Each of us at William J. King & Associates knows how difficult it can be to understand the terminology of life and health insurance policies. We’ve compiled a comprehensive list of what we consider to be some of the most important terms to help you better understand the extensive world of insurance. If you need further explanation of any terms, please contact us. We are more than happy to explain the terms used in your health and life insurance policies.


a supplement to many life insurance policies that provides an additional cash benefit to the insured or his/her beneficiaries if an accident causes either the death of the insured or causes the insured to lose any two limbs or the sight in both eyes.
a mathematician in the insurance field. Responsible for calculating premiums, developing plans, and defining underwriting risk.
a licensed individual who represents several insurance companies and sells their products.
a dollar amount set by the plan that puts a cap on the amount of money the insured must pay out of his or her own pocket for covered expenses over the course of a calendar year.


the person or party the owner a life insurance policy names to receive the policy benefit in the event of the insured’s death.
reimbursement for covered medical expenses as specified by the plan.
prescription drug that is marketed with a specific brand name by the company that manufactures it. May cost insured individuals a higher co-pay than generic drugs on some health plans. (see “generic.”)
a licensed insurance professional who obtains multiple quotes and plan information in the interest of his client (e.g., employee benefits consultant/broker or individual health insurance broker)


an amount that the insured person must pay before insurance payments for covered services begin.
insurance company or HMO insuring the health plan.
the plan agreement. A printed description of the benefits and coverage provisions intended to explain the contractual arrangement between the carrier and the insured group or individual. May also be referred to as a policy booklet.
a document that describes the type and length of coverage provided by a group insurance policy that is given to each insured by the group policyholder.
not all plans cover chiropractors – practitioners who manipulate the spine and other structures within the body to relieve pain and tension resulting from posture, stress, or strain. Some plans offer chiropractic care as an optional benefit.
a formal request made by an insured person for the benefits provided by a policy.
federal legislation that requires group health plans to provide health plan members the opportunity to purchase continued coverage in the event their insurance is terminated. Applies only to employer groups with 20 or more employees. Learn more about COBRA at the U.S. Department of Labor’s website. (Please note, this may take a few minutes to appear)
the percentage of covered expenses an insured individual shares with the carrier (e.g., for an 80/20 plan, the health plan member’s co-insurance is 20%). If applicable, co-insurance applies after the insured pays the deductible and is only required up to the plan’s stop loss amount (see “stop loss”).
a health insurance policy that covers both major medical coverages (e.g., hospitalization and surgeries) and basic medical expense coverages.
the amount an insured individual must pay toward the cost of a particular benefit. For example, a plan might require a $10 co-pay for each doctor’s office visit.
any pre-existing condition waiting period met under an employer’s prior (qualifying) coverage will be credited to the current plan, if any interruption of coverage between the new and prior plans meets state guidelines.


the dollar amount an insured individual must pay for covered expenses during a calendar year before the plan begins paying co-insurance benefits.
some health plans offer dental care as an optional benefit or rider that you or your employees may decide to add at an additional cost.
usually the spouse and unmarried children (adopted, step, or natural) of an employee.
domestic partners are commonly defined as “two adults who share an emotional, physical, and financial relationship similar to that of a married couple but who either choose not to marry or cannot legally marry. They share a mutual obligation of support for the basic necessities of life.” Additionally, some carriers may require that domestic partners own property together to qualify.
dual choice allows the employer to offer his employees not one, but two health plans. Instead of picking the least expensive plan for all employees, dual choice lets employees choose the type of plan that best meets their needs or budgets. Usually, this is a choice of an HMO and PPO, or HMO and POS. The employer will typically pay a portion of the premium in these plans, and the employee will pay the balance. Here are a few approaches:

  • An employer may pay for the lower cost plan and employees may buy up to the more expensive plan.
  • An employer may pay a set amount per month for every employee.
  • An employer may charge all employees the same amount and pay the balance, regardless of the plan each employee selects.


