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Welcome to the NEA Members Insurance Trust glossary. This section offers a compilation of commonly used insurance terms and definitions within the insurance industry.
These definitions reflect a widely accepted or general interpretation of listed terms; however, alternative entities may define certain words, and/or phrases within a context where a provided definition might not apply.
Accidental Death and Dismemberment
An insurance coverage that provides financial benefits in the event of an accidental death or severe injury resulting in dismemberment. This coverage extends beyond typical life insurance, offering specific protection against accidental circumstances, ensuring financial support for beneficiaries or policyholders in such unforeseen events.
Beneficiary
A beneficiary is an individual or entity designated to receive financial benefits or proceeds from an insurance policy in the event of the policyholder’s death. This designation ensures that the intended party receives the specified benefits, serving as a key aspect of effective estate planning and financial protection.
Cash Value
Cash value represents the amount available to the policyholder over time. This value grows through contributions and earns interest, providing a potential source of funds that can be accessed or borrowed against during the policy’s lifespan.
Certificate of Insurance
A document providing evidence that an individual or entity holds a valid insurance policy. Typically issued by an insurance company, this certificate outlines key details of the policy, such as coverage types, policy limits and effective dates under a group insurance plan.
Claim
A claim is a formal request made by the policy holder to the insurance company, seeking financial compensation or coverage for a covered loss or damage.
Conversion Privilege
The right to change insurance coverage from one policy to another; i.e., the right to change from a group life insurance plan to an individual policy.
Cost of Living Adjustment
This rider offsets the impact of future inflation (the effect of the devaluation of money over time) on the value of life insurance policies bought today. A Cost-of-Living Adjustment rider changes the face amount of the policy each year by a stated percentage.
Death Benefit
The amount payable to the designated beneficiaries upon the death of the individual insured under a life insurance policy.
Decreasing Term Life
A type of insurance policy where the amount of life insurance coverage decreases over time.
Face Value
The stated amount of a life insurance policy that is payable upon the insured’s death.
Group Life Insurance
Group life insurance is a single contract for life insurance coverage that extends to a group of people. It is offered by an employer or another large-scale entity, such as an association or labor organization, to its workers or members.
Level Premiums
Premium payments that remain the same (or level) for the duration of the life insurance policy.
Life Insurance
A financial contract between an individual (policyholder) and an insurance company, where the insurer agrees to pay a designated sum of money, known as the death benefit, to beneficiaries upon the death of the insured.
Living Needs Benefit (or Accelerated Death Benefit)
A policy provision or rider that allows the policyholder to access a portion of the death benefit while still alive if diagnosed with a qualifying terminal illness, critical condition or permanently confined to a nursing home. This benefit may vary by policy. Check the definition and terms of the coverage you are considering.
Medicare
Medicare is an entitlement program funded primarily by payroll taxes. There are four parts to Medicare coverage. Part A is known as hospital insurance and is free to people at age 65 and older who have contributed to the Federal Insurance Contribution Act (FICA) over their working years. Part B is insurance that pays for basic medical services provided by physicians, clinics and laboratories after a deductible that rises each January 1. Part C, known as “Medicare Advantage,” is an option that can replace Parts A and B. Part D is the Medicare Prescription Drug Plan.
Medicare Supplement
Medicare usually covers only about half of the covered medical costs of America’s senior citizens. Many individuals find themselves in need of additional insurance – a Medicare supplement (or Medigap) plan – that fills in the gaps left by Medicare.
Premium
The amount paid by an individual to an insurance company in exchange for insurance coverage. Paid regularly, typically monthly or annually, the premium ensures that the policy remains in force, and the insurer commits to providing the agreed-upon coverage.
Primary Coverage
The policy that pays out first in the event of a claim or loss. It takes precedence over any other applicable insurance policies, offering the initial layer of financial protection.
Property and Casualty Insurance
Insurance that protects against the loss of real property such as a vehicle or a home and its contents and protects against personal liability losses associated with the property, as defined by the policy.
Rider
A rider is an additional provision or amendment attached to an insurance policy, modifying its terms or coverage. Riders can be added to customize a policy, addressing specific needs or concerns not covered in the standard policy.
Supplemental Coverage
Additional protection that individuals can acquire to augment their existing coverage. This type of coverage is designed to fill gaps or provide extra financial support beyond what primary insurance policies offer.
Term life insurance provides protection for an individual’s needs up to a particular age. The benefit is paid if the insured dies before the end of the term. The policy expires at the maximum age defined by the policy, or if premium payments are not paid. These policies do not build cash value.
Waiver of Premium
A policy provision or rider under which the insurer waives its right to collect the policy’s premiums in the event of total disability as defined by the policy.