Insurance Glossary

ACCIDENT INSURANCE
A form of health insurance against loss by accidental bodily injury (an injury sustained as the result of an accident).

ACCIDENTAL DEATH AND DISMEMBERMENT BENEFITS
A lump sum payment is assured if the insured dies as the result of an accident, within a specified period. Usually the same sum is paid on the accidental loss of both limbs, hand and foot or the sight of both eyes.

ACTIVELY-AT-WORK-REQUIREMENT
A form of individual evidence of insurability, since the insured’s health must be at least sound enough to be actively at work at the usual place of employment on the date the insurance takes effect. Since this definition is impractical for dependants, there is usually a requirement that if the dependant is confined in a hospital on the date the insurance would otherwise become effective, the effective date of insurance will be deferred until release from the hospital.

ACTUARY
An accredited, professionally trained person in insurance mathematics, who calculates rates, reserves, dividends and other valuations as well as makes statistical studies and reports.

ADMINISTRATION
The handling of all functions related to the operation of the group insurance plan once it becomes effective. The claim function may or may not be included.

ADMINISTRATION MANUAL
A manual of instructions provided to the policyholder by the insurance company, or administrator, which outlines and explains those duties required of the plan to assure the successful operation of the group insurance program.

ADMINISTRATIVE SERVICES ONLY
Plans which do not require the underwriting services of the insurer. Instead, the only services required are administrative services, in particular, claim paying service. There is no premium to be paid and no premium tax. The client may open a bank account and direct the bank to accept cheques written against the account by authorized individuals of the insurance company, or administrator.

ADMINISTRATOR
The individual or company responsible for administrating a group insurance contract. This may include services such as accounting, certificate issuance and claims settlement.

AGE LIMITS
Minimum or maximum age limits for the insuring of individuals under insurance contracts.

AGE REDUCTION
A reduction in the amount of insurance on an individual who attains a specified age.

ASSOCIATION GROUP PLANS
Health insurance plans designed for members of a professional association or trade association. Members may be protected under a group policy or by individual franchise policies.

ATTAINED AGE
The age attained at one’s last birthday which does not change until the next birthday.

AUTOMATIC REINSURANCE
A type of reinsurance in which the insurer must cede and the reinsuring company must accept all risks within certain contractually defined areas. The reinsuring company undertakes in advance to grant reinsurance to the extent specified in the agreement in every case where the ceding company accepts the application and retains its own limit.

BENEFICIARY
The person(s) designated by an insured to receive Group Life and/or Accidental Death Benefits upon the death of the insured.

BENEFIT FORMULA
A formula or rule for determining the amount of benefit payable under each contingency covered by a group insurance contract. The formula frequently takes into account salary and employment (classification or) category at the time the loss is incurred.

BENEFIT WAITING PERIOD
The period of time which must elapse before someone is eligible for benefits under a group insurance contract.

BENEFITS, GROUP LIFE INSURANCE
Group life insurance is based upon the one year term plan. It is pure life insurance coverage and contains no savings element. The benefit provided is a lump sum payable to the beneficiary named by the employee upon the death of the employee form any cause whatsoever.

BILLINGS
An initial billing statement will contain a list of each employee covered, and the corresponding premium for that employee. Subsequent billings are usually prepared monthly.

BOOKLET - CERTIFICATE
Many carriers distribute booklets to individuals insured under a master contract. These summarize policy provisions, coverage’s and limitations provided to each insured member of a group insurance plan. In some instances this booklet replaces any additional certificate cards.

BROKER
A term generally used to describe one who places business with more than one company, and who has no exclusive contract requiring that all his business first be offered to a single company.

CANCELABLE CONTRACT
A contract of accident and sickness insurance that may be terminated by the policyholder or insurer at any time. The fact that the contract is cancelable must be stated in the contract and usually provides that the insurer must give the policyholder ten days’ notice by registered mail and the policyholder give the insurer notice by registered mail.

CARVE-OUT
The term often used when referring to an Integrated Plan.

CENSUS DATA
Statistical information such as age, sex, income, insurance classification, or dependent status on persons eligible for or insured under a group policy which is used to determined premium rates or benefits.

CERTIFICATE CARDS
The insurer may issue certificate cards to the covered employees, in a form convenient for insertion in a wallet. The certificate mentions the mane of the employee, the benefits for which he or she and (eventually) any dependants are covered, and a capsule summary of the amount of coverage.

CHILD
Refers to a child who is supported solely by the insured and permanently living in the home of which the insured is the head; a child who is legally adopted and a stepchild who lives in the insured’s home.

CHILD, HANDICAPPED
Specific provision in contract for the continuing coverage of child dependants regardless of age if handicapped an unable to provide for themselves.

CLAIMS RESERVES
Must be held by an insurance company to cover the liability which has been incurred by reason of carrying the risk to a certain point of time. Even though the risk may be discontinued at that point, claims may still be due under the terms of the contract and other claims may not be reported until after the actual date of termination of the contract. The claim reserve must be sufficient to meet all such claims which are properly payable even though they may not be reported at the precise time of cancellation.

