Health and Accident Insurance

Question 1

Accidental death and dismemberment (AD&D)

Answer 1

The purest form of accident insurance. It provides the insured with a lump-sum benefit amount in the event of accidental death or dismemberment under accidental circumstances

Question 2

Accidental Means

Answer 2

The Unforeseen, unexpected, unintended cause of an accident.

Requirement of an accident-based policy that the cause of the mishap must be accidental for any claim to be payable.

Question 3

Accidental Results

Answer 3

Policies that use the accidental bodily injury provision (sometimes called the results provision) required that the result of the injury has to be unexpected and accidental.

This is far less restrictive than the accidental means provision.

Question 4

Blanket Health Policies

Answer 4

Issued to cover a group who may be exposed to the same risks, but the composition of the group (the individuals within the group) are constantly changing.

A blanket health plan may be issued to an airline or a bus company to cover its passengers or to a school to cover its students.

No certificates of coverage are issued in a blanket health plan, as compared to group insurance.

Question 5

Business Continuation Plans

Answer 5

provide a way to help a business continue in the event an owner or key employee dies, ore in the event of a disabling sickness or injury.

Question 6

Business Overhead Expense Insurance

Answer 6

A form of disability income coverage designed to pay necessary business overhead expenses, such as rent, should the insured business owner become disabled.

Overhead expenses include such things as rent or mortgage payments, utilities, telephones, leased equipment, employees’’ salaries, and the like.

This includes all the expenses that would continue and must be paid, regardless of the owner’s disability.

Business overhead expense policies do not include any compensation for the disabled owner.

Question 7

Cafeteria Plans

Answer 7

Benefit arrangements in which employees can pick and choose from a menu of benefits, thus tailoring the benefits package to their specific needs.

Taxation of cafeteria plans is regulated by Section 125 of the Internal Revenue Code, thus sometimes cafeteria plans are referred to as a Section 125 Plan.

Question 8

Cancellable Policies

Answer 8

Allows the insurer to cancel or terminate the policy at any time.

This type of renewability is prohibited in most states.

Question 9

Capital Sum

Answer 9

Another form of payment payable under an AD&D policy and is the amount payable for the accidental loss of sight or accidental dismemberment, or capital sum.

It is a specified amount, usually expressed as a percentage of the principal sum, which varies according to the severity of the injury.

For example, the benefit for the loss of one foot or one hand is typically 50% of the principal sum.

The most extreme losses (such as both feet or sight in both eyes) generally qualify for payment of the full benefit, which is 100% of the principal sum.

Question 10

Common Disaster Provision

Answer 10

ensures a policy owner if both the insured and the primary beneficiary die within a short period of time, the death benefits will be paid to the contingent beneficiary.

It also states that the primary beneficiary must outlive the insured a specified period of time in order to receive the proceeds.

Question 11

Conditionally Renewable Policies

Answer 11

Give the insurer the option to terminate the policy only in the event of one or more conditions stated in the contract.

Typically, these conditions are age related.

If the insurer decides to renew (not cancel) the policy, they also have the option (and usually choose to) increase the premiums on the anniversary date.

Question 12

Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA)

Answer 12

Federal legislation which extends group health coverage to terminated employees and/or their families at the individual’s expense, for up to 18 months.

COBRA coverage may be extended beyond 18 months in certain circumstances.

COBRA rules typically apply when an employee loses coverage through loss of employment (except in cases of gross misconduct) or due to a reduction in work hours.

COBRA benefits also extend to spouses or other dependents in case of divorce or the death of the employee.

Children who are born to, adopted, or placed for adoption with the covered employee while he or she is on COBRA coverage are also entitled to coverage.

All companies that have averaged at least 20 full-time employees over the past calendar year must comply with COBRA regulations.

Question 13

Contributory

Answer 13

A group insurance plan issued to an employer under which both the employer and employees contribute to the cost of the plan.

Generally, 75% of the eligible employees must be insured in most states.

Question 14

Conversion Privilege

Answer 14

Allows a policy owner, before an original insurance plicy expires, to elect to have a new policy issued that will continue the insurance coverage.

Conversion may be effected at attained age (premiums based on the age attained at time of conversion) or at original age (premiums based on age at time of original issue).

Conversion is a common privilege for term life insurance and all group insurance.

The insured does not have to prove insurability (good health) when converting a policy.

Question 15

Coordination of Benefits

Answer 15

Designed to prevent duplication of group insurance benefits.

Limits benefits from multiple group health insurance policies in a particular case to a % of the expenses covered and designates the order in which the multiple carriers are to pay benefits.

Question 16

Credit Policies

Answer 16

Are designed to help the insured pay off a loan in the event they are disabled due to an accident or sickness or in the event they die.

If the insured becomes disabled, the policy provides for monthly benefit payments equal to the monthly loan payments due.

If the insured dies, the policy will pay a lump sum to the creditor to pay off the loan.

Credit policies typically cannot exceed the amount of the loan as that is the only amount the creditor has insurable interest in.

Question 17

Creditable Coverage

Answer 17

Is previous coverage under another insurance plan when there has not been a break in coverage of 63 days.

