Terms & Definitions
The following terms and definitions are general explanations. In all cases, the actual terms of your policy will govern definitions and how claims will be paid.
If the elimination or waiting period for receiving benefits can be satisfied by adding or accumulating elimination days from multiple episodes of care, the time interval over which days can be accumulated is the Accumulation Period.
Activities of Daily Living (ADLs)
The ability of an individual to live independently and able to perform unaided activities such as bathing, continence, dressing, eating, toileting and transferring. ADL standards are often discussed as a measurement or definition of eligibility for long term care.
This is the strictest definition of disability. The insured is considered disabled if he or she is unable to perform the duties pertaining to any gainful occupation. It limits payments to those insured's who are unable to work in any occupation based on their education, training and experience, as determined by the insurance carrier.
The current age of the insured and/or applicant, often based upon the previous or next birthday, whichever is closer. See also Insurance Age and Original Age .
Attending Physician’s Statement (APS)
A written statement from a physician who has treated, or is currently treating, a proposed insured or an insured for one or more conditions. The statement provides an insurance company with information relevant to underwriting a risk.
The effective date of an insurance policy is made earlier than the date of application so that the premium rate will be lower. Back-dating is typically limited to not more than six months.
The time period during which benefits are payable to the insured.
(Also known as Schedule of Benefits) under a group insurance plan, a table or schedule which specifies the amount of coverage provided for each class of insured. Insureds are often classified withe reference to either their earnings or to their rank/position. Under an Individual Policy the Schedule of benefits is a page summarizing the major policy benefits and their cost
Business Overhead Expense
Disability policy intended to reimburse the business for specified overhead expenses in the event a business owner becomes disabled.
An agreement in which one party agrees to sell, and the other agrees to buy, an interest in a business upon the occurrence of specific events, such as the death, disability or retirement of one of the owners. See also Disability Buy-Sell Insurance.
An individual insurance policy that can be terminated at any time by the insurer. See also Conditionally Renewable Policy , Guaranteed Renewable Policy, Non-Cancellable Policy and Non-Cancellable and Guaranteed Renewable Policy.
A disability resulting in the insured needing assistance with at lease two activities of daily living, being cognitively impaired or having the total, permanent and irrevocable loss of speech, hearing in both ears, the sight of both eyes or the use of both legs, both arms, or one leg and one arm, due solely to a sickness or injury.
Certificate of Insurance
A document given to each person insured by a group insurance plan. The document shows the type and amount of coverage to which to group member is entitled and the beneficiary of the coverage. The certificate may also contain a summary of the contract terms as the affect individual group members. See also Group Contract and Master Contract.
A request for payment under the terms of an insurance policy.
A person or party making a formal request for payment of benefits that are due under an insurance policy.
Loss of short-term/long term memory, orientation to people, place time and deductive/abstract reasoning that severely impairs the ability to function independently.
Conditional Premium Receipt
A type of premium receipt given when the applicant pays the initial premium and under which life insurance will become effective before a policy is issued only if the proposed insured is found to be insurable. Also called a conditional receipt and/or temporary insurance agreement.
Contract providing the insured may renew it to a stated date or an advanced age, that is subject to the right of the insurer to decline renewal only under conditions as previously stated in the contract. See also Cancellable Policy, Guaranteed Renewable Policy, Non-Cancellable Policy and Non-Cancellable and Guaranteed Renewable Policy.
The period of time (usually two years) during which an insurer may challenge the validity of an insurance policy. See also Incontestable Clause.
Contributory Group Insurance
Any group insurance plan that calls for the insureds to pay a portion of the cost of the group insurance coverage. Compare to Noncontributory Group Insurance.
(1) The right of a person who is covered by a group insurance policy to convert his or her group coverage to coverage under an individual insurance policy. Such a conversion can be made when a person leaves the group, benefits are downgraded or terminated for a specific class or when the group master policy is ended; (2) the right to change insurance coverage in certain prescribed situations from one type of policy to another. For example, the right to change from an individual term insurance policy to a permanent life insurance policy; or change from an individual disability income policy to a long term care policy.
Coordination of Benefits (COB)
Group policy provision that determines the primary carrier in situations when insured is covered by multiple policies. Prevents insured from receiving claims overpayments.
Cost of Living Adjustment (COLA)
An increase in a pension benefit, disability income benefit or life income benefit to compensate for an increase in the cost of living. Usually added to an insurance policy as an optional rider.
Death Benefit Amount
The amount paid to the beneficiary or beneficiaries of a disability insurance policy if an insured dies.