CLAIMS, CASH
Cash disbursed, drafts redeemed, or drafts drawn for the settlement of group insurance claims.

CLAIMS CHARGED
Denotes amount of claims dollars actually charged to a group policy. If pooling or claim averaging is used to stabilize a groups experience during a single contract period, the claim expense “charged” to the group’s premium in that single year may be more or less than the group’s actual incurred claims.

CLAIMS, CO-ORDINATION OF BENEFITS
The policy will specify how benefits will be calculated if the claimant’s insured under several group contracts against the same event.

CLAIMS FLUCTUATION RESERVE
The insurance company attempts to set its premium rate at such a level that after deducting claims incurred and the company’s retention, the balance is likely to be positive, leaving available a cash amount which, after reserves have been set up, may be refunded to the policyholder. The reserve is held to the credit of the policyholder and used only to cover any negative results which may occur in future experience.

CLAIMS INCURRED
This is the total of claims paid for the period plus changes in the reserves held for incurred but unreported, unsettled, or continuing claims. It represents the estimate of the total liability created in the policy year by the plan of benefits in effect for that policy year.

CLAIMS, INCURRED BUT UNPAID
Incurred claims which have not been paid as of some specified date (may include both reported and unreported claims).

CLAIMS, PAID
Most insurers define paid claims as those benefit cheques dated within the policy year. Other insurers count only those cheques issued which cleared the bank during the policy period. Although some other definitions do exist, these two are the most common.

CO-INSURANCE
A provision in an accident and sickness contract by which the insurer and insured share, in a specific ratio, the covered losses under a policy. For example, the insurer may reimburse the insured for 80 per cent of covered expenses, the insured paying the remaining 20 per cent of such expenses.

COMMUTED VALUE
The single sum which represents the present worth, or equivalent value, of a stipulated number of installments payable at fixed future dates. The commuted value is computed on the basis of a given rate of interest. Often called “discounted value”.

COMPOSITE RATES
When different rates are combined to arrive at an average, the result is termed a “composite rate”. A good example is the “dependent rate”, which makes no distinction between workers who have one child or a dozen.

CONTINGENCY RESERVE
A reserve established to share among all policyholders the cost to the insurer of unpredictable, catastrophic losses.

CONTINGENT BENEFICIARY
The person(s) or party legally entitled to the proceeds of an insurance policy upon death of the insured if the primary beneficiary does not survive the insured.

CONTRACT
A binding agreement between two or more parties for the doing or not doing of certain things. A contract of insurance is embodied in a written document usually called the policy. The chief requirements for the formation of a valid contract are (1) parties having legal capacity to contract, (2) mutual assent of the parties to a promise, or set of promises, generally consisting of an offer made by one party and an acceptance thereof by the other, (3) a valuable consideration, (4) the absence of any statute or other rule making the contract void, and (5) the absence of fraud or misrepresentation by either party.

CONTRIBUTORY
Group people use “contributory” to designate those situations where the insured individual pays or “contributes” part of the premium. The alternative is “noncontributory”, meaning employer-pay-all.

CONVERSION
Group Life laws require that benefits lost upon termination is “convertible” into individual Life Insurance, without evidence of good health.

CONVERSION CHARGE
A charge made by a Group Department for credit to the Individual insurance Department whenever group life insurance is converted. This charge, which is charged directly to the case involved, is made because experience has shown that the average mortality on individual policies issued as conversions of group insurance is excessive.

COST CONTAINMENT
The control of the overall cost of health care services within the health care delivery system. Costs are contained when the value of the resources committed to an activity are not considered to be excessive.

COST PLUS
An insurance arrangement whereby a policyholder is charged the amount of claims paid plus the insurer’s retention. Generally, no claim reserves are held by the insurer under this arrangement.

CREDIBILITY
The degree of belief that can be given to actual loss experience compared with anticipated loss experience.

CREDIBILITY FACTORS
Numerical values expressing the degree of credibility assigned to observed samples of actual claims experience for experience rating or analysis.

CREDITORS' DISABILITY
Insurance issued in conjunction with indebtedness that provides for the payment of loan installments while the borrower is disabled.

CREDITOR GROUP HEALTH INSURANCE
That form of insurance under which a borrower of money or purchaser of goods is indemnified in connection with a specific loan or credit transaction against loss of time resulting from an accident or illness.

CREDITOR GROUP LIFE INSURANCE
That form of group life insurance insuring lives of a group of persons who have become indebted to a creditor under agreements to repay their indebtedness according to a fixed plan; the main purpose being to liquidate the indebtedness of the debtor in the event of death prior to the repayment of the indebtedness.

DEDUCTIBLE
The amount of covered expenses that must be incurred and paid by the insured before benefits become payable by the insurer.

DENTAL CAPITAL PLANS
In general, capitation dental plans provide for defined types of dental services to be delivered by a closed panel of selected dentist for a fixed annual per capita fee. The fee, which is usually paid monthly, does not vary with the amount of services provided.