the date requested by an employer for insurance coverage to begin.
most plans cover emergency care in a hospital emergency room if it is an extremely urgent medical emergency, even if the hospital you are taken to is not in the plan’s network. It is possible, however, that after your condition has been stabilized, you would be transferred to a participating plan hospital.
a visit to a hospital for treatment of an accidental injury or for emergency medical care. To qualify as an emergency, the symptoms must be sudden, severe, and require immediate medical attention. Some states judge emergencies by the “prudent layperson” law, meaning that the health plan must cover a trip to the emergency room “if a prudent layperson, acting reasonably, would have believed that an emergency medical condition existed.” Keep in mind that some plans won’t cover a trip to the emergency room if the symptoms appeared more than 24 hours earlier.
the amount of premium the employer requires the employee to pay toward his or her health insurance.
the time during which a new group member may first enroll for group insurance coverage.
expenses that are not covered under an insurance plan. These are listed in the certificate booklet/policy.
a carrier’s written response to a claim for benefits. It is sometimes accompanied by a benefits check.


fee structure used by insurers under which the insurance company places caps or limits on the dollar amounts that it will reimburse providers’ covered medical procedures and services, both in and out-of-network if applicable. Also known as a limited fee schedule.
also called an indemnity plan. A health insurance plan that allows the insured to use any medical provider that he or she chooses. As such, there are no networks to utilize.
see “short-term medical coverage.”
formulary drugs generally have a lower co-pay. A formulary drug is one that has been thoroughly reviewed by a team of expert pharmacists and physicians; these drugs have been identified as safe, effective, and beneficial to members for treating medical conditions. When deciding between drugs that are equally safe and effective, the formulary team also considers the relative costs of medications. These savings are then passed on to you through lower premiums.
a group insurance plan for which an insurance company bears the responsibility of making all claim payments.
a group insurance plan under which the employer takes complete responsibility for all claim payments and related expenses rather than purchasing coverage from an insurance company.


the chemical equivalent to a “brand-name drug.” These drugs cost less with the savings passed on to health plan members in the form of a lower co-pay.
an insurance contract made with an employer or other entity that covers individuals in the group.
a life insurance plan that provides employees with additional coverage at economical group rates.
a health insurance policy that the insurer is required to renew – as long as premiums are paid – at least until the insured attains the age limit specified in the policy, or the policy is cancelled by the insured. The insurer may increase the premium rate for any class of guaranteed renewable policies.


a doctor, hospital, laboratory, nurse, or anyone else who delivers medical or health-related care.
a type of insurance that provides protection against the risk of financial loss resulting from the insured person’s sickness, accidental injury, or disability.
under this federal law, group health plans cannot deny coverage based solely on an individual’s health status. This law also gives employees who change or lose their jobs better access to health coverage, guarantees renewability and availability to certain employees and limits exclusions for pre-existing conditions. For example, group health plans must credit any employee the amount of time that they spent on any health plan prior to the new plan, which is known as “prior credible coverage.” A pre-existing condition will be covered without a waiting period when an employee joins a new group plan if the employee has been insured for the previous 12 months with credible health insurance, with no lapse in coverage of 63 days or more. This means that if an employee has been insured for 12 months or more, the employee will be able to go from one job to another and his or her pre-existing coverage will remain intact – without additional waiting periods. However, if an employee has a pre-existing condition and was not covered previously for 12 months before joining a new plan, the longest the employee will have to wait for their pre-existing coverage to be covered is 12 months.
A health care financing and delivery system that provides comprehensive health care for subscribing members in a particular geographic area using managed care techniques. Most HMOs require that you only utilize physicians within their network, often going so far as to require you to choose a primary care physician who directs most courses of your treatment.
skilled medical care and other health care services that you receive in your home for the treatment of an illness or injury. Some insurance plans don’t provide this kind of coverage, or provide it only for a limited amount of time.


card given to insured individuals that advises medical providers that a patient is covered by a particular health insurance plan.
traditional insurance plans (not HMOs or PPOs) that permit insured individuals to choose their doctors and hospitals. Insured individuals do not have to choose doctors or hospitals from a specific list of providers. Also called “fee-for-service” plans.
medical procedures that require the patient to spend at least one night at the hospital. Most plans limit the amount of time an inpatient may stay at the hospital following surgery.
describes a provider or health care facility that is part of a health plan’s network. When applicable, insured individuals usually pay less when using an in-network provider.


this option is offered by some plans to provide a set amount of life insurance for the insured’s spouse, domestic partner, or children.
the maximum amount a health plan will pay in benefits to an insured individual.
a restriction on the amount of benefits paid out for a particular covered expense.
insurance that pays employees a percentage of monthly earnings in the event of disability.


