Personal Finance Chapter 27

Health insurance

A plan for sharing the risk of high medical costs resulting from injury or illness

group insurance

Common type of health insurance in which all those insured have the same coverage and pay a set premium

COBRA

A law that allows people who leave employment to continue their health insurance under the company plan for a limited period of time

Coordination of benefits

A group health insurance provision that specifies how the insurers will share the cost when more than policy covers a claim

Flex 125 Plan

An employee benefit program that allows employees to set aside money, pretax, to help pay deductibles, copayments, and other health expenses

Basic health coverage

Includes medical, hospital, and surgical costs

Major medical coverage

Provides protection against the catastrophic expenses of a serious injury or illness

Stop-loss provision

An insurance clause that caps or sets a maximum that the insured has to pay during any calendar year

HSA

A health savings account used in association with a medical plan that carries a high deductible

HMO

A group plan offering prepaid medical care to its members (health maintenance organization)

PPO

A group of health care providers who band together to provide health services for set fees (preferred provider organization)

Disability Insurance

An insurance plan that makes regular payments (usually monthly) to replace income lost when illness or injury prevents the insured for working

Life insurance

Provides funds to the beneficiaries when the insured dies

Portability

The feature that allows a group policy to be converted into an individual policy. When you leave your employer, you are able to continue paying the premiums and convert your group policy into an individual policy

Incontestable clause

A provision of a life insurance policy stating that once the policy has been in effect for a stated period of time, the insurer may no longer question items on the application in order to deny coverage

double indemnity

The beneficiary is paid double the face amount of insurance policy

temporary life insurance

Life insurance that only lasts for a specified period

term life insurance

The most common form of temporary life insurance. It remains in effect for a specified period of time. The policy only has value the covered risk occurs while the policy is in effect

permanent life insurance

Life insurance that remains in effect for the insured's lifetime and builds a cash value

cash value

The savings accumulated in a permanent life insurance policy that you would receive if you can canceled your policy

HIPAA

Law that limits the pre-existing conditions that group plans may exclude. It also makes it illegal for an insurer to deny coverage based on health status

Unmanaged care plans

(Traditional fee-for-service) Allow participants to choose any doctor and to be reimbursed for a portion for a portion of the expense incurred after a deductible is met. This plan is often most expensive.

Point of Service Plan

Medical insurance plan that is a hybrid of an HMO and a PPO. It gives people more choice and control over medical services, but is designed to encourage participants to stay within the plan

Medicare

Government-sponsored health insurance for people 65+. It is funded by the Social Security Administration and funded by employee payroll deductions

Medicaid

Government-sponsored health insurance for people with low incomes and limited resources

Guaranteed renewability

Provision that protects you against cancellation if your health declines

Rider

A small insurance policy that modifies the coverage of the main policy

Waiver of premium

Rider that allows you to stop paying premiums and keep your coverage in force if you become disabled and cannot work

Guaranteed insurability

Rider that gives you the right to renew a policy or buy additional coverage regardless of changes in health

Decreasing term insurance

Temporary life insurance in which the amount of coverage decreases each year while the premium remains the same

Level term insurance

Temporary life insurance in which the amount of coverage remains constant from beginning to end

Credit life

Temporary life insurance that can only be used to repay a debt should the borrower die before doing so

Renewable term insurance

Temporary life insurance that gives the policyholder the right to renew each year, without having to pass a physical exame

Whole life

Permanent life insurance in which you pay fixed premiums throughout your life and the policy pays a stated sum at death to your beneficiary

Limited-pay life

Permanent life insurance in which premiums are limited to a specific number of years or until age 65. You remain insured for life, and the company will pay the face value of the policy at your death

Universal life

Permanent life insurance that combines a savings plan with a death benefit. The premiums and death benefits can be changed. The interest rate earned changes with the economy.

Variable life

Permanent life insurance that combines a death benefit with investment options. The death benefit and cash value rise or fall with the investment results. The premiums may or may not be fixed.