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Rated Policy: A policy issued at a higher premium rate to offset the risk of insuring an individual whose health (or some other risk factor) disqualifies the individual for Preferred or Standard rates.
Reentry Term: A term insurance policy with Select and ultimate rates which allows the insured to renew (reenter) the policy at lower attained age Select rates instead of the policy's guaranteed renewal at higher attained age ultimate rates. Reentry requires evidence of insurability.
Reinsurance: To transfer in whole or in part, a risk or contingent liability already covered under an existing contract from one insurer (the ceding company) to another (the re-insurer).
Reinstatement: The period after the grace period during which the policy can be restored from a lapsed status through submission of acceptable evidence of insurability and unpaid premiums plus interest. The policy must not have been surrendered for its cash value. Some companies, allow reinstatement without evidence of insurability during the 31 days following the grace period if the insured is alive; however, if death occurs during this period only the benefits provided under the non-forfeiture provisions would apply.
Renew: To continue the policy for another period of time. Permanent coverage is generally renewable annually for life. Term insurance coverage may or may not be renewable; if renewable, the renewal period may be much shorter than life.
Renewable Term Insurance: 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.
Rescission: The legal act of canceling (rescinding) the policy and refunding all premiums paid from the policy's issue.
Reverse Split Dollar: A split dollar arrangement in which the employer receives the majority of the death benefit and the employee owns the cash value. Premium payments are shared by the employer and the employee.
Revocable Beneficiary: A beneficiary whose rights are subject to the rights of the policy owner who may revoke or change the beneficiary designation and exercise any ownership rights under the policy without the beneficiary's consent. See Irrevocable Beneficiary.
Rollover: The tax-free transfer of accumulated assets from a qualified retirement plan to an IRA, which must be completed within 60 days of the termination of the original plan.
Rating Process: The steps used to determine a premium rate for a particular group based on the amount of risk that group presents. Items that commonly go into the rating process include age, sex, type of industry, benefits, and administrative costs.
Reasonable and Customary Charges: The charge for medical services which refers to the amount approved by the Medicare Carrier for payment. Customary charges are those which are most often made by a provider for services rendered in that particular area.
Recipient: Anyone designated by Medicaid as being eligible to receive Medicaid benefits.
Recurring Clause: Health Insurance policy provision defining the duration of a period of time during which the recurrence of a condition will be considered a continuation of a prior period of disability or confinement.
Referral: Occurs when a physician or other health plan provider receives permission to consult another physician or hospital.
Referral Provider: The person or provider to whom a participating provider has referred a member of the plan.
Registered Nurse: A licensed professional with a four-year nursing Degree, who is able to provide all levels of nursing care including the administration of medication.
Rehabilitation Clause: A clause in a Health Insurance policy, particularly a Disability Income policy, that is intended to assist the disabled policyholder in vocational rehabilitation.
Relative Value Schedule: A surgical schedule which basically compares the value of one surgical procedure to another and establishes the surgical fee to be paid.
Relative Value Unit: Sometimes used instead of dollar amounts in a surgical schedule, this number is multiplied by a conversion factor to arrive at the surgical benefit to be paid.
Respite Care: Normally associated with Hospice care, respite care is a benefit to family members of a patient whereby the family is provided with a break or respite from caring for the patient. The patient is confined to a nursing home for needed care for a short period of time.
Restoration of Benefits: A provision in many Major Medical Plans which restores a person's lifetime maximum benefit amount in small increments after a claim has been paid.
Retention: The portion of the premium which is used by the insurance company for administrative costs.
Return of Premium: A rider or provision in a Health Insurance contract agreeing to pay a benefit equal to the sum of all the premiums paid, minus claims paid, if claims over a stated period of time do not exceed a fixed percentage of the premiums paid.
Risk Analysis: The process of determining what benefits to offer and premium to charge a particular group.
Second-To-Die: A type of life insurance policy that insures two lives. The death benefit is payable at the second death. Generally, this product is used as a funding vehicle for estate taxes payable at the second death when the unlimited marital deduction is utilized. Second-To-Die policies are also referred to as survivorship policies. See Joint and Survivor Life.
