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ultimate cost
The total net cost, including the cost of all benefits and
expenses, incurred by a pension plan over the life span of
the plan.
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unallocated
funding
A method of funding a pension plan in which the pension funds
as a whole are held and managed by a funding agency, often
an insurance company, and are not allocated to specific plan
participants. When a participant retires, the funding agency
either purchases an annuity for the retiree or pays periodic
benefits directly from the fund. However, the funding agency
makes no contractual promises that it will pay any specific
benefit amounts. Contrast with allocated funding.
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unappropriated
earned surplus
In Canada, the amount of an insurer's surplus remaining after
determination of an insurer's reserves, capital, and other
surplus amounts.
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unbundled insurance
product
An insurance product in which the mortality, investment, and
expense factors used to calculate premium rates and cash values
are each identified in the policy. Some nontraditional products,
such as universal life insurance, are unbundled. See also
bundled insurance product.
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unclaimed benefits
Policy benefits for which no payee can be found. Under typical
state statutes for unclaimed property, when an insurer cannot
locate anyone entitled to policy benefits, the insurer will
hold the unclaimed benefits for seven years and then turn
them over to the state. Usually, the unclaimed property statute
of the state of the beneficiary's last known address applies.
If no address is known, the statute of the insurer's state
of domicile will govern.
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unclaimed property
statutes
Statutes that regulate the disposition of funds for which
no owner can be found. Insurers typically hold unclaimed property
for seven years. If the rightful owner is not found during
this time, the property is turned over to the state. Also
known as escheat laws. See also unclaimed benefits.
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underwriter
(1) The person who assesses and classifies the potential degree
of risk that a proposed insured represents. (2) The person
or organization that guarantees that money will be available
to pay for losses that are insured against. In this sense,
the insurance company is the underwriter.
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underwriting
(1) The process of assessing and classifying the potential
degree of risk that a proposed insured represents. Also called
selection of risks. (2) Providing guarantees that money will
be available to pay for losses that are insured against.
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underwriting
department
The department in a life and health insurance company that
selects the risks that the company will insure. The underwriting
department tries to make sure that the actual mortality or
morbidity rates of the company's insureds do not exceed the
rates assumed when premium rates were calculated. The underwriter
considers an applicant's age, weight, physical condition,
personal and family medical history, occupation, financial
resources, and other selection factors to determine the degree
of risk represented by the proposed insured. This department
also participates in the negotiation and management of reinsurance
agreements, through which an insurance company transfers some
or all of an insurance risk to another insurance company.
Also called the new business department.
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underwriting
impairments
Factors that tend to increase an individual's risk above that
which is normal for his or her age.
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underwriting
manual
A summary of the methods used by a particular insurer to evaluate
and rate risks. The underwriting manual provides underwriters
with background information on underwriting impairments and
serves as a guide to suggested underwriting actions when various
impairments are present. See also risk class.
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underwriting
requirements
Printed instructions that indicate what evidence of insurability
is required for a given situation and which of several optional
information sources will be needed to provide underwriters
with necessary information. Sources of information may include
medical records and the results of physical examinations.
Underwriting requirements are graduated based on the proposed
insured's age and the amount of coverage requested.
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Unemployment
Insurance Act
In Canada, a federal statute that provides unemployment insurance
to almost all persons who are employed in Canada. Benefits
are provided to covered employees who are laid off or unable
to work due to accidental injury, sickness, or pregnancy.
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Uniform Accident
and Sickness Insurance Act
In Canada, model legislation governing health insurance contracts
agreed upon by the Canadian Council of Insurance Regulators
(CCIR) and enacted with minor variations by all the common
law jurisdictions.
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Uniform Life
Insurance Act
In Canada, model legislation governing life insurance contracts
agreed upon by the Canadian Council of Insurance Regulators
(CCIR) and enacted with minor variations by all of the common
law jurisdictions.
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Uniform Pension
Plan (UPP)
In Canada, a prototype pension plan (see prototype plan) developed
by members of the Canadian Life and Health Insurance Association
and approved by the appropriate Canadian regulatory authorities,
including Revenue Canada.
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unilateral contract
A contract in which only one party promises to do something.
A life insurance policy is a unilateral contract.
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uninsurable
risk class
The group of people with a risk of loss so great that an insurance
company will not offer them insurance.
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union welfare
fund or union welfare trust
A fund organized by a union and one or more employers to which
contributions are made by the employer(s) so that group benefits
can be made available to the union's members.
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unit-benefit
formula
A method of calculating benefits for a defined benefit pension
plan based on years of service. The formula may take into
account only years of service (for example, $50 per month
for each year of service) or years of service and compensation.
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universal life
insurance
An unbundled whole life insurance product in which the
mortality, investment, and expense factors used to calculate
premium rates and cash values are expressed separately in
the policy. In a universal life insurance policy, any applicable
expense charges are deducted from the premium and the remainder
of the premium is then credited to the policy's cash value.
Each month the insurer deducts the mortality costs from the
cash value and credits the remainder of the cash value with
interest.
The owner of a
universal life policy can specify the premium amount he or
she will pay, as long as this amount falls within the minimum
and maximum specified by the company. If the renewal premium
is insufficient to pay the policy's mortality and expense
charges, the balance is taken from the policy's cash value.
If the premium exceeds the maximum level specified by the
company, then the policy's cash value may grow too large in
proportion to the policy's death benefit and the policy will
be considered an investment contract rather than an insurance
contract. The difference in size that must be maintained between
the cash value and the death benefit is called the corridor.
In a universal
life policy, the policyowner is permitted to change the policy's
death benefit after the policy has been issued, although this
right is subject to restrictions. First, if a policyowner
wishes to increase the policy's death benefit the insurer
may require evidence of insurability. Second, any decrease
in the policy's death benefit must not violate the corridor
guidelines.
A universal
life insurance policy describes the mortality rate assumptions
that the company is using to calculate the mortality charges.
In addition, a maximum mortality charge per thousand dollars
of coverage at each age is listed, and the insurer guarantees
not to exceed this charge.
Most universal
life insurance policies guarantee a minimum interest rate
of 4 percent or 4 1/2 percent on the money in the policy's
cash value. If economic conditions warrant, the interest rate
may be higher, but it can be no lower. Normally, insurers
state that the interest rate paid on the cash value will reflect
current interest rates in the economy.
The cash value
of a universal life insurance policy may be used as collateral
for a policy loan in much the same way that the cash value
of a traditional whole life policy may be used. The money
in a universal life policy's cash value may also be withdrawn,
rather than used as collateral for a policy loan. The cash
value is reduced by the amount withdrawn plus any applicable
cash withdrawal fees, but the policy remains in force. In
contrast, the owner of a traditional whole life insurance
policy can withdraw the cash value only by cancelling the
policy.
For other information
about universal life insurance, see also back-loaded policy,
corridor, front-loaded policy, group universal life insurance
(GUL), option A plan, and option B plan. See also bundled
insurance product and unbundled insurance product.
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usual and customary
charge
The amount a health plan will recognize for payment for a
particular medical procedure. It is typically based on what
is considered "reasonable" for a specific procedure in your
service area.
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unregistered
reinsurer
In Canada, a reinsurer who is not licensed to accept reinsurance
in a given jurisdiction. Contrast with registered reinsurer.
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utilization
review
A cost-control mechanism by which the appropriateness, necessity,
and quality of health-care services are monitored by both
insurers and employers.
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