Life & Health key terms

An insurance company that holds a license from a state's insurance regulator and is therefore allowed to sell policies in that state, subject to its financial and market-conduct rules.

The formal license a state insurance department issues to an insurer, authorizing it to transact specified lines of insurance business within that state.

A financial or blood relationship with the person insured that would cause the policyholder to suffer a genuine loss if that person died; it must exist when the policy is applied for.

The principle that an insurance payment should restore the insured to roughly the same financial position held before a loss, without allowing a profit from the claim.

The tendency of people in poor health or with above-average risk to buy insurance, or keep it in force, more eagerly than low-risk people, which can push up claim costs.

The principle that the insurer and the applicant must deal honestly and disclose all material facts relevant to the risk when a policy is applied for and issued.

The stated death benefit printed on a life insurance policy, payable to the beneficiary when the insured dies while coverage is in force; it excludes added riders and dividends.

The savings-type account inside a permanent life insurance policy that builds over time and is available if the policy is surrendered, borrowed against, or applied to a nonforfeiture benefit.

Life coverage that stays in force for a stated number of years, such as 10 or 20, and pays a death benefit only if the insured dies during that period; it builds no cash value.

Permanent coverage that stays in force for the insured's entire lifetime, charges a level premium, and builds guaranteed cash value the owner can borrow against or withdraw.

Permanent coverage with flexible premiums and an adjustable death benefit, where the insurer credits interest to a cash account and deducts monthly cost-of-insurance and expense charges.

Permanent coverage in which the death benefit and cash value fluctuate with the investment performance of separate accounts chosen by the owner, who bears the investment risk.

A policy provision stating that after the policy has been in force for a set period, usually two years, the insurer can no longer void coverage because of misstatements on the application.

The extra time, commonly 30 or 31 days, after a premium due date during which the policy stays in force so the owner can pay without losing coverage.

The right to restore a lapsed life policy by paying overdue premiums with interest and providing evidence of insurability, usually within a limited window after the lapse.

The choices a whole life owner has if the policy lapses with cash value, typically taking the cash surrender value, reduced paid-up insurance, or extended term insurance.

A contract in which an insurer accepts money, accumulates it, and then pays it out as a stream of income, usually for retirement and often for the rest of the annuitant's life.

The point at which an annuity's accumulated fund is converted into a series of regular income payments, after which the payout schedule and its guarantees are fixed.

A fee an insurer deducts when an annuity or permanent policy with a surrender period is cashed out early, used to recover sales costs and discourage early withdrawal.

A life policy that fails the federal seven-pay test, so it loses favorable tax treatment and withdrawals or loans are taxed as income first, plus a 10% penalty before age 59½.

A tax-free transfer, allowed under the Internal Revenue Code, of cash value from one life policy or annuity to another of like kind, without the owner taking constructive receipt.

The fraction of each annuity payment that represents a tax-free return of the after-tax premiums paid, excluded from gross income until the entire investment in the contract is recovered.

The amount of covered medical expense the insured must pay out of pocket each year before the health plan begins paying its share of covered benefits.

The percentage of covered medical costs the insured pays after the deductible is met, while the insurer pays the remaining share, for example 20% versus 80%.

A yearly cap on the deductibles, coinsurance, and copays an insured pays for covered in-network care; once it is reached, the plan pays 100% of covered benefits.

A provision that limits or delays coverage for a medical condition the insured was treated for during a set look-back period before the policy's effective date.

A rule that determines which of two or more health plans pays first when a person is covered by more than one policy, so total payments do not exceed the cost of care.

A policyholder's right to return a newly delivered policy within a stated number of days, commonly 10 to 30, for a full refund of premium.

The waiting time, usually stated in days, that must pass after a disability or long-term care event begins before the policy starts paying benefits.

A disability standard that pays benefits when the insured cannot perform the material duties of the job held before becoming disabled, regardless of other work that may be available.

Basic self-care tasks such as bathing, dressing, eating, toileting, transferring, and continence; needing help with several of them commonly triggers long-term care benefits.

A health plan that delivers care through a network of contracted providers, usually requires a primary care physician and referrals to specialists, and generally pays nothing for non-emergency out-of-network care.

A health plan that contracts with a network of providers but still pays some benefits for out-of-network care, with lower cost sharing when the insured stays inside the network.

A private plan approved by Medicare to provide Part A and Part B benefits, often with drug coverage and extras, in place of original Medicare for enrolled beneficiaries.

A private supplemental policy sold to people enrolled in original Medicare that helps pay Medicare's deductibles, coinsurance, and other cost-sharing gaps.

A state-mandated employer benefit that pays medical costs and wage replacement to employees injured on the job, regardless of fault, in exchange for the employee giving up most tort claims.

A tax-advantaged personal account paired with a qualifying high-deductible health plan that lets people set aside pre-tax money for current and future medical expenses.