We know it can be difficult to understand insurance lingo. That is why we hope you find the following terms and definitions simple and easy to understand. Read the entire page or skip to a specific area you would like to learn a little more about.
LifeLIFE INSURANCE: protection against the death of the insured in the form of payment to a designated beneficiary, typically a family member or business.
TERM INSURANCE: protection during limited number of years; expiring without value if the insured survives the stated period, which may be one or more years but usually is five to thirty years, to cover the need for temporary protection.
UNIVERSAL LIFE: a flexible premium life insurance policy under which the policy owner may change the death benefit from time to time (with satisfactory evidence of insurability for increases) and vary the amount or timing of premium payments. Premiums (less expense charges) are credited to a policy account from which mortality charges are deducted and to which interest is credited at rates which may change from time to time.
VARIABLE LIFE: benefits relate to the value of assets behind the contract at the time the benefit is paid. The assets fluctuate according to the investment experience of funds managed by the life insurance company. Premium payments may be fixed as to timing and amount (scheduled premium variable life) or subject to change by the policy holder (flexible premium variable life).
WHOLE LIFE: kept in force for a person's whole life as long as the scheduled premiums are maintained. All Whole Life policies build up cash values. Most Whole Life policies are guaranteed as long as the scheduled premiums are maintained. The variable in a Whole Life policy is the dividend which could vary depending on how well the insurance is doing. If the company is doing well and the policies are not experiencing a higher mortality than projected, premiums are paid back to the policy holder in the form of dividends. Policyholders can use the cash from dividends in many ways. The three main uses are: it can be used to lower or vanish premiums, it can be used to purchase more insurance or it can be used to pay for term insurance.
HealthHEALTH INSURANCE: protection against the costs of hospital and medical care arising from an illness or injury (sometimes called Accident & Sickness Insurance).
CO-PAYMENT: the portion, either a percentage or a fixed dollar amount, of a medical bill that a patient pays. The insurer pays the rest.
DEDUCTIBLE: the amount of loss paid by the policyholder before the insurance policy benefits become payable.
COINSURANCE: a provision that the insured and insurance company will share covered losses in agreed proportion. In health insurance, the preferred term is "percentage participation."
SupplementalSupplemental health insurance is a policy that pays cash benefits in addition to the benefits paid by any other health insurance coverage. The original intent of this coverage was to cover the gaps left by deductibles and co-payments in regular health insurance. These supplemental policies have now expanded to take on several new roles and even serve as the primary coverage for the most often incurred types of medical charges. These policies are relatively inexpensive. The lower cost is directly attributable to the lower benefit amounts that are available as compared with traditional health insurance. In some cases, this is the only health insurance that an applicant can find or can afford; in these cases it is better to have some limited coverage than no health insurance at all.
Most health insurance policies have a provision that allows the insurance company to reduce benefits for expenses that are paid by another health insurance policy. For example, if you break your arm in an auto accident, your regular health insurance does not pay until the auto insurance covers its portion of the medical costs. Supplemental insurance works in the opposite way. Using the same example, supplemental insurance would pay a cash benefit even though all of the medical bills had already been paid by the auto insurance and/or health insurance company. The cash might be used to offset lost income due to the injury or be used as "mad money".
One of the attractive features of supplemental health insurance is that it does provide payment for pre-existing medical conditions when many other types of insurance exclude this benefit.
The most common type of supplemental health insurance is intended for people covered under Medicare. Medicare is the primary health insurance for Americans over age 65 but it does not cover long term health care at home or in a nursing facility. A Medicare policy has a deductible and co-payments that must be paid by the individual. To protect themselves from these costs, many seniors elect Medicare Supplement or Long Term Care insurance. The cost of both types of supplemental coverage together can add up to more than $4,000 per year so not all seniors are able to afford this protection. Of the two types, long term coverage may be more important for protecting financial security.
DisabilityDISABILITY: a condition that curtails to some degree a person's ability to carry on his normal pursuits caused by either a sickness or injury. A disability may be partial or total, and temporary or permanent.
DISABILITY INSURANCE: coverage that provides a portion of income lost as a result of a covered disability caused by either a sickness or injury.
Long Term CareLONG-TERM CARE INSURANCE: covers the cost of long-term custodial care in a nursing facility or at home.
LONG TERM CARE BENEFITS: a special rider or policy offered by some companies will pay long term or catastrophic health care benefits as a supplemental benefit. These are called living benefit or care riders. Depending upon the policy, benefits may be for nursing home care and/or at home health care.
