These words are described in insurance policies 


Accelerated  Benefits Rider A life insurance rider that allows for the early payment of some portion  of the policy's face amount should the insured suffer from a terminal illness or injury

Access to Policy Benefits (Benefit Triggers) There are two ways to access long term care insurance policy benefits:

  1  Activities of Daily Living—the insured requires personal assistance with 2 or 3 activities of daily living. Each policy will define 5 or 6 ADLs.  Personal assistance may be defined in different ways in each policy but generally will refer to either hands-on assistance, stand-by assistance (for the safety of the insured) or directional assistance (cueing) to help the insured by reminding them. 

  Cognitive Impairment deterioration or loss in intellectual capacity measured by clinical evidence and standardized tests.

Accidental Death Benefit Rider  A life insurance policy rider providing for payment of an additional cash benefit related  to the face amount of the base policy when death occurs by accidental means.

Accidental Death Insurance  Insurance providing payment  if the insured's death results from an accident.

Activities of Daily Living (ADL)  Daily activities used to measure functional disability. In long term care insurance policies the common ADLs used are bathing, dressing toileting, continence, transferring or mobility, and eating or feeding. Bathing is usually the first functional loss. The ease of access to policy benefits is determined by how the above activities of daily living are defined and what level of personal assistance is required in order for one to be deemed to fail an activity of daily living

Adult Day Care A community-based group program that provides health, social, and related support services in a facility licensed or certified by the state as an Adult Day Care Center for impaired adults. It does not mean 24-hour care.

Agent An authorized representative of an insurance  company who sells and services insurance contracts.

Alternate Care Facility A hospice or facility engaged primarily in providing ongoing care and related services to inpatients in one location and meets all of the following criteria: 

  1. Provides care and services 24 hours a day to sufficiently support needs resulting from inability to perform Activities of Daily Living or Cognitive Impairment. 

  2. Has a trained and ready to respond employee on duty at all times to provide that care.

  3. Provides 3 meals a day and accommodates special dietary needs.

  4. Is licensed or accredited by the appropriate agency to provide such care.

  5. Has formal arrangements for the services of a physician or nurse to furnish medical care in case of emergency. 

  6. Has appropriate methods and procedures for handling and administering drugs and biological tests.

Alternate Plan of Care If the insured would otherwise require confinement in a long term care facility, the insurance company, the insured and the insured’s physician may agree that an alternate plan of treatment or alternate site of care such as an assisted living facility would be appropriate; and the insurance policy would pay for this care. Some policies will also pay for durable medical equipment if, as an alternative to nursing home care, a person would then be able to receive care in his or her own home. Modifications to the insured’s home may also be included under this policy provision. It should be noted that the definition of the alternate plan of care may vary from one insurance policy to the next.

Annually Renewable Term  A form of renewable term insurance that provides coverage for one year and allows the policy owner to renew his or her coverage each year, without evidence of  insurability. Also called yearly renewable term.

Assignment  Assignment The transfer of the ownership rights of a Life Insurance  policy from one person to another.

Attained Age Your current age. Your attained age is one of the factors life insurance companies use to determine your  premiums. The older you are, the greater chance you'll die while  you are covered - so the higher your premium.

Backdating A procedure for making the effective date of a policy earlier than  the application date. Backdating is often used to make the age of  the consumer at issue lower than it actually was in order to get lower premium. State laws often limit to six months the time to  which policies can be backdated.

Beneficiary  The person designated to receive the death benefit when the insured  dies.

Benefit Increase Option (BIO), Automatic Inflation Benefit (AIB), Inflation Option Inflation provisions included in a long term care insurance policy will usually take one of three forms:

  1 Consumer Price Index Option-- periodic offer (usually every one, two, or three years) to purchase a
dditional insurance without regard to any changes in one’s health. An additional premium is charged based on the amount of the increase and the age of the insured at the time the additional insurance is purchased. The additional premium is level and charged for the remaining life of the policy. This offer is generally not made after any claim has been made against the policy.

