Critical Insurance Terms Glossary
A document used by an insurance company to collect information on the prospective insured which the underwriter uses to assist in the process of evaluating whether coverage will be offered (underwriting).
Attending Physician Statement (APS)
An APS is a medical report completed by the proposed insured’s physician, which documents his or her past and current health history. Insurance companies Underwriters use this report in the risk evaluation process (underwriting) of an application to evaluate benefit eligibility.
A Beneficiary is a person or entity who is named to receive benefits from an insurance policy. There are three types of Beneficiaries:
- Primary Beneficiaries (such as a spouse): are first entitled to the proceeds.
- Secondary Beneficiaries (such as a child): are entitled to the proceeds if the Primary Beneficiary is no longer living when the insured dies.
- Tertiary Beneficiaries (such as a grandchild): receive the proceeds if both the primary and the Secondary Beneficiaries are no longer living when the insured dies.
A Benefit is the percentage of face amount on a Critical Insurance policy payable to the insured upon Diagnosis.
A Buy-Sell policy would pay the tax-free, lump sum to the insured’s corporation or business partner to buy out the business interest of the owner.
Is coverage provided under the terms of a Conditional Receipt. This coverage is provided up to stated limits and is based on certain conditions during the underwriting process. This benefit varies by insurance carrier.
A receipt provided to the prospective insured upon submission of the appropriate premium at time of application. The insured will then receive interim coverage during the underwriting process, subject to the terms and conditions of the Conditional Receipt.
This provision indicates that the Insurance Company will renew the insurance policy if the insured complies with specified conditions.
A Conversion Privilege allows employees who are leaving a job to keep some or all of their Critical Insurance coverage without having to submit evidence of insurability. All future policy premiums are at the employee’s expense.
Are the actual conditions that can be diagnosed and pay a benefit under a Critical Insurance policy. It is important to note that a good Critical Insurance policy is not defined by the number of conditions covered. Rather, a good Critical Insurance policy is defined by the definitions of each covered condition. Here is a list of conditions that are found on different company policies with a description of what a good definition should look like (Not all products are available in all States and definitions may be different depending on the State of issue.):
- Advanced Alzheimer’s Disease: A progressive degenerative disease of the brain supported by medical evidence that the Insured exhibits the loss of intellectual capacity resulting in impairment of memory and judgment. This impairment results in a significant reduction in mental and social functioning, such that the Insured requires permanent daily personal supervision and is unable to perform independently three or more of the following activities of daily living: transferring (moving in or out of a bed or chair), dressing, bathing, feeding, toileting, and continence. (Assurity Life- Assurity Balance CI)
- Angioplasty: The actual undergoing of a percutaneous transluminal angioplasty deemed medically necessary to correct a narrowing or blockage of one or more coronary arteries. (Assurity Life- Assurity Balance CI)
- Aortic Surgery: The actual undergoing of surgery for disease of the aorta needing excision and surgical replacement of a portion of the diseased aorta with a graft. The surgery must be deemed medically necessary and performed by a cardiologist, cardiovascular thoracic surgeon or vascular surgeon. Aorta refers to the thoracic and abdominal aorta but not its branches. (Assurity Life- Assurity Balance CI)
- Benign Brain Tumor: The diagnosis, by a neurologist, of a non-malignant tumor within the substance of the brain or meninges resulting in permanent deficit to the neurological system. Permanent deficit is defined as a continuous residual neurological deficit as a result of the tumor. (Assurity Life- Assurity Balance CI)
- Blindness: Diagnosis by an ophthalmologist of a total and irreversible loss of vision in both eyes. The corrected visual acuity must be 20/200 or less in each eye or field of vision must be less than 20 degrees in both eyes. (Assurity Life- Assurity Balance CI)
- Carcinoma In Situ: A Diagnosis of cancer wherein the tumor cells still lie within the tissue of origin without having invaded neighboring tissue. Cancer in Situ includes early prostate cancer diagnosed as T1N0M0 or equivalent staging and melanoma not invading the dermis. (Assurity Life- Assurity Balance CI)
- Coronary Bypass: The actual undergoing of coronary artery bypass surgery using either a saphenous vein or internal mammary artery graft for the treatment of coronary heart disease deemed medically necessary to correct a narrowing or blockage of one or more coronary arteries. (Assurity Life- Assurity Balance CI)
- Coma: Loss of consciousness (external stimulation produces only primitive avoidance reflexes) for a continuous 96 hours. (Assurity Life- Assurity Balance CI)
- Deafness: Diagnosis by a physician of the total and irreversible loss of hearing in both ears, with an auditory threshold of 90 decibels or greater. (Assurity Life- Assurity Balance CI)
- End-stage Renal Disease: The chronic and irreversible failure of both kidneys requiring periodic and ongoing dialysis. (Assurity Life- Assurity Balance CI)
- Heart Attack: An Acute Myocardial Infarction resulting in the death of a portion of the heart muscle myocardium) due to a blockage of one or more coronary arteries and resulting in the loss of the normal function of the heart. (Assurity Life- Assurity Balance CI)
