Accident & Health key terms

The tendency of people with higher-than-average health risks to seek or keep insurance more often than low-risk people, which can raise costs for an insurer unless it prices and underwrites for the difference.

The process an insurer uses to evaluate an applicant's health, occupation, habits, and other risk factors to decide whether to issue coverage and on what terms and premium.

Grouping insureds with similar expected loss characteristics into rating classes so each class pays a premium that reflects its anticipated claims experience.

The principle that insurance restores an insured to approximately the financial position held before a loss, rather than allowing profit from a claim.

The mutual duty of applicant and insurer to deal honestly and disclose material facts, because the insurer relies on the applicant's representations when issuing coverage.

A false statement on an application that would have influenced the insurer's decision to issue coverage or the premium charged, potentially allowing the insurer to rescind the policy.

The intentional withholding of a material fact by an applicant that the insurer needed in order to evaluate and rate the risk.

A legitimate financial or personal stake in the continued health or life of the person insured, which must exist at the time the policy is purchased.

A contract in which the amounts exchanged by the parties are unequal and depend on chance, so one party may receive far more or less in value than it paid.

An insurance contract drafted by the insurer with little or no input from the insured; ambiguities are generally interpreted in favor of the insured.

The state-issued authorization an individual must hold to solicit, negotiate, or sell insurance, granted after meeting prelicensing education, examination, and background requirements.

An insurer's formal notice to the state that it authorizes a licensed producer to act as its agent in selling its products.

A producer's legal obligation to hold and handle money belonging to clients or insurers with care and honesty and to account for those funds promptly.

Inducing a policyholder to lapse or replace existing coverage through misleading or incomplete comparisons, an unfair trade practice prohibited by state law.

Statutorily prohibited marketplace behaviors such as misrepresentation, rebating, twisting, and improper claim settlement that regulators may penalize.

Offering a client part of the producer's commission or another inducement not stated in the policy as an incentive to buy insurance, generally illegal in most states.

The amount an insured pays, usually monthly or annually, to keep an insurance policy in force.

A specified dollar amount the insured must pay out of pocket for covered services before the insurer begins paying benefits for a claim period.

The percentage split of covered expenses shared between insurer and insured after the deductible, such as the insurer paying 80 percent and the insured 20 percent.

The most an insured must pay in a plan year for covered services through deductibles, coinsurance, and copays before the plan pays 100 percent of covered expenses.

A fixed dollar charge the insured pays at the time of a covered service, such as a set amount per office visit or prescription.

A period after the premium due date, commonly 31 days for individual health policies, during which coverage remains in force and the payment can still be made.

Restoring a lapsed policy to active status, usually upon evidence of insurability and payment of overdue premium, sometimes with a waiting period for new claims.

A provision stating that after the policy has been in force for a set period, typically two years, the insurer cannot contest the policy based on misstatements on the application.

A health condition diagnosed or treated before the effective date of coverage, which a policy may exclude or limit for a stated period.

A span of time after the policy effective date or after a loss during which no benefits are payable for specified conditions or events.

The number of days of disability, or of treatment, that must pass before benefits begin; it functions as a time deductible on disability income policies.

The maximum length of time for which benefits will be paid for a covered claim, such as two years or to age 65 on a disability policy.

A disability that prevents the insured from performing the substantial and material duties of their own occupation or any occupation, depending on the policy's definition.

A disability definition that pays benefits when the insured cannot perform the duties of the specific occupation held before disability, even if able to work elsewhere.

A stricter disability definition that pays only when the insured is unable to perform the duties of any occupation for which they are reasonably suited by training or experience.

A partial disability benefit that pays a reduced amount when the insured returns to work but earns less than before because of the disabling condition.

Rules that determine the order in which multiple health plans pay a claim so total payments do not exceed the covered expense, with the primary plan paying first.

A managed care plan that provides comprehensive services through a network of contracted providers in exchange for a fixed prepaid premium, often requiring a primary care gatekeeper.

A managed care arrangement that contracts with a network of providers at discounted rates and pays more when members use in-network providers than out-of-network ones.

A primary care physician in some managed care plans who must authorize specialist referrals and coordinate care for the member.

A managed care process that evaluates the medical necessity and appropriateness of care before, during, or after treatment to control costs.

Advance approval from the insurer or plan required before certain services, such as hospitalization or surgery, will be covered.

Coverage issued to an employer or other organization that insures a defined group of members under one master policy, typically without individual medical underwriting.

A federal law letting certain employees and dependents continue group health coverage for a limited time after a qualifying event such as job loss, at their own expense.

The federal health insurance program for people age 65 and older and for certain younger people with disabilities, divided into Parts A, B, C, and D.

Private supplemental insurance that helps pay Medicare cost-sharing such as deductibles, coinsurance, and copayments that original Medicare does not cover.

A joint federal-state program that provides health coverage to eligible low-income individuals and families, with benefits and eligibility set under state and federal rules.

A contract, usually issued by an insurer, that accumulates funds and then pays a stream of income, either for a set period or for life.

The point at which an annuity's accumulated value is converted into a series of periodic income payments.

A fee charged for withdrawing more than a permitted amount from a deferred annuity during the early contract years, designed to recover acquisition costs.

A policy feature under which the insurer must renew coverage at the insured's option but may raise premiums for an entire class of insureds, not individuals.

The strongest renewal guarantee, under which the insured may renew coverage and the insurer cannot cancel or raise the premium while premiums are paid.