5% Simple Inflation Option-- the daily benefit will automatically increase on each policy anniversary date by 5% of the original daily benefit amount selected. An additional premium is charged for this option and the premium is scheduled to remain level for the life of the policy. Some policies will limit the amount of increase. permitted under this option by either a defined number of years (i.e. 20 years), by age (i.e. no increases permitted after age 85), or by a defined cap in dollars (i.e. an initial benefit of $100 per day will increase until a benefit of $200 per day is reached).

  3  5% Compound Inflation Option—the daily benefit will automatically increase on each policy anniversary date by 5% of the prior year’s daily benefit amount selected. An additional premium is charged for this option and the premium is scheduled to remain level for the life of the policy. Some policies will limit the amount of increase permitted under this option by either a defined number of years (i.e. 20 years), by age (i.e. no increases permitted after age 85), or by a defined cap in dollars (i.e. an initial benefit of $100 per day will increase until a benefit of $200 per day is reached).

Benefit Period The time during which the policy will pay benefits. There are three different approaches to defining the benefit period:

  1 Time Frame—the benefit period is described in years (i.e. 2 years, 3 years, 4 years, 5 years, 6 years, lifetime). Once a period of care begins, the policy will cover all of the eligible care received for as long as the policy is in force (until the benefit period limit is reached). Generally this type of policy will have a restoration of benefit feature included.

  2 Pool of Days—the benefit period may be stated in years but it is also stated in days (i.e. 3 years would also be shown as 1095 days (3 years X 365 days). When the benefit period begins, only the days that you actually receive care are counted and deducted from the policy. You may have a policy that has a stated benefit of $120 per day, but if the actual costs are $60, the policy would reimburse $60 and one day would be charged against the policy.

  3 Pool of Funds—the pool of funds is established by multiplying the number of years (or days) in the policy benefit period by 365 days times the daily benefit selected. For example, a 5 year policy with a $100 per day benefit would provide a pool of funds of $182,500 (5 X 365 X $100 per day). The policy lasts as long as money remains in the pool of funds. Only those dollars that are actually paid out by the policy are charged against the pool of funds.

Binder  A temporary insurance policy that expires at the end of a specific  time period or when the permanent policy is written. A binder is  given to an applicant for insurance during the time the complete policy paperwork is being completed.

Cash Benefits  Money that is paid to the insured upon settlement  of a covered claim. Often found with Hospital Income Programs, "cash  benefits" are paid directly to the insured rather than the doctor or the hospital directly.

Cash Value  The equity amount or "savings" accumulation  in a whole life policy.

Claim Notification to an insurance company that payment of an amount is due under the terms of the policy.

Conditional  Receipt  Given to policy owners when they pay  a premium at time of application. Such receipts bind the insurance  company if the risk is approved as applied for, subject to any other  conditions stated on the receipt.

Cognitive Impairment The deterioration or loss of intellectual capacity such as dementia, Alzheimer’s Disease, and Parkinson’s Disease. The eligibility for benefits under a long term care insurance policy is determined by clinical evidence or standardized tests, which judge the areas of memory, orientation and reasoning. It is important to have a separate trigger or means of access to a long term care policy for cognitive impairment. Some long term care insurance policies permit access to benefits only if the insured requires directional assistance or cueing in two or more ADLs.

Contestable  Clause  A provision in an insurance policy setting forth the conditions under which or the period of time during  which the insurer may contest or void the policy. After that time  has lapsed, normally two years, the policy cannot be contested.  Example: Suicide.

Contingent Beneficiary  Person or persons named to receive  proceeds in case the original beneficiary is not alive. Also referred  to as secondary or tertiary beneficiary.

Coverage  Another word for insurance. Insurance companies  use the term coverage to mean either the dollar amounts of insurance  purchased ($200,000 of liability coverage), or the type of loss  covered (coverage for theft).