the coordination of health care services in the attempt to produce high quality health care for the lowest possible cost. Examples are the use of primary care physicians as gatekeepers in HMO plans and pre-certification of care.
many individual plans and some small group plans for groups of fewer than 15 employees don’t cover the costs associated with pregnancy and birth. However, federal law requires that group plans cover maternity if a group has 15 employees or more.
the most money you will be required to pay a year for deductibles and coinsurance. It is a stated dollar amount set by the insurance company, in addition to regular premiums.
the Federal health insurance program for Americans age 65 and older and for certain disabled Americans. If you are eligible for Social Security or Railroad Retirement benefits and are age 65, you and your spouse automatically qualify for Medicare. Medicare has two parts: hospital insurance, known as Part A, and supplementary medical insurance, known as Part B, which provides payments for doctors and related services and supplies ordered by the doctor. If you are eligible for Medicare, Part A is free, but you must pay a premium for Part B.

Medicare will pay for many of your health care expenses, but not all of them. In particular, Medicare does not cover most nursing home care, long-term care services in the home, or prescription drugs. There are also special rules on when Medicare pays your bills that apply if you have employer group health insurance coverage through your own job or the employment of a spouse.

Medicare usually operates on a fee-for-service basis. HMOs and similar forms of prepaid health care plans are now available to Medicare enrollees in some locations.

provides health care coverage for some low-income people who cannot afford it. This includes people who are eligible because they are aged, blind, or disabled or certain people in families with dependent children. Medicaid is a Federal program that is operated by the States, and each State decides who is eligible and the scope of health services offered.
outpatient mental health benefits are generally divided into two categories, severe and non-severe health care. State laws vary widely on the degree to which insurance companies must cover mental illness. Most plans do provide some coverage, though there may be limitations such as the severity or nature of the illness, and the duration of care.
an arrangement created to obtain health and other benefits for participating employer groups. Small employers can pool their contributions to receive the advantages of large group underwriting.


a group of doctors, hospitals, and other providers contracted to provide services to insured individuals for less than their usual fees. Provider networks can cover large geographic markets and/or a wide range of health care services. If a health plan uses a preferred provider network, insured individuals typically pay less for using a network provider.
a policy that guarantees you can receive insurance as long as you pay the premium. It is also called a guaranteed renewable policy.
non-formulary drugs often require a higher co-payment. Non-formulary drugs are those that have not yet been reviewed or have been denied formulary status, typically because they offer no extra benefit over the drugs already on a plan’s formulary list.
non-severe mental health problems are generally psychologically based, such as phobias, manias, and mild-to-moderate depression. In most cases, these problems can be treated without a stay at a treatment facility.


any time you visit a doctor at his or her office for medical care.
describes a provider or health care facility that is not part of a health plan’s network. If the plan uses a network, insured individuals usually pay more when using an out-of-network provider.
the total of an insured individual’s co-insurance payments and co-payments.
an individual (patient) who receives health care services (such as surgery) on an outpatient basis, meaning they do not stay overnight in a hospital or inpatient facility. Many insurance companies have identified a list of tests and procedures (including surgery) that will not be covered (paid for) unless they are performed on an outpatient basis. The term outpatient is also used synonymously with ambulatory to describe health care facilities where procedures are performed.


not all plans cover physical therapy, which is a program of special exercises that can help an injury heal without restricting movement or limiting function.
overseeing the details and routine activities of installing and running a health plan, such as answering questions, enrolling new individuals for coverage, billing and collecting premiums, etc.
an HMO plan that also incorporates an indemnity plan option allowing members to obtain medical care from providers outside of the HMO network at a reduced benefit and at greater out-of-pocket expense.
written document that contains the terms of the contractual agreement between an insurance company and the owner of policy.
the period of time that the policy is to remain in force.
the person or business that owns an insurance policy.
pre-admission review and approval of appropriateness and medical necessity of hospitalization or other medical treatment.
an illness, injury or condition for which the insured individual received medical advice, treatment, services, or supplies; had diagnostic tests done or recommended; had medicines prescribed or recommended; or had symptoms of typically within 12 months (time periods may vary depending on state laws) prior to the effective date of insurance coverage.
an organization where providers are under contract to an insurance company or health plan to provide care at a discounted or negotiated rate. Typically, you can see any doctor in the PPO network without requiring special approval, and you usually do not need to choose a primary care physician. Most PPOs will also allow you to seek care outside of the PPO network; however, the benefits are usually reduced and the insured has a greater out-of-pocket expense.
payments to an insurance company providing coverage.
a type of specified expense coverage that provides benefits for the purchase of drugs and medicines prescribed by a physician and not available over-the-counter. Often a plan will provide a prescription drug card that allows the insured to obtain medications by simply paying a co-pay at a participating pharmacy.
usually your first contact for health care. This is often a family physician or internist, but some women use their gynecologist. A primary care doctor monitors your health and diagnoses and treats minor health problems, and refers you to specialists if another level of care is needed.
the length of time that a new group member must wait before becoming eligible to enroll in a group insurance plan.
any person or entity providing health care services, including hospitals, physicians, home health agencies and nursing homes. Usually licensed by the state.