Helps replace retirement savings lost as the result of a total disability. If you are deemed Totally Disabled, a Grantor Trust is established in your name. Benefits from your policy will be paid into the trust and invested using options that you choose.
Disability Buy-Sell Insurance
Insurance that provides cash funds to a business or professional partnership so that the business interests of a totally disabled partner or stockholder may be purchased if the disability is long-term or permanent. Also called Disability Buy-Out Insurance.
Disability Income Insurance
Insurance that provides specified payments (intended to replace a portion of lost income) to the policyholder in the event that he or she becomes either partially or totally incapable of working full or part-time due to injury or sickness. May also be called “Income Protection Insurance.”
Date a person becomes eligible for benefits.
Period of time during which potential members of a Group program may enroll without providing evidence of insurability. See also Open Enrollment.
The conditions an individual must meet in order to participate in group health insurance, group life insurance or a retirement plan.
Employee who is eligible based on the requirements detailed in the group contract or program specifications.
Also called the Waiting Period, it is a specified period of time beginning with the onset of a disability that must pass before benefits become available.
Employee Benefit Program
Benefits offered to an employee by his employer at his place of work, covering contingencies such as medical expenses, disability, retirement, and death, paid for wholly or in part by the employer.
Evidence of Insurability
Medical exams or tests required by an insurer before an applicant can purchase most individual disability or life insurance policies.
An attachment to an insurance policy that excludes or limits coverage for a specific health impairment. Also called an impairment waiver; see also Impairment Rider and Rider.
This is the first page of an Individual Isurance Policy. This page typically includes the name of the insured, their age and the name of the policy owner if it is different from the insured. This page also states the amount of the premiums, the agreement number, date on which the parties entered into an agreement. Lastly, this page normally has the signatures of both the president and the secretary of the company.
Free Look Period
The time period allowed a new insured to look over the terms and conditions of the final policy after delivery, during which the insured may cancel the policy with full premium refund. The free-look period is often 10 days after delivery of the policy for life and health, or up to 30 days on property and liability. Also called a Ten-Day Free Look.
Your share, based on the percentage of ownership, of the usual and customary monthly business expenses you are responsible for each month. They include, but are not limited to lease, utilities and telephone, some employee salaries and benefits, professional expenses etc.
This refers to how many days after your premium remains unpaid that the policy will remain in effect. The standard grace period is 31 days. This means that you have 31 days after your premium due date to make the payment without any lapse of coverage.
Coverage of a number of individuals under one contract. Commonly the group is employees of the same employer.
Document provided to each member of a group plan. It details benefits provided under the group contract issued to the employer or other insured. See also Certificate of Insurance.
Contract of insurance made with an employer or other entity covering a group of persons identified by their relationship to the entity buying the contract. Generally used to cover employees of a common employer, members of a trade association or trusteeship, members of a welfare or employee benefit association, members of a labor union, or members of a professional or other association not formed only for the purpose of obtaining insurance. See also Master Contract.
Insurance that provides coverage for several people under one contract, called a master contract. Group Long and Short Term Disability, Group Life Insurance and Group AD&D are common.
Guaranteed Insurability Option Rider
A rider to an insurance policy that gives the policy owner the right to purchase additional insurance of the same type as provided in the original contract. The additional insurance may not be more than an amount specified in the contract and can be purchased at specified premium rates and at specified times without new evidence of insurability. Also called a Policy Purchase Rider, Future Increase Option Rider.
Guaranteed-Issue Insurance (GI)
Insurance coverage for which there is usually no or limited individual underwriting. All eligible members of a particular group of proposed insureds who apply for coverage and who meet certain conditions are automatically issued a policy.
Guaranteed Renewable Policy
An insurance policy in which the insurer is required to renew the policy for a specified amount of time regardless of changes to the health of the insured. The agreement requires that premiums are paid on time and that the insurer makes no changes except if a premium change is made for an entire class of policyholders. See also Cancellable Policy, Conditionally Renewable Policy , Non-Cancellable Policy, and Non-Cancellable and Guaranteed Renewable Policy .
Form used by underwriters to evaluate groups or individuals to determine the risk.
Any aspect of the health, occupation, activities or life style of a proposed insured that could increase his or her expected mortality or morbidity.
An attachment to an insurance policy that excludes or limits coverage for a specific health impairment. Also called an impairment waiver; waiver or exclusoin see also Exclusion Rider and Rider.