Section 401(k) Plan: Internal Revenue Code 401(k) is an employer-sponsored, salary-reduction retirement savings program. The employee defers a percentage of current salary on a pre-tax basis and the employer often matches some portion of that amount. There is a cap on the annual contribution and a 10% penalty is levied on moneys withdrawn before age 59 1/2. The accumulating funds can be borrowed by the employee and repaid with interest.
Section 403(b) Plan: Internal Revenue Code 403(b) is a retirement program offered to employees of tax-exempt organizations, such as public schools. Subject to certain limitations, the organization pays annuity premiums on behalf of their employees and provides employees with a tax advantage by excluding the amount of the payments from their gross incomes.
Section 408(k) Plan: Internal Revenue Code 408(k) is an individual employee retirement account, funded by either an employer or a self-employed person. The maximum contribution is the lesser of 15% of compensation or $30,000. Employees have the option of taking the employer contribution in cash, but must then pay current income taxes on it. Also known as a Simplified Employee Pension (SEP).
Self-Employed Individual's Retirement Act: An act of the U.S. Congress, approved in 1962, permitting self-employed people and their employees to take advantage of tax benefits similar to those offered under tax-sheltered annuities and the qualified retirement plans of large organizations. Also known as HR 10 and the KEOGH Act.
SEP: See Simplified Employee Pension
7-Pay Test: The maximum annual premium allowed during the first seven years in order to avoid classification as a modified endowment contract under TAMRA §7702A. The premium will vary by company and the insured's issue age, sex and underwriting class. A new 7-pay test is required after each material change of the contract.
Simplified Employee Pension Plan (SEP/SEPP): An employer-sponsored plan than can be used by sole proprietors, partners, and corporations. Deductible contributions up to the lesser of 15% of salary, not to exceed $30,000, can be made to IRAs owned by eligible employees. No IRS filings are required.
Simplified Underwriting: An underwriting process that applies a less strict analysis of risk factors. Participants in group plans or charitable giving plans may qualify for this abbreviated form of underwriting.
Single Life Status Survivorship: A second-to-die life contract which changes after the first death to reflect that only one life is insured. Generally, the premium does not change, but the illustrated dividends, mortality assessments and the cash values may increase (depending on which price method is used).
Single Premium: Refers to the one-time payment required to cover the entire cost of a life insurance or annuity contract.
Single Premium Immediate Annuity: A fixed immediate annuity that is purchased with a single lump sum payment, providing income for life or for a specified period.
Single Premium Life Insurance: An insurance plan that requires only one premium and is guaranteed to remain paid-up throughout the insured's lifetime. These contracts are generally used as cash accumulators. Under current tax law, new single premium contracts are classified as modified endowment contracts. It is not a true single premium life product when a single payment sales illustration does not come with a guarantee that future payments will never be required.
Single Premium Retirement Annuity: A fixed deferred annuity that is purchased with a single lump sum payment.
Social Security Substitute Benefit (SSSB): An optional disability insurance policy benefit that provides benefits when the insured is totally or partially disabled, as defined in the DI contract, except that benefits may be reduced or may not be payable when the insured or a member of the insured's family is entitled to Social Security benefits. The SSSB is an additional benefit version of the Social Security Substitute coverage.
SPIA: See Single Premium Immediate Annuity (SPIA).
Split Dollar Plan: An arrangement in which premiums, cash values and death benefits are divided between two parties, usually an employer and employee. In business situations, this may result in the employee having to report an economic benefit cost for tax purposes.
Stock: A certificate of ownership of a corporation representing a share of its capital and surplus.
Stock Company: An insurance company formed and capitalized through the sale of shares of stock. Those purchasing the stock are owners and share in the company's earnings. Common stockholders vote on the company's board of directors, on matters involving company policy, and may receive a distribution of earnings through stock dividends declared by the company. Compare to Mutual Company.
Sub-Standard Risk: A life insurance applicant who faces a greater likelihood of early death than the group experience on which the Standard premium rates are calculated. Examples include persons in poor health and those who work in dangerous occupations.
Suicide Clause: A policy provision stating that if the insured dies by suicide within two years of the date of issue, the amount payable will be limited to the total premiums paid, less any policy debt. The full benefit would be paid if suicides occurs after the second policy year. Most companies have a two year suicide clause, except where state law mandates otherwise.
