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Glossary of Insurance Terms

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maintenance expenses
The costs of keeping a policy in force. Maintenance expenses include the cost of processing premium payments and making policy dividend payments and the time that agents and customer service personnel spend in servicing and conserving policies that are in force.

major medical insurance
A type of medical expense insurance that provides broad coverage for most of the expenses associated with treating a covered illness or injury. See also comprehensive major medical insurance and supplemental major medical insurance.

major services
In dental insurance, dental services, such as inlays, crowns, prosthodontics, and orthodontics, which are often covered at 50 percent of their reasonable and customary charges.

managed care
An organized way to manage costs, use, and quality of the health-care system. The major types of managed care plans are health maintenance organizations (HMOs), point-of-service (POS) plans, and preferred provider organizations (PPOs).

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managing general agent (MGA)
An independent contractor who is authorized to appoint PPGAs on a company's behalf and who may represent more than one company.

mandatary
In Quebec, a party who is authorized by another party, the mandator, to act on the mandator's behalf in contractual dealings with third parties.

mandated benefit
A benefit required by state law to be included in a health insurance policy.

mandator
In Quebec, a party who authorizes another party, the mandatary, to act on the mandator's behalf in contractual dealings with third parties.

mandatory securities valuation reserve (MSVR)
In the United States, a liability account that is designed to absorb, within certain specified limits, realized and unrealized capital gains and losses resulting from an insurer's investments.

manual rates
Premium rates that are established for broad classes of groups. Manual rates are often used to establish premium rates for small groups with no credible loss experience, and to establish initial premium rates for large groups. See also blended rates and experience rating.

master contract
The legal contract between an insurance company and a group insurance policyholder. The master contract insures a number of people under a single contract. Also called the master policy. See also certificate of insurance.

master plan
A standardized form of pension or other employee-benefit plan developed by a financial institution to simplify plan drafting for plan sponsors. Although similar to a prototype plan, a master plan usually refers to a plan document developed by a financial institution (like an insurer) that can be adopted only by plan sponsors who use that financial institution to fund the plan.

master policy
See master contract.

matching contributions
In the United States, contributions made by an employer to an employee's Section 401(k) plan (cash or deferred arrangement) and designed to equal the employee's contributions up to a certain amount or percentage of compensation. See also elective contributions and nonelective contributions.

material fact
A fact that is relevant to an insurance company's underwriting decision regarding issuing or rating a policy.

material misrepresentation
In insurance, a misstatement by an applicant that is relevant to the insurer's acceptance of the risk, because, if the truth had been known, the insurer would not have issued the policy or would have issued the policy on a different basis.

matured endowment
An endowment insurance policy that has reached the end of its term during the lifetime of the insured and is therefore payable.

maximum benefit
The largest benefit amount that a defined benefit pension plan is legally permitted to provide to a plan participant. In the United States, the maximum benefit is determined under Section 415 of the Internal Revenue Code. The maximum benefit is subject to legislative change and is generally indexed to inflation so that it increases as price levels increase. In Canada, a maximum pension benefit is also established under taxation rules. See also contribution limit and section 415 limits.

maximum benefit period
The maximum length of time for which disability income payments will continue.

maximum benefits for related confinements provision
A provision included in basic hospital and surgical policies that limits the maximum benefits for all hospital confinements and for all surgery performed during one period of sickness or for any single injury.

Medicaid
A joint federal-state health insurance program that is run by the states and covers certain low-income people (especially children and pregnant women) and disabled people.

medical application
An application for insurance in which the proposed insured is required to undergo some type of medical examination. The results of the medical examination are then reported to the insurance company.

medical expense insurance
Any of several types of health insurance designed to pay for part or all of an insured's health care expenses, such as hospital room and board, surgeon's fees, visits to doctors' offices, prescribed drugs, treatments, and nursing care. See also hospital confinement insurance, hospital-surgical expense insurance, major medical insurance, and specified expense coverage.

medical necessity provision
A condition included in most major medical expense plans, stating that medical services that are educational or experimental in nature are not eligible for coverage.

medical report
A report on a proposed insured's health that is completed by a physician and is based on a physical examination and questioning of the proposed insured. Such a medical report serves as part of a medical application.

medical savings accounts (MSAs)
Health insurance plans which provide incentives for individuals to replace high-premium, low-deductible policies with lower-cost, high-deductible catastrophic coverage. Premiums for this coverage are lower, and the savings may be used to fund a tax-preferred medical savings account from which you can pay for qualified medical care and expenses, including annual deductibles and copayments on a pre-tax basis.