DENTAL PLANS
Extent of benefits varies by contract. Coverage typically helps to pay for preventive and maintenance services and major restorative procedures such as crowns, bridges, dentures, braces and orthodontic services.

DEPENDANT
An insured’s spouse, not legally separated from the insured, and unmarried child(ren) who meet certain eligibility requirements, and who are not otherwise insured under the same group policy. The precise definition of a dependent varies by insurer.

DEPENDANT LIFE
This if Life Insurance issued on the spouse and children of an insured employee.

DEPOSIT PREMIUM
The premium deposit paid by a prospective policyholder when an application is made for a group insurance policy. It is usually equal, at least, to the first month’s estimated premium and is applied toward the actual premium when billed.

DESIGNATED BENEFICIARY
The person(s) or party designated by the insured to receive the proceeds of an insurance policy upon death of the insured.

DIRECT CLAIM PAYMENT
A method of paying claims where by the insured individuals deal directly with the insurance company rather than submitting claims through the group policyholder.

DISABILITY
A physical or mental condition that makes an insured person incapable of performing one or more duties of his or her occupation.

DISABILITY BENEFIT
A payment which arises because of the total and/or permanent disability of an insured; a provision added to a policy which provides for a waiver of premium in case of total and permanent disability.

DISABILITY INCOME INSURANCE
These plans pay a periodic cash amount, for example, 70 per cent of normal earnings. Short-term plans begin benefits the first day off work, or soon after, and continue payments for a limited number of weeks. Long-term plans normally start benefits three to six months after the onset of disability and continue payments for a stated term or to a stipulated age.

EARNED PREMIUM
That part of the premium for which coverage (protection) has already been provided and which the insurer has, therefore, “earned”.

ELIGIBLE GROUP
A group of persons eligible, under insurance laws and company underwriting practices, to be insured under a group policy; usually includes individual employer groups, multiple-employer groups, labor union groups, creditor-debtor groups and certain association groups.

ELIGIBILITY DATE
The date on which a member of an insured group becomes eligible to apply for insurance.

ELIGIBILITY PERIOD
The period of time following the eligibility date (usually 31 days) during which a member of an insured group is eligible to apply for insurance without evidence of insurability.

ELIGIBLE EMPLOYEES
Those employees who have met the eligibility requirements for insurance set forth in the group policy.

EMPLOYEE BENEFIT PROGRAM
A program through which various benefits are offered to employees by their employer to cover such contingencies a medical expenses, disability income, retirement and death, usually paid for wholly or in part by the employer. Such benefits frequently are referred to as “fringe benefits” because they are separate from wages and salaries.

EMPLOYEE CENSUS
Data, such as age, sex, occupation, earnings and dependency status, relating to the insured persons under a group policy.

EMPLOYEE-PAY-ALL PLAN
One in which the insured’s (employees) pay the entire premium. Thus, the policyholder does not contribute at all.

ENROLLMENT CARD
A document signed by an eligible person as notice of his desire to participate in the group insurance plan. In a contributory case, this card also provides an employer with authorization to deduct contribution from an employee’s pay. If group life and accidental death and dismemberment coverage is involved, the card usually includes the beneficiary’s name and relationship.

EVIDENCE OF INSURABILITY
Proof presented through written statements on an application from and/or through a medical examination, that an individual is eligible for a certain type (or level) of insurance coverage. This form is required for eligible’s who do not enroll during the open enrollment period (generally 31 days) who apply for reinstatement after having previously withdrawn from the plan; who apply for reinstatement after having received an overall maximum benefit or who apply for excess amounts of group life insurance. (The form is also required for individuals requesting levels of insurance benefits over the non-medical limits.)

EXCESS AMOUNTS OF LIFE INSURANCE
An amount of life insurance offered a certain class in excess of the amount normally allowed, based upon the total life volume developed for the case. This excess amount of life insurance is usually medically underwritten.

EXPECTED MORTALITY
The number of deaths expected to occur in a given group within a specified time period; usually expressed as a ratio of expected death claim payments to premium.

EXPENSE LOADING
That portion of group insurance premium required to cover acquisition and administration costs.

EXPERIENCE
Refers to the premium-claim history of a given risk. The larger the risk, the more valid the ratio of claims to premiums. Generally, used to calculate renewal rates.

EXPERIENCE ANALYSIS
Any statistical analysis of experience for all or any segment of the group business such as a line or a territory; any group of cases, coverage’s, or benefits; or any single case, coverage or benefit. It may include single or multiple experience periods, analysis of past and projection of future trends, plus various descriptive or inferential statistics.

EXPERIENCE RATED PREMIUM RATES
Premium rates for a group coverage which are based, wholly or partially, on the past claims experience of the group to which they will apply.

EXPERIENCE RATING
The process of determining the premium rate for a group risk wholly or partially, on the basis of that risk experience.

EXPERIENCE REFUND
The amount of premium returned by an insurer to a group policyholder when the financial experience of the particular group (or the experience refund class to which the group belongs) has been more favourable than anticipated in the premiums collected from the group (a Dividend).

