CO Life & Health key terms

Requirement that the person buying a policy on someone's life would suffer a real financial or emotional loss if that person died. It must exist when the application is signed, not only at death.

The person, people, trust, or estate named in a policy to receive the death benefit. A primary beneficiary is paid first; a contingent beneficiary is paid if the primary has already died.

The savings part of a permanent life policy that builds over time and belongs to the owner. It can be borrowed against or taken at surrender and is reduced by loans and withdrawals.

Coverage that pays a death benefit only if the insured dies within a stated number of years. It builds no cash value and is usually the least expensive way to buy a large amount of protection.

Permanent coverage with a premium that stays level for life, a guaranteed death benefit, and cash value that grows on a guaranteed schedule. It stays in force as long as required premiums are paid.

Permanent coverage with flexible premiums and an adjustable death benefit. Its cash value earns current interest, and the policy stays in force while that value is enough to cover the cost of insurance.

Permanent coverage whose cash value is invested in subaccounts the owner selects, so the owner carries the investment risk. It is a security, sold only with a securities license and accompanied by a prospectus.

A contract with an insurer that builds funds tax deferred and then pays them out, either in a lump sum or as income for a chosen period or for life. It is not life insurance.

A policy provision stating that after the coverage has been in force for a set time, usually two years, the insurer cannot cancel the policy or refuse a death claim because of misstatements on the application.

The number of days after a premium due date, commonly 31 for life insurance, during which the policy stays in force. A death during this time still pays, minus the unpaid premium.

Restoring a lapsed policy to full force. The owner usually pays overdue premiums with interest and proves insurability, and the contestable and suicide periods may start over.

Choices available when a permanent policy with cash value is surrendered or lapses: take the cash value, buy reduced paid-up insurance for a smaller face amount, or take extended term insurance for the full face amount.

A share of an insurer's divisible surplus paid to owners of participating policies. It is not guaranteed and can be taken in cash, used to reduce premium, or left on deposit with interest.

Money the owner borrows from the insurer using the policy's cash value as security. Interest is charged, and any unpaid balance plus interest is subtracted from the death benefit or surrender value.

A rider that excuses premium payments while the insured is totally disabled, keeping the policy in force. It usually has a waiting period, often six months, and requires proof of continuing disability.

One master policy covering a group such as the employees of a company. It typically requires no individual medical underwriting, is term coverage, and lets a departing member convert to an individual policy.

A life policy that fails the federal seven-pay test because premiums were paid too quickly. It keeps its death benefit but loses favorable tax treatment; loans and withdrawals are taxed as income first and may face a penalty.

A tax-free transfer of cash value from one life policy or annuity to another under Section 1035 of the Internal Revenue Code, so any gain is not taxed at the time of the exchange.

The amount the member pays out of pocket for covered services each year before the plan begins to pay. Some services, such as preventive care, may be covered before the deductible is met.

The share of covered costs the member pays after the deductible, stated as a percentage such as 20 percent. The plan pays the rest, and the member's share stops at the out-of-pocket maximum.

A fixed dollar amount the member pays for a covered service, such as 30 dollars for an office visit, instead of a percentage. Copays may or may not count toward the deductible.

The most a member will pay in a plan year for covered in-network care, counting deductibles, coinsurance, and copays. After it is reached, the plan pays covered costs at 100 percent.

A managed care plan that usually requires members to use a network of providers, choose a primary care physician, and get referrals for specialists. Care outside the network is generally not covered except in emergencies.

A plan that contracts with a network of providers at negotiated rates. Members may see in-network providers at lower cost or go out of network for a higher share, and no referrals are required.

A plan that combines HMO and PPO features. Members choose a primary care physician and get referrals for in-network care at the lowest cost, but may use out-of-network providers by paying more.

Rules that decide the order in which two or more health plans pay when a person is covered by both, so total payments do not exceed the cost of care. The primary plan pays first.

A federal law that lets employees and dependents keep group health coverage for a limited time after a qualifying event such as job loss, at their own expense plus a small administrative fee.

A health condition diagnosed or treated before a person's coverage starts. Under current federal rules for most plans, a plan may not deny or limit coverage because of a preexisting condition.

The waiting time after a disability or long-term care need begins before benefits become payable, such as 90 days. It works like a deductible measured in time rather than in dollars.

Definitions that determine when disability benefits begin. Own occupation means the insured cannot do their own job; any occupation means they cannot do any job for which they are reasonably suited. Own occupation is broader and costs more.

A disability benefit that pays a reduced amount when the insured can still work but has lost income because of the disability. It is often stated as a percentage of the full benefit.

Coverage that pays for custodial and other help with daily activities when someone has a chronic illness or disability, in a facility or at home. Benefits usually start after an elimination period.

Basic self-care tasks such as bathing, dressing, eating, toileting, transferring, and continence. Long-term care policies usually pay benefits when a person cannot perform a set number of them without help.

The federal health program for people 65 and older and for certain disabled people. Part A covers hospital care, Part B covers medical services, Part C is Medicare Advantage, and Part D covers prescription drugs.

Private insurance that supplements original Medicare by paying some of the costs Medicare leaves to the member, such as copays and coinsurance. Plans are standardized by letter, and it does not work with Medicare Advantage.

A joint federal and state program that pays medical and long-term care costs for people with low income and limited assets. Eligibility rules vary by state, and it is the main payer of long-term custodial care.

A tax-advantaged account owned by an individual that can be used for qualified medical expenses. It must be paired with a qualifying high-deductible health plan, and unused funds roll over year to year.

A policy the insurer must renew at the owner's option as long as premiums are paid. Premiums can be raised, but only for an entire class of policyholders, not for one person because of claims.

The insurer's right to recover money it paid from the party who caused the loss, or from the injured member's settlement with that party. It helps prevent a member from being paid twice for the same injury.

The fee benchmark a plan uses to decide how much it will pay for a service, based on what providers in the area typically charge. Amounts above the benchmark may be billed to the member.