing and coordinating all aspects of a patients medical care in managed care plans. The main goal is to reduce health care usage and costs. Managed care patients cannot receive referrals to specialty care or hospital admission without preauthorization from a gatekeeper. However, patients can obtain emergency room service when they believe an emergency exists. condition the applicant must first meet to qualify for the benefits of a long-term care policy. For example, a gatekeeper provision could require a doctor to certify that a person is unable to perform certain daily living activities.

Gatekeeper Provision (refers to long-term care insurance) This is a

General Agent An insurance company representative who supervises the companys

business within a specific territory. He or she may appoint local agents. A general agent is also an independent contractor compensated on a commission basis.

General Liability and Property Coverage (refers to business insurance)

Liability insurance protects businesses when they are legally liable for someones injury or property damage. The insurer pays the damages, and funds and handles the business legal defense. Property insurance covers a business physical assets, such as buildings, equipment, furnishings, fixtures, inventory, etc.

premium due date. During this time, the policy remains in force without penalty even though the policyholder has not yet paid the premium.

Grace Period (refers to disability, health, life, and long-term care insurance) A period of time (commonly 10 to 31 days depending on the type of contract) after the Group Contract An insurance contract between an insurance company and an

employer or other entity to cover employees or other group members. A group contract may include life insurance, health insurance, or an annuity, and sometimes property liability. Eligibility for coverage of group members is defined in the contract. For example, an eligible employee might be defined as employees working over 30 hours per week for the employer. health care services contract (HCSC) that covers a group of employees and often their dependents. Health care coverage occurs under a master policy issued to the employer or other group.

Group Insurance (refers to health insurance) A heath insurance policy or a

Guaranteed Insurability Rider (GIR) (refers to life insurance) A contract

provision a life insurance policy owner buys from an insurance company. It gives the policy owner the right to buy an additional amount of life insurance at one or more specified option dates, without providing new evidence of insurability at that time. For example, a person could buy a $100,000 life insurance policy with a Guaranteed Insurability Rider (GIR). The GIR would allow the person to buy $50,000 of additional insurance on the fifth and tenth year policy anniversary without providing medical information.

person makes premium payments. Disability and life insurance policies usually have an age limit while health insurance policies do not. The insurance company may also increase premium rates on a statewide basis.

Guaranteed Renewable (refers to auto, disability, health, and life insurance) An insurance policy the insurance company is required to renew as long as the insured

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Health Care Service Contractor (HCSC) (refers to health insurance) Any

corporation, cooperative group, or association that is sponsored by or connected with a health care provider or group of providers. They may engage in the limited insurance-like business to accept prepayment for health care services from individuals and groups. For example, Blue Cross and Blue Shield companies usually hold a HCSC license. doctor, hospital, and other medical expenses that result from illness or injury.

Health Insurance A policy or product that provides coverage for someone for Health Maintenance Organization (HMO) (refers to health insurance)

This health insurance plan requires subscribers to get all their care from a list of providers (except for some emergency care). The plan may require the subscribers primary care doctor to provide them with a referral before they can see a specialist or go to the hospital. an insurer.

Health Plan A generic term that refers to a specific health benefits package offered by High Risk Pool (refers to health insurance) In Washington state, this is a non-

profit organization called the Washington State Health Insurance Pool. It provides access to health insurance to all Washington state residents who are unable to buy individual or group health insurance in the regular market. Hold Harmless Clause (refers to health insurance) State law and regulations require contracted health care providers to not hold patients accountable for claim amounts that a health insurance company owes on a contract.

Homeowner Policy An insurance policy to cover a homeowners house, other

structures on their property, and personal contents against losses caused by such things as windstorms, fire, or theft. This type of policy also includes liability coverage.

pays when an insured person is hospitalized. They include reimbursement for both inpatient and outpatient medical care expenses. Inpatient benefits include charges for room and board, necessary services, and supplies. Outpatient benefits include surgical procedures, radiology services, and rehabilitation therapy.

Hospital Benefits (refers to health insurance) Benefits an insurance company

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Maintenance Organization (HMO), or the Health Care Service Contractor (HCSC) within the contractual period.