EXTENDED BENEFITS
The extension of certain benefits under specific conditions, beyond the termination of an insured’s participation in a plan or the termination of the master policy.

EXTENDED HEALTH CARE
(This term refers to benefits offered under a group policy, which are supplementary to benefits provided by Medicare, sometimes referred to as Medicare Supplement benefits, or “Major Medical”.)

EXTENDED INSURANCE
The extension of benefits under certain conditions beyond the termination date of insurance.

EXTENDED MEDICAL EXPENSE
This term refers to a medical plan that has a deductible and/or reimburses covered expenses at some percentage less than 100 per cent. These plans are in addition to the Provincial Plan coverage…. You may sometimes hear this type of plan referred to as “Major Medical”.

FAMILY DEDUCTIBLE
A type of deductible which may be satisfied by the combined expenses of all covered family members rather than a single family member; may also be used to refer to a deductible provision whereby after two or three family members have satisfied individual deductibles, no further deductible is applied to any family member in that deductible period.

FEE-FOR-SERVICE
Method of charging whereby a physician or other practitioner bills for each visit or service rendered. Under this system, expenditures increase not only if the fees themselves increase but also if more units of service are charged for, or more expensive services are substituted for less expensive ones. (A term also used by insurance consultants to designate how they are paid.)

FEE SCHEDULE
Maximum dollar or unit allowances for health services which apply under a specific contract.

FLAT SCHEDULE
A type of schedule of insurance under which everyone is insured for the same benefit(s) regardless of salary, position, or other circumstances.

(FULL CPP OFFSET)
(Offset used in LLTD policies, usually in Small Groups. The insurer subtracts all of the CPP money paid to a disability claimant, including amounts paid on behalf of dependent children, from the LTD amount paid by the insurer. The sum total of all amounts paid by CPP plus the amounts paid by the insurer is combined in the calculation of the LTD benefit percentage paid.)

GRACE PERIOD
A specified time after a premium payment is due within which the policyholder may make such payment, and during which the protection of the policy continues.

GROSS COST
The cost of an insurance program over a specified period of time (e.g. a policy year) before taking dividends, rate credits, etc., into consideration.

GROSS PREMIUM
The contracted premium (manual plus any loadings) before applying any discounts.

HEALTH INSURANCE
Insurance providing for the payment of benefits as a result of sickness or injury includes various types of insurance such as accident insurance disability income replacement insurance, medical expense insurance, accidental death insurance and dismemberment insurance. Often includes government hospital-medical plans.

INCONTESTABLE CLAUSE
The provision in a group life and/or health insurance policy which prevents the insurance company from disputing the validity of: (a) an insurance policy once it has been in force for a specified period of time (e.g., two years) – as long as premiums are paid and (b) an individual’s insurance, on the basis of statements made by the individual in connection with insurability at the time of application for the coverage, once the insurance has been in force for two years during the individual’s lifetime.

INCONTESTABILITY
A provision in the law that a contract providing accident and/or sickness insurance benefits which, together with renewals thereof, has been in effect continuously for two years is incontestable, except for fraud or misstatement of age, with respect to a failure to disclose or a misrepresentation of a fact relevant to the insurance, with respect to a person insured or a group person insured as the case may be.

INCURRED BUT NOT REPORTED CLAIM RESERVES (IBNR)
These reserves represent an estimation of claims actually incurred in the policy year but not settled as of the end of the policy year. They may be established as a function of premiums earned, claims paid, or benefits in force, using average factors, or in exceptionally large cases they may be the result of a detailed study of that particular policyholder’s actual claims. Reserves for known pending claims generally restricted to life and AD&D are added to these claim reserves.

INITIAL DEPOSIT
The premium deposit paid by the employer when an application is completed for a group insurance policy. It is usually equal, at least, to the 1st month’s premium and is applied as such when the actual premium for the 1st premium frequency is calculated.

INSURING CLAUSE
A clause which defines and describes the scope of the coverage provided and the limits of indemnification.

INTEGRATED DEDUCTIBLE
A fixed amount or the sum of the benefits paid under a base medical care plan, whichever is greater, which must be exceeded before supplemental major medical benefits are payable.

INTEGRATION
Co-ordination of the disability income insurance benefits with other disability income benefits, such as Canada and Quebec Pension Plan.

IRREVOCABLE ENEFICIARY
A beneficiary whose designation as such by the insured may not be changed without his/her consent.

JOINT BENEFICIARY
Person or persons legally entitled to share in the proceeds of an insurance policy.

JOINT INSURANCE
The joint underwriting of a group insurance risk by two or more carriers sharing the premiums, claims, and expenses on an agreed percentage basis. One company usually handles the administration, and the policy is usually on special forms naming each insurer.

LAPSE
Termination of a policy upon the policyholder’s failure to pay the premium within the time allowed.

LAPSED POLICY
A group master contract that has automatically expired, as provided by its terms, due to non-payment of premium.