- Heart Valve Replacement: The actual undergoing of open heart surgery to replace or repair one or more valves. (Assurity Life- Assurity Balance CI)
- HIV Infection (Occupational): Infection with the Human Immunodeficiency Virus (HIV) resulting from an accidental injury which occurred in the United States after the issue date of the policy, and which exposed the Insured to HIV contaminated blood or bodily fluids during the course of the duties of the Insured's normal occupation. Payment under this condition requires satisfaction of ALL of the following (Assurity Life- Assurity Balance CI):
- The accidental injury must be reported to the insurer within 14 days of the accidental injury - An HIV test must be taken within 14 days of the accidental injury and the result must be negative - An HIV test must be taken between 90 days and 180 days after the accidental injury and the result must be positive - The accidental injury must have been reported, investigated and documented in accordance with workplace legislation and regulations
- Invasive Cancer: A malignant tumor that demonstrates uncontrolled growth with the spread of malignant cells beyond the tumor’s original site and the invasion of tissue. (Assurity Life- Assurity Balance CI)
- Loss of Independent Living: The loss of two or more Activities of Daily Living diagnosed by a physician, where the loss is expected to be permanent. The insured must be under the regular and appropriate care of a physician and usually must satisfy a 180 Waiting Period for benefit payment eligibility. (American General- CriticalCare Plus)
- Loss of Limbs: The total and irreversible severance of two or more limbs from above the wrist or ankle joint as the result of an accident or medically required amputation. (Assurity Life- Assurity Balance CI)
- Loss of Speech: The total, permanent and irreversible loss of an ability to speak as a result of an accidental injury. (Assurity Life- Assurity Balance CI)
- Major Burns: Third degree burns covering at least 20% of the body surface. (Assurity Life- Assurity Balance CI)
- Major Organ Transplant: The clinical evidence of major organ(s) failure which requires the malfunctioning organ(s) or tissue of the Insured to be replaced with an organ(s) or tissue from a suitable human donor. The Insured must be registered by the United Network of Organ Sharing (UNOS). Usually, the following organs are covered (Assurity Life- Assurity Balance CI):
- Entire Heart - Lung - Liver - Pancreas-Kidney - Small intestine - Pancreas - Kidney - Bone marrow
- Motor Neuron Disease: The unequivocal diagnosis, by a neurologist, of one of the following Motor Neuron Diseases (Assurity Life- Assurity Balance CI):
- amyotrophic lateral sclerosis (A.L.S. or Lou Gehrig's Disease) - primary lateral sclerosis - progressive spinal muscular atrophy - progressive bulbar palsy - pseudo bulbar palsy
- Multiple Sclerosis: The occurrence of at least two episodes of well defined neurological abnormalities, with objective evidence of lesions at more than one site within the central nervous system. (Mutual of Omaha- Critical Illness Insurance)
- Paralysis: Complete and permanent loss of the use of two or more limbs from a neurological injury for a continuous 180 days. (Assurity Life- Assurity Balance CI)
- Stroke: Any acute cerebrovascular accident producing neurological impairment and resulting in paralysis or other measurable objective neurological deficit persisting for at least 96 hours and expected to be permanent. (Assurity Life- Assurity Balance CI)
Cross Purchase Agreement
Is a type of Buy/Sell Agreement where business owners purchase insurance on each partner and they become both the owners and beneficiaries of policy benefits.
Disability insurance is a type of Insurance that pays the insured a Monthly Benefit for a predetermined amount of time by replacing income lost from either an accident or sickness.
Income & Net Worth
Used during the underwriting process to determine the amount of Benefit an applicant may qualify for. Unlike Disability Insurance, it is not defined as gross (after tax) salary, wages, commissions, bonus income, etc. derived from active employment. Calculation is based on including investment income, rent, royalties, etc.
The Effective Date is the day in which the policy begins and the insured is eligible to make a claim for benefits.
Entity Purchase Agreement
Similar to a Cross-Sell Agreement, this type of Buy/Sell Agreement designates the corporation as both the owner and the beneficiary of insurance policy proceeds.
Critical Insurance policies include specific conditions in which a Diagnosis will not be covered. For example, most policies will not provide benefits for diagnoses caused by war, participating in a riot, committing a felony, or a self-inflicted injury.
Is contractually attached to a Critical Insurance Policy and outlines the specific benefit(s) that will not be covered under the policy. Ridered benefits that are excluded often include preexisting conditions identified either by medical history or physical exam.
A payment arrangement under Section 162 of the Internal Revenue Code (IRC) that allows the insured to pay their Critical Insurance premium using a salary bonus that can be deducted from taxes.
A method of evaluating data relevant to earned income, unearned income, net worth, fringe benefits and other components of compensation to determine an insured’s eligible Benefit.
A Grace Period is the 31 days immediately following the premium due date. The coverage will continue during the 31 days, but if the premium is not paid by the end of the Grace Period, all coverage will be terminated and proof of insurance will be required in order to continue coverage after the Grace Period.
Group Critical Insurance
An employer provided/paid Critical Insurance plan that is either Simplified or Guaranteed Issue. These plans usually allow face amounts of $10,000 up to $100,000 but benefits can be taxable should the Employer deduct premium payments on their taxes.