Medicare
The federally sponsored health insurance program of hospital and medical insurance primarily for people aged 65 and older.

Medicare carve-out
Medical expense coverage offered by employers to retired employees that reduces medical expense benefits to the extent that those benefits are provided by Medicare.

Medicare supplement
Medical expense coverage that provides benefits for certain expenses not covered under Medicare. This coverage is available only to individuals who are covered by Medicare and can be purchased by individuals or by employers to cover retired employees.

MIB, Inc. (Medical Information Bureau)
MIB is organized as a non-stock, not-for-profit membership association of life insurance companies of the United States and Canada. MIB conducts a confidential interchange of information of underwriting significance among its member life insurance companies. The interchange enables MIB member companies to protect the interests of prospective insurance consumers, policyholders and life insurance companies from consumers who omit or misrepresent material facts on their applications for life, health or disability insurance. If in the underwriting of an application for insurance, an MIB member company develops information which is significant to health or longevity, a brief, coded resume of such information will be submitted to MIB. If the consumer applies to another MIB member insurance company, that company may request a copy of the report from MIB provided it has obtained from the consumer a written authorization naming MIB as an informational source. Under the general rules of the association, an insurance company may not base its underwriting decision solely on information provided by MIB. Each member company must conduct its own underwriting investigation. Access to MIB information is restricted to each member company's authorized medical, underwriting and claims personnel. Consumers may request disclosure of or correction to their MIB record by contacting the MIB Information Office, P.O. Box 105, Essex Station, Boston, MA 02112, (617) 426-3660.

minimum age requirement
In pension planning, a requirement that an employee attain a certain age before being permitted to participate in the employer's pension plan. In the United States, a private employer's qualified pension plan cannot have a minimum age requirement greater than age 21. See also minimum service requirement.

minimum deposit arrangement
An arrangement whereby a policyowner can apply the first-year cash value of a policy to the initial premium amount.

minimum deposit business
The use of policy loans to pay premiums. In minimum deposit business, a policyowner instructs the insurance company to pay the premium out of the policy's cash value and to bill the policyowner for a premium only if the cash value is insufficient to pay the premium. Also called leveraged business.

minimum funding standards
In the United States, standards established under Section 412 of the Internal Revenue Code relating to the advance funding of qualified pension plans. The standards are designed to ensure that contributions to a qualified plan are adequate to meet the plan's current and future obligations. Failure to satisfy minimum funding standards can lead to penalty taxes and enforcement actions. See also funding standard account.

minimum premium plan (MPP)
A group health insurance plan that is partially self-insured by the group policyholder but fully administered by an insurance company. The premium is small because the group policyholder pays most of the claims itself. See also administrative services only (ASO) contract and self-insured group.

minimum service requirement
In pension planning, a requirement that an employee complete a certain period of employment (often known as a probationary or waiting period) before being permitted to participate in the employer's pension plan. In the United States, an employee who meets minimum age requirements generally cannot be subject to a waiting period of more than one year, although a plan with full and immediate vesting of benefits can require a two-year waiting period. In Canada, a two-year waiting period is permissible. See also minimum age requirement.

misrepresentation
(1) A false or misleading statement made to induce a prospect to purchase insurance. Misrepresentation is a prohibited insurance sales practice. (2) A false or misleading statement made by an applicant for insurance. Certain misrepresentations provide a basis for the insurer to avoid the policy.

misstatement of age provision
Life insurance policy wording that specifies the action the insurer will take if, at the insured's death, the insurer discovers that the insured's age was misstated in the application and the misstatement has resulted in an incorrect premium for the amount of insurance purchased. In an individual life insurance policy, this provision specifies that the policy's benefit amount will be adjusted. In a group insurance policy, this provision generally specifies that the policy's premium amount will be adjusted.

mode of premium payment
The frequency with which premiums are paid (for example, annually, quarterly, monthly).

model bill
Sample legislation developed by the National Association of Insurance Commissioners (NAIC) in the United States or the Canadian Council of Insurance Regulators (CCIR) in Canada. States and provinces may adopt this sample legislation exactly as written or use it as the basis for developing their own laws.

Model Life Insurance Solicitation Regulation
In the United States, a regulation adopted by the NAIC in 1976 that requires insurers to give life insurance consumers (1) information that will improve their ability to select the most appropriate plan of life insurance to meet their needs, (2) an understanding of the basic features of the policy that has been purchased or that is under consideration, and (3) the ability to evaluate the relative costs of similar plans of life insurance.