An individual’s waiting period for pre-existing conditions is reduced or eliminated altogether when he or she has creditable coverage.

Question 18

Disability (income) Insurance

Answer 18

is a form of insurance that insures the beneficiary’s earned income against the risk that a disability creates a barrier for a worker to complete the core functions of their work. Although disability insurance is designed to protect one’s income, there are typically rules and regulations in place limiting the benefits of a disability policy to one’s income level, and typically only allowing protection for a portion of their income.

Question 19

Disability Buy-Sell Plans (disability buy-out agreement)

Answer 19

Agreements between business co-owners that provides that shares owned by any one of them who becomes disabled shall be sold to and purchased by the other co-owners or by the business using funds from disability income insurance.

The buy-out plan usually contains a provision allowing for a lump-sum payment of the benefit, thereby facilitating the buyout of the disabled’s interest.

The policy is legally binding and proceeds are normally received tax-free.

Question 20

Enrollment Card

Answer 20

Must be completed and signed by a new employee during the open enrollment period to enroll in group insurance.

Question 21

Enrollment Period

Answer 21

The limited period of time during which all members may sign up for a group plan.

This period typically happens once a year for a set number of days.

Question 22

Franchise Health Plans (wholesale plans)

Answer 22

Provide health insurance coverage to members of an association or professional society.

Individual policies are issued to individual members and the association or society simply serves as the sponsor for the plan.

Premium rates are usually discounted for franchise plans.

Question 23

Group Health Insurance

Answer 23

Insurance that provides coverage for a group of persons, usually employees of a company, under one master contract.

Group health plans are available to employers, trade and professional associations, labor unions, credit unions, and other organizations.

Insurance is extended to individuals in the group through the master contract.

this normally does not require individual underwriting nor evidence of insurability.

The employer or the association is the policy owner and is responsible for premium payments.

The employer may pay the entire premium or may require some contribution from each member to cover the insurance cost.

Question 24

Guaranteed Renewable Policies

Answer 24

Specify that the policy MUST be renewed (usually until the insured reaches a specified age).

However, the insurer still has the option (and usually choose to) increase the premiums on the anniversary date.

Medicare supplement policies and long-term care policies are the most common types of guaranteed renewable policies.

Question 25

Health insurance

Answer 25

A general way of describing insurance against loss through sickness or accidental bodily injury.

It is also called accident and health, accident and sickness, sickness and accident, or disability insurance.

It is important to remember the general term “health insurance” applies to many different types of insurance, not just the medical insurance that pays for doctor and hospital visits.

Also known as Medical insurance.

Question 26

Health Insurance Portability and Accountability Act (HIPAA)

Answer 26

Provides the ability to transfer and continue health insurance coverage for millions of American workers and their families when they change or lose their jobs.

The HIPAA Privacy Rule provides federal protection for an individual’s health information and gives patients an array of rights with respect to that information.

The HIPAA Security Rule provides technical safeguards to assure the confidentiality, integrity, and availability of electronic protected health information.

Question 27

Health Savings Accounts

Answer 27

A tax-advantaged medical savings account available to taxpayers in the United States who are enrolled in a high-deductible health plan (HDHP).

The funds contributed to an account are not subject to federal income tax at the time of deposit.

Qualified health care expenses include amounts paid for: Doctors’ fees, Prescription and nonprescription medicines, Necessary hospital services not paid for by insurance, Retiree health insurance premiums, Medicare expenses (but not Medigap), Qualified long-term care services, COBRA coverage.

Qualified medical expenses are expenses incurred by the HSA owner, the spouse, and dependents.

Nonqualified withdrawals are subject to income taxes and a 20% penalty.

HSAs are fully portable, and assets can accumulate over the years.

Upon death, HSA ownership may be transferred to a spouse tax free.

Question 28

Interim Coverage

Answer 28

is a short-term policy purchased on an interim basis typically when in between jobs or waiting for a new policy to start

Question 29

Irrevocable Beneficiary

Answer 29

May not be changed without the written consent of the beneficiary.

The irrevocable beneficiary has a vested interest in the policy, therefore the policyowner may not exercise certain rights without the consent of the beneficiary.

Question 30

Key Person Disability Insurance

Answer 30

The protection of a business against financial loss caused by the death or disablement of a vital number of the company, usually individuals possessing special managerial or technical skill or expertise.

This type of coverage pays a monthly benefit to a business to cover expenses for additional help or outside services when an essential person is disables.

Benefits are received by the business tax-free because the premium paid is not tax deductible.

Question 31

Limited Risk Policies

Answer 31

Provides coverage for specific kinds of accidents or illnesses, such as injuries received as a result of travel accidents or medical expenses stemming from a specified disease.

Question 32

Medical expense insurance

Answer 32

pays benefits for nonsurgical doctors fees commonly rendered in a hospital; sometimes pays for home and office calls

Question 33

Noncancelable Policies

Answer 33

State the policy cannot e cancelled nor can its premium rates be increased under any circumstances.

Disability policies are the most common noncancelable (noncan) policies.