An insurance policy clause that provides a time limit (usually two years) on the insurer’s right to dispute a policy’s validity based upon material misstatements made in the application. See also Contestable Period .
The first premium payable for an insurance contract.
In a disability insurance policy, an accidental bodily injury which occurs while the policy is in force.
A report made by a consumer reporting agency concerning a proposed insured’s lifestyle, occupation and economic standing. This report is considered an investigative consumer report as defined by the Fair Credit Reporting Act. See also Personal Interview Report .
Instrumental Activities of Daily Living (IADL’s)
These are activities such as using a telephone, shopping, traveling out the home, taking medications, managing money, preparing meals, doing housekeeping and laundry. Some LTC policies include IADL limitations as a benefit trigger for providing home health care benefits.
An insurance statement that an insurer may ask an applicant to complete if a considerable amount of time has passed between the time of application and the time the policy is actually issued. The statement will stipulate that, for a policy to become effective, the insured must still be insurable at the time of policy delivery according to the underwriting rules and practices of the company.
Age nearest birthday. See also Attained Age and Original Age .
The person or party insured under an insurance policy.
The issuer of an insurance policy (the insurance company) that promises to pay a benefit if a specified event occurs.
Injury resulting from an act, the doer of which intended to inflict injury.
Level of care associated with skilled nursing facility providing nursing care under the supervision of physicians or a registered nurse.
A beneficiary whose rights to the proceeds of a life insurance policy cannot be cancelled by the policyholder unless the beneficiary consents. See also Beneficiary, Contingent Beneficiary, Primary Beneficiary and Revocable Beneficiary.
An Irrevocable Trust holds assets, but the donor cannot change the trust once established.
Issue and Participation Limits
A carrier-specific chart detailing the amount of disability insurance coverage that the carrier will issue based on an insured’s level of income.
Key Person Insurance
An insurance contract designed to cover the key employees in a business for the benefit of the employer; may be written on a group or an individual basis.
The termination of an insurance policy for failure to pay premium(s) when due.
Late Payment Offer
A means to encourage reinstatement of a lapsed insurance policy. The offer specifies that the insurer will accept an overdue payment after the grace period ends and will reinstate the policy without requiring the insured to complete a reinstatement application or submit evidence of insurability.
A premium that remains the same.
Long-Term Disability Insurance
Disability Income Insurance which is designed to provide benefits for a long duration such as 2 years, 5 years, or to Age 65. The elimination period for this policy is usually 90 or more days. See also Disability Income Insurance and Short-Term Disability Insurance .
Insurance which pays an insured a benefit based on their loss of income, resulting from accidental bodily injury or sickness.
Also called the “Master Policy,” it is the legal contract between an insurance company and a group policyholder. The master contract insures a number of people under a single contract. Also see Certificate of Insurance.
A misstatement by an insurance applicant that is relevant to the insurer’s acceptance of the risk, because, if the truth had been known, the insurer would not have issued the policy or would have issued the policy on a different basis.
Medicaid is the joint federal and state government program to pay medical costs for the poor. Medicaid will pay nursing home and some home care costs if you are disabled, provided that your financial assets and monthly income are below certain allowed levels.
Medical Information Bureau (MIB)
MIB Group, Inc. ("MIB") is an association of over 500 U.S. and Canadian life insurance companies providing information and database management services to the financial services industry. Organized in 1902, MIB's core fraud protection services protect insurers, policyholders and applicants from attempts to conceal or omit information material to the sound and equitable underwriting of life, health, disability, and long term care insurance. Fair pricing of insurance products is largely dependent on accurate "risk assessment", "risk classification", and "risk selection". A determination of these factors begins with the assurance of accurate health information supplied on the insurance application concerning the proposed insured.
Consumers may request disclosure of or correction to their MIB record by contacting the MIB Information Office, P.O. Box 105, Essex Station, Boston, MA 02112, (617) 426-3660 or http://www.mib.com.
Service or treatment deemed absolutely necessary in treating a patient and the omission of such could adversely affect the patient's condition.
The federal government program to provide health insurance for people over 65. While everyone over 65 is eligible for Medicare, it pays for very little long-term care.
Mental and Nervous Disorders
Refers to a mental or emotional disease or disorder of any kind that does not have an organic origin, and sometimes substance abuse issues.
Mode of Premium Payment
The frequency with which premiums are paid for an insurance policy (either monthly, quarterly, semi-annually or annually). There is typically a modal charge for choosing to pay premiums other than on an annual basis.
