combination clause
A clause in a disability income
contract that specifies a point at which the definition of total
disability will no longer be based on an insured's inability to
perform his or her "own occupation" but on the insured's inability
to perform "any occupation."
combination dental plan
A dental plan which contains
features of both scheduled and nonscheduled plans. Typically,
combination plans cover preventive and diagnostic procedures on a
nonscheduled basis and other services on a scheduled basis. See also
nonscheduled dental plan and scheduled dental plan.
combination plan
A pension plan which employs an
approach to funding wherein part of the funding is allocated and
part is unallocated. The allocated part of the employer's
contribution is used to purchase annuities or life insurance
contracts with cash values. The unallocated part is placed in a side
fund, also called a conversion fund. See also allocated funding and
unallocated funding.
commission
The amount of money paid to an insurance
agent for selling an insurance policy. A commission is almost always
calculated as a percentage of the premium.
Commissioners Method
A method prescribed in the United
States for calculating modified net premiums and reserves for life
insurance policies.
common accident provision
(1) A provision of many
medical expense insurance contracts which specifies that, if two or
more members of the same family are injured in the same accident,
their combined medical expenses will only be subject to one
deductible. (2) A provision found in many voluntary group accidental
death and dismemberment plans which specifies that the amount
payable by the insurance company is limited to a stipulated maximum
for all employees killed or injured in a single accident.
common disaster clause
A life insurance policy
provision which states that the primary beneficiary must survive the
insured by a specified period, such as 60 or 90 days, in order to
receive the policy proceeds. Otherwise, the policy proceeds will be
paid as though the primary beneficiary had died before the insured.
community-rating
Applying the same premium rate
structure to certain group insurance subscribers, regardless of
their past or potential loss experience. See also pooling.
commuted value
In Canada, the present value of the
pension benefits expected to be paid to a retiree from the date of
retirement until death.
company retention method
A method of comparing the
costs of various life insurance policies wherein the present value
of premiums, cash values, and dividends is calculated by weighting
each item each year by the probability that it will be paid. See
also cost comparison methods.
comprehensive major medical insurance
A form of health
insurance coverage that combines the features and benefits of a
hospital-surgical expense policy and the features and benefits of a
major medical policy.
concurrent review
A component of a utilization review
program that monitors an insured's care while the insured is
hospitalized and encourages the dismissal of an insured from the
hospital as soon as the insured's medical condition no longer
warrants continued in-patient care.
conditionally renewable policy
A health insurance
policy that grants an insurer the right to refuse to renew the
policy for reasons specified in the policy at the end of a premium
payment period. See also cancellable policy, guaranteed renewable
policy, noncancellable and guaranteed renewable policy,
noncancellable policy, and optionally renewable policy.
conditional premium receipt
A type of premium receipt
given when the applicant pays the initial premium and under which
life insurance will become effective before a policy is issued only
if the proposed insured is found to be insurable. Also called a
conditional receipt. Compare to binding premium receipt. See also
approval type temporary insurance agreement and insurability type
temporary insurance agreement.
confirmation certificate
A certificate issued to the
beneficiary of a life insurance policy that outlines the amount of
life insurance proceeds in a retained asset account, the account
number, and the current interest rate.
conservation
An agent's or an insurer's efforts to
prevent a policy from lapsing.
Consolidated Omnibus Budget Reconciliation Act of 1985
(COBRA)
In the United States, a statute which requires that
employers sponsoring group health plans offer continuation of
coverage under the group plan to employees and their spouses and
dependent children who have lost coverage because of the occurrence
of a "qualifying event." Qualifying events include reduction in work
hours, many types of termination of employment, death, and divorce.
constructive delivery
Legally equivalent to physical
delivery of a policy. Constructive delivery occurs (a) when an
insurer parts with control of the policy with the intention that the
insurer will be unconditionally bound by the policy as a completed
instrument or (b) when the policy is physically delivered to an
agent of the applicant.
consumer report
As defined by the Fair Credit Reporting
Act, a consumer reporting agency's communication of any information
pertaining to an individual consumer's creditworthiness, credit
standing, credit capacity, general reputation, or personal
characteristics.
consumer reporting agency
Any person or organization
that regularly prepares consumer reports and furnishes them, either
for profit or on a cooperative, nonprofit basis, to other persons or
organizations. Also called a credit reporting agency. See also Fair
Credit Reporting Act (FCRA).
contestable period
The period of time (usually two
years) during which an insurer may challenge the validity of a life
insurance policy. See also incontestable clause.
contingencies
Events that are possible but that may or
may not happen. Insurers base their premium rates and their
willingness to accept risks partly on the probability that certain
contingencies will or will not occur.
contingency reserve
A voluntary reserve established by
an insurance company to help pay any unusual and unexpectedly large
claim amounts. See also special surplus funds.
contingent beneficiary
The party designated to receive
life insurance policy proceeds if the primary beneficiary should die
before the person whose life is insured. Also called the secondary
beneficiary or the successor beneficiary.
contingent payee
The party who will receive any life
insurance policy proceeds that are still payable under a settlement
option at the time of the primary payee's death. Unlike the
contingent beneficiary, the contingent payee's rights do not end
when the insured dies. Also called the successor payee.
contingent payment
A payment that will be made only if
some predesignated condition is met, such as the recipient being
alive.
continuance tables
Tables containing morbidity
statistics that indicate the distribution of claims according to the
duration of the illness or amount of expense involved in the claims.
continuous-premium whole life
insurance
A type of whole life insurance in which premiums
are payable until the death of the insured. Also called straight
life insurance.
contract of adhesion
A legally binding agreement that
is prepared by one party and that must be accepted or rejected as a
whole by the other party, without any bargaining between the parties
to the agreement. Insurance contracts are contracts of adhesion.
contract of indemnity
A type of
contract in which the amount of the benefit to be paid is based on
the actual amount of financial loss as determined at the time of
loss. For example, many hospital expense insurance contracts are
contracts of indemnity. See also valued contract.
contributed surplus
On a Canadian life insurance
company's balance sheet, the amount in excess of par value paid in
by stockholders minus the amount of dividends paid to stockholders.
contribution limit
The maximum annual addition
permitted by law to be made to a participant's account in a defined
contribution pension plan. The annual contribution includes employer
contributions, employee contributions, and forfeitures that have
been reallocated from other participants' accounts. The limit is
subject to legislative change and is generally indexed to inflation
so that it increases as price levels increase. In the United States,
the contribution limit is set under Section 415 of the Internal
Revenue Code. See also maximum benefit and Section 415 limits.
contribution to surplus
In mutual insurance companies,
the income that results when an insurance company makes more money
than is needed to pay for the cost of providing insurance.
contributory group insurance
Any group insurance plan
that calls for the insureds to pay a portion of the cost of the
group insurance coverage. Contrast to noncontributory group
insurance.
contributory plan
Any pension or employee benefit plan
in which plan participants can or must make contributions to the
plan out of their own funds. Contrast with noncontributory plan.
convention blank
The standardized Annual Statement form
that all United States insurers must complete and submit yearly to
their state's insurance regulators. See Annual Statement.
conversion fund
The fund in which unallocated employer
contributions to a combination plan are accumulated. Also called a
side fund.
conversion privilege
(1) The right of a person who is
covered by a group insurance policy to convert his or her group
coverage to coverage under an individual insurance policy. Such a
conversion can be made when a person leaves the group, benefits are
downgraded or terminated for a specific class, or when the group
master policy is ended. (2) The right to change insurance coverage
in certain prescribed situations from one type of policy to another.
For example, the right to change from an individual term insurance
policy to an individual whole life insurance policy.
convertible term insurance
A type of term insurance
that allows the policyowner to change the term insurance policy to a
whole life policy without providing evidence of insurability. The
premium rate is normally based on the age of the insured at the time
of the conversion.
copayment
A cost sharing
arrangement in which a person pays a specific charge for a specific
medical service -- say $10 for an office visit or $5 for a
prescription.
coordination of benefits (COB) clause
A provision in a
group health insurance policy specifying that benefits will not be
paid for amounts reimbursed by other group health insurers. The
purpose of a coordination of benefits provision is to assure that an
insured's benefits from all sources do not exceed 100 percent of
allowable medical expenses. See also overinsurance provision.
corridor
(1) In the United States, the required
difference between a universal life insurance policy's death benefit
and the policy's cash value. This difference is a specified
percentage that depends on the insured's age. If a policy's cash
value exceeds the required percentage of the death benefit (that is,
intrudes on the corridor), the policy will be considered an
investment contract rather than an insurance contract. Also called
the TEFRA corridor. (2) In reinsurance, an amount of insurance which
is in excess of the ceding company's retention limit but which is
less than the reinsurer's minimum cession. The ceding company must
usually retain this amount of insurance.
corridor deductible
A flat amount that an insured must
pay above the amount paid by his or her hospital-surgical expense
policy before any benefits are payable under the major medical
policy. In a sense, the deductible bridges the gap between a
hospital-surgical policy and a major medical policy.
cost comparison methods
The different formulas that
insurance companies use to show prospective policyowners the cost of
different insurance policies. See also company retention method,
interest-adjusted net cost method, and rate of return method.
cost-of-living adjustment (COLA)
An
increase in a pension benefit, disability income benefit or life
income benefit to compensate for an increase in the cost of living.
See also indexation.
coupon advertisement
As defined by the Superintendent's
Guidelines in Canada, (1) a sales inducement designed to invite the
public to contract for insurance by the inclusion of an application
for an individual insurance contract or (2) a broad description of
coverage designed to invite the public to request an application for
insurance with additional printed material for the purpose of
issuing the applicant an individual insurance contract.
credibility percentage
The amount of credit or weight
given to a group's actual claims experience in determining a
projection of future claims or in the calculation of a dividend.
Sometimes called the credibility factor. See also experience rating
and experience refund.
credit life insurance
A type of decreasing term
insurance designed to pay the balance due on a loan if the borrower
dies before the loan is repaid.
credits
In the numerical rating system, credits
represent underwriting factors that have a favorable effect on an
individual's mortality rating. Credits are assigned negative values.
See also debits and numerical rating system.
cross-selling
The process of selling both
property/casualty and life and health insurance, as well as other
financial services products, to the same customer.
current assumption whole life
insurance
A type of whole life insurance in which premium
rates and cash values vary according to the insurer's assumptions
regarding mortality, investment, and expense factors. Each
policyowner can decide whether he or she wants favorable changes in
assumptions to result in a lower premium or a higher cash value for
the policy. If changes in assumptions result in a higher premium
than that paid when the policy was purchased, the policyowner may
choose to lower the policy's death benefit and maintain the previous
premium or pay the higher premium and maintain the original death
benefit. As with indeterminate premium life insurance, current
assumption whole life insurance guarantees that the premium will not
increase above the rate guaranteed when the policy was purchased.
Also called interest-sensitive whole life insurance.
current settlement option rates
Settlement option rates
that reflect the interest rates currently earned by the insurer.
curtailment
An event or amendment to a pension plan
that significantly reduces plan benefits or employer contributions.
Types of curtailments include a reduction of the expected years of
future service of present employees, and the elimination of the
accrual of defined benefits for some or all of the future services
of a significant number of employees.
customer service department
The department in a life
and health insurance company that is charged with providing
assistance to the company's policyowners, agents, and beneficiaries.
Customer service specialists answer policyowners' requests for
information, help them interpret policy language, answer questions
about policy coverage, and make changes requested by the
policyowner, such as changing the policyowner's address, beneficiary
designation, and mode of premium payment. The customer service
department may also send premium notices to customers, collect
premium payments, and calculate and process policy loans,
nonforfeiture options, dividends, and surrenders. In some companies,
the customer service department also processes commission payments
for company agents. Also called the client service department, the
policy administration department, the policyowner service
department, and the service and claim department.
