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A
Accident: An unforeseen and unintended event.
Accidental Death Benefit: Benefit payable if
death results from an accident.
Accumulation Period: A period of consecutive
months that begins on the first day of disability and during which the
elimination period must be satisfied.
Annualization of Waived
Premium: If the policy anniversary falls during the period that
premiums are being waived, an entire year's premium will be waived regardless of
the premium payment mode used by the insured.
Application: A form on which the company
requests information from the prospective insured (applicant) upon which the
home office underwriters decide whether or not to issue the policy. It then
becomes part of the contract when the policy is issued.
Association Coverage: Group insurance issued to
an association rather than to the employees of a business or members of a union.
Automatic Increase Rider: An optional benefit
which provides automatic increases each year, despite changes in health, income
or occupation.
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B
Benefit Period: The longest period of time for
which benefits are payable for continuous disability.
Business Overhead Expenses: The usual expenses
required to maintain an office or run a business.
Buy-Sell Agreement: An agreement made by the
owners of a business to purchase the share of a disabled or deceased owner. The
value of each owner's share of the business and the exact terms of the buying
and selling process are established before death or the onset of a disability.
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C
Capital Sum Benefit: The benefit that will be
provided when the insured suffers complete loss of a hand or foot, severed
through or above the wrist or ankle, or loss of the entire sight in one eye, and
survives it for 30 days.
Conditional Receipt: A receipt given for premium payment
accompanying an application for insurance. If the application is approved as
applied for, the coverage is effective as of the date of prepayment or the date
on which the last of the underwriting requirements, such as medical examination,
has been fulfilled.
Consumer Price Index: The Consumer Price Index
for All Urban Consumers as published by the Federal Department of Labor. That
index shows the rate of change in the cost of living in the United States.
Conversion Privilege: The right given to an
insured person to change insurance without evidence of medical insurability,
usually to an individual policy, upon termination of coverage under a group
contract.
Cost of living Rider: An optional benefit which
provides for increases in the disability benefit during periods of disability.
Cross-Purchase Arrangement: An arrangement
between two or more business owners that in the event of an owner's death or
disability, the remaining owner or owners will purchase the business interest of
the deceased or disabled owner.
Cumulative Benefit: In an overhead expense
policy, the monthly benefit times the number of months the insured has been
disabled after the elimination period.
Current Expenses: An insured's expenses in each
month while residually disabled.
Current Income: All income which an insured
received on a cash basis in each month while residually disabled.
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D
Disability: An individual's physical or mental
inability to perform the major duties of his or her occupation because of
sickness or injury.
Disability Insurance: A form of health
insurance which provides periodic payments when the insured is unable to work as
a result of sickness or injury.
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E
Earned Income: Gross salary, wages,
commissions, fees, etc., derived from active employment. This does not include
investment income, rents, or amounts received from annuities or insurance
policies.
Elimination Period: The consecutive number of
days for which no benefits are payable at the start of a claim. An insured must
be disabled all of those days.
Entity Arrangement: An arrangement between the
business entity and the business owners that in the event of an owner's death or
disability, the business entity will purchase the business interest of the
diseased or disabled owner.
Exclusions: Certain conditions and causes which
are not covered by the policy. These are listed in the policy.
Expenses: The regular business expenses which
an insured may deduct from gross earned income for federal tax purposes.
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F
Future Increase Option: An optional benefit
which allows the insured to purchase additional coverage up to a stated age,
regardless of health, as long as his or her income warrants the increase.
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G
Group Insurance: A policy covering the
employees of a business or members of a union.
Guaranteed Renewable: A type of insurance which
cannot be cancelled or altered by the insurance company as long as the insured
continues to pay premiums on time. However, the premium may be increased for
classes of insureds.
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I
Income: Gross earned income, less business
expenses, but before any other deductions. Income includes salaries, wages,
fees, commissions, bonuses, business profits or other payments for personal
services. It does not include unearned income from savings, investments, or real
property.
Indexing: A provision which increases the
insured's pre-disability earnings every year according to a given formula, so
residual disability benefits will not lose purchasing power because of
inflation.
Injury: Accidental bodily injury that occurs
while a policy is in force.
Installments: A series of payments at regular
intervals over a period of time.
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K
Key Employee: An owner or a highly skilled
employee whose efforts are directly responsible for some measure of
profitability to the firm.
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L
Level Premium: A premium which remains the same
up through the insured's age 65.
Lifetime Disability Benefit: A benefit that is
payable for the lifetime of the insured if continuously and totally disabled
before a specified age (i.e., 45 or 55).
Loss of Income: The difference between an
insured's prior income and current income. In better policies, if the loss of
income is more than 75% of prior income, the loss is deemed to be 100% for
purposes of the Residual Disability Rider.