Conversion Privilege  Allows the policy owner, before  an original insurance policy expires, to elect to have a new policy  issued that will continue the insurance coverage. Conversion may be effected at attained age (premiums based on the age attained  at time of conversion) or at original age (premiums based on age at  time of original issue).

Convertible  Term   A policy that may be changed to another form by contractual provision and without evidence of insurability.  Most term policies are convertible into permanent insurance.

Cross-Purchase Plan  An agreement that provides that upon a business owner's death, surviving owners will purchase the  deceased's interest, often with funds from life insurance.

Death Benefit  The amount of money paid to the beneficiary  when the insured person dies.

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Decreasing Term Insurance  Term life insurance on which the face value slowly decreases in scheduled steps from the date the policy comes into force to the date the policy expires,  while the premium remains level. The intervals between decreases  are usually monthly or annually.

Double Indemnity  Payment of twice the basic benefit in the  event of loss resulting from specified causes or under specified circumstances.

Evidence of Insurability  Any statement or proof of a person's physical condition, occupation, etc., affecting acceptance  of the applicant for insurance.

Exclusions  Specified hazards listed in a policy for which benefits will not be paid.

Expiry  The termination of a term life insurance policy  at the end of its period of coverage.

Face Amount  The amount of insurance provided by the terms  of an insurance contract, usually found on the first page of the policy.  In a life insurance policy, the death benefit.

Final Expenses  Expenses incurred at the time of a person's  death. These include funeral costs, court expenses associated with  probating his or her will, current bills or debt, and taxes. Depending  on their circumstances, the survivors may also want to pay the outstanding balances of mortgage and loans.

First To Die Insurance  Insurance policy whose death benefit is paid to the surviving insured upon the death of  one of the insured's. There is no longer a benefit once the benefit is paid, however, the surviving insured usually has the option of  purchasing a policy of the same amount without providing evidence of insurability.

Fixed Benefit  A death benefit, the dollar amount of which  does not vary.

Free Look  Provision required in most states whereby policy owners have up to 20 days to examine their new policies at no obligation.

Funeral Expenses  Expenses incurred for a funeral  and burial. These can include casket, vault, grave plot, headstone and funeral director.

Grace Period  Period of time after the due date of a premium during which the policy remains in force without penalty.

Graded Premium Policy  A type of whole life policy designed  for people who want more life coverage than they can currently afford.  They pay a lower premium rate that increases gradually over the first three to five years and then remains constant over the life of the policy.

Guaranteed Term  A form of renewable term insurance that remains in force as long as the premiums are paid on time.  With guaranteed term insurance, the insurance company cannot terminate  the policy during the term.

Guaranteed Insurability (Guaranteed Issue) Arrangement, usually  provided by rider, whereby additional insurance may be purchased at various times without evidence of insurability.

Home Health Care (HHC) Care received in one’s home generally provided by family members, friends, licensed health care professionals (registered nurse, licensed practical nurse, physical therapist or occupational therapist) or certified health care professionals such as a nurse’s aide or home health aide, homemakers or providers of chore services. Most long term care insurance policies will generally only reimburse for services provided by licensed health care professionals or certified health care professionals provided through a state licensed home health care agency.

Incontestable  Clause  A clause in a policy providing that a policy has been in effect for a given length of time (two or three years), the insurer shall not be able to contest the statements  contained in the application. In life policies, if an insured lied as to the condition of his health at the time the policy was taken  out, that lie could not be used to contest payment under the policy if death occurred after the time limit stated in the incontestable clause.

Indemnity Benefit vs. Cost Incurred Benefit An indemnity benefit is paid to the insured regardless of the actual costs of care. The stated daily benefit amount is paid in full in some long term care insurance policies even if Medicare payments are being received for the same care. A cost incurred benefit reimburses for actual costs up to the stated daily benefit amount. Policies will generally provide for either reimbursement of 80% or 100% of costs incurred up to the daily benefit amount.

