Insurance terms can be downright confusing. Fear not. Here’s a list of commonly used insurance terms and their definitions so you can make sense of it all.



Accidental Death Benefit — An insurance benefit paid to your beneficiary if you die as a result of an accident.

Accumulation Phase — In deferred annuities, the period during which your contributions grow with interest.

Agent — A person authorized and licensed to sell insurance policies or annuities on behalf of a company.

Allowable Charge — The most your health plan will consider for a covered service. You may see the phrase, “The actual charge may be different from the allowable charge.” This means your health plan may only cover a portion of what your doctor charges. For example, for an office visit, your doctor bills you $85 (the actual charge) but your health plan may only approve $80 (the allowable charge).

Annuity — A contract designed to be a guaranteed source of income. You make premium contributions to an insurance company and, in return, the company makes a series of income payments to you at regular intervals. You choose to receive income payments now or at some future date.

Attained Age — The age you have reached on a specific date (your actual age).

Beneficiary — The person you select to receive the benefit from your life insurance policy or annuity following your death.

Benefit — The amount of money paid by the insurance company when your claim is approved.

Cancer Insurance — Health coverage that can help pay for the many expenses cancer often brings. Benefits can cover a variety of services, including preventive care, cancer treatments, travel expenses and medications.

Cash Value — Your equity in a life insurance policy that builds over time. It’s your money to borrow from if you need emergency funds.

Claim — A request for payment of benefits.

Coinsurance — The amount you pay (usually a percentage) for your health care, after you pay the deductible; normally applies to traditional Major Medical or managed care plans.

Conversion Privilege — The right to change your coverage from one type of insurance policy to another. For example, some term life insurance policies allow you to convert to a whole life insurance policy regardless of your health.

Co-Payment (Co-Pay) — The set amount you pay for each medical service you receive. For example, a managed care plan might charge a $25 co-pay for a doctor visit.

Covered Services — A listing of all of the procedures for which your insurance policy pays.

Death Benefit — In life insurance, the benefit amount paid to your beneficiary upon your death. Under current Federal law, death benefits are not taxable income to your beneficiary. In some circumstances, estate or inheritance taxes may apply.

Deductible — The amount you must pay for health care before your insurance begins to pay. This amount can change every year. For example, if your health insurance has a $1,000 deductible, you must reach that amount before your coverage begins paying.

Deferred Annuity — A contract designed to be a guaranteed source of income, where you receive income payments at some future date, which allows your money to grow with tax advantages.

Effective Date — The day your insurance coverage begins.

Elimination Period (Waiting Period) — The length of time you must wait before benefits will be paid.

Employer-Sponsored (Group) Insurance — Coverage through your employer. The employer takes on a portion of your insurance costs while you agree to pay your share of the premiums and required co-pays, deductibles and other expenses.

Face Amount — The benefit amount of your life insurance policy that will be paid at your death or when the insurance policy matures.

Final Expenses — The bills left behind after your death, which can include funeral and burial costs, unpaid medical bills, credit card balances or estate taxes.

Grace Period — The length of time a renewal premium may be paid after the due date during which your insurance policy remains in force without penalty.

Guaranteed Minimum Interest Rate — The lowest interest rate that can be credited to an annuity. The amount will be stated in the annuity contract.

Guaranteed Renewable — An insurance policy that continually gives you the option to renew your coverage; the company cannot cancel your insurance as long as you pay your premiums when due.

Health Maintenance Organization (HMO) — A type of managed care plan where your coverage is limited to specific services you receive from a predetermined network of providers.

Home Health Care Insurance — Coverage that can help pay for long-term care services you receive at home, such as visits by nurses, home health aides and physical therapists.

Hospital Indemnity Insurance — Supplemental coverage that can pay you a set daily, weekly or monthly benefit when you have a covered hospital stay, regardless of what the actual charged amount is.

Immediate Annuity — An annuity that provides income payments shortly after you make the initial premium contributions.

Inpatient Care — Medical or surgical services (along with room, board and general nursing care) you receive while having an overnight stay in the hospital.

Issue Age — The age you are when your insurance policy goes into effect.

Lapse — When your coverage ends because you have not paid the premiums by the end of the grace period.

Level Benefits — The face amount of your insurance policy remains the same for the life of the coverage.

Level Premiums — Rates that stay the same each year the insurance policy is in force; there are no increases.

Life Insurance — Coverage that pays a specified amount upon your death or when the insurance policy matures.

Limited-Benefit Plans — Coverage designed as an alternative to Major Medical and managed care plans. They can help pay your everyday medical expenses but generally do not cover the less common catastrophic expenses.

Loan Value — The amount of cash value in your life insurance policy which you can borrow.

Long-Term Care Insurance — Coverage designed to help pay for medical care and other services if you become unable to care for yourself due to an extended illness or disability.

Lump Sum — Benefits of an insurance policy paid out in one single payment.

Managed Care Plan — Health insurance designed to help oversee the cost, accessibility and quality of health care. Common types are Health Maintenance Organizations and Preferred Provider Organizations.

Medicaid — A joint Federal and state insurance program that helps pay the health care costs for some low-income citizens and certain disabled individuals.

Medicare — Federal health insurance for people who are 65 and older, for some younger people with disabilities, and for people with end stage renal disease (kidney failure).

Medicare Supplement (Medigap) Insurance — Health coverage that helps pay some of the medical expenses not fully paid by Medicare. The benefits offered are regulated by the states and/or the Federal government.

MMA — The Medicare Prescription Drug, Improvement, and Modernization Act of 2003.

Mutual Insurance Company — A corporation that is owned by its policyowners rather than stockholders.

Out-Of-Pocket Expenses — The part you pay for your health care. This may include premiums, deductibles, coinsurance and/or co-payments.

Outpatient Care — Medical or surgical services that do not include an overnight stay (normally 24 hours) in a hospital.

Payout Phase — The time in which annuity payments are made to you.

Permanent Life Insurance — Coverage that lasts throughout your life. There are three main types: whole, universal and variable. All permanent life insurance policies accumulate cash value.

Pre-Existing Condition — A health problem you had before your insurance started; qualifications can vary by insurance policy.

Preferred Provider Organization (PPO) — A type of managed care plan that offers incentives for you to go to certain providers, but still offers some type of coverage if you go outside of the network. It is often less restrictive than a Health Maintenance Organization.

Premium — The amount you pay a company in exchange for insurance coverage. Usually premiums are paid monthly, quarterly or annually.

Preventive Care — Routine medical services to help keep you healthy or detect illness, such as annual exams, cancer screenings and flu shots.

Primary Care Doctor — A physician who gives you basic medical services and coordinates medical care and referrals.

Provider — The supplier of health care services, such as a physician, hospital or physical therapist.

Rider — A modification to an insurance policy that can provide additional coverage and/or features to the original insurance policy.

Stock Insurance Company — A corporation owned by stockholders, who share in the profits and/or losses.

Term Life Insurance — Coverage that provides a benefit amount if you die within a set period of time, such as 10, 15 or 20 years.

Underwriting — The process of identifying, classifying, analyzing and assuming risk according to insurability.

Whole Life Insurance — Coverage that offers protection throughout your lifetime. It builds cash value and has level premiums that do not increase as you get older.

Workers’ Compensation — Insurance that covers employees who get sick or injured on the job, which helps ensure they don’t have to take legal action against their employers.

Make sure to check out other important insurance topics, including:

• Coverage Types
• Tips for Choosing Coverage
• Industry Information