LATE APPLICANT
An eligible who apples for insurance after the normal 31 days open enrollment period. Evidence of Insurability is not required during the 31 day period but is required for a late applicant.

LEVEL PLAN (LIFE SCHEDULE)
A group life policy that provides a flat schedule of benefits as opposed to a graded schedule where different benefits are offered to different classes of people. In a level plan, everyone receives the same benefits, regardless of salary or position.

LEVEL PREMIUM BILLING
A method of premium billing which allows the policyholder to pay a certain set amount of premium on each due date during the policy year, based upon an estimated annual premium with an adjustment at the end of the policy year for the changes in coverage that have occurred during the policy year.

LOADING FACTOR
The amount added to the net premium rate determined for a group insurance plan to cover an excess age group, hazardous industry, large percentage of unskilled employees, or adverse experience.

LONG-TERM DISABILITY
It provides income protection in the event of time lost due to sickness or accident of long term nature. Generally monthly payments commence after a specified waiting period and continue while the employee remains disabled usually up to age 65 (in Canada).

LOSS RATIO
The ratio of claims to premiums. It may be calculated in several different ways, e.g., using paid premiums or earned premiums versus paid claims with or without changes in claim reserves.

MAXIMUM BENEFIT
The maximum amount any one individual may receive under an insurance contract.

MAXIMUM BENEFIT PERIOD
The maximum period for which the benefit payments are made.

MINIMUM PREMIUM PLAN
A combination approach to funding an insurance plan which is aimed primarily at premium tax savings. The employer self-funds a fixed per cent (e.g., 90 per cent) of the estimated monthly claims and the insurance company insures the excess.

MONTHLY ADJUSTMENT BILLING
A method of premium billing where the policyholder is billed on each premium due date for the insurance coverage on the actual number of persons covered by the group insurance plan.

MONTHLY STATEMENT
A statement sent by Group Administration to the policyholder on all Home Office administered cases which reflect the previous in-force, current in-force, premium adjustments and premium due. On a monthly case it serves as the bill. On other than a monthly case it serves as the bill and as an interim statement of liability.

MORBIDITY
The incidence and severity of sicknesses and accidents in a well-defined class or classes of persons.

MORBIDITY TABLE
A statistical table showing the average number of illnesses (and sometimes accidents) befalling a large group of persons.

MORTALITY
The death rate at each age as determined from prior experience. A mortality study (table) shows the probability of death and survival at each age for a credible unit of population.

MULTIPLE EMPLOYER GROUP
Employees of two or more employers covered under one master contract (e.g. trade associations of employers in the same industry, union members who work for more than one employer).

MULTIPLE EMPLOYER TRUST
A trust formed to provide group insurance benefits for employees of companies that band together with the expectation that the coverage rate for each participating firm will be lower than if they had separate policies.

MULTIPLE INDEMNITY
A provision under which the principal sum will be multiplied by 100, 200, 300 or more percent in case of death from certain types of accidents.

NET ANNUAL AVERAGE PREMIUM
The average annual cost per $1,000 of insurance for each employee insured under that policy. This cost has been reduced to reflect any dividends paid during the policy year in question.

NET COST
In group insurance it equals claims & expenses & reserves. The determining factor in Net Cost is not premium but mostly claims even though to some extent expenses are a direct function of premiums and the contingency reserve charge may depend somewhat on premiums.

NET PREMIUM
Paid or earned premium (after discounts).

NET PREMIUM RATE
The portion of the premium rate developed for a group insurance coverage, which is designed to provide for expected claims, including female loading but not including industry, age, unskilled labor or area loading, or application of reduction factors, nor increases or decreases due to experience.

NO LOSS/NO GAIN
In group insurance, an agreement by a carrier that benefits paid under the previous carrier’s plan will not be diminished.

NON-CANCELLATION POLICY
A contract provision in which the insurance company can neither cancel coverage nor vary the premiums rate specified in the contract. Policies specify, at the time of purchase, the length of time the coverage is non-cancelable and guaranteed renewable.

NON-CONTRIBUTORY
A term used to describe a group insurance plan under which the policyholder pays the entire cost.

NON-EVIDENCE MAXIMUM
The maximum benefit available without providing evidence of insurability.

NO PRE-EXISTING CONDITIONS LIMITATION
Grants the insured coverage for expenses incurred while insured resulting from conditions existing prior to the date insured. See Pre-Existing Conditions Limitations.

OPEN ENROLLMENT PERIOD
A time period during which uninsured employees (with respect to themselves or their dependants) may obtain insurance under an existing group plan without presenting evidence on insurability.

OVERALL MAXIMUM
The maximum benefit available, usually only after the underwriters have approved amounts over the Non-Evidence Maximum Benefit.

PARTIAL DISABILITY
A benefit sometimes found in disability income policies providing payment of reduced monthly income in the event the insured cannot work full-time or is prevented from performing one or more important daily duties pertaining to his/her occupation.