In Force  Insurance on which the premiums are being  paid or have been fully paid.

Instrumental Activities of Daily Living (IADLs) In addition to the Activities of Daily Living (ADLs), IADLs identify the full range of activities necessary for independent living in the community. IADLs include meal preparation, handling personal finances, shopping, traveling, doing housework, using the telephone and taking medications.

Insurability  All conditions pertaining to individuals that affect their health, susceptibility to injury and life expectancy;  an individual's risk profile.

Insurable interest  Requirement of insurance contracts that loss must be sustained by the applicant upon the death of another and it must be sufficient to warrant compensation.

Insurance  A formal social device for reducing risk by  transferring the risks of several individual entities to an insurer.  The insurer agrees, for a consideration, to pay for the loss in  the amount specified in the contract.

Insurance  Policy  The printed form which serves  as the contract between an insurer and an insured.

Insured  The party who is being insured. In life insurance, it is the person because of his or her death the insurance company  would pay out a death benefit to a designated beneficiary.

Insurer  Party that provides insurance coverage, typically  through a contract of insurance.

Irrevocable  Beneficiary  A beneficiary that cannot  be changed without that beneficiary's consent.

Increasing Term Insurance  Term life insurance in which  the death benefit increases periodically over the policy's term. Usually purchased as a cost of living rider to a whole life policy.

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Lapse  Termination of a policy upon the policy owner's failure to pay the  premium within the grace period.

Levels of Care:

1 Skilled Care—care provided by a Registered Nurse (RN), Licensed Practical Nurse (LPN), Licensed Vocational Nurse (LVN), Physical Therapist (PT) or Occupational Therapist (OT). When the assistance of these care providers is required every day the level of care is called skilled care.

  2 Intermediate Care—care provided by the above licensed professionals less than every day.

  3 Custodial Care—assistance with activities of daily living provided by a family member, friend, companion or certified professionals such as a nurses aide or home health aide. It may also include homemaker or chore services.

Level Term Insurance  Term coverage on which the face value and premiums remain unchanged from the date the policy comes into  force to the date the policy expires.

Life Expectancy  The average number of years remaining for  a person of a given age to live as shown on the mortality or annuity table used as a reference.

Life Insurance  An agreement that guarantees the payment of a stated amount of monetary benefits upon the death of the insured.

Limited Pay  Policy  A type of whole life insurance designed to let the policyholder pay higher premiums over a specific period such as 10 or 20 years and then not pay any premiums for  the rest of his or her life.

Medical  A document completed by a physician or another approved examiner and submitted to an insurer to supply medical evidence of insurability (or lack of insurability) or in relation  to a claim.

Medical Expenses  Reasonable charges for medical, surgical, x-ray, dental, ambulance, hospital, professional nursing, prosthetic devices, and funeral  expenses. (The insurance company defines what is reasonable.)

Medical Help System A communication system, located in your home, used to summon medical attention in case of a medical emergency.

Misrepresentation  Act of making, issuing, circulating or causing to be issued or circulated an estimate, an illustration, a circular  or a statement of any kind that does not represent the correct policy  terms, dividends or share of surplus or the name or title for any policy or class of policies that does not in fact reflect its true  nature.

Modified Premium Policy  (See Graded Premium Policy)

Mortality Charge  The charge for the element of pure insurance protection in a life insurance policy.

Mortality Cost  The first factor considered in life insurance premium rates. Insurers have an idea of the probability that any person will die at any particular age; this is the information  shown on a mortality table.

Mortality Rate  The number of deaths in a group  of people, usually expressed as deaths per thousand.

Mortality Table  A table showing the incidence of death  at specified ages.

NAIC Model Regulations The National Association of Insurance Commissioners issues and amends a body of model laws and regulations governing long term care insurance as a guide to state legislation and regulation of long term care insurance. Most states have adopted all or a portion of these standards.

Non medical  Insurance  A contract of life insurance underwritten on the basis of an insured's statement of his health  with no medical examination required.