Question 34

Noncontributory

Answer 34

An employee benefit plan under which the employer bears the full cost of the employees’ benefits; in most states, the plan must insure 100% of the eligible employees.

Question 35

Nonoccupational Coverage

Answer 35

Coverage provided by a Disability Income policy hat does not provide benefits for losses occurring as the result of the insured’s employment.

Question 36

Nonparticipating Plan

Answer 36

Insurance under which the insured is not entitled to share in the divisible surplus of the company

Question 37

Nonrenewable Policies

Answer 37

Are for stablished policy lengths of a year or less (typically short-term health insurance) and are considered temporary.

Question 38

Optionally Renewable Policies

Answer 38

Give the insurer the option to terminate the policy on a date specified in the contract.

If the insurer decides to renew (not cancel) the policy, they also have the option (and usually choose to) increase the premiums on the anniversary date.

Question 39

Participating Plan of Insurance

Answer 39

A plan under which the policy owner receives shares (commonly called dividends) of the divisible surplus of the company.

Question 40

Patient Protection and Affordable Care Act

Answer 40

Designed to increase heath insurance quality and affordability, lower the uninsured rate by expanding insurance coverage and reduce the costs of healthcare.

It introduced mechanisms including mandates, subsidies and insurance exchanges.

The law requires insurers to accept all applicants, cover a specific list of conditions and charge the same rates regardless of pre-existing conditions or sex.

The Patient Protection and Affordable Care Act, often shortened to the Affordable Care Act (ACA) and nicknamed Obamacare, only applies to specific medical coverage

It does NOT apply to ALL health insurance policies.

Question 41

Per Capita (by the head)

Answer 41

Evenly distributes benefits among all named living beneficiaries.

Question 42

Per Stirpes (by the bloodline)

Answer 42

means that in the event that a beneficiary dies before the insured, benefits from that policy will be paid to that beneficiary’s heirs.

Question 43

Preexisting conditions

Answer 43

an illness of medical condition that existed before a policy’s effective date; usually excluded from coverage, through the policy’s standard provisions or by waiver.

Under HIPAA, are defined as health issues that existed, were treated, or diagnosed within 6 months prior to employment.

An enrollee’s pre-eisting conditions for a health benefit plan may be excluded for up to 12 months (18 months for late enrollees).

A late enrollee is an individual who elects coverage after the initial eligibility period.

Question 44

Primary Beneficiary

Answer 44

The first in line to receive death benefit proceeds.

Question 45

Probationary Period

Answer 45

A specified number of days after an insurance policy’s issue date during which coverage is not afforded for sickness.

Standard practice for group coverages as well as disability coverage.

The probationary period typically does NOT apply to accidents.

The real goal of this provision is to prohibit people from buying insurance only when they need it and immediately filing a claim, otherwise known as adverse selection.

Question 46

Renewability Provisions

Answer 46

Define the rights of the insurer to cancel the policy at differnt points during the life of the policy. There are five principal renewability classifications:

• Cancellable,
• Optionally Renewable
• Conditionally Renewable
• Guaranteed Renewable
• Noncancelable

Generally Speaking, the more advantageous the renewability provisions to the insured, the more expensive the coverage.

Question 47

Revocable Beneficiary

Answer 47

A beneficiary that the policy owner may change at any time without notifying or getting permission from the beneficiary.

Question 48

Secondary (contingent) Beneficiary

Answer 48

Second in line to receive death benefit proceeds.

Question 49

Simultaneous Death Act

Answer 49

States that if the insured and the primary beneficiary die at approximately the same time for a common accident with no clear evidence as to who died first, the Uniform Simultaneous Death Act law will assume that the primary died first, this allows the death benefit proceeds to be paid to the contingent beneficiaries.

Question 50

Special Risk Policy

Answer 50

Covers unusual hazards normally not covered under ordinary accident and health insurance.

An actress who insures her legs for $1 million or a pilot test-flying an experimental airplane who obtains a policy covering his life while flying that particular plane are both purchasing special risk policies.

Question 51

Spendthrift Clause

Answer 51

Prevents a beneficiary from recklessly spending benefits by requiring the benefits to be paid in fixed amounts or installments over a certain period of time.

A Spendthrift clause would have no effect if the beneficiary receives the proceeds as one lump sum payments.

Question 52

Tertiary Beneficiary

Answer 52

The Third in line to receive death benefit proceeds.

If no one named, death benefit will go to insured’s estate.

Question 53

The Beneficiary of an Accidental Death and Dismemberment (AD&D)

Answer 53

Insurance policy is the person or entity designated in the policy to receive the death proceeds.

Question 54

The Principal Sum under an AD&D Policy

Answer 54

The amount payable as a death benefit.

It is the amount of insurance purchased.

The principal sum represents the maximum amount the policy will pay.

Question 55

Waiting Period

Answer 55

A period of time (often 12 months) beginning with your effective date during which your health insurance plan does not provide benefits for pre-existing conditions.

This period may be reduced or waived based on any prior health care coverage you had before applying for your new health insurance plan.