Modified Own Occupation
A definition of disability that would consider you disabled if you are unable to perform the material and substantial duties of your occupation and you are not engaged in any other gainful occupation. It is your choice to work elsewhere, not the insurance carrier's.
The likelihood that a person of a given age will experience an illness or disability.
The frequency with which death occurs among a specified group of people.
Mutual Insurance Holding Company
An insurer without capital stock. Policyholders, not stockholders, exercise corporate voting rights, including election of the Board of Directors.
If you are an employee this is your W-2 wage. If you own a corporation, use gross revenues minus business expenses. Net income, not gross, is used to determine how much monthly benefit you may qualify for.
Non-Cancellable and Guaranteed Renewable Policy
An individual insurance policy that the insurer cannot terminate and for which the premiums cannot be raised. See also Cancellable Policy , Conditionally Renewable Policy, Guaranteed Renewable Policy, and Non-Cancellable.
An individual insurance policy for which the premium cannot be raised by the insurer and which must be renewed by the insurer until the insured reaches a specific age provided premiums are paid when due. See also Cancellable Policy , Conditionally Renewable Policy, Guaranteed Renewable Policy, and Non-Cancellable and Guaranteed Renewable Policy .
Noncontributory Group Insurance
A group insurance plan in which the insureds pay no portion of the premium for their insurance. The group policyholder pays the entire premium. If a group plan is noncontributory, the enrollment of group members is automatic; all eligible group members are covered. Compare to Contributory Group Insurance .
Injury not qualifying the insured for total or partial disability benefits.
Non-Duplication of Benefits
Provision in some policies specifying benefits will not be paid for amounts reimbursed by others. Often called coordination of benefits (COB).
Policy or provision of a policy excluding accidents that occur on the job, when such employment is covered by workers compensation.
A life policy for which the policyholder or contract owner does not receive dividends.
A group of occupations that present a similar risk to an insurance company. If all other factors are equal, people in the same occupation class will pay the same premium rates for disability income insurance.
Impairment of health which has been caused by continued exposure to conditions inherent in a person's occupation or a disease caused by employment or resulting from the nature of employment.
See also Eligibility Period.
The age of an insured on the inception date of an insurance policy. See also Attained Age and Insurance Age.
You are considered over-insured by some carriers if the amount of disability insurance you have exceeds a specified percentage of your income. This may limit the amount of benefits an insurance carrier will issue or possibly pay at time of claim. See also Issue and Participation Limits and/or Relations to Earnings Clause .
Overhead Expense Insurance
A reimbursement policy that pays the fixed overhead of your business during times of disability.
A definition of disability which states that as long as the insured is unable to perform the material and substantial duties of his or her regular occupation (or occupations, if more than one) at the time of disability, the insured will be considered eligible to receive the full benefit under the policy. Types of Own Occupation include Any, Modified, Regular, Specialty, Transitional and True Own Occupation.
A report based on a physical examination and a medical history completed by a medial representative other than an insured’s own physician.
Employee or former employee eligible to receive benefits from an employee benefit plan or whose beneficiaries may be eligible to receive benefits from the plan.
Number of employees enrolled compared to total eligible for coverage. Often, a minimum participation percentage is required.
Personal Interview Report
A report which contains the same type of information as an inspection report except that the report relies on the proposed insured as the source of information. See also Inspection Report.
The printed document issued to the policyholder by a company stating the terms of the insurance contract.
The person or party who owns and individual policy. The policy owner is not necessarily the insured. Also referred to as Policyholder.
A condition that existed before a health insurance policy was issued. Carrier specific language will determine whether or not a Pre-Existing Condition will be covered, and when.
The payment, or regular periodic payments, that a policyholder makes to own an insurance policy.
A condition that considers an insured to be fully disabled and entitled to full disability benefits if he or she has a total and complete loss of his or her sight, speech, hearing or loss of two limbs.
The party or parties designated and who have first right to receive policy benefits when the benefits of an insurance policy become payable. See also Beneficiary, Contingent Beneficiary, Irrevocable Beneficiary and Revocable Beneficiary.
An insurance policy that covers a person classified as a greater than average risk of loss. The policy's premium rate may be higher than the rate for a standard policy or the policy is issued with special limitations or exclusions or both.
Steps used to determine premium rate for particular group based on amount of risk that group presents. Generally factored into the rating process are age, sex, type of industry, benefits, and administrative costs.
A partial (residual) disability benefit payable after an insured satisfies a qualification or an elimination period, returns to work and then suffers a loss of earnings directly resulting from a preceding total partial disability.