Model Rules Governing the Advertisement of Life Insurance
In the United States, an NAIC model law which provides a set of comprehensive guidelines covering nearly all aspects of advertisements for life insurance policies and annuity contracts.

Model Unfair Trade Practices Act
In the United States, an NAIC model law that prohibits unfair trade practices, such as defamation, rebating, unfair discrimination, and unfair claim settlement practices; the law contains a general prohibition agahnst any form of insurance advertising that is "untrue, deceptive, or misleading."

modified net premiums
Net premiums that are other than level, generally being lower for the first year than for subsequent years.

modified-premium whole life insurance
A type of whole life insurance in which the policyowner pays a lower than normal premium for a specified initial period, such as five years. After the initial period, the premium increases to a stated amount that is somewhat higher than usual. This higher premium is then payable for the life of the policy.

money market fund
A low-risk mutual fund that achieves great liquidity by investing primarily in short-term securities.

money-purchase pension plan
A type of defined contribution plan that specifies a rate of contribution to each participant's account (for example, 8% of annual compensation) and results in a benefit that is equal to the amount in the participant's account (including investment gains and losses) at retirement. Upon retirement, the money that the employer has contributed, plus investment earnings, is often used to purchase an annuity which will provide a regular pension benefit.

monthly debit ordinary (MDO) insurance
Ordinary life insurance that is marketed under the home service system and paid for by monthly premium payments, usually made to an agent. See also home service distribution system.

monthly outstanding balance method
In group creditor insurance, a premium-paying arrangement for contributory plans whereby, every month, the lender adds to the outstanding balance of the loan an amount sufficient to insure that balance for one month. Contrast with single-premium method.

moral hazard
The danger that a proposed insured might deliberately attempt to conceal or misrepresent information. Moral hazard is a risk factor that affects the underwriting decision.

morbidity
Sickness, disability, or failure of health.

morbidity rate
The likelihood that a person of a given age will suffer an illness or disability. The premium that a person pays for health insurance is based in part on the morbidity rate for that person's age group.

morbidity table
A chart that shows the rates of sickness and injury occurring among given groups of people categorized by age.

mortality charge
The cost of the insurance protection element of a universal life policy. This cost is based on the net amount at risk under the policy, the insured's risk classification at the time of policy purchase, and the insured's current age.

mortality curve
A line graph that represents the mortality rates as they change from age to age.

mortality experience
The actual number of deaths occurring in a given group of people.

mortality rate
The frequency with which death occurs among a defined group of people. The premium that a person pays for life insurance is based in part on the mortality rate for that person's age group.

mortality table
A chart that displays the rates of death among a given group of people categorized by age. See also aggregate mortality table, annuity mortality table, basic mortality table, select and ultimate mortality table, select mortality table, and ultimate mortality table.

mortgage redemption insurance
A form of decreasing term insurance that covers the life of a person who takes out a mortgage. If the person dies during the term of insurance, the policy proceeds will approximate the remaining amount of the mortgage loan.

multi-company representation
In Canada, an arrangement by which a life and health insurance agent is allowed to represent more than one insurance company.

multi-employer plan
A pension or other employee-benefit plan involving more than one employer and established by collective bargaining (negotiation between a union and employers). Coverage under the plan is portable within the group, which means that an employee who leaves one employer who is a member of the group and goes to work for another member of the group may continue coverage under the plan.

multiple-employer trust (MET)
(1) An arrangement whereby several employers (often in the same industry) cooperate to procure group insurance for their employees. (2) An arrangement made by an insurance company to cover several employers under one master policy, usually with specific benefit packages and limitations.

multiple-line agency (MLA) system
A personal selling distribution system that uses full-time career agents to distribute both life and health and property/casualty insurance products for groups of financially interrelated or commonly managed insurance companies. Also known as the multiple-line exclusive agency system or all-lines exclusive agency system.

mutual benefit method
An early method of funding life insurance, formerly used by fraternal orders or guilds. Under the mutual benefit method, the promised death benefit was provided by charging participating members an equal amount after the death of an insured member. Also called the post-death assessment method. See also assessment method .

mutual insurance company
An insurance company owned by policyowners rather than stockholders.

mutualization
The process of converting a stock insurance company to a mutual insurance company.

Written by the Insurance Center

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