Incurred But Not Reported (IBNR) (refers to business and health insurance) Claim costs the insured person does not file with the insurance company, the Health Indemnify This provides payment, repair, or replacement to a victim of loss. Independent Practice Association/Organization (IPA/IPO) (refers to health insurance) This is when a health insurance company contracts with a doctor

organization. The doctor organization then contracts with individual doctors to provide health services to the insurance companys members. IPA doctors practice in their own offices, and also see fee-for-service patients. The health insurance company reimburses the IPA on a capitated basis. The IPA may reimburse its doctors on a capitated or modified fee-for-service basis when doctors charge agreed-upon rates to the covered patients and then bill the IPA. individuals and their dependents who buy health insurance coverage directly from an insurer - approximately 5 percent of the entire health insurance market. People usually buy their own coverage because they are not eligible for government (such as Medicare or Medicaid) or employer-sponsored coverage. policy that guarantees if a policyholder dies before receiving payments equal to the amount they paid to establish the annuity, the insurer will refund the difference to the beneficiary in equal installments.

Individual Market (refers to health insurance) This market consists of

Installment Refund Annuity (refers to life insurance) A type of annuity

Insurable Interest (refers to homeowner and life insurance) For homeowner

insurance, this is when a person has a legal financial interest in the property that is the

subject of the insurance. For life insurance, this is the financial interest one person (the beneficiary) has in the person covered by the life insurance policy. exchange for a premium, the insurance company agrees to pay for losses covered under the terms of the policy. the states insurance law, and to make reasonable rules and regulations to implement provisions of the law. The Insurance Commissioner also conducts investigations, examinations, and hearings related to those enforcement activities.

Insurance A contract to transfer risk from individuals to an insurance company. In Insurance Commissioner The elected state official who is authorized to enforce

Insurance Policy This is the entire written insurance contract.

losses, or provide benefits or service.

Insured The individual or party who the insurance company agrees to cover for

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Joint Life Policy (refers to life insurance) A life insurance policy that insures

two or more people. Some of these policies pay a death benefit on the first person to die. Some pay on the last person to die.

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Key Man Insurance Policy (refers to disability and life insurance) Life or
disability insurance to cover a key employee whose death or disability would cause the employer financial loss. The policy is owned by and payable to the employer.

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pay the premium.

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Lapse When an insurance company ends a policy because the insured person fails to Level Premium Insurance (refers to life insurance) A life insurance premium

that remains at the same dollar amount throughout the life of the policy.

Liability Insurance (refers to auto, business, and homeowner insurance)

Coverage that pays for any loss if the insured person is legally liable for bodily injury to others or damage to someones property.

dollar amount beyond which a liability insurance company does not protect the insured on a particular policy.

Liability Limits (refers to auto, business, and homeowner insurance) The Life Insurance A contract between a person and a life insurance company that

provides coverage in the event the person dies. Life insurance policies may include endowment benefits, additional benefits in the event the insured person loses an arm or leg due to an accident, or in the event of a disability. Life insurance policies also may offer annuities.

Limit of Liability The maximum dollar amount an insurance company agrees to pay
the insured person in case of loss.

insurance policy.

Limitations These are exclusions, exceptions, or reductions of coverage in an Limits The maximum amount of benefit the insurance company will pay for a given
situation or occurrence. Limits also include the ages below or above what an insurance company will not issue a new policy, or continue a policy.

that lasts longer than two years. Note: each individual insurance policy defines the terms long-term and disability.

Long-Term Disability (refers to long-term care and disability insurance) Typically, a disability is the limitation of normal physical, mental, and social activities Loss Ratio The percentage of each premium dollar an insurance company spends
on claims.

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insurance policy. This insurance only applies to expenses the patient incurs while they are hospitalized. cover medical expenses over and above that of a basic health insurance policy. Major medical policies pay expenses both in and out of the hospital.

Major Hospitalization Policy or Insurance (refers to health insurance) Health insurance to cover medical expenses over and above that of a basic health

Major Medical Insurance (refers to health insurance) Health insurance to

covered health care services for a covered person using a primary care provider and a network. Examples include Health Maintenance Organizations (HMOs) and Point-ofService (POS) plans.

Managed Care Plan (refers to health insurance) A health plan that coordinates

Managed Care Organization (MCO) (refers to health insurance) Any type

of organization that provides managed care, such as a Health Maintenance Organization (HMO) or a Health Care Service Contract (HCSC) that provides services through a Preferred Provider Organization (PPO).

insurance companies to offer or include certain benefits in specific health plans. Mandates may include mammograms, automatic coverage of newborn or adopted children, and home and hospice treatment options. the product it sells. policy is due.

