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cafeteria
plan
An employee benefit plan which gives each employee several
choices as to the types and/or amounts of group benefits.
Also known as a flexible benefit plan.
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Canada Pension
Plan (CPP)
A plan that primarily provides retirement income and long-term
disability income benefits to residents of Canadian provinces
other than Quebec.
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Canadian Council
of Insurance Regulators (CCIR)
A Canadian organization of provincial insurance regulators
who meet regularly to discuss insurance issues and to develop
model insurance legislation that it encourages provincial
legislatures to adopt. Similar to the National Association
of Insurance Commissioners in the United States.
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Canadian Life
and Health Insurance Association (CLHIA)
An association of most of the life and health insurance companies
in Canada which conducts research on insurance issues and
promotes the best interests of the insurance industry. The
CLHIA is the primary source of information about the life
and health insurance industry in Canada.
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Canadian Life
and Health Insurance Compensation Corporation (CompCorp)
In Canada, a federally incorporated, nonprofit company established
by the Canadian Life and Health Insurance Association (CLHIA)
in order to protect consumers against loss of benefits in
the event a life or health insurance company becomes insolvent.
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Canadian method
A method prescribed in Canada for calculating modified net
premiums and reserves.
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cancellable
policy
An individual health insurance policy that can be terminated
at any time by the insurer. See also conditionally renewable
policy, guaranteed renewable policy, noncancellable and guaranteed
renewable policy, noncancellable policy, and optionally renewable
policy.
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capacity
The largest amount of insurance an insurer or a reinsurer
is willing or able to underwrite. The term can refer to an
insurer's capacity on one individual or to the insurer's capacity
for all its business.
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capitation
A method of paying medical providers through a prepaid, flat
monthly fee for each covered person. The payment is independent
of the number of services received or the costs incurred by
a provider in furnishing those services.
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capitation basis
A compensation plan used in some health maintenance organizations
(HMOs) in which a physician is paid a flat amount per year
per subscriber who has elected to use that physician. For
that amount, the physician must treat the subscriber as often
as necessary during that year. See also fee schedule basis.
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captive agents
See exclusive agents.
captive insurance
company
An insurance company, formed and controlled by a separate
company, whose purpose is to provide insurance to the controlling
company. Companies which form captive insurance companies
include all types of companies which extend credit to customers,
including banks and retailers. See also agent-owned reinsurance
company (AORC).
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career agent
A full-time commissioned salesperson who works out of an insurance
company's field office, holds an agent contract with that
company, and sends all, or almost all, of his or her business
to that company. A career agent may occasionally broker business
with other companies.
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career average
(career earnings) benefit formula
A type of defined benefit formula in which the retirement
benefit amount is derived on the basis of a participant's
compensation during the entire period of participation in
the plan. See also defined benefit formula. Contrast with
final average benefit formula.
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carry-over provision
A provision found in most medical expense policies stating
that expenses incurred during the last three months of a benefit
period that are used to satisfy the current benefit period's
deductible may be used to satisfy any or all of the following
benefit period's deductible.
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case management
A cost-containment program designed to identify alternate,
less costly methods of treatment for seriously ill patients
without sacrificing the quality of care a patient receives.
Also known as catastrophic claim management, large claim management,
or medical case management.
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cash-balance
pension plan
A type of defined benefit plan in which each participant has
an account which is credited with amounts reflecting the employer's
contributions and amounts reflecting investment interest.
The balance in the account indicates the participant's accrued
benefit. Upon retirement or withdrawal, the participant may
receive the full account balance in a lump sum, provided that
the benefits are fully vested, or may use the account balance
to purchase an annuity.
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Cash or Deferred
Arrangement (CODA)
See Section 401(k) plan.
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cash payment
option
A life insurance policy dividend option under which policy
dividends are paid to the policyowner in cash.
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cash premium
accounting system
A premium accounting system used for industrial insurance.
Under this system, the agent informs the home office of the
amount collected on each policy. The home office then updates
the policy records to reflect these collections and prepares
new route collection records. Contrast with advance and arrears
system.
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cash refund
option
A form of the life income option with refund which specifies
that any proceeds remaining when the beneficiary dies will
be paid in a lump sum to the contingent payee. Contrast with
the installment refund option.
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cash surrender
value
In a life insurance policy, the amount of money, adjusted
for factors such as policy loans or late premiums, that the
policyowner will receive if the policyowner cancels the coverage
and surrenders the policy to the insurance company. Also called
the net cash value. Compare to cash value.
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cash surrender
value option
A life insurance policy nonforfeiture option which specifies
that a policyowner who discontinues premium payments can elect
to surrender the policy and receive the policy's cash surrender
value.
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cash value
In a life insurance policy, the amount of money, before adjustment
for factors such as policy loans or late premiums, that the
policyowner will receive if the policyowner allows the policy
to lapse or cancels the coverage and surrenders the policy
to the insurance company. Cash values are a feature of most
types of permanent life insurance, such as whole life and
universal life. Compare to cash surrender value. Also called
inside build-up and policyowner's equity.
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catastrophic
claim management
See case management.
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causal relation
requirements
Proof required by statute in Kansas, Missouri, Rhode Island,
and Puerto Rico to show that the facts misrepresented in an
application for insurance were related to the loss insured
against.
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ceding company
In a reinsurance transaction, the insurer that purchases reinsurance
to cover all or part of those risks that it does not wish
to retain in full. Also called the direct insurer, direct
writer, or direct-writing company.
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certain payment
A payment that will definitely be made under any circumstances,
its payment not being contingent upon any predesignated condition.
