Glossary of Insurance Related Terms

Earned Premium

That portion of a policy's premium payment for which the protection of the policy has already been given. For example, an insurance company is considered to have earned 75 percent of an annual premium after a period of nine months of an annual term has elapsed.

Economic Policy

Special type of participating whole life insurance in which the dividends are used to buy term insurance or paid-up additions equal to the difference between the face amount of the policy and some guaranteed amount.

Education Fund

One of the uses of life insurance. It is designed to provide money for a child's education should the breadwinner of the family die.

Effective Date

The date on which the insurance under a policy begins.

Electronic Funds Transfer (EFT)

A transaction that allows payers to have premium payments drawn directly from their bank accounts, eliminating the need to write checks.

Eligibility Date

The date on which an individual member of a specified group becomes eligible to apply for insurance under the (group life or health) insurance plan.

Eligibility period

In contributory group insurance plans, the period of time, usually 31 days, during which a new group member may apply for group insurance coverage.

Eligibility Requirements

Requirements imposed for eligibility for coverage, usually in a group insurance or pension plan. (LI,H)

Elimination period

(1) In medical expense insurance, a prescribed amount of time following policy issue during which the insured’s medical expenses are not covered by the policy. Such waiting periods usually last from 14 to 30 days following policy issue and normally apply only to medical expenses arising from sickness, not from accidents. (2) In disability income insurance, a specified amount of time, beginning with the onset of the disability, during which benefits are not payable. Such waiting periods may last from seven days to six months. The waiting period in a disability income insurance policy is sometimes called the elimination period or the probationary period. (3) In a group insurance plan, the length of time that a new group member must wait before being eligible to join the group plan. Also called a probationary period.

Emergency Fund

One of the uses of life insurance which provides money for the emergency expenses of a deceased's family prior to the final settlement of the estate.

Employee Benefit Program

Benefits offered an employee at his place of work by his employer, covering such contingencies as medical expenses, disability, retirement, and death, usually paid for wholly or in part by the employer. These benefits are usually insured. (LI,H)

Employee Certificate of Insurance

The employee's evidence of participation in a group insurance plan, consisting of a brief summary of plan benefits. The employee is provided with a certificate of insurance rather than the actual insurance policy. (LI,H)

Employee Retirement Income Security Act (ERISA)

This act prescribes federal standards for funding, participation, vesting, termination, disclosure, fiduciary responsibility, and tax treatment of private pension plans. (LI)

Endorsement

An additional piece of paper, not a part of the original contract, which cites certain terms and which, when attached to the original contract, becomes a legal part of that contract.

Endorsement Split Dollar

A split dollar plan in which the employer owns and controls a life policy on the life of an employee. The employee's rights to certain policy benefits are protected by an employer endorsement. (LI)

Endow

When an insurance policy's guaranteed cash value equals the initial death benefit, it is said to "endow" or mature. Whole Life contracts typically endow at the insured's age 100.

Endowment insurance

A type of life insurance that provides a benefit (a) if death occurs during the term of coverage or (b) if, at the end of the term of coverage, the insured is alive.

Entire Contract Clause

A provision in an insurance contract stating that the entire agreement between the insured and the insurer is contained in the contract, including the application if it is attached, declarations, insuring agreements, exclusions, conditions and endorsements. (LI,H)

Entity Agreement

A buy-sell agreement usually used with a partnership in which the partnership agrees to purchase the interest of a deceased or disabled partner. (LI)

Entity Plan

The arrangement whereby the business, rather than an individual owner, purchases the insurance that will be used to secure the business in the event of an owner's death.

Error and omissions (E&O) insurance

Insurance designed to cover claims that result from the negligent acts or mistakes of an agent, including (1) his or her vicarious liability stemming from negligent acts or (2) mistakes committed by individuals for whom the agent is legally liable.

Estate plan

A plan that addresses how best to preserve an individual’s assets after the individual dies. Life insurance is often an important part of an estate plan.

Estate Planning

Planning for the orderly handling and administration of an estate upon the death of the owner. This usually involves drawing up a will and setting up trusts and insurance, with the intention of minimizing loss to the estate value incurred by estate taxes and administrative expenses.