Regular Own Occupation
See True Own Occupation .
Clause in a Health Insurance policy intended to assist the disabled policyholder in vocational rehabilitation.
A benefit available in some disability income or long-term care policies intended to assist the disabled policyholder to recover and return to their pre-claim occupation or activities.
The restoration of a lapsed insurance policy. The insurer usually requires evidence of insurability and payment of past-due premiums before a policy can be reinstated.
Relations to Earnings Clause
A provision in some individual disability policies that places a limitation on the benefit that an insurance company pay if the total disability benefit from all insurers is more than a certain percentage of the insured's earnings.
The act of surrendering an insurance policy in order to purchase another policy.
A definition of disability that states you are able to perform one or more, but not all, of the material and substantial duties of your occupation on a full time basis and/or have a loss of income because of your partial disability. Also referred to as Partial Disability.
Residual Disability Benefit
A benefit amount that is established according to a formula specified in a disability income policy. The amount of the benefit varies according to the percentage of income loss attributable to the disability. Also referred to as a Partial Disability Benefit.
Return of Premium
Rider or provision in Health Insurance policy agreeing to pay 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.
A Revocable or "Living" Trust is a legal instrument you create to hold assets. You can change the trust or remove assets from it any time.
An amendment or optional benefit included in an insurance policy that becomes a part of the insurance contract and modifies the policy by limiting or expanding its benefits or excluding certain conditions from coverage. See also “Exclusions.”
A group of insureds who present a substantially similar risk to the insurance company. The most common risk classes used by life insurance companies are Preferred Best, Preferred, Standard, Non-Smoker, Substandard and Uninsurable.
A representation used by an agent to assist with explaining an insurance product to a potential customer.
Short-Term Disability Insurance
Disability Income Insurance designed to provide benefits for a short duration, typically 13 or 26 weeks duration and no more than 2 years. The elimination period for this policy is typically no more than 2 weeks. Policies can be issued on an individual or group basis. See also Disability Income Insurance and Long-Term Disability Insurance.
Social Security Disability Income (SSDI)
A long-term disability income program that provides benefits to disabled workers who are under age 65 and who have paid a specified amount of Social Security tax for a prescribed number of quarter-year periods.
Specialty Own Occupation
You will be considered totally disabled even if you are at work in some other capacity so long as you are not able to work in your occupation. If your occupation is limited to a single specialty by a Board of Specialties (like medical, dental, trail attorney, etc.) your specialty will be considered your occupation.
Summary Plan Description
An overview or summary of benefits provided. Used most often with employees covered by self-funded plans.
If both spouses have LTC policies, some policies will, on the death of one spouse, convert the policy of the surviving spouse to paid-up status. That is, the surviving spouse need pay no further premiums.
Temporary Insurance Agreements
Legal agreements between an insurer and a proposed insured that provide a guaranteed amount of temporary life insurance coverage for a specified period of time, usually the underwriting period.
Ten-Day Free Look
Notice, placed prominently on the face page of policy, advising the insured of his right to examine the policy. If dissatisfied, he may return the policy within ten days for a full premium refund and no further obligation. See also Free-Look Period.
A definition of disability that states you are unable to perform the material and substantial duties of your occupation because of injury or sickness. Specific carrier language will determine what a total disability is. See also Own Occupation, Presumptive Disability and Residual Disability
You will receive a monthly disability benefit if you are totally disabled in your occupation, meaning that you are prevented from performing the material and substantial duties of your regular occupation, but gainfully employed in another occupation. Your monthly benefit is not reduced unless your benefit for total disability plus the income of your new occupation is more than 100% of your income before disability.
True Own Occupation
This definition of disability states that if you become totally disabled from your regular occupation and choose to work in another occupation, you’ll receive full benefits, regardless of the income you earn from the other occupation.
Benefit providing reimbursement of expenses up to a maximum; without any schedule of benefits as such.
The process of classifying applicants for insurance by considering characteristics such as age, gender, health, occupation, income, use of tobacco products and hobbies. People with similar characteristics are charged a premium based on the group's level of risk.
The period of time between beginning of a disability and start of Disability Insurance benefits. Also known as Elimination Period.
Waiver of Premium
A provision that sets conditions under which an insurance policy would be kept in full force by the company without the payment of premiums. It is used most by policyholders who become totally and permanently disabled, but may be available in other cases.
Your Own Occupation
If you are totally disabled from your occupation and you choose not to work in another occupation (the insurance company cannot force you), 100% of the benefit is payable to age 65.