Cash Value – is the portion the Life Insurance, that earns interest and may be withdrawn or borrowed against.
Cash Value Corridor (in life insurance) is the minimum percentage of cash value (CV) a contract must have as a death benefit (DB) to be considered life insurance under Internal Revenue Code § 7702. The minimum percentage of cash value declines from 250 percent at age 40 and younger to 100 percent at age 95. (For example, the minimum amount of life insurance DB that a 30-year-old insured’s policy with $10,000 of CV must have under the cash value corridor test is $25,000 ($10,000 × 250% = $25,000).
Coinsurance – a portion of the medical cost you pay after your deductible has been met.
Copay – flat fee that you pay on the spot each time you go to your doctor or fill a prescription. Copay amount is stated on the Health plan ID card.
Coverage (in Health Insurance):
- CREDITABLE COVERAGE – plans with prescription drug coverage at least as good as Medicare Part D (ACA, Group insurance, Medicare, etc.)
- NOT CREDITABLE COVERAGE – plans like the Short-Term coverage, which do not have to comply with the Medicare Part D rule.
Coverage (in Transportation Property insurance):
- COLLISION coverage pays for damage to your vehicle if you hit something or someone
- LIABILITY coverage protects the others from the result of your actions – if you damage and injure someone or something. It’s a way to apologize for your own wrong-doing.
- UNINSURED driver coverage pays for your damages, if you got hit by an uninsured driver
- UNDERINSURED driver coverage pays for your damage, if you get hit by a driver with insufficient insurance coverage
Credit Life Insurance pays off your loan if you die before settling the debt. In general, the amount of insurance can’t be more than what you owe on the loan. Usually more expensive than Term Life.
Cost of Insurance (COI):
- Monthly Deduction for COI = Cost of Insurance Rate (COIR) x Net Amount of Risk (NAR)
Cost Sharing Reductions (CSRs) are discounts that lower the amount a consumer has to pay for deductibles, coinsurance, and copayments. If a consumer qualifies based on their household income, they must enroll in a plan in the Silver category to get these extra savings.
Death Benefit – a payout to the beneficiary of a life insurance policy, annuity, or pension when the insured or annuitant dies. In life insurance, death benefits are not subject to income tax and named beneficiaries ordinarily receive the death benefit as a lump-sum payment.
Deductible – the amount you pay each year for most eligible services (health, auto, business, etc.) or before your insurance begins to share in the cost of covered services.
DoD TRICARE is health care for active or retired members of the military (i.e., people in the Army, Navy, Marine Corps, Air Force, Coast Guard, Public Health Service, or the National Oceanic and Atmospheric Administration).
Estate is the combination of all the possession of an individual, MINUS all of the debts. It includes real estate assets, bank accounts, life insurance, etc. When an individual dies, they leave an Estate, which can be passed on to the survivors. Life insurance is a critical element of a family estate plan.
Graded Death Benefit: Graded benefit policy pays a lower amount if death occurs during the first few years after the policy is purchased. After a predetermined time, the death benefit goes up to the stated face value of the policy. (see Level Death Benefit as comparison)
Health Marketplace types:
- SBM – State-based marketplace – states operate their own marketplaces
- SBM-FP – State-based marketplace on the Federal Platform – some SBMs received approval to utilize the federal platform to perform all eligibility and enrollment functions, along with consumer assistance, for their Individual Marketplace, the SHOP, or both. These are considered SBM-FPs.
- FFM – Federally-facilitated marketplace – if a state does not operate a state-based marketplace, the Department of Health & Human Services (HHS) operates an FFM and/or Federally-facilitated SHOP in that state.
Level Benefit: Level benefit pays out the same, regardless of when the death occurs. (see Graded Death Benefit as comparison)
Material Change in Risk is any substantial change in how the risk of the insured items (or persons) should be assessed. The change must be Material to the Risk + Within your knowledge and control. Such conditions must be promptly brought up to the Insurer. Insurer can adjust the contract to match the risk or terminate the contract. Non-Reporting or non-prompt reporting of Material Change can result in insurer voiding the policy.
MEC: Modified Endowment Contract
Medicare is a health insurance program for people age 65 or older, people under age 65 with certain disabilities, people of all ages with end-stage renal disease (permanent kidney failure requiring dialysis or a kidney transplant), and certain individuals exposed to environmental health hazards.
Net Amount of Risk (NAR) (in Universal Life) – is the amount of the policy’s death benefit that is not covered by the policy’s reserve. (Death Benefit minus Cash Value). NAR=DB-CV
Peril – an event like a fire or a break-in, that may damage your home or belongings. The perils covered by your insurance are listed in the policy.
Personal Injury Protection (PIP) is a form of No-Fault insurance, which helps you with paying for medical bills that are not covered by the health insurance plan. PIP pays out regardless of who is at fault.
Personally Identifiable Information (PII) is any information that can be used to distinguish or trace a specific individual, to pick that person out of a group. (read more here)
Premium – amount paid periodically to the insurer by the insured for covering the risk.
Universal Life:
- Planned premium (in Universal Life) is the amount billed to the policy owner. The amount of premium that you plan to pay and its frequency, i.e., monthly, quarterly, semiannually, or annually.
- Minimum premium is the premium that would generally be just enough to keep the policy in force for a year without the accumulation of any cash value.
- Target premium is the level of premioum level at which the agent can expect to receive maximum first-year commission.
- Maximum premium is the largest premium that the policy owner can pay, without losing the meaning of insurance, and turning into a primarily an investment. This result in the loss of the favorable tax treatment by the IRS.
Rider – Optional addition/modifier to the policy. It can ADD or SUBTRACT features from the policy.
Target Premium – The target premium of a contract is the amount of the annual payment charged to cover the pure cost of insurance on the Life of an individual. It does not include administrative policy fees or excess premiums paid into a contract.
Trust (Irrevocable Trust) – allows the placement of life insurance and its proceeds under protection, where it exempted from the taxable estate. The trust becomes the owner and the underlying insurance policies.
VHA is the health system for military veterans (from the Army, Navy, Marines, Air Force, or Coast Guard). All veterans should apply to the VHA to determine eligibility.