PERMANENT AND TOTAL DISABILITY
A disability that will presumably last for the insured’s lifetime and prevents engagement in any occupation for which the insured is reasonably fitted.

PLAN ADMINISTRATOR
The person appointed by the insured (employer or sponsor) to administer a group insurance plan.

POLICY
The legal document issued by the insurer to the insured which outlines the conditions and terms of the insurance. Also called the contract.

POLICY ANNIVERSARY
The annual date which separates the experience under a group policy between one period of time and the next for dividend and retroactive rate purposes, the periods of time normally is twelve consecutive months.

POLICY CONSTANT
The factor that is added to the total premium in a group life rate calculation in recognition of the minimum expense loading associated with any case regardless of the size of the risk. This factor amounts to $.20 per thousand of insurance multiplied by the number of thousands on insurance but in no event to exceed $8.00.

POLICY DIVIDEND
A refund to the policyholder each year of a portion of the premium based on the company’s experience and anticipated costs. Policy dividends are not guaranteed but depend on mortality and morbidity experience, investment earnings, expenses and other factors and may be increased or decreased at the discretion of the insurer.

POLICY FEE
An amount sometimes charged in addition to the first premium as a fee for issuance of the policy (e.g., group health conversion policies).

POLICYHOLDER
The owner of a policy.

POLICY YEAR
The period of time that elapses between policy anniversaries, as specified in the policy.

POOLED CLAIMS
Claims applicable to pooled risk which are excluded from individual case experience rating.

POOLING
The combining of all premiums, claims, expenses, etc., for certain size cases (e.g., all cases involving ten but less than 50 insured’s), types of coverage (e.g., all AD&D business), or excess classes (e.g., amounts of group life insurance that are medically examined or are in excess of normal limits)

POOLING CHARGES
These are automatic charges against premium in lieu of charging single large claim amounts against premium in years of adverse experience. They operate to reduce individual exposures (i.e., an amount of a life claim above the account’s normal under-writing maximum).

PRE-EXISTING CONDITION
Any physical and/or mental condition or conditions that existed prior to the effective date of coverage under a contract.

PRE-EXISTING CONDITIONS LIMITATION
A restriction on payments on those charges directly resulting from an accident or illness for which the insured received care or treatment within a specified period of time (e.g., three months) prior to the date of coverage.

PREMIUM
The amount paid to the insurer for the insurance protection.

PREMIUM EARNED
This is the total premium the consumer is liable to pay based on the rates and volumes in force during the period.

PREMIUM FREQUENCY
The number of times premiums are payable in a policy year. For example, a policy on which premiums are paid on a monthly basis is said to have a monthly premium frequency.

PREMIUM NOTICE BILLING
The premium statement requesting the policyholder to pay a premium on a particular due date. The insurer may enclose a premium remittance card which should be returned with the policyholder’s cheque.

PREMIUM PAID
That portion of earned premium actually paid and receipted during the policy year.

PREMIUM RATE
The price of a unit of coverage or benefit.

PREMIUM STATEMENT
The bill prepared by the insurer and sent to the policyholder for each premium due on a group plan administered by the insurer; or the report submitted to the insurer as of each premium due date by a policyholder whose group plan is on a self-administered basis.

PREMIUM TAX
As assessment levied by a Provincial Government on the Net Premium income collected in a particular Province by an insurer.

PREMIUM BENEFICIARY
The first person(s) designated to receive proceeds of an insurance policy upon death of the insured.

PRIMARY CPP OFFSETS
Standard offset on a group LTD policy which subtracts the amount paid by Canada Pension Plan’s (CPP) disability benefit, on behalf of the disabled person only, from the amount paid by the insurer. CPP disability amounts paid for dependent children are not used as “primary” offsets. See also Full CPP Offsets.

PRINCIPAL SUM
The payment specified in the policy. Normally the amount paid for accidental death, dismemberment or loss of sight. A fixed or definite amount payable for a specified loss. Sometimes called “Capital Sum”.

PROBATIONARY PERIOD
The length of time a person must wait from the date of entry into an eligible class or application for coverage to the date insurance is effective. Also referred to as the Service Period or Waiting Period.

PROOF OF LOSS
Documentary evidence required by an insurer to prove a valid claim exists. In group life insurance, it usually consists of a completed claim form and proof of death (death certificate or acceptable substitute); in group medical care insurance, it usually consists of a completed claim form and itemized medical bills.

PROPOSAL
A quotation submitted to a prospective group insurance policyholder by the insurance company through an agent, broker or group representative. This quotation outlines the benefits available under the proposed plan and the costs to both employer and employee.

PROSPECTIVE RATING
A method of renewal rating that adjusts the rates for the coming policy year in accordance with such factors as known credible past experience, insurance industry and insurance company trends, general business trends (e.g. inflation, deflation) current manual rates, etc.

PROVISION
A part (clause, sentence, paragraph, etc.) of a group insurance contract which describes
Or explains a feature, benefit, condition, requirement, etc., of the insurance protection afforded by the contract.