within many managed care plans, transfer to specialty physician or specialty care by a primary care physician.
the specified date of when the health insurance coverage will renew for another period, typically one year.
a modification to a Certificate of Insurance policy regarding clauses and provisions of a policy. A rider usually adds or excludes coverage.
uncertainty of financial loss.
a yearly medical “checkup” during which your doctor will perform simple medical care such as checking your height, weight, vision, and blood pressure, as well as screening for problems like colon cancer, cervical cancer, prostate cancer, and high cholesterol.
some plans divide all drugs into two categories: formulary or non-formulary. If you have drug coverage, your prescription (Rx) co-payment may be different for formulary and non-formulary drugs.


as defined by the American Psychiatric Association in its Diagnostic and Statistical Manual (DSM), severe mental illness includes the following disorders: schizophrenia, schizoaffective disorder, bipolar disorder (manic-depressive illness), major depressive disorders, panic disorder, obsessive-compulsive disorder, pervasive developmental disorder or autism, anorexia nervosa, and bulimia nervosa. Such problems generally require at least occasional inpatient care.
this type of coverage pays a percentage of your salary if you become temporarily disabled, meaning that you are not able to work for a short period of time due to sickness or injury (excluding on-the-job injuries, which are covered by workers’ compensation). The per-week amount is usually 50, 60, or 66 2/3 percent of your weekly salary, and lasts for a period of time specified by the plan.
similar to flex-term medical coverage. Short-term medical coverage is a major medical plan designed to protect you in the event of an illness or injury during “gaps” in your traditional medical coverage – when you are between jobs or plans, a recent graduate, on strike, etc. Short-term plans are not meant to cover routine exams and preventive care; if you are looking for a choice of plan types and the ability to renew your plan beyond one year, a traditional medical plan, while typically more expensive, might be a better fit for your health insurance needs.
a level of care for patients who need intensive, 24-hour nursing supervision. This can take place in the home or in skilled nursing facilities, which offer services such as rehabilitation and specialized nutrition.
groups with one to 99 employees. The definition of small employer group may vary between states.
state laws requiring that commercial health insurance plans include specific benefits.
the dollar amount of claims filed for eligible expenses at which the insurance begins to pay at 100% per insured individual. Stop-loss is reached when an insured individual has paid the deductible and reached the out-of-pocket maximum amount of co-insurance.
this kind of coverage provides extra financial security for you and your family in the event of accidental death or dismemberment.


a type of life insurance that provides a death benefit if the insured dies during a specific period.
an organization responsible for marketing and administering small group and individual health plans. This includes collecting premiums, paying claims, providing administrative services, and promoting products.


entity that assumes responsibility for the risk, issues insurance policies, and receives premiums.
urgent care is appropriate when a medical urgency arises that necessitates immediate care, but has not reached the level of extreme emergency. Most managed care plans require you to seek urgent care at a participating urgent care facility or hospital.


a type of specified expense coverage that provides benefits for expenses the insured incurs in obtaining eye examinations and corrective lenses.


a period of time when you are not covered by insurance for a particular problem.
a section on the enrollment form that states an employee was offered insurance coverage but opted to waive this coverage.
the goals of well baby care are 1) to immunize; 2) to provide parents with reassurance and counseling on safety, nutrition, and behavioral problems; and 3) to identify and treat physical and developmental problems.
insurance coverage for work-related illness and injury. All states require employers to carry this insurance.

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