Surrender: Cancellation of the policy, which involves returning the contract to the issuing company.
Survivorship Life Insurance: See Second-To-Die.
Second Surgical Opinion: A cost containment technique to help patients and insurance companies determine whether a recommended procedure is necessary, or whether an alternative method of treatment could accomplish the same result. Some health policies require a second surgical opinion before specified procedures will be covered, and many policies pay for the second opinion.
Secondary Care: Medical services provided by physicians who do not have first contact with patients, such as specialists.
Secondary Coverage: Coverage which provides payment for charges not covered by the primary policy or plan.
Self-Inflicted Injury: An injury to the body of the insured inflicted by himself.
Service Area: The area, allowed by state agencies or by the certification of authority, in which a health plan can provide services.
Service Benefits: Medical expense benefits provided by service associations whereby benefits are identified in terms of days of coverage instead of monetary values.
Service Plans: Plans of insurance where benefits are the actual services rendered rather than a monetary benefit, such as Blue Cross and Blue Shield.
Short-Term Disability Income Policy: A disability income policy with benefits payable for "Short Term," usually less than two years, as opposed to a Long Term Disability Income policy.
Short-Term Disability Insurance: A group or individual policy usually written to cover disabilities of 13 or 26 weeks duration, though coverage for as long as two years is not uncommon.
Sickness: Includes physical illness, disease, pregnancy, but does not include mental illness.
Sickness Insurance: A form of Health Insurance against loss by illness or disease. It does not include accidental bodily injury.
Skilled Nursing Care: Daily nursing and rehabilitative care that is performed only by or under the supervision of skilled professional or technical personnel. Skilled care includes administering medication, medical diagnosis and minor surgery.
Skilled Nursing Facility: A health care facility designed to qualify for treatment to Medicare eligible people. Included is treatment for rehabilitation and other care such as 24-hour nursing coverage, physical, occupational, and speech therapies.
Split Dollar Coverage: An arrangement of Disability Income Insurance in which the employer and employee each pay a portion of the premium. The employer purchases coverage for the sick pay or paid disability leave provided as an employee benefit. The employee pays for disability coverage beyond what the employer provides as a benefit.
Staff Model HMO: This is an HMO where physicians are employed and all premiums are paid to the HMO, which then compensates the physicians on a salary and bonus arrangement.
Stop-Loss Insurance: This is a type of reinsurance which can be taken out by a health plan or self-funded employer plan. The plan can be written to cover excess losses over a specified amount either on a specific or individual basis, or on a total basis for the plan over a period of time such as one year.
Subscriber Contract: An agreement which describes the individual's benefits under a health care policy.
Supplemental Medical Insurance: Part B of Medicare is a voluntary program which generally covers physician's services and various outpatient services. A premium is charged for electing Part B coverage.
Supplemental Services: Additional services which can be purchased over and above the basic coverage of a health plan.
Surgical Insurance Benefits: A form of Health Insurance against loss due to surgical expenses.
Surgical Schedule: Usually part of a basic medical expense plan which itemizes various surgical procedures and the monetary benefit allocated to each procedure.
Target Premium: The annual payment on a universal life contract which, based on non-guaranteed elements, endows the contract at its maturity date (usually age 95). The premium is calculated by the insurer and may be more conservative than the minimum premium that could be illustrated under the product's current assumptions. The target premium may change from year to year as the insurance company's actual experience fluctuates.
Tax Basis: On a life insurance policy, the total premiums paid (less costs for additional benefits). The total premiums less dividends and cash surrenders received determines the policy's gain. On a non-modified endowment contract, the tax basis is recovered before the policy's gain is taxed as income.
Tax-Deferral: Postponing the payment of income taxes until some point in the future, often at retirement. Generally, the cash value growth inside life insurance is eligible for deferral, unless the amount of cash received through surrender exceeds the policy's tax basis. Any additional surrenders beyond the basis must be reported as taxable income. Taxes may be deferred on modified endowment and annuity contracts until the owner takes possession of the cash benefits.