Estate Tax

Tax imposed by a state or the federal government on the transfer of property from a deceased to his/her heirs.

Evidence of insurability

Proof that a person is an insurable risk.

Examination

The medical examination of an applicant for Life or Health insurance. (LI,H)

Examined Business

Coverage written on an applicant who has been examined and who has signed the application but has paid no premium. (LI,H)

Examiner

A physician appointed by the medical director of a life insurer to examine applicants.

Excepted Period

A period of time between the effective date of a Health Insurance policy, and the date coverage begins for all or certain physical conditions. (H)

Excess Interest

Interest credited to an insured's contract in excess of the amount guaranteed by the terms of the contract. (LI)

Exclusion

Provision that indicates a circumstance or event, such as an act of war, for which benefits will not be paid.

Exclusion rider

An attachment to a health insurance policy that excludes or limits coverage for a specific health impairment.

Exclusions

Losses for which an insurance policy does not provide benefits. For life insurance and accidental death benefit coverages, exclusions describe causes of death for which benefits will not be paid. In health insurance policies, exclusions describe losses not covered, such as those related to pre-existing conditions, cosmetic surgery, or self-inflicted injuries.

Exclusive agents

Career agents who are under contract with one insurance company only and who are not permitted to sell the products of other insurers.

Executive Bonus Plan

A plan whereby an employee owns a life insurance policy that was purchased, all or in part, by the employer. The employee treats the employer's payments as reportable income for tax purposes. The employer deducts its payments as compensation. Also known as an Employee Bonus Plan.

Executor

An individual or institution that is tasked with the settling of an estate for the deceased. Activities may include gathering the assets, paying the taxes and distributing the estate in accordance with the will.

Expectation of Life

The average number of years of life remaining for persons of a given age according to a particular mortality table. Also called life expectancy. (LI)

Expected mortality

The number of deaths that have been predicted to occur in a group of people at a given age.

Expense Charges

The charges assessed against a policy to cover part or all of the insurance company's acquisition and maintenance expenses related to issuing and servicing the policy, including charges covering various federal, state and local taxes.

Experienced Mortality

The mortality that actually occurs to a group of inureds of a given insurance company in contrast to expected mortality. (LI)

Experienced Mortality or Morbidity

The actual mortality or morbidity experienced in a group of insureds as compared to the expected mortality or morbidity. (LI,H)

Expiration Date or Expiry

The date on which the insurance policy ceases to protect the policyowner.

Expiry

The termination of a Term Life Insurance policy at the end of its period of coverage. (LI)

Extended Death Benefit

A group policy provision which will pay the life benefit when (1) the insured is totally and continuously disabled at the time the policyholder stops paying premium until the insured's death, and (2) if the insured dies within one year of the date the premium payments stopped, or prior to age 65. (LI)

Extended Term Insurance

A provision in most policies which provides the option of continuing the existing amount of insurance as Term Insurance for as long a period of time as the contract's cash value will purchase. This is one of the nonforfeiture options available to the insured in case a premium is not paid within the grace period. The benefits, as printed in a life insurance policy, that the insurer guarantees to the policyowner if the policyowner stops paying premiums. These amounts may be used in a variety of nonforfeiture options.

Extended term insurance option

A nonforfeiture option in which the net cash value of a policy is applied as a net single premium to purchase paid-up term insurance. The amount of term insurance is equal to the death benefit of the policy being surrendered less any outstanding policy loans. The insured maintains the same amount of coverage but usually for a shorter period of time than the original coverage.

Extra Percentage Tables

Mortality or morbidity tables showing the extra premium for certain impaired health conditions. Usually this premium is shown as a percentage of the standard premium. A form of substandard rating. (LI,H)

Extra Premium or Extra Percentage Table

The amount charged in addition to the regular rate to cover any extra hazard or special risk. Usually this premium is shown as a percentage of the standard premium. A form of Sub-Standard Risk rating

Extra-percentage tables method

A commonly used plan for rating substandard risks. Under this method, each substandard class is charged a premium rate that is a certain percentage above the standard premium rate.