h perosnal

Insurance

protection against possible financial loss

Insurance company

a risk-sharing firm that assumes financial responsibility for losses that may result from an insured risk

Insurer

an insurance company

Policy

a written contract for insurance

Premium

the amount of money a policyholder is charged for an insurance policy

Insured

A person covered by an insurance policy

Policyholder

A person who owns the insurance policy

Risk

chance or uncertainty of loss; also used to mean "the insured"

Peril

the cause of a possible loss (Ex. fire, windstorms, explosions, robbery, accidents)

Hazard

a factor that increases the likelihood of loss through some peril (Ex. faulty wiring)

Pure risk

A risk in which there is only a chance of loss; also called insurable risk.

Speculative risk

a risk in which there is a chance of either loss or gain

Self-insurance

the process of establishing a monetary fund to cover the cost of a loss

Deductible

the set amount a policyholder must pay per loss on an insurance policy before the insurance company starts to pay

Risk shifting

Transferring risk by buying insurance to cover potential losses (most common method of dealing with risk)

Risk avoidance

avoiding/stopping an act that would create a risk

Risk reduction

finding ways to lower your chance of incurring a loss such as wearing a seatbelt or wearing a helmet when riding a bike

Risk assumption

the process of accepting the consequences of risk

Liability

legal responsibility for the financial cost of another person's losses or injuries

Negligence

failure to use ordinary or reasonable care in a situation

Strict liability

The legal responsibility for damage or injury even if you are not negligent; held responsible for intentional and unintentional actions.

Vicarious liability

Legal responsibility placed on one person for the acts of another. (Ex. Parents can be responsible if their child causes financial or physical harm to others; if an employee causes injuries/damages, the employer can be held responsible.

Homeowner's insurance

coverage that provides protection for your residence and its associated financial risks

Personal property floater

additional property insurance that covers the damage or loss of a specific item of high value (ex. jewelry, silver, etc.)

Household inventory

a list or other documentation of personal belongings, with purchase dates and cost information

Umbrella policy

supplementary personal liability coverage; also called a personal catastrophe policy

Medical payment coverage (homeowners)

Home insurance that pays the cost of minor accidental injuries on one's property.

Endorsement

An addition of coverage to a standard insurance policy (Ex: earthquake insurance can be added as an endorsement so can flood insurance)

Coinsurance clause

a policy provision that requires a homeowner to pay for part of the losses if the property is not insured for the specified percentage of the replacement value (few companies use this...most require full coverage)

Replacement value

a claim settlement method in which the insured receives the full cost of repairing or replacing a damaged or lost item

Actual cash value (ACV)

a claim settlement method in which the insured receives payment based on the current replacement cost of a damaged or lost item, less depreciation

Financial responsibility law

state legislation that requires drivers to prove their ability to cover the cost of damage or injury caused by an automobile accident

Bodily injury liability

Coverage for the risk of financial loss due to legal expenses, medical costs, lost wages, and other expenses associated with injuries caused by an automobile accident for which the insured was responsible.

Medical payments coverage (automobile)

automobile insurance that covers medical expenses for people injured in one's car or as a pedestrian

Uninsured motorist coverage

Automobile insurance coverage for the cost of injuries to a person and members of his or her family caused by a driver without insurance or by a hit-and-run driver.

Underinsured motorist coverage

pays from your coverage if you are in an accident with another motorist that has lower liability coverage than your coverage. Your underinsured coverage will pay the difference.

No-fault system (insurance)

an auto insurance program in which drivers involved in accidents collect medical expenses, lost wages, and related injury costs from their own insurance companies.

Property damage liability

automobile insurance coverage that protects a person against financial loss when that person damages the property of others

Collision

automobile insurance that pays for damage to the insured's car when it is involved in an accident

Subrogation

The process by which an insurer can, after it has paid a loss under the policy, recover the amount paid from any party (other than the insured) who caused the loss or is otherwise legally liable for the loss.

Comprehensive physical damage coverage

Insurance coverage that protects you if your vehicle is damaged in a non-violent situation--fire, theft, vandalism, hail, floods, tornadoes, earthquakes, etc.

Wage loss insurance

Reimburse you for any salary or income lost due to injury in an automobile accident

towing and emergency road service coverage

pays for mechanical assistance in the event that your vehicle breaks down

Rating territory

the place of residence used to determine a person's automobile insurance premium

Driver classification

a category based on the driver's age, sex, marital status, driving record, and driving habits; used to determine automobile insurance rates

Assigned risk pool

consists of people who are unable to obtain automobile insurance due to poor driving or accident records and must obtain coverage at high rates through a state program that requires insurance companies to accept some of them.

