Insurance Glossary

Sometimes it seems that the insurance world speaks an entirely different language. Fortunately we speak insurance. And English. Here’s our dictionary.

Beneficiary

Typically used in a life insurance policy to refer to the person you designate to receive the policy amount if you die. You can change the beneficiary (though you can’t if you’re already dead…)

Claim

Quite simply, when you incur a health expense that is covered by your health insurance policy, your medical provider submits a “claim” to the insurance company. It’s basically their request for payment. When the insurance company pays the claim, you’ll receive a form called an “explanation of benefits.”

Coinsurance

In most traditional plans, once you reach your annual deductible, you enter into coinsurance, where the company will pay some percentage of subsequent claims and the client pays the rest (usually an 80/20 or 70/30 split). There is typically a cap on what the client will pay, called your “out-of-pocket maximum.” Once you reach that cap, the insurance company will pay all claims.

Copay

Some health insurance plans allow you to visit the doctor and pay a predetermined fee for services, which is called a copay. The insurance company then pays the remainder of the cost of the visit. A copay typically covers expenses that take place in that office on that day. Some plans limit the number of copays a client may use in one year.

Deductible

Your deductible is basically the portion of your health expenses that you will be responsible for each year before the health insurance company begins paying benefits. As a general rule, the higher your deductible, the lower your monthly premium.

Effective Date

The date your plan takes effect.

Exchange

An exchange is a place consumers can go to learn about health insurance plans and to compare policies and prices. There are government-operated exchanges and private exchanges that are run by insurance companies or by other private companies. About half the states run a state exchange, with the remaining states participating in the federal government’s exchange marketplace.If you qualify for a subsidy (see below), it will only be available to you in plans that are on the government exchange. That is really the only reason you would need to purchase there. Any plan on the government exchange is likely available on private exchanges, and you will find other plans on private exchanges that are not available on the government version.AC Forrest is equipped to help you navigate either option.

Health Savings Account (HSA)

Health Savings Accounts are a rather new option that function much the same as an IRA, the retirement account many people are more familiar with. You are eligible to open an HSA when you are covered by a high deductible health insurance plan that meets federally mandated requirements. These plans generally provide good major medical protection with a higher deductible and lower premiums.You can establish your health savings account at the bank of your choosing and deposit pre-tax money to fund health-related expenses. The money you place in the account is not taxable income. (For this reason, the IRS sets annual limits on maximum contributions.)The idea is that you take the money you save on monthly premiums and put some of it into this account to fund medical expenses – so you’re saving (with interest) and controlling your health dollars rather than sending them on to the insurance company whether you need it or not. Again, this money is yours and rolls over year to year (not a use it or lose it situation). The tradeoff is that you are typically responsible for your healthcare costs up to the deductible amount. You will, of course, benefit from provider discounts when you stay in network.

Health Sharing

Health Sharing ministries and organizations have been around since the 1980s as an alternative to traditional health insurance. Members of these organizations agree to share in one another’s health expenses according to the guidelines of the organization. They are not insurance plans, but increasing numbers of people prefer and have been quite satisfied with this faith-based alternative.

Lifetime Maximum

Traditionally, there was a cap on the benefits your health insurance coverage would pay over the life of the plan, but under the Affordable Care Act lifetime maximums are no longer allowed.

Marketplace

As Obamacare was implemented, the term “Marketplace” replaced the term “exchange.” So see “exchange” above.

Out of Pocket Maximum

In most traditional plans, once you reach your annual deductible, you enter into coinsurance, where the company will pay some percentage of subsequent claims and the client pays the rest (usually an 80/20 or 70/30 split). There is typically a cap on what the client will pay, called your “out-of-pocket maximum.” Once you reach that cap, the insurance company will pay all claims.Under the affordable care act, the Out of Pocket Maximum has become even more simple. Quite simply, this is the maximum amount of money you’ll spend on covered medical care in a given year – this includes your deductible, copays and other fees.

Pre-Existing Condition

Any condition that you has been diagnosed or for which a reasonable person would have sought medical advice or treatment.

Premium

Your monthly bill.

Preventive Care

Routine healthcare examinations such as physicals, vaccinations, mammograms, and annual OBGYN exams.

Quote

An estimate of what a particular insurance plan will cost. For most insurance plans, a quote is usually generated by a client’s date of birth, zip code, and tobacco use (disability insurance would add one’s income to the mix). A quote is a “ballpark” estimate that is particularly useful in comparing how plans and providers stack up. The actual premium you would pay would be determined by your application and the specifics of your case. Quotes are particularly useful in comparing plans against one another.

Rider

An amendment to a policy. Think of a “rider” as riding on the back of the policy. It’s an add-on.

Short-Term Health Insurance

A basic insurance policy that will bridge the gap when you have recently lost group coverage and anticipate getting on a group health insurance plan fairly soon. These plans are designed for those who are between jobs and for recent graduates who no longer qualify as dependents on their parents’ plan.

Subsidy

Under the affordable care act, many people will qualify to receive money from the federal government to help them pay their health insurance premiums. This money is called a “subsidy.” The amount of the subsidy will vary depending on income and the price of the “benchmark” plan in your state. We can help you figure that out! Anyone making less than 400% of the federal poverty limit should be eligible for some level of subsidy.

Term Life Insurance

Life insurance that is in force for a defined period of time (most commonly for 10, 20, or 30 years). After the policy period is over, the policy ends (though it can usually be converted to a more expensive permanent policy at that point). Term life insurance is not an investment product, and is significantly less expensive than whole or universal life insurance.

Underwriting

The process whereby the insurance company reviews an application and gathers information before making a final decision on an applicant. With life insurance, this usually involves a para-medical exam as well. The task of an underwriter is essentially to assess the risk of insuring each applicant.