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certificate
of assumption
In assumption reinsurance, a certificate sent to each policyholder
whose policy has been ceded to give the policyowner (1) notice
of the assumption and (2) information concerning the new insurer.
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certificate
of authority
(1) A document created by an insurer detailing the authority
granted to an agent or group of agents to act on behalf of
the insurer. (2) In the United States, a certificate issued
by a state's insurance department authorizing an insurer to
issue certain types of insurance within the state.
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certificate
of indebtedness
A certificate issued by an insurer to the beneficiary of a
life insurance policy that specifies a guaranteed minimum
interest rate and the frequency with which the insurer will
make interest payments under the interest settlement option.
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certificate
of insurance
A document given to each person insured by a group insurance
plan. This document shows the type and amount of coverage
to which the group member is entitled and the beneficiary
of the coverage. The certificate may also contain a summary
of the contract terms as they affect individual group members.
See also master contract.
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cession
(1) In reinsurance, the act of ceding. (2) In reinsurance,
a parcel or unit of insurance that a company cedes to a reinsurer.
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change of condition
provision
An insurance provision stipulating that, for a policy to become
effective, all conditions described in the application must
still be true at the time of delivery.
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change of occupation provision
An individual health insurance policy provision that grants
the insurer the right to adjust a policy's premium rate or
benefits when the insured changes jobs or careers.
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CICA
The CICA, together with the provincial and territorial institutes
of chartered accountants, represents a membership of 60,000
professional accountants in Canada and Bermuda. The CICA sets
accounting and auditing standards for business, not-for-profit
organizations and government. It issues guidance on control
and governance, publishes professional literature, develops
continuing education programs and represents the CA profession
nationally and internationally.
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claim
A request for payment under the terms of an insurance policy.
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claim administration
department
The department in a life and health insurance company responsible
for processing claims. In this department, claim examiners
review claims presented by policyowners or beneficiaries,
verify the validity of claims, and authorize the payment of
benefits to the proper person.
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claimant
The person or party making a formal request for payment of
benefits due under the terms of an insurance contract.
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claim examiner
An employee of an insurance company whose responsibilities
include investigating claims, approving the claims that are
valid, and denying those that are invalid or fraudulent.
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claim frequency
rate
In health insurance calculations, the claim frequency rate
is the expected percentage of insured people who will file
claims and the number of claims they will file during a given
period. The claim frequency rate is used to calculate average
claim costs, which are used to calculate premium rates.
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claim investigation
The process of obtaining necessary claim information in order
to decide whether or not to pay a claim.
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claim reserve
A claim department's estimate of the amount of money needed
to pay a claim. The estimate is made with the help of information
that the claim department gathers in the course of handling
the claim. This information may involve, for example, the
extent to which the claim is covered by the policy, the effect
of previously paid claims on the amount of coverage available
to pay a current claim, and the effect of any applicable reinsurance
coverage on the claim.
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class beneficiary
designation
A beneficiary designation that names several people as a group
-- for example, "children of the insured" -- rather than naming
each person individually.
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clean-up fund
A lump-sum life insurance death benefit designed to pay the
insured's outstanding debts and final expenses.
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CLHIA Guidelines
Recommendations to insurance companies adopted by the Canadian
Life and Health Insurance Association (CLHIA). Insurers are
expected to abide by these guidelines as a condition of membership
in the CLHIA.
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closed contract
An insurance contract in which the terms of the insurance
contract and the application constitute the entire agreement
between the policyowner and the insurer. Commercial insurance
companies use closed contracts. See also open contract.
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closing
The process of securing a purchase commitment from a prospect
by requesting and obtaining the prospect's agreement to submit
an application for the coverage recommended in a sales proposal.
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COBRA
The Consolidated Omnibus Budget Reconciliation Act of 1985,
commonly known as COBRA, requires group health plans with
20 or more employees to offer continued health coverage for
you and your dependents for 18 months after you leave your
job. Longer durations of continuance are available under certain
circumstances. If you opt to continue coverage, you must pay
the entire premium, plus a two percent administration charge.
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coinsurance
The amount you are required to pay for medical care in a fee-for-service
plan or preferred provider organization (PPO) after you have
met your deductible. The coinsurance rate is usually expressed
as a percentage of charges. For example, if the insurance
company pays 80 percent of the claim, you pay 20 percent.
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coinsurance
provision
A stipulation found in most health insurance policies that
requires an insured to pay a stated percentage, in excess
of the deductible, of all eligible medical expenses.
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COLA
See cost-of-living adjustment (COLA).
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collateral assignment
A transfer of some ownership rights in a contract from one
party to another, generally for a temporary period. Insurance
policies are often assigned as collateral for a loan, in which
case all transferred rights revert to the assignor when the
loan is repaid. See also assignment.
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combination
company
A life and health insurance company that sells both industrial
and ordinary insurance products.
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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."
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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.
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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.
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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.
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Commissioners
Method
A method prescribed in the United States for calculating modified
net premiums and reserves for life insurance policies.
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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.
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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.
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community-rating
Applying the same premium rate structure to certain group
insurance subscribers, regardless of their past or potential
loss experience. See also pooling.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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conservation
An agent's or an insurer's efforts to prevent a policy from
lapsing.
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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.
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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.
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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.
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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).
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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.
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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.
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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.
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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.
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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.
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contingent payment
A payment that will be made only if some predesignated condition
is met, such as the recipient being alive.
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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.
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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.
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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.
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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.
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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.
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contribution
limit
The maximum annual addition permitted by law to be made to
a participant's account in a defined contribution pension
plan.
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