Mandated Benefits (refers to health insurance) Washington state law requires

Market Share An insurance companys portion or percentage of the total market for Maturity (refers to life insurance) The date the face amount of a life insurance Maximum Allowable Charge (refers to health insurance) The highest
amount the insurance company will allow as a covered benefit for a particular medical service.

Maximum Lifetime Benefit (refers to health insurance) This is the maximum

dollar amount a health insurer agrees to pay on behalf of the insured for covered services during the course of his or her lifetime.

Medicaid (refers to health insurance) A federal and state funded program that

provides hospital and medical coverage to low-income people who meet certain criteria, such as: Age 65 or older Blind Children under age 19 Disabled Expecting mothers Families with children under age 19 Immigrants

three licensed doctors engage in a formally-organized and legally-recognized patient health care business. They share equipment, facilities, common records, and personnel involved in both patient care and business management.

Medical Group Practice (refers to health insurance) This is when at least

Medical Loss Ratio (refers to health insurance) The total cost of health care
benefits divided by the total premium.

Medical Underwriting (refers to health insurance) A process used by an

insurer to screen health insurance applicants out of a plan based on health or a preexisting medical condition.

required to maintain the health of a patient in line with the geographical areas standards of medical practice. These are often defined in the policy.

Medically Necessary (refers to health insurance) Covered health care services Medicare (refers to health insurance) A federally funded insurance plan that

provides hospital and medical coverage for people age 65 and older, for people with certain disabilities who are under age 65, and for people of all ages with End-Stage Renal Disease (permanent kidney failure) or Amyotrophic Lateral Sclerosis (Lou Gehrigs disease). a managed care plan and Medicare to provide services to Medicare clients for a fixed monthly payment.

Medicare Risk Contract (refers to health insurance) A contract between Medicare Supplement (refers to health insurance) Voluntary private insurance Member (refers to health insurance) An enrollee, beneficiary, or insured. A

coverage Medicare enrollees buy to cover the cost of services not reimbursed by Medicare. member includes people who enroll or subscribe to a health insurance plan, and includes their eligible dependents. table that shows the number of people exposed to the risk of illness and disease at each age, and the actual number of people who became ill or diseased at each age.

Morbidity-Sickness Table (refers to disability and health insurance) A

Morbidity Rate (refers to health insurance) An actuarial term for the likelihood
that medical expenses will occur.

Mortality-Death Table (refers to life insurance) A table that shows the number
of people who died at each age.

Multi-Specialty Group (refers to health insurance) A group of doctors who

represent various medical specialties and who work together.

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National Association of Insurance Commissioners (NAIC) A National

association of state insurance commissioners, who discuss regulatory problems, and who form and recommend uniform insurance practices and legislation.

life insurance agents.

National Association of Life Underwriters (NALU) A national organization of National Flood Insurance Program (NFIP) (refers to business and homeowner insurance) A program offered by the U.S. governments Federal

Emergency Management Administration that pools policy premiums throughout the United States. It is backed by the federal government and offers reasonable rates to the public for flood damage coverage.

performance in partnership with managed care plans, purchasers, consumers, and the public sector.

National Committee for Quality Assurance (NCQA) (refers to health insurance) A non-profit organization created to improve patient care and health plan Network Model HMO (refers to health insurance) A Health Maintenance

Organization (HMO) that contracts with two or more independent group practices to provide health services. Solo practices may be included, but it is mainly organized around groups. Health Care Service Contractors (HCSCs) commonly use this HMO model.

Non-Forfeiture Values (refers to life and long-term care insurance) Those Non-Standard Market (refers to auto insurance) This auto insurance market

values in a life or long-term care insurance policy that the policy owner does not forfeit even if he or she stops paying premiums.

includes young drivers with less experience, drivers with multiple tickets or accidents, and drivers with reckless or drunk driving histories.

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Open Enrollment (refers to health insurance) A period when eligible members

may enroll in, or transfer between available health care plans. Federal Health Maintenance Organization (HMO) regulations require that HMOs, which meet certain criteria, conduct annual open enrollment periods of no less than 30 days.

Open Panel (refers to health insurance) An HMO contracts with private

doctors to provide care to HMO patients.

the insured person pays the premiums continuously as long as they live. Its also called Straight Life.