Tax-Deferred Annuity: Annuities available for purchase by employees of certain non-profit and public education institutions as described in IRC §501(c)(3). Money used to purchase the annuity is not taxable as income until annuity payments begin, usually at retirement. Also known as a Tax-Sheltered Annuity (TSA).
Tax Equity and Financial Responsibility Acts of 1982 and 1983 (TEFRA): Legislation that changed the way life insurance companies are taxed and also changed the taxation of withdrawals from annuity contracts to a gain-out-first basis.
Tax-Payer Identification Number (TIN): The policy owner's Social Security number. The insurer must have a certified TIN to avoid backup withholding when there is taxable gain.
Tax-Qualified Plan: A retirement plan arrangement that allows an employee and/or employer to make contributions, often on a pre-tax basis, to an annuity. Certain requirements and contribution limits must be met to qualify. Examples include Pension/ Profit-Sharing, 401(k), Simplified Employee Pension, Tax-Deferred Annuity, and Individual Retirement Annuity plans. Compare to Non-Qualified Benefit Plan.
Tax Reform Act of 1984 (TRA 84): Legislation that refined the definition of a what qualifies as a life insurance company, raised taxes on life insurance companies beyond TEFRA, and defined requirements which a life insurance product must meet in order to receive favorable tax treatment.
Tax Reform Act of 1986 (TRA 86): Legislation that eliminated nearly all tax shelters and many income tax deductions in exchange for lower tax rates for both individuals and corporations.
Tax-Sheltered Annuity: See Tax-Deferred Annuity.
TDA: See Tax-Deferred Annuity.
TEFRA: See Tax Equity and Financial Responsibility Acts of 1982 and 1983.
TEFRA Corridor: The corridor between the death benefit and the cash value which must be maintained for the contract to enjoy its life insurance (versus annuity) tax treatment. The corridor is a percentage of cash value and decreases with the attained age.
10 Day Free Look: The time period after the policy's delivery during which the insured can return the contract and receive a full refund of premiums paid. The policy is then void from the beginning. This provision is mandated by many states and in some cases is longer than 10 days. Also known as the Right to Return Provision.
1035 Exchange: An Internal Revenue Code provision which allows the tax free exchange of one insurance contract for another. The exchange is not taxable and the tax cost basis of the old contract is carried over to the new one. However, the exchanged contracts must be similar products and the insured and owner may not change.
Term Conversion: Many term policies come with conversion rights guaranteeing that, for a specified period of time, the policy can be converted to a permanent plan for the equivalent amount of coverage, without having to provide additional evidence of insurability. In some cases, the premium on the new policy will be based on the insured's age at the time of the original purchase. At Certain Life Insurance Companies, the client may be eligible for a one-time conversion credit on the new premium.
Term Life Insurance: Insurance which provides a death benefit only. Premiums increase each year, or, in the case of level premium renewable term, at the end of each renewal period (typically 5,10,15 or 20 years). Level premium decreasing term has a level premium, but the insurance benefit decreases on each policy anniversary. Since term insurance can become quite expensive at older ages, it is often used to cover protection needs of a shorter duration or to cover a specific need such as an outstanding loan balance. It may be convertible to some form of permanent life insurance.
Term Rider: A rider attached to a basic policy to provide additional coverage in the form of term insurance. Dividends earned on the basic plan may be designated to replace the term insurance with permanent paid-up additions.
Trust: A fiduciary relationship with respect to property. It is an arrangement whereby one person has the legal title to property being held for the benefit of someone else who has the equitable title to the property.
Tax Equity and Fiscal Responsibility Act of 1982: This act defines the primary and secondary coverage responsibilities of the Medicare program and also the provisions to be used by health plans in their contracts with the HCFA (Health Care Financing Administration).
Ten Day Free Look: A notice, placed prominently on the face page of the contract, advising the insured of his or her right to examine a health policy, and if dissatisfied return the policy within ten days for a full refund of premium and no further obligation.
Tertiary Care: Services provided by such providers as thoracic surgeons, intensive care units, neurosurgeons, etc.
Terminally Ill: A term which refers to the status of a person who will normally die within 6 months of a specific illness or sickness. Often refers to the terminally ill requirement for hospice care.
Therapeutic Alternatives: Alternate drug products which may be different in chemical content, but provide the same effect when administered to patients.
