Common Insurance Terms
Below is a list of common insurance terms with their commonly accepted definitions:
Additional
Insured: A person or organization that is
included as an insured party to the policy —generally an organization(s) that
has a monetary interest in property or equipment. This might include a landlord, convention
center, or leaseholder for copiers and other office equipment. Coverage only
applies to liability for operations performed by or for the named insured.
Additional Named
Insured: A person or organization that is
added to the policy. The additional named insured has many of the same rights
and responsibilities as the named insured.
Additional Premium: Monies
due to the insurer as the result of a mid-term endorsement or change in exposure.
Aggregate Limit: The maximum
amount an insurer will pay for all covered losses for the policy period.
Consolidated Omnibus Budget
Reconciliation Act (COBRA): Federal law that continues health care benefits for
employees whose employment has been terminated. Employers are required to
notify employees of these benefit continuation options, and, failure to do so
can result in penalties and fines for the employer.
Declarations Page: Typically
the front page(s) of an insurance policy that declare what coverage is being
provided by the insurance policy.
Specific details include the policy number, insurance carrier, named
insured; effective date: coverage type; policy limits; deductible amount and
premium due.
Deductible: A portion of a
covered loss that is not paid by the insurer, for which the insured is obligated to pay by the insurance policy. Generally the
higher the deductible, the lower the insurance premium.
Durable Medical Equipment
(DME): Items of medical equipment
owned or rented which are placed in the home of an insured to facilitate
treatment and/or rehabilitation.
Effective Date: The date on which a policy's coverage
of a risk goes into effect.
Endorsement: A document
issued by the insurer and attached to an insurance policy to modify coverage
afforded under a specific insurance policy. An endorsement can be added at
policy inception or later during the term of the policy. Endorsements take
precedence over any conflicting terms in the policy form.
Employee Retirement Income
Security Act (ERISA): Also called the Pension Reform Act, this act regulates
the majority of private pension and welfare group benefit plans in the U.S.. It sets forth requirements governing, among many
areas, participation, crediting of service, vesting, communication and
disclosure, funding, and fiduciary conduct.
Exclusions: Conditions or situations not
considered covered under an insurance contract.
Exposure: A condition or a
situation that creates the possibility of a loss.
Insurance: A contractual
agreement that transfers the risk of a loss, from one entity to another, in
exchange for payment.
Insured: The person(s) or
entity that is protected under an insurance contract.
Insurer: The company selling
insurance to an insured for a covered loss under the insurance policy contract.
Limit of Liability: The
maximum amount that an insurer agrees to pay in the event of a loss.
Managed Care: Systems and
techniques used to control the use of health care services. This generally
includes a review of medical necessity, incentives to use certain providers,
and case management.
Medicaid (Title XIX):
Government entitlement program for the poor who are blind, aged, disabled or
members of families with dependent children (AFDC). Subject to broad Federal guidelines, states
determine the benefits covered, program eligibility, rates of payment for
providers, and methods of administering the program.
Medicare (Title XVIII): A
federal program for the elderly and disabled, regardless of financial status.
It is not necessary, as with Medicaid, for Medicare recipients to be poor.
Named Insured: The person or organization specifically named on the
insurance policy declaration page.
Per Occurrence Limit: The
maximum amount an insurer will pay for a loss arising out of one occurrence.
Depending on policy wording, losses may include multiple losses suffered by the
insured.
Policy: A contract of insurance, describing the term,
coverage, premiums and deductibles. The policy includes all forms, coverage
parts and endorsements. In some cases
the policy includes the application and warranties made by the insured
Premium: The amount charged
by an insurer to provide a level of insurance coverage described under a
specific insurance policy.
Risk: The chance or
uncertainty of a loss.
Risk Management: The
practice of appraising and controlling risk.
Subrogation: Procedure where insurance company recovers
from a third party when the cause of loss was the fault of another person
and/or organization.
Third Party Administrator
(TPA): An independent organization that provides administrative services
including claims processing and underwriting for other entities, such as
insurance companies.
Underwriting: The Process of selecting, classifying,
analyzing and assuming risk according to insurability.
For a more comprehensive list of insurance terms and definitions, we would encourage you to visit the IRMI's online index of insurance terms.