Loss Payee: The individual or entity named to
receive all benefits.
Lump Sum: A single payment of benefits, with no
further payments due.
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M
Monthly Indemnity: The amount the insurer will
pay for each month of total disability.
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N
Noncancellable (Noncan): A policy which cannot
be cancelled or altered by the insurance company as long as the insured
continues to pay premiums on time, and whose premium will not increase up
through the insured's age 65.
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O
Occupation: An insured's regular occupation or
profession at the time of becoming disabled.
Optional Benefit: An additional benefit offered
by the insurance company to certain occupational classes which may be included
in a policy at the applicant's request, for an additional premium.
Overinsured: Receiving a larger income through
benefits while disabled than income earned while working.
Owner: As named in the policy schedule page,
the owner's rights include, but are not limited to, the right to renew the
policy and to request any change in benefits.
Own Occupation (Own Occ): A definition of
disability which states that as long as the insured is unable to perform the
duties of his or her regular occupation (or occupations, if more than one) at
the time of disability, the insured will be considered eligible to receive the
full benefit under the policy.
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P
Partial Disability: An insured's physical
inability to perform some, but not all, of the duties of his or her regular
occupation due to sickness or injury.
Participation Limit: The total amount of
coverage which will be allowed by a company from all carriers.
Physician: A legally qualified physician other
than the insured, who is not a loss payee or owner under the policy.
Policy: All material which constitutes the
contract of insurance.
Policy Term: The effective period of the
policy, usually the period for which premiums are paid.
Pre-Disability Earnings: The earnings level of
the insured prior to the onset of disability.
Pre-Existing Condition: An injury, illness, or
physical condition which existed prior to the issue of the disability policy.
Presumptive Disability: The presumption that
the insured is totally disabled, even if still at work, if sickness or injury
results in the total and complete loss of sight in both eyes, hearing in both
ears, power of speech, or use of any two limbs. The elimination period is waived
from the date of the loss and total disability benefits are payable while such
loss continues until the end of the benefit period.
Prior Expenses: An insured's average monthly
expenses for the same tax year on which his or her prior income is based for
purposes of the residual disability rider.
Prior Income: The insured's average monthly
income for the tax year with the highest earnings in the three years just prior
to the date on which he or she became disabled.
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Q
Qualified Sick Pay Plan: A formal (written and
communicated) plan to continue the salary of certain employees in the event they
become disabled. Also know as Salary Continuation Plan.
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R
Recovery Disability Rider: A rider which
provides reduced benefits when and insured returns to work following a
compensable period of total disability.
Recurrent Periods of Disability: In some
policies, recurrent periods of disability from the same cause or causes will be
considered one continuous period of disability unless each period is separated
by a recovery of six months or more.
Rehabilitation Benefit: A benefit paid to help
meet some of the costs an insured may incur by enrolling in a rehabilitation
program for the purpose of returning to his or her occupation.
Residual Disability: In better policies, a
disability that causes an insured's income to fall more than 20% below its
pre-disability level. Some companies include a loss of time requirement or the
inability to perform some duties of the insured's regular occupation.
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S
Sickness: A sickness or disease, including a
pregnancy, which is first diagnosed and treated while the policy is in force.
Social Insurance
Substitute Rider: A rider which pays a benefit if the insured is
disabled under the policy and not receiving social insurance benefits.
State Disability Benefit
Insurance Laws: Laws enacted in California, Hawaii, New Jersey, New
York and Rhode Island which provide the payment of benefits for the
non-job-related sickness or injury.
Stock Redemption
Arrangement: An "entity" type arrangement under a buy-sell
agreement in a corporation. See "Entity Arrangement."
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T
Total Disability: The physical or mental
inability to perform the major duties of one's occupation because of sickness or
injury.
Transplant Donor Benefit: In some policies, the
provision that the insured will be considered disabled as a result of sickness
if he or she is totally disabled because of the transplant of a body part to
another person.
Trigger Date: The date on which the buyout
obligation becomes contractually effective under the terms of the buy-sell
agreement.
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W
Waiting Period: See "Elimination
Period."
Waiver of Elimination Period: In some policies,
the elimination period will be waived if an insured becomes disabled within five
years after the end of a period of disability which lasted longer than six
months and for which benefits were paid.
Waiver of Premium: In some policies, a
provision which relieves the insured of having to make premium payments after he
or she has been disabled for 90 days, or the elimination period, if shorter. In
addition, premiums paid during those 90 days are refunded and premiums due
during the 90 days after recovery are waived.
Worker's Compensation: Benefits paid to a
worker to compensate for losses caused by a work-related injury or illness.
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