Glossary of Terms

A-B   -   C-D   -   E-F   -   G-K   -   L-M   -   N-P   -   Q-S   -   T-Z

Grace period
Most life insurance contracts provide that premiums may be paid at any time within a period of generally 30 or 31 days following the premium due date, the policy remaining in full force in the meantime. If death occurs during the grace period, the premium is deducted from the proceeds payable. As a general rule, no interest is charged on overdue premiums if paid during the grace period. In health policies, a period of time (usually 30 days) after the premium due date, the policy remaining in force and without penalty for past due payment.

Group insurance
Insurance protecting a group of persons, usually employees of the same firm. It is based on the principle that the selection process may be applied directly to groups of people, as well as to individuals. If certain general requirements are met, the insurance principles can be applied to groups of nonselected persons. As a rule, the group must have been formed for a purpose other than to obtain insurance; the members must either all be insured or, if premiums are paid in part by the individuals, at least 75 percent must become insured; the amount of insurance for each member of the group must be determined by a formula precluding individual selection or choice by the individuals insured.

Health Insurance Association of America (HIAA)
An association supported by life and health insurance companies and created to provide the research, public relations and legislative base for the promotion of voluntary private health insurance.

HMO
Health care centers that stress preventive health care, early diagnosis, and treatment on an outpatient basis. An organized system of health care delivery and financing that provides a broad range of services to a voluntarily enrolled group for a fixed and periodic payment. The HMO participant pays a flat annual premium and is entitled to medical check-ups and routine health care, plus major medical coverage.

HRA
HRA's, or Health reimbursement accounts, consist of funds set aside by employers to reimburse employees for qualified medical expenses, just as an insurance plan will reimburse covered individuals for the cost of services incurred.

Incontestable clause
A life and health insurance policy provision that states that the insurance company may not contest payment of benefits (assuming premiums have been paid) after a specified period, usually one to three years after issue. This, in effect, gives the insurance company time to determine if there have been any misrepresentations made on the application.

IRA
A personal, qualified retirement account in which an individual may accumulate contributions up to a certain sum each year for retirement income. Such accounts may also be established by purchasing individual retirement annuities from an insurance company or by purchasing individual retirement bonds issued by the federal government. Contributions may or may not be deductible, depending on the individual's income and/or coverage under an employee-sponsored retirement plan. Regardless, funds accumulate on a tax-deferred basis.

Interim term insurance
Term life insurance issued to an applicant for a period of 30 or 60 days, after which time the insurance company either issues a permanent insurance policy or rejects the application. This is one form of interim insurance.

IRA annuity
Issued by a life insurance company, a fund, built by premium payments, investment increments, etc., for retirement purposes. An IRA annuity may be created by an individual retirement annuity contract or an individual endowment insurance contract.

IRA rollover account
The qualified IRA account resulting when funds are transferred from one IRA vehicle to another or from some other qualified plan (pension, profit sharing, etc.) to an IRA if the individual's participation in such other plan is terminated. The transfer takes place on a tax-free basis.

Joint tenancy
Undivided ownership interests in property that are vested in two or more people, with the right of survivorship. When one dies, that person's interest passes to the surviving tenant or tenants rather than to the deceased tenant's heirs. An estate shared equally by two or more parties, with the survivor obtaining complete possession.

Keogh Act (or HR 10)
The Self-Employed Individuals Tax Retirement Act, originally passed by Congress in 1962 and since amended several times, enabling self-employed individuals to establish and fund tax-favored individual retirement plans similar to those available to corporations.

A-B   -   C-D   -   E-F   -   G-K   -   L-M   -   N-P   -   Q-S   -   T-Z