Ordinary Life (refers to life insurance) A whole life insurance policy in which Out-of-Pocket Limit (refers to health insurance) The maximum coinsurance Outcomes Management (refers to health insurance) An outcome is the

a health care plan requires a person to pay, after which the insurer will pay 100 percent of covered expenses up to the policy limit. positive or negative result of a medical or surgical treatment. Managed care organizations use outcomes management to closely monitor and measure patient treatment results. This information provides caregivers with a better understanding of which treatments result in better outcomes for patients. (HMOs) usage review, this is an insured person who does not fall within the norm. They either use too many or too few services. This term is also used to describe a patient who varies significantly from other patients, such as a longer or shorter length of stay, leaving against medical advice, etc.

Outlier (refers to health insurance) In a Health Maintenance Organizations

Out-of-Area Benefits (refers to health insurance) Coverage that a managed

care plan allows its members for emergency situations should they temporarily be outside of their Health Maintenance Organization (HMO) or Preferred Provider Organization (PPO) prescribed service area.

provided to an insurance plan member while they are outside their plans established geographic service area. These services are usually not covered or are covered at a lower amount, unless delaying treatment would adversely affect the members health.

Out-of-Area Services (refers to health insurance) Health care services

Outpatient Services (refers to health insurance) Health care services provided

to a patient in or out of a hospital facility, when medical or surgical care does not include an overnight hospital stay.

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Paid-Up (refers to life insurance) This is a life insurance term, in which the

policy owner paid all required premiums, but the policy has not yet matured (by either death or endowment). For example, in a 10-year payment policy, after the policy owner completes the 10-year premium-paying period, the policy will continue to cover the insured person for the rest of his or her life.

Participating Provider (refers to health insurance) A provider who contracts

with a health insurance plan to provide health care. The provider agrees to provide health care services to covered individuals for payment (other than coinsurance, copayments, or deductibles) from the health insurance plan. by other doctors, usually within the same geographic area and medical specialty.

Peer Review (refers to health insurance) Evaluation of a doctors performance Performance Standards (refers to health insurance) These are standards an

individual health care provider is expected to meet to achieve the desired quality of care. Volume of care also may be included, such as office hours, office visits per week or month, on-call days, surgical procedures per year, etc. the cost or revenue a health insurance plan receives from each plan member for a month. It includes revenue, expenses, or services use.

Per Member Per Month (PMPM) (refers to health insurance) This refers to

Personal Injury Protection (PIP) (refers to auto insurance) This is insurance

coverage for medical and other expenses, such as wage loss and funeral expenses that result from an auto accident no matter who is at fault. Auto insurance companies must offer PIP to consumers. If consumers do not want it, they must reject it in writing.

the features of both Health Maintenance Organizations (HMOs) and Preferred Provider Organizations (PPOs). POS plans encourage but do not require members to choose a primary care doctor. Members may visit non-network providers, but they will pay higher deductibles and copayments. of the premium. It represents the difference between the premium charged and the companys actual cost of coverage during the term of the insurance policy.

Point-of-Service Plan (POS) (refers to health insurance) This plan includes

Policy Dividend Most common in life insurance policies, this is a partial return Policyholder The person who has possession of the policy. Policy Owner The person who may exercise the rights and privileges in the
insurance policy. This person may or may not be the insured.

Pooling Grouping of a large number of similar risks together to spread the risk and
make insurance more affordable. For example, auto insurers pool all the drivers with similar risks, such as age and driving record together.

Portability (refers to health insurance) Gives someone the ability to go from

one health plan to another without having to wait for coverage of a pre-existing condition. Both state and federal law contain provisions to determine if aconsumer may move from plan to plan without being subjected to pre-existing condition waiting periods.

Practice Parameters (refers to health insurance) These are strategies doctors

use for patient management to help them with clinical decision-making. Practice parameters are also called practice options, practice guidelines, practice policies, or practice standards.

care plans use to control plan members use of health care services through review and pre approval. See also term prior authorization. or their doctor to obtain prior authorization from the health care plan before any nonemergency hospitalization occurs.

Preauthorization (refers to health insurance) This is a procedure managed

Preadmission Review (refers to health insurance) Requires an insured person Pre-Existing Condition (refers to health insurance) A health problem

someone has before the date their new health insurance plan starts. Coverage for a preexisting condition depends on the health insurance plan.

Preferred Market (refers to auto insurance) This auto insurance market

features the lowest premiums. It is available to low-risk drivers with exceptional driving records.