QUALIFICATION PERIOD
The period of time whether for short or long term disability during which the employee must be totally disabled before commencement of benefits.

REDUCTION FORMULA
This is used to keep Life insurance rates at a reasonable level. Where there is substantial coverage on older and retired workers an attempt is normally made starting at age 65 to reduce the amount of Group Life insurance by 500/0 or more.

REDUCTION OF BENEFIT
Automatic reduction in coverage under certain specified conditions e.g., the monthly benefits may be reduced to 50 percent while the insured ceases to be fully and gainfully employed away from home or after the insured has reached age 60, 65, etc.

REFUND, EXPERIENCE
- Refer to Experience Refund

REFUND, PREMIUM
- Refer to Premium Refund

REIMBURSEMENT
Medical & Dental Care Insurance is on a reimbursement basis; that is, benefits are based on actual charges made, and no more.

REIMBURSEMENT POLICY
A policy which provides benefits for actual expense incurred by the insured, subject to a maximum amount.

REINSTATE
To place in force again, without the usual probationary or service period, an individual’s group insurance which for some reason has terminated; or, to place in force again a group contract which has terminated?

REINSTATEMENT
The revival of a contract which has lapsed. In Group Insurance, a provision allowing portions of the maximum benefit exhausted in prior claims to be reinstated following a specified period during which no benefits are payable.

REINSURANCE
The acceptance by one or more insurers, called reinsurers of a portion of the risk underwritten by another insurer who has contracted for the entire coverage.

RENEWAL
An offer and acceptance of a premium for a new policy term.

RENEWAL DATE
The annual date on which the present policy is scheduled to be reviewed for experience.

RENEWAL RATING
The review given by the insurance company of the premium rates that have been used for the group plan. It is a process of reviewing premium paid, claims and expenses, employee age and benefit distribution to determine the necessity of changing billing rates.

RESERVE
A sum set aside by an insurance company as a liability to fulfill future obligations.

RESERVES
In Group Insurance, reserves are normally two types (1) claim reserves and (2) special (or contingency) reserves. Claim reserves are for claims which have occurred but not yet been reported or which are unsettled or continuing (open) in nature. (Also called) Open and Unreported (O&U) Claim Reserves. They are most often referred to in the marketplace as “Incurred But Not Reported” (IBNR) reserves. Special reserves are used to accomplish specific goals. They include premium stabilization reserves, rate reduction reserves, special risk reserves, retired life insurance reserves, etc….

RETENTION
That portion of the premium retained by the insurer for expenses, contingencies and profits or contribution to surplus.

RETROSPECTIVE PREMIUM AGREEMENT
A formal binding agreement from the policyholder to pay the insurer for deficits which are incurred as a result of the insurer’s agreement to continue coverage at a rate level which eliminates any margin for claim fluctuation.

RETROSPECTIVE RATING
A method of experience rating that adjusts the final premium of a risk in accordance with the experience of that risk during the term of the policy for which the premium is paid.

RIDER
An amendment which modifies the terms of the group contract or certificates of insurance. It may incr3ease or decrease benefits, waiver a condition or coverage, or in any other way amends the original contract.

RENEWAL UNDERWRITING
The review of the financial experience of a group case and the establishment of the renewal premium rates and terms under which the insurance may be continued.

RETENTION ESTIMATE
A projection of estimated expenses on a particular group insurance case.

RETROACTIVE RATE CREDIT
The portion of the premiums which the insurer, issuing group policies on a nonparticipating basis, returns to a policyholder after taking into account the claims incurred, expense charges, risk charges, changes in reserves and profits.

RISK CHARGE
The portion of a group insurer’s retention intended to be used for any of the following: (1) to spread the cost of catastrophic or epidemic losses over all groups (2) to pay certain claims which may be “pooled” and not charged against the experience of a particular group, (3) to cover the experience deficits arising on the poorer risks in a given class, (4) to provide a contribution to the insurer’s general surplus as protection against major losses affecting its entire group business.

SCHEDULE OF INSURANCE
A list of the amounts of insurance for each coverage according to predetermined classifications for each person which have been decided upon by the policyholder and insurer.

SELF-ADMINISTRATION
The policyholder maintains all records regarding the insured’s covered under the group insurance plan. The employer prepares the premium statement for each payment date and submits it with a cheque to the insurance company. The insurance company has the contractible prerogative to audit the policyholder’s records.

SELF-INSURANCE
A special fund, such as a mutual benefit association or health and welfare fund, established by an employer or employee group, or a combination of the two which directly assumes the functions, responsibilities and liabilities of an insurer. This non-insurer directly provides rather than purchase insurance coverage.

SERVICE FEES
Special compensation usually granted to consultants and/or brokers who directly perform many of the functions of a group representative and/or Home Office (e.g., they prepare specifications, prepare and present proposals, handle solicitations and enrollments, prepare announcement materials, install the case, handle all service calls, do certain calculations, handle all renewals, etc.)