Occupational Hazard  A condition in an occupation that increases the peril of accident, sickness, or death. It usually will mean  higher premiums.

Offer and  Acceptance  The offer may be made by the applicant signing the application, paying the first premium and, if necessary, submitting to physical examination. Policy issuance,  as applied for, constitutes acceptance by the company. Or the offer  may be made by the company when no premium payment is submitted with the application. Premium payment on the offered policy then constitutes acceptance by the applicant.

Original Age  The age you were when you bought the policy.

Other Insured  Rider  A term rider covering a family member other than the insured that is attached to the base policy covering the insured.

Ownership  All rights, benefits and privileges under  life insurance policies are controlled by their owners. Policy owners  may or may not be the insured. Ownership may be assigned or transferred by written request of current owner.

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Para-Med (Paramedical) Examination  The medical  examination of an applicant for Life Insurance.

Para-Med  (Paramedical)  A physician, nurse, or para-med appointed by the medical director of a life insurance company to  examine applicants.

Permanent  Life Insurance  A term loosely applied to life insurance policy forms other than Group and Term, usually  Cash Value Life Insurance, such as Whole Life Insurance.

Policy  The printed document issued to the policyholder  by the company stating the terms of the insurance contract.

Policy Holder  The person who owns a life insurance policy. This is usually the  insured person, but it may also be a relative of the insured, a  partnership or a corporation.

Pre-existing Conditions A policy provision that states no benefits will be paid for nursing home or home health care confinement that begins during the first 6 months of the insurance policy if the care required is the result of a condition for which care or treatment was received during the 6 months prior to the effective date or start date of the policy. Some companies will waive the preexisting condition clause if the condition was mentioned in the application. Some policies have no preexisting condition provisions.

Preferred  Risk  A risk whose physical condition, occupation, mode of living and other characteristics indicate a  prospect for longevity superior to that of the average longevity  of unimpaired lives of the same age.

Premium  The periodic payment required to keep an insurance policy in force.

Premium Flexibility  The policy holder's right to vary the amount of premium paid each month towards a universal life policy.

Primary Beneficiary  In life insurance, the beneficiary designated by the insured as the first to receive policy benefits.

Primary Policy  The insurance policy that pays first when  you have a loss that's covered by more than one policy.

Probate Costs  The legal fees and other costs incurred in the probate process, which is the legal processing of your will. Assets that you leave to other people through your will cannot be distributed until the will is probated.

Provisions  Statements contained in an insurance policy  which explain the benefits, conditions and other features of the insurance contract.

Rated  Coverage's issued at a higher rate than standard because of some health condition, or impairment of the insured.

Re-entry Option  An option in a renewable term  life policy under which the policy owner is guaranteed, at the end of the term, to be able to renew his or her coverage without evidence of insurability, at a premium rate specified in the policy.

Reinstatement  Putting a lapsed policy back in force by producing satisfactory evidence of insurability and paying any past-due premiums required.

Renewable Term/Annual Renewable Term  Term insurance that may be renewed for another term without evidence of insurability.  Level term usually turns into renewable term with increasing premiums after the level premium period.

Replacement  A new policy written to take the place of one currently in force.

Representation  Statements made by applicants on their applications for insurance  that they represent as being substantially true to the best of their  knowledge and belief but that are not warranted as exact in every  detail.

Restoration of Benefits If benefits are received from the policy and the insured does not require long term care assistance for a period of 180 consecutive days, then any subsequent incident would be considered a new period of care and the full original benefit period for care would be available.

Revocable  Beneficiary  The beneficiary in a life  insurance policy in which the owner reserves the right to revoke or change the beneficiary. Most policies are written with a revocable  beneficiary.

Rider  An attachment to a policy that modifies its conditions by expanding or restricting benefits or excluding certain conditions from coverage.

Risk  The chance of injury, damage, or loss.

