Insurance Terms To Know Before Open Enrollment

If you’re preparing for open enrollment, you’ve likely seen words like “claims,” “deductibles,” and “copay.” It's helpful to become familiar with common insurance terms like these to better understand your benefits.

Below, you’ll find basic insurance terms and definitions that can help you when it’s time for open enrollment and selecting your benefits.

Accident insurance

Accident insurance is a type of insurance that provides payment following an accidental injury. Claim payments can be used for anything the recipient sees fit, including treatment, recovery transportation, lodging, and childcare.

Allowable charge   

An allowable charge is the amount your insurance company considers to be reasonable for a specific medical service. Allowable charges are typically set based on market value. They’re also known as allowed amounts, maximum allowable charges, or usual, customary, or reasonable (UCR) charges.

Example: Let’s say you twist your ankle and go to the hospital for an X-ray. The hospital (which is a provider within your insurance network) will only