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Insurance Terms
Accelerated Death Benefit -- A feature of a life insurance policy that lets you use some of the policy's death benefit prior to death.
Annuity - An annuity is an insurance contract. An annuity contract is created when an individual gives a life insurance company money which may grow on a tax-deferred basis and then can be distributed back to the owner in several ways. The defining characteristic of all annuity contracts is the option for a guaranteed distribution of income until the death of the person or persons named in the contract. Perhaps confusingly, the majority of modern annuity customers use annuities only to accumulate funds and to take lump-sum withdrawals without using the guaranteed-income-for-life feature.
Beneficiary -- The individual or organization that is entitled to the benefits or proceeds of a will, trust or insurance policy.
Benefit Period -- The number of years of coverage you are buying. Many policies will offer between three and five years and some will offer lifetime benefits. Lifetime benefits will cost roughly 30% more than a five year plan.
Benefit Triggers -- Term used by insurance companies to describe when to pay benefits
Cash Surrender Value -- The amount of money you may be entitled to receive from the insurance company when you terminate a life insurance or annuity policy. The amount of cash value will be determined as stated in the policy.
Coinsurance -- The amount you are required to pay for medical care in fee-for-service coverage or preferred provider organization after your deductible. It is usually a percentage of billed charges. For example, if the insurance company pays 70 percent of the claim, your coinsurance is 30 percent.
Daily Benefit -- The amount of insurance benefit in dollars a person chooses to buy for long term care expenses.
Deductible -- The amount of money you must pay, usually every year, to cover your medical care expenses before your insurance starts paying, usually tax deductible.
Designated Beneficiary Plan -- This plan allows you to avoid probate by naming your beneficiaries and specifying what percentage of your estate will be left to each of them.
Elimination Period -- A type of deductible; the length of time the individual must pay for covered services before the insurance company will begin to make payments. The longer the elimination period in a policy, the lower the premium.
Exclusions -- Specific conditions or circumstances for which an insurance policy will not provide benefits.
Guaranteed Renewable -- When a policy cannot be cancelled and must be renewed when it expires unless benefits have been exhausted. The company cannot change the coverage or refuse to renew the coverage for other than nonpayment of premiums including health conditions and or marital or employment status.
Health Insurance Portability and Accountability Act (HIPAA) -- Federal health insurance legislation passed in 1996 that allows, under specified conditions, long term care insurance policies to be qualified for certain tax benefits.
Health Maintenance Organization (HMO) -- Prepaid health plan in which you pay a monthly premium and the HMO covers your cost of care to see doctors within a predefined network. You must choose a primary care physician who coordinates all of your care and makes referrals to any specialists you might need. As an HMO participant, you will usually bear the cost of medical services which do not participate in your plan's network.
Lapse -- Termination of a policy when a renewal premium is not paid.
Lifetime Maximum -- Maximum amount of benefits available to an insurance policy holder during his life. All benefits are subject to this maximum, unless stated as unlimited.
Long term care insurance - A policy to help lessen the expense of nursing home care if later needed. Usually most reasonable if purchased at the early age of 50. Some states offer Partnership Programs that shield some assets from Medicaid.
Medicare -- The primary health insurance program for people aged 65 and older and those with certain disabilities. Medicare coverage provides for acute hospital care, physician services, brief stays in skilled nursing facilities, and short-term skilled home care related to a medical problem. Medicare coverage is determined by the nature of services required by the patient, not the specific diagnosis. Coverage is restricted to medical care, and does not include prescription drugs or custodial care at home or in nursing homes.
Medicaid -- A joint federal-state program which covers health services for low-income individuals and families. Coverage and eligibility requirements vary from state to state. Medicaid is the primary payer of nursing home care. In addition, many states offer some level of home and community-based long-term care services for eligible individuals. Such additional services are at the option of the state and are not mandated by Federal law. You must be a resident of the state in which you plan to apply for Medicaid, especially for Long Term Nursing Home Care. Applying for Medicaid while hospitalized will expedite the process.
Medicare Supplemental Insurance -- A private insurance policy designed to cover certain gaps in Medicare coverage. (See Medigap Insurance above)
Medigap Insurance -- A private insurance policy designed to supplement the coverage of the Medicare program. Medigap policies are typically designed to minimize Medicare co-payments and deductibles for covered services and generally do not offer expanded coverage such as long term care services or prescription drugs.
Noncancellable Policies -- Insurance contract that cannot be cancelled and the rates cannot be changed by the insurance company.
Nonforfeiture Benefits -- A policy that returns at least part of the premiums to you if you cancel your policy or let it lapse.
Out-of-Pocket Maximum -- The maximum amount of money you will be required to pay per year for deductibles and coinsurance in addition to your regular premiums.
Pre-Existing Condition -- An illness or disability for which you were treated or advised within a certain time period (typically 6-12 months) before applying for a new insurance policy. A pre-existing condition clause would prohibit coverage of the particular condition during the designated time period.
Premium -- The amount paid, usually monthly or quarterly, in exchange for health insurance coverage.
Primary Care Physician (PPC) -- Under a health maintenance organization or point-of-service plan, a primary care physician is the first contact for health care. A primary care physician (usually a general practitioner) is often used as a "gate keeper" to make referrals to health care specialists, as necessary.
Rescind -- When the insurance company cancels a policy.
Rider -- Addition to an insurance policy that changes the provisions of the policy.
State Health Insurance Assistance Program -- Federally funded program to train volunteers to provide counseling on the insurance needs of senior citizens
Tax-Qualified Long Term Care Insurance Policy -- A policy that conforms to certain standards in federal law and offers certain federal tax advantages.
Term Life Insurance -- Covers a person for a period of one or more years. It pays a death benefit only if you die during that term. It generally does not build cash value.
Third Party Notice -- A benefit that lets you name someone who the insurance company would notify if your coverage is about to end due to non-payment of premium. This can be a relative, friend, or professional such as a lawyer or accountant, for example.
Thirty-Day Free Look -- The right to return the policy within 30 days after you have purchased the policy, if you do not want it for any reason, and the right to receive a refund for the premium paid.
Underwriting -- The process of examining, accepting, or rejecting insurance risks, and classifying those selected, in order to charge the proper premium for each.
Universal Life Insurance -- A kind of flexible policy that lets you vary your premium payments and adjust that face amount of your coverage.
Waiver of Premium -- A provision in an insurance policy that relieves the insured of paying the premiums while receiving benefits.
Whole Life Insurance -- Policies that build a cash value and cover a person for as long as he or she lives if premiums continue to be paid.
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