SERVICE-TYPE PLANS
Plans which provide their benefits in the form of services rendered rather than cash benefits (e.g., Blue Cross, Blue Shield, and Dental Service Corporations).

SIMPLIFIED ACCOUNTING PROCEDURE
Arrangement under which the policyholder performs practically all of the clerical and billing operations, rather than (the insurer). The insurance records of each employee are maintained exclusively by the policyholder.

SINGLE CASE AGREEMENT
An agreement with an agent or broker specifying commissions which will be paid under a particular contract.

SPECIFICATIONS
A detailed professional listing of the qualifications of a certain group of individuals (e.g., type of risk, complete census date, contributions, past experience if a transferred case), and the coverage’s (types, amounts, schedules) and services (self-administration, draft book claims level commissions) which they will require usually provided by consultants/brokers when soliciting competitive form insurers.

STEP-RATE PREMIUM
Premium rates for a single unit of group insurance (e.g., $10,000 or $25,000 life) scheduled according to age, sex, occupation or other classification of individual insured’s; most often used in employee pay-all group life policies and most often found in five-year age bands.

STOP-LOSS PROVISIONS
In group insurance, provisions that determine (in advance) the amount of insurance claims in excess of which the policyholder is not charged. A premium is levied for this limitation of risk.

SUBSTANDARD RISK
A risk that cannot meet the normal health requirements of a standard insurance policy. Protection is provided in consideration of a waiver, a special policy form, or a higher premium charge. Substandard risks may include hazardous sports or occupations.

SURPLUS
The amount by which the value of an insurer’s assets exceed its liabilities.

TABLE RATE
A rate as selected form a premium rate table.

TABULAR CLAIM CHARGES
To the extent that a group is too small to have all actual claims charged to their premium (those claims below the pooling level, on any one insured) artificial claims must be substituted. The purpose of tabular claim charges is to “average out” over a number of years the paid claims (below the pooling level) for the group. Tabular claim charges are usually determined by adding a percentage (creditability factor) of the actual claims experienced to a percentage (inverse of creditability factor) of the average claim amount expected, plus any pooling charges.

TARGET RISK
A large premium risk that attracts unusually keen competition among insurers, agents or brokers.

TERMINATION
An employee who terminates employment or withdraws from the protection of the group plan offered by this employer.

THIRD-PARTY ADMINISTRATION
The method of administration under which a third party (such as a professional insurance administrator or a broker) maintains all records regarding the person covered under the group insurance plan. The third party administrator may also pay claims using the draft book system.

THIRD-PARTY PAYOR
Any organization, public or private, that pays or insures health or medical expenses on behalf of beneficiaries or recipients (e.g., Blue Cross and Blue Shield, Commercial insurance companies). The individual generally pays a premium for such coverage in all private and some public programs. The organization then pays bills on his behalf; such payments are called third-party payments and are distinguished by the separation between the individual receiving the service (the first party), the individual or institution providing it (the second party) and the organization paying for it (the third party).

TRUST AGREEMENT
A legal document which establishes a trust fund makes provisions as to how the trust fund shall be allocated and appoints and defines the duties, responsibilities and liabilities of the trustees.

TRUSTEE
A person appointed by a trust agreement to administer a trust fund. In group insurance it would be an individual (usually one of several) designated to administer a fund for purposes which include the purchase of group insurance.

TRUSTEE GROUP INSURANCE PLAN
A policy issued to the trustees of a fund established by a formal trust agreement covering employees subject to a collective bargaining agreement, or employees of two or more employers who are participants of the trust agreement. A trust arrangement can also be used on a voluntary basis to cover persons who are members of an association or employees of a particular employer.

UNALLOCATED BENEFIT
A reimbursement provision, usually for miscellaneous hospital and medical expenses, which does not specify how much will be paid for each type of treatment, examination, dressing or the like, but only sets a maximum which will be paid for all such treatments.

UNDERWRITING
The process by which an insurer determines whether or not and on what basis it will accept an application for insurance.

UNDERWRITING PROFIT
An insurer’s profit from its insurance operations as distinguished from its investment earnings on group term insurance; it is calculated by deducting claims, expenses, and reserve contributions from earned premium.

UNEARNED PREMIUM
That portion of a premium for which the protection of the policy has not yet been given.

UNINSURED PLANS
Provide health or short-term disability benefits, often administered by an insurance company. Because they’re not insured, benefits are not guaranteed.

UTILIZATION
The extent to which a given group uses a specified service in a specific period of time. Usually expressed as the number of services used per year per 100 or per 1,000 persons eligible for the service, but utilization rates may be expressed in other types of ratios.

VOCATIONAL EVALUATION
A professional analysis of the insured’s work potential, integrating information about physical capabilities, mental aptitudes, interests, personality, motivation, transferable skills and environmental considerations.

WAIVER
An agreement attached to a policy which exempts from coverage for certain disabilities (or risks) normally covered by the policy.

WAIVER OF PREMIUM
A provision that under certain conditions a person’s insurance will be kept in full force by the insured without further payment of premiums. It is used most often in the event of permanent and total disability.