A policy provision guaranteeing that as long as premiums are paid by the end of each grace period, no changes can be made to any provision in the policy, except the premiums may be increased. The premiums can change, but only if the change applies to all policies within the same risk class.
Insurance Company Ratings
Insurance company ratings can provide important information on the companies’ financial performance, stability, claims paying ability and more. There are five major insurance industry ratings services: A.M. Best, Standard and Poor's, Moody's, Duff and Phelps, and Weiss. Their top ratings are:
- Standard and Poor's - AAA
A phone interview ordered by an underwriter that confirms an applicant’s health history, employment and living habits. This information is obtained by interviewing the applicant directly.
Key Person Policy
A policy designed to reimburse the business for financial loss should a key person suffer a critical illness.
Critical Insurance Policies pay a tax free benefit in a lump sum (as long as premiums are paid after tax).
A Medical Examination (and lab report) is often part of the application process for Critical Insurance policies. The information becomes part of the contract and is attached to the policy. It usually consists of obtaining certain body measurements, health questions and blood and urine samples. On occasion, it may also include ECGs, EKGs and/or MD Exams.
A method and process used to evaluate an applicant’s health and medical history to determine whether a policy will be issued and if so, the appropriate coverage, premium and exclusions.
This figure is used in financial underwriting to determine the appropriate Benefit amount. Calculation includes but is not limited to the total non-business related assets of an insured.
Outline of Coverage
A summary of the overall benefits provided to a policyholder in a policy by the insurance carrier.
See Medical Exam definition.
Personal History Interview
See Inspection Report definition.
Policy Schedule Page/Policy Declaration Page
This section of the policy provides the details of all the specific individual policy data such as insured’s name, policy number, Face Amount Benefit, Optional Riders, Policy Provisions and the premium.
Pre-existing conditions are usually defined as any mental or physical condition for which:
- The insured has consulted a physician; or
- The insured has received medical treatment or services; or
- The insured has taken prescribed drugs or medications; or
- A reasonably prudent person would have sought medical advice, care or treatment during the 365-day period ending the day prior to the policy's effective date.
If during a specified period of time prior to coverage, the insured received medical attention for the same illness or injury that caused their claim, after the policy’s effective date of coverage, the condition will not be covered. Some policies have more restrictions that state if the insured did not seek medical attention for the condition but still experienced the symptoms prior to coverage, the benefit for that condition may be excluded from claim or the policy may be rescinded.
Preferred Risk Class
A Preferred Risk Class are individuals who have a lower anticipated mortality or morbidity rate based on exceptional health, family medical history and low risk occupations, etc, than individuals with average health and are considered a Standard Risk Class.
A Premium is the payment required to keep an insurance policy in effect.
The premium payment frequency is selected by the insured. Most insurance companies offer annual, semi-annual, quarterly or monthly payment options. Fees are typically assessed for semi-annual and quarterly premium payment modes.
An underwriting decision that assesses additional premium to a policy in order to cover a certain condition(s) and allows the issuance of a policy in recognition of perceived additional risk.
Return of Premium
A Death Benefit built into the policy at no extra cost that returns 100% of all premiums, less any benefits paid, if insured dies of any cause other than a covered diagnosis. Return of Premium is not available in every State. Be sure to review each Insurance Carrier’s Outline of Coverage for clarification.
A Federal program that provides potential income benefits to the majority of working Americans, in the form of disability, retirement or survivor benefits. The qualification for Social Security benefits is based on very strict and narrow definitions and benefits are limited to low monthly maximums.
Standard Risk Class
The Standard Risk Class are the individuals whose mortality and morbidity risks are considered average. Most people are included in this risk class.
Supplemental Health Statement
This application form provides the underwriter with additional details about an applicant’s health.
Applicants who use tobacco products are subject to a higher premium rate class, usually referred to as a Tobacco Rate Class. Those applicants who do not use tobacco products are given a lower premium rate. If an applicant smoked in the past, but has quit more than a year ago, most insurers will consider that applicant as a nontobacco user. Nicotine is easily detected from the results of a urinalysis, which is commonly required by most insurance companies in the underwriting process.
An underwriter can be defined as either an insurance company that receives premiums and accepts responsibility for fulfilling policy contracts or an insurance company employee who reviews all risk categories and then decides what risks the company should assume.
Is the process of risk assessment an insurance company uses to determine the insurability of an applicant. Typically this includes assessment of current and prior medical history, blood draw, urinalysis, review of financial information, assessment of job duties, travel exposure, avocations and any other information which leads to an understanding of the risks and exposures associated with an applicant.
An uninsurable risk is someone who is declined coverage due to excessive risk of loss.
The benefits of a Critical Insurance policy are effective on date of issue for all covered illnesses except for the Cancer benefits, which have a reduced benefit for the first 90 days after the Effective Date. On the 91st day, full policy benefits are available for Cancer claims. It is important to review each State specific definition of Waiting Period as some States have different Waiting Periods than others.
An underwriting action which limits or excludes coverage for certain conditions.