Coordination of benefits (COB)

a method of integrating the benefits payable under more than one health insurance plan

COBRA (Consolidated Omnibus Budget Reconciliation Act)

requires employers to offer employees/dependents who would otherwise lose group health insurance the option to continue with their group coverage for a set period of time

hospital expense insurance

pays part or all of hospital bills for room, board, and other charges

surgical expense insurance

pays part or all of the surgeon's fees for an operation

physician expense insurance

provides benefits for doctors' fees for nonsurgical care, x-rays, and lab tests

basic health insurance coverage

combination of hospital expense insurance, surgical expense insurance, and physician expense insurance

Major Medical Expense Insurance

pays most of the costs exceeding those covered by the hospital, surgical, and physician expense policies

coinsurance

a provision under which both the insured and the insurer share the covered losses

stop-loss

A provision under which an insured pays a certain amount, after which the insurance company pays 100 percent of the remaining covered expenses.

comprehensive major medical insurance

a type of major medical insurance that has a very low deductible and is offered without a separate basic plan

hospital indemnity policy

pays stipulated daily, weekly, or monthly cash benefits during hospital confinement

Dental Expense Insurance

provides reimbursement for the expenses of dental services and supplies and encourages preventive dental care

Vision Care Insurance

insurance that covers eye examinations, prescription lenses, frames, and contact lenses

Long-term care insurance (LTC)

pays for the cost of day-in, day-out care for long-term illness or disability

Copayment (copay)

provision in an insurance policy that requires the policyholder or patient to pay a specified dollar amount to a health care provider for each visit or medical service received

Blue Cross

an independent membership corporation that provides protection against the cost of hospital care

Blue Shield

an independent membership corporation that provides protection against the cost of surgical and medical care

Managed care

prepaid health plans that provide comprehensive health care to members

Health Maintenance Organization (HMO)

a health insurance plan that provides a wide range of health care services for a fixed, prepaid monthly premium

Preferred Provider Organization (PPO)

a group of doctors and hospitals that agree to provide health care at rates approved by the insurer

Exclusive Provider Organization (EPO)

a network that renders medical care from affiliated health care providers.

Point of Service (POS)

a network of selected contracted, participating providers; also called an HMO-PPO hybrid or open-ended HMO.

Health Savings Account (HSA)

a tax-free savings account—funded by employees, employer, or both—to spend on routine medical costs. Usually combined with a high-deductible policy to pay for catastrophic care

Flexible Spending Account (FSA)

Allows employees to use pretax dollars to pay for out-of-pocket health and dependent-care expenses.

Health Reimbursement Account (HRA)

Employer-funded plan that reimburses employees only for eligible and substantiated health-care expenses.

Medicare

A federal program of health insurance for persons 65 years of age and older

Medicare Part A (aka Hospital Insurance)

helps pay for inpatient hospital care, inpatient care in a skilled nursing facility, home health care, and hospice care.

Medicare Part B (aka Medical Insurance)

helps pay for doctors' services and a variety of other medical services and supplies not covered by hospital insurance.

Medigap Insurance (MedSup)

Supplements Medicare by filling the gap between Medicare payments and medical costs not covered by Medicare.

Medicaid

Federal program that provides medical benefits for low-income persons.

Disability Income Insurance

provides payments to replace income when an insured person is unable to work

Workers Compensation

A form of insurance paid by the employer providing cash benefits to workers injured or disabled in the course of employment.

Life Insurance

insurance paid to named beneficiaries when the insured person dies

Stock Life Insurance Companies

*Owned by the shareholders

*About 71% are of this type

*Sell non-participating (non-par) policies

*If you want to pay the same premium each year choose a non-participating policy with guaranteed premiums

Mutual Life Insurance Companies

- owned by the policyholders

- 29% of policies are from this type of company

- sell participating (par) policies; premiums are higher than non-participating policies

Term Life Insurance

Insurance that provides financial protection from losses resulting from a death during a definite period, or term; sometimes called temporary life insurance.

Whole Life Insurance

Insurance that is kept in force for a person's entire life and pays a benefit upon the person's death, whenever that may be; also known as straight life, cash-value life, or ordinary life.

Cash Value (or cash surrender value)

the amount received after giving up a life insurance policy.

Universal Life Insurance

a whole life policy that combines term insurance and investment elements

Group Life Insurance

life insurance that provides a master policy for a group; each eligible group member receives a certificate of insurance; does not require medical examinations.

Endowment Life Insurance

Provides coverage from the beginning of the contract to maturity and guarantees payment of a specified sum to the insured even if he/she is still living.

Credit Life Insurance

A special type of coverage written to pay off the balance of a loan in the event of the death of the debtor.

Industrial Life Insurance

a type of insurance in which the policies are sold in small amounts and an agent of the company collects the premiums at the insured's home; least popular form.

grace period of life insurance

allows 28 to 31 days to elapse during which time you may pay the premium without penalty.

nonforfeiture clause

a provision that allows the insured not to forfeit all accrued benefits

Incontestability Clause

a provision stating that the insurer cannot dispute the validity of a policy after a specified period

Suicide clause in life insurance

The insurance pays for suicide, but only if the policy has been in force for more than 2 years

beneficiary

the person designated to receive money from a life insurance policy

policy loan provision

allows the policyholder to borrow the cash value of the policy