Glossary
Life & Health insurance terms, explained.
Every definition below maps to a concept on the state Life & Health licensing exam. Written in plain English from NAIC model terminology — no jargon for jargon's sake.
Life
- Accidental Death BenefitA rider paying an additional benefit if death results from an accident, sometimes doubling the face amount.
- BeneficiaryThe person or entity designated to receive the death benefit.
- Cash ValueThe savings component of a permanent life policy that the owner can access.
- Conversion PrivilegeThe right to convert term insurance to a permanent policy without evidence of insurability.
- Guaranteed Insurability RiderA rider letting the insured buy additional coverage at set dates without new evidence of insurability.
- Incontestability ClauseAfter a policy has been in force for a set period (usually two years), the insurer cannot void it for misstatements on the application.
- Indexed Universal Life (IUL)Universal life whose cash-value growth is tied to a market index, subject to caps and floors.
- Insurable InterestA financial or emotional stake in the continued life or health of the insured, required when a policy is issued.
- Modified Endowment Contract (MEC)An over-funded life policy that fails the 7-pay test and loses the normal tax treatment of distributions.
- Nonforfeiture OptionsThe ways a policyowner can recover cash value if a permanent policy lapses or is surrendered.
- Per StirpesA distribution method where a deceased beneficiary's share passes to their descendants.
- Policy LoanA loan taken against a permanent policy's cash value.
- Term Life InsurancePure death-benefit coverage for a fixed period, with no cash value.
- Universal Life InsuranceFlexible-premium permanent life insurance with an adjustable death benefit.
- Variable Life InsurancePermanent life insurance whose cash value is invested in subaccounts, requiring a securities registration to sell.
- Whole Life InsurancePermanent life insurance with level premiums and guaranteed cash value.
Health
- CoinsuranceThe percentage of covered costs the insured shares after meeting the deductible.
- Coordination of Benefits (COB)Rules that determine the order in which multiple health plans pay so total payment does not exceed the loss.
- CopaymentA fixed dollar amount the insured pays for a covered service.
- DeductibleThe amount an insured pays out of pocket before the insurer begins paying.
- Elimination PeriodA waiting period after a disability or claim begins before benefits start to be paid.
- Health Savings Account (HSA)A tax-advantaged account paired with a high-deductible health plan, used for qualified medical expenses.
- High-Deductible Health Plan (HDHP)A health plan with a higher deductible and lower premium that qualifies the insured to fund an HSA.
- HMO (Health Maintenance Organization)A managed-care plan that covers in-network care and usually requires a primary care physician referral.
- MedicaidA joint federal-state, needs-based program providing health coverage to low-income individuals.
- MedicareThe federal health program for people 65+ and certain disabled individuals, organized into Parts A, B, C, and D.
- Medigap (Medicare Supplement)Standardized private policies that cover gaps such as deductibles and coinsurance in Original Medicare.
- PPO (Preferred Provider Organization)A managed-care plan offering lower costs in-network and partial coverage out-of-network.
- Probationary PeriodAn initial period after a health policy starts during which certain conditions are not covered.
Annuities
Contracts
- Free-Look PeriodA window after a policy is delivered during which the owner can cancel for a full premium refund.
- Grace PeriodA period after a missed premium during which the policy stays in force.
- Material MisrepresentationA false statement on an application that, if known, would have changed the insurer's decision.
- RiderAn optional amendment that adds, modifies, or limits policy coverage.
- Waiver of PremiumA rider that pays the policy's premiums if the insured becomes totally disabled.
Regulation
- Admitted InsurerAn insurer licensed by a state's department of insurance to transact business there.
- Affordable Care Act (ACA)The 2010 law that reshaped individual health insurance with guaranteed issue, essential benefits, and subsidies.
- COBRAA federal law letting employees continue group health coverage after qualifying events, usually up to 18 months.
- Guaranty AssociationA state body that protects policyholders if an insurer becomes insolvent, up to statutory limits.
- HIPAAA federal law governing health-coverage portability and the privacy of protected health information.
- ReplacementTerminating or altering an existing policy in connection with buying a new one, triggering disclosure rules.
- TwistingUsing misrepresentation to induce a policyholder to replace one policy with another, to their detriment.
General
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