Risk Selection  The method a home office underwriter uses  to choose applicants that the insurance company will accept. The underwriter must determine whether risks are standard, substandard  or preferred and set the premium rates accordingly.

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Secondary  Beneficiary  An alternate beneficiary designated to receive payment, usually in the event the original beneficiary predeceases the insured.

Single Premium Policy  A whole life policy for people who want to buy a policy for a one-time lump sum, and then be covered for  the rest of their lives without paying any additional premiums.

Standard Risk  Person who, according to a company's underwriting standards, is entitled to insurance protection without extra rating  or special restrictions.

Substandard  Risk  Person who is considered an under-average or impaired insurance risk because of physical condition, family  or personal history of disease, occupation, residence in unhealthy climate or dangerous habits.

Term Insurance Protection during limited number of years; expiring without value if the insured survives the stated period, which may be one or more years but usually is five to twenty years, because such periods usually cover the needs for temporary protection.

Term  Period for which the policy runs. In life  insurance, this is to the end of the term period for term insurance.

Tertiary Beneficiary   In life insurance, a beneficiary  designated as third in line to receive the proceeds or benefits  if the primary and secondary beneficiaries do not survive the insured.

Third-Party Owner  A policy owner who is not the prospective insured. The policy owner and the insured may be, and often are the same person. If for example, you apply for and are issued an insurance policy on your life, then you are both the policy  owner and the insured and may be known as the policy owner-insured. If, however, your mother applies for and is issued a policy on your life, then she is the policy owner and you are the insured.

Underwriter  Company receiving premiums and accepting responsibility  for fulfilling the policy contract. Also, company employee who decides whether the company should assume a particular risk; or the agent  who sells the policy.

Uninsurable Risk  A person who is not acceptable for insurance due to excessive risk.

Universal  Life  An interest-sensitive life insurance policy that builds cash values. The premium payer has control over how the policy is structured. He has the flexibility to eliminate the premiums (essentially pay up the policy and pay no more premiums) or have the premiums continue for life. It is a matter of juggling three variables: the assumed interest rate, the cash value and the premium payment plan. The policy is interest-sensitive, and if interest  rates change from the assumed interest, it will affect the other two variables. In the past, many Universal Life Policies were structured  assuming a higher interest rate then was actually received, therefore, most of them have under performed. If you have a Universal Life Policy, you should have it evaluated to see if it needs to have  the premiums adjusted to get it back on track. A fourth variable  that has not been a factor but could be in the future, and the owner  should be aware of, is the Mortality variable. Universal Life policies  are usually structured assuming current mortality rates. The insurance  companies reserve the right to change those rates.

Variable Life  Life insurance under which the benefits relate to the value of assets behind the contract at the time the benefit is paid. The assets fluctuate according to the investment experience of funds managed by the life insurance company. Premium payments may be fixed as to timing and amount (scheduled premium variable life) or subject to change by the policy holder (flexible premium variable life).

Waiting Period (Elimination Period or Deductible) The number of days the insured must pay for care before the policy starts paying benefits. After a period of 180 days of not requiring care, a subsequent period of care would require a new waiting period. Some policies have a one time-only waiting period.

Waiver of  Premium  Rider or provision included  in most life insurance policies exempting the insured from paying premiums after he or she has been disabled for a specified period  of time, usually six months.

Whole Life Insurance  Life insurance that is kept in force  for a person's whole life as long as the scheduled premiums are maintained. All Whole Life policies build up cash values. Most Whole  Life policies are guaranteed as long as the scheduled premiums are maintained. The variable in a Whole life Policy is the dividend which could vary depending on how well the insurance is doing. If  the company is doing well and the policies are not experiencing  a higher mortality than projected, premiums are paid back to the  policy holder in the form of dividends.  Policyholders can  use the cash from dividends in many ways. The three main uses are: it can be used to lower or vanish premiums, it can be used to purchase more insurance or it can be used to pay for term insurance.                                                                top of page