Therapeutic Equivalence: Different drugs which will control a symptom or illness exactly the same as other drugs used to control that illness.
Third Party Administrator (TPA): A company which provides administrative services for employers and other associations having group insurance policies. The TPA in addition to being the liaison between the employer and the insurer is also involved with certifying eligibility, preparing reports required by the state and processing claims.
Third-Party Payor: This refers to any organization such as Blue Cross/ Blue Shield, Medicare, Medicaid, or commercial insurance companies which is the payor for coverage's provided by a health plan.
Time Limit on Certain Defenses: One of the uniform individual accident and sickness provisions required by state law to be included in every Individual Health Policy. It sets a limit on the number of years after a policy has been in force that an insurer can use as a defense against a claim the fact that a physical condition of the insured existed before the policy was issued, but was not declared at that time.
Total Disability: A degree of disability from injury or sickness that prevents the insured from performing the duties of any occupation from remuneration or profit. The definition in any given case depends on the wording in a covering contract.
Transportation Ticket Policy: An accidental Death and Dismemberment and Disability Benefit policy issued with a common carrier ticket and limited to the risks or travel and the duration of the trip for which the ticket has been purchased.
Travel Accident Insurance: A form of Health Insurance limiting coverage to accidents occurring while the insured is traveling.
Treatment Facility: Any health care facility, either residential or nonresidential, which is authorized to provide treatment for mental illness or substance abuse.
Triage: A method of ranking sick or injured people according to the severity of their sickness or injury in order to ensure that medical and nursing staff facilities are used most efficiently.
Triple Option: A plan where employees have their choice, among different types of provides such as HMO, PPO, or basic indemnity plan. Usually, their choice depends on how much they want to pay for the coverage
Underwriting: The process of determining a reasonable expectation of an applicant's death (mortality) or disability (morbidity) likelihood, for the purpose of issuing insurance.
Underwriter: An employee of a life insurance company whose job it is to evaluate the insurability and determine the classification of persons applying for insurance protection.
Universal Life Insurance: A life insurance policy that combines term insurance and a side fund investment in one contract. Typical designs are interest-sensitive and allow for flexible premium payments which can be varied by the policy owner at will. Also known as Flexible Premium Adjustable Life.
Urgent Notice: This notice is sent to policy owners or payors after the grace period has expired to ask for the premium payment needed to reinstate the policy.
Unallocated Benefit: A benefit providing reimbursement of expenses up to a maximum but without any schedule of benefits as such.
Uniform Billing Code of 1992 (UB-92): This code is scheduled to be implemented on October 1, 1993. It's a federal directive which states how a hospital must provide their patients with bills, itemizing all services included and billed on each invoice.
Uniform Premium: A rating system that is used to calculate premiums for all insured's with no distinctions as to age, sex or occupation.
Uniform Provisions: A set of provisions regarding the operating conditions of individual Health policies developed in a model law recommended by the National Association of Insurance Commissioners and required, with minor variations by almost all jurisdictions, and permitted in all jurisdictions.
Urgi-Center: An emergency medical service center which is separate from any other hospital or medical facility.
Utilization: This refers to how much a covered group uses a particular health plan or program.
Utilization and Review Committee: A committee composed of medical personnel whose purpose is to monitor the health care services and supplies provided to Medicare patients.
Utilization Management: This procedure or process utilizes a review coordinator to evaluate the necessity and appropriateness of various health care services.
Utilization Review: A cost control mechanism by which the appropriateness, necessity, and quality of health care is monitored by both insurers and employers.
Waiting Period: The period of time between the beginning of a disability and the start of Disability Insurance benefits. Also known as the elimination period.
Waiver: In disability insurance, see Exclusion Rider.
Waiver of Premium (WP): An optional policy benefit that waives the payment of all premiums that come due during the total disability of the insured.
Whole Life Insurance: Permanent insurance which provides, at minimum, a level death benefit upon the insured's death, or a cash endowment upon policy maturity that is equal to the death benefit.
Yearly Renewable Term (YRT): A life insurance contact with premiums that increase annually and provide a level death benefit. YRT products provide financial protection only in the event of death, and have no cash value.
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