Understanding Terms: Glossary

When going about shopping for the right policy or making sure your policy protects you in the ways you need, it is important to understand insurance terms used. In educating yourself about the legal jargon employed by the insurance companies, you can be better prepared to combat an unfair claim payment or prevent your policy from being hijacked by vague language.

Below, courtesy of the University of Illinois, is a glossary of insurance terms, ranging from the letter O to R:

Optionally renewable. An insurance policy renewable at the discretion of the company.

Out of pocket payments. The percentage of medical expenses not paid by insurance company. Only approved, allowable expenses apply toward out-of-pocket.

Outline of coverage. A description of policy benefits, exclusions, and provisions that makes it easier to understand a particular policy and compare it with others.

Paid-up insurance. Insurance on which all required premiums have been paid.
Partial disability rider. A policy addition that will pay disability benefits for a period of time when the insured is partially disabled.

Participating policies. Life insurance policies that pay dividends.
Participation limits. The maximum monthly benefit from all sources of which an insurer will write a portion.

Peer review committees. Groups of physicians or other medical providers who advise insurers, patients, and physicians in disputes regarding what is a “reasonable and customary fee” for services rendered by medical providers other than those on the committee.

Period of confinement. The time during which you receive care for a covered illness. The period ends when you have been discharged from care for a specified period of time, usually six months.

Personal liability. Responsibility for the damage or loss to someone’s property or bodily injury of someone.

Personal property. Property not considered real property, such as automobiles, clothing, and furnishings.

Policy. The printed legal document stating the terms of the insurance contract that was issued to the policyholder by the company.
Policyholder. The person who owns an insurance policy.

Preadmission Testing (PAT). Laboratory and other prescreening tests and examinations prior to being admitted to a medical facility as an inpatient.
Preexisting condition. A medical condition that the insured has prior to the effective date of the policy.

Preferred Provider Organization (PPO). A prepaid health insurance plan where several hospitals and doctors agree to provide services at a discounted rate.

Premium. The charge for insurance protection.

Private Mortgage Insurance (PMI). Insurance that protects the lender from financial loss when the mortgager defaults. Allows a homebuyer to obtain a mortgage with little or no down payment.

Reasonable and Customary Charge. Health care fees consistent with average rates or charges for identical or similar services in a specified geographic area.

Reinstatement clause. A clause that lets the policyholder reinstate an insurance policy upon completion of reinstatement application accepted by the company and payment of back premium. The customer should check with the insurance company to see that the cash value of the policy was not reduced.

Renewable term insurance. Term insurance providing the right to renew at the end of the term for another term or terms, without a medical exam. The premium rates increase at each renewal as the age of the insured increases.

Replacement value. The claim settlement method in which the insured receives the full cost of repairing or replacing the damaged or lost items/property up to the policy limits.

Residual disability benefits. Disability insurance policy benefits paid when the disabled individual returns to work and is able to earn only a portion of the former benefits. The benefits paid will bring the individual’s total income up to the former benefit level.

Rider. An amendment to a policy that modifies the policy by expanding or restricting its benefits or excluding certain conditions from coverage. An example of a rider is additional insurance for valuables such as jewelry.

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