Insurance Terms and Definitions
Medical
- Coinsurance: The percentage of each claim you must pay after your deductible is met.
- Copayment: A predetermined amount you must pay for certain health care services.
- Deductible: The amount you must pay before your health insurance benefits kick in.
- Exclusions: Terms and/or conditions that are not covered by your health insurance plan.
- Health Maintenance Organization (HMO): A health insurance plan that allows you to use the services of participating (in-network) physicians, hospitals and clinics.
- Health Savings Account: A plan that allows you to contribute and use pre-tax money for qualified medical expenses. These accounts are portable and must be linked to a high-deductible health insurance plan.
- High-Deductible Health Plan: A health insurance plan with lower premiums that covers health care expenses only after you meet your deductible (typically higher than traditional plans) each year.
- Out-of-Pocket Maximum: A predetermined amount of money you must pay before your health insurance plan covers eligible costs at 100 percent.
- Point-of-Service Plan (POS): A health insurance plan that allows you to choose between in-network and out-of-network care each time you need medical treatment.
- Pre-Existing Condition: A coverage limitation on certain medical conditions for a specified period of time under a new policy. This can be a condition that is either previously diagnosed or that would require treatment prior to issue.
- Preferred Provider Organization (PPO) Plan: Robust coverage with an expansive provider network. Allows you to go to your provider of choice without a referral.
DI, Life and LTC
- Term Life Insurance: Life insurance that provides protection for a specified period of time.
- Waiting Period: The time that must pass before you can collect insurance benefits.
- Accidental Death Benefit (ADB) – Accidental death benefit policies provide a payout if a death was caused by an accident. There are restrictions on both timing of the accident and death, as well as what is considered an accident. Accidental death benefit coverage may be from a standalone life insurance policy or a rider attached to a life insurance policy.
- Cash Value (CV) – A portion of your premium goes towards the death benefit, and another part goes to a cash account, where it grows tax-deferred over time. Funds that grow over time and are available for you to use in different ways – for example, borrowed against, withdrawn, or used to pay premiums.
- Class – Refers to a risk category assigned by the insurance company during the underwriting process, based on your health history and lifestyle choices and used by insurers to set your policy premiums. Such as your health, build, family health history, hobbies, and occupation.
- Death Benefit (DB) – The funds your beneficiaries will receive upon your death, paid out income tax-free.
- Exclusions – Terms and/or conditions that are not covered by your health insurance plan.
- Fully Paid-Up Policy – A life insurance policy that has all required premium payments made, allowing the policy to remain in force without the need for further payments. This type of policy guarantees a death benefit to the beneficiaries upon the policyholder’s death and typically requires premiums for a specific duration before becoming fully paid-up.
- Loan Value (LV) – Policyholders can borrow against the cash value (accumulated funds) that builds in a whole or universal life insurance policy.
- Pre-Existing Condition – A coverage limitation on certain medical conditions for a specified period under a new policy. This can be a condition that is either previously diagnosed or that would require treatment prior to issue.
- Replacement of an Existing Policy – It means canceling your existing coverage and helping secure a new policy for reasons like better rates, different coverage, or changing needs.
- Underwriting – The process an insurance carrier Underwriter uses to assess and evaluate the coverage risk for providing coverage.
- Waiver of Premium (WP) – Is an insurance policy clause (rider) that will waive the premium payments should the policyholder becomes critically ill, seriously injured, or physically impaired.
Frequently Asked Questions
How much Disability Insurance Coverage do I need?*
Everyone’s circumstances are different, so the benefit will vary, so it’s important to consult with an insurance professional or financial advisor for personalized advice. In order to calculate the amount you need:
- Figure out your gross annual income, minus bonuses and incentive payments.
- Add your monthly expenses, including housing, food, transportation, and other essential costs.
- Decide how much of your income you want to protect, typically 60-80% of your after-tax income.
How much Life Insurance Coverage do I need?*
In order to calculate the amount of life insurance you need:
- Multiply your annual salary X’s the number of years you want to replace that income.
- List your mortgage, line of credit and HELOC balance(s).
- List other debts.
- List current and future expenses you deem necessary such as school tuition, final expenses, estate taxes daycare.
How much Long Term Care Coverage do I need?*
In order to calculate the amount of Long-Term Care Insurance Coverage you need:
- Make sure to account for your location, healthcare costs, and personal financial situation.
- Review your monthly income: Determine how much you can afford to spend on long-term care.
- Subtract the cost of services: Deduct the monthly cost of long-term care services from your income to find the remaining amount.
- Determine the coverage needed: This amount is the minimum long-term care insurance you need to cover your expenses.
- Consider the duration: Long-term care insurance typically lasts for two years, but you may want to consider purchasing additional coverage if you plan to apply for Medicaid.
Can a DI, Life or LTC Insurance Policy ever be canceled due to health reasons?
The answer is NO. These policies guarantee renewable.
Can changes be made to a DI, Life or LTC Insurance Policy?
The answer is YES.
- Disability – Extend the policy’s term or add riders.
- Life Insurance – Increase or decrease your coverage, add riders or switch providers.
- Long Term Care – Upgrade or exchange your policy to avoid an increase in your premium.
Can one person have more than one DI, Life or LTC Insurance Policy?
The answer is YES. There are no legal limits on the number of policies a person can have. While insurance companies do not impose coverage caps, they will limit the amount by an individual’s income or net worth. Also, coverage amounts can vary by age and insurer.
*Consult with a financial advisor AND insurance professional for personalized advice. Make sure to account for your location, healthcare costs, and personal financial situation.
Contact Me
Mike Tamburino
Individual & Group Health Benefit Consultant
Leave me a voicemail: 215-801-7070