Preferred Provider Organization (PPO) (refers to health insurance) This

is a network of health care providers who contract with health insurance plans. A health insurance plan often pays more if members get their care from doctors or hospitals that contract with a PPO. The providers and hospitals are called network providers. Members pay more if they go to a doctor or hospital not listed in the plans network.

statistically have fewer accidents than average. Insurance companies take into account factors such as age, gender, or a clean driving record. These drivers are usually eligible for a reduced rate. cover the cost of insurance.

Preferred Risk (refers to auto insurance) This typically refers to drivers who

Premium The dollar amount an insured person pays to the insurance company to Prescription Benefit Managers (PBMs) (refers to health insurance) The

person who monitors prescription claims for managed care organizations. They track the drugs and their volumes that are prescribed by the plans participating doctors.

receives, often through a family doctor. However, the patient may also receive primary care from a nurse, a paramedic, or other type of health-care provider, depending on the situation. Managed care systems try to resolve as many health problems as possible at this level.

Primary Care (refers to health insurance) Primary care is the first care a patient

procedure to control plan members use of health care services through review and pre approval. See also preauthorization.

Prior Authorization (refers to health insurance) This is a managed care

Pro Rata Dividing the premium proportionately between the insured person and the
insurance company based on how long the insurance policy was in force.

Producer A term applied to an agent, solicitor, or other person who sells insurance. Progressive Rates (refers to health insurance) A method health plans use to
implement new monthly, quarterly or semi-annual rates. New or renewing subscribers, or groups with anniversaries falling within such periods, are automatically subject to prevailing rates in effect during those periods. Insurers generally guarantee these rates for the full 12-month benefit year.

company about a loss. The purpose is to provide the company with sufficient information about the loss to help it decide its liability under the policy. to provide health care services, such as hospitals, doctors, naturopaths, medical health clinicians, pharmacists, etc.

Proof of Loss A formal statement made by the insured person to the insurance

Providers (refers to health insurance) Institutions and individuals licensed

Q Q Q

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Quality Assurance (refers to health insurance) An internal peer review process

managed care organizations use to audit the quality of care given by providers. It also involves educating providers on how to prevent and correct errors, and how to improve the quality of care.

R R R

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Rating Bands These limit the difference between the lowest and highest health

insurance premium rates companies may charge to a pool of groups or individuals. For example, on individual health insurance contracts, the insurance companys highest permitted rate for any age group cannot be more than 375 percent of the lowest rate for all age groups.

consumers. In some cases, a rating bureau may compile data and measure hazards of individual risks in terms of rates for a given territory.

Rating Bureau A private organization that classifies and shares rates with

(or something of value) as an incentive to buy insurance. This is illegal.

Rebate When an insurance agent gives a policy owner a part of his or her commission Reinsurance A risk management tool for insurance companies. It transfers risk

from one insurance company to another. For example, a primary insurance company will agree to insure an airlines fleet of planes for $10 billion. Through separate reinsurance contracts, the primary insurance company will pay premiums to nine other insurance companies to accept $1 billion of the risk. If a $10 billion loss occurs, each company will pay $1 billion.

Replacement Cost (refers to business and homeowner insurance) The cost

to replace property without deducting depreciation.

insurance company sets aside to pay claims and claim expenses.

Reserves (refers to health, homeowner, and auto insurance) Funds that an Rider An attachment to a policy that modifies the conditions of the policy by Risk The chance that a loss will occur. Risk Sharing (refers to health insurance) A financial arrangement between a
managed care organization and a contracted health care provider to allocate the risk and rewards of providing health care services. Risk sharing motivates the provider to operate more efficiently.

expanding or decreasing its benefits, or excluding certain conditions from coverage.

S S S

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its a list of specific items a policy covers, such as surgical procedures, therapy, or additional expenses. For property-related insurance, its a list of items covered under one policy, such as various buildings, animals, and other property.

Schedule (refers to health and homeowner insurance) For health insurance,

assumes responsibility for the covered health care expenses of its employees. Usually the employer sets up and contributes money to an account solely to pay claims. Often an independent organization, such as a third-party administrator, processes employee claims and makes claim payments out of the employers self-funded plan account.

Self-insurance (refers to health insurance) When an employer or organization

SHIBA HelpLine (refers to health insurance) A free counseling service, the

Statewide Health Insurance Benefits Advisors (SHIBA) HelpLine uses about 400-trained volunteers to assist health insurance consumers statewide. Volunteers assist consumers

with health insurance options, and help them find access to health care and prescription drug programs. The SHIBA HelpLine is a service of the Office of the Insurance Commissioner and is sponsored by local community-based organizations. financed by taxes that enrolls everyone in a government-run program. For example, Medicare is a single payer plan for people in the U.S. over age 65.

Single Payer Plan (refers to health insurance) A system of health care coverage, Special Limits (refers to homeowner insurance) The limitation in a

homeowners policy about losses for specific items, such as gold and silver bullion, currency, securities, letters of credit, manuscripts, passports, tickets, stamps, boats, trailers, firearms, and silver and goldware. To cover these items, the homeowner must buy additional coverage.

Staff Model HMO (refers to health insurance) A group of doctors who provide
health care services. They are either staff employees of a professional group practice, which is an integral part of the Health Maintenance Organization (HMO) plan, or they are direct employees of the HMO itself.

to the average driver who uses family-type cars and has a reasonably good driving record.

Standard Market (refers to auto insurance) This auto insurance market refers Stop Loss A provision in an insurance policy created to cut off an insurers or
insureds losses at a certain point.

Subrogation This allows the insurance company to recover the payment it made

to the person it insures from the person responsible for the damages or their insurance company.

because its unavailable from an insurance company licensed in the state.

Surplus Line Coverage a consumer buys from an unlicensed insurance company

TTT Term The period of time that an insurance policy is issued.

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care claims processing, pay providers, develop and coordinate self-insurance programs, and help locate stop-loss insurance. They also may analyze the effectiveness of the plan and its usage. For homeowner and auto insurance, its a person or company hired to investigate and process claims. In either case, the TPA is not the policyholder or the insurer.

Third-Party Administrator (TPA) (health, homeowner, and auto insurance) For health insurance, its a person or company hired by an employer to manage health

U U U
for insurance companies.

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Underwriter A person trained to evaluate risks, and determine rates and coverages Underwriting Loss When the cost to pay insurance claims, plus overhead, exceeds
premium income.

Unearned Premium This is the part of an advance insurance premium payment

that has not yet been used for coverage written. For example, if an insured person has an annual premium, at the end of the first month of the premium period, 11 months of his or her premium would still be unearned.

coverage protects an insured driver from losses due to another driver, who doesnt have auto insurance, or who is not fully covered. Auto insurance companies must offer UIM as part of an auto insurance policy. Consumers who do not want the coverage must sign a waiver.

Uninsured/Underinsured Motorist (UIM) (refers to auto insurance) This

with the going rate or charge in a certain geographical area for identical or similar services. Note: For auto insurance, this relates to Personal Injury Protection claims.

Usual, Customary and Reasonable (UCR) (refers to health and auto insurance) A health providers usual charge for a health care service that is consistent Utilization (refers to health insurance) A numerical measure of use of a single Utilization Review (UR) (refers to health insurance) A health insurance

service or type of service, such as hospital care, prescription drugs, or doctor services, by a given population group over a given period of time.

companys review to determine if the health care services a provider or facility gives to a member or group of members is necessary and appropriate.

W W W

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insurance, it is a period of time between the start of a disability and the date benefits begin. For health insurance, it is the time a person must wait from the date of their employment until the date their health care coverage starts. This term may also refer to the total time a person must be covered on a health plan before the plan will cover preexisting conditions.

Waiting Period (refers to disability and health insurance) For disability

Waiver A waiver is a rider that excludes liability for a stated cause of an accident or

sickness. It can be a provision that agrees to waive the insurance premium payment during a period of disability. It can also mean the company could waive its right to have the insured person examined by a doctor it chooses. An agent, adjuster, or insurance company may give a waiver of rights to the insured person orally or in writing.

Whole Life (refers to life insurance) A life insurance policy that runs for the
whole life of the person covered under the policy until death. Policyholders may pay premiums for a whole life policy for their entire life or for a limited period at a higher premium.

Withhold (refers to health insurance) The portion of the fee or monthly

capitation payment to the health care provider that is held back by the Managed Care Organization (MCO) until it determines the cost of the providers total annual referrals for hospital services. A provider who exceeds utilization norms set by the MCO does not receive the withheld amount.

Workers Compensation (refers to health insurance) Most employers in

Washington state are required by law to provide workers compensation insurance through the states Department of Labor and Industries (L&I). Workers compensation pays employees medical expenses and provides some income replacement when they are injured on the job.

Write In the insurance industry, this means to insure. It also means to underwrite or
to sell insurance policies.

2121-OIC-Glossary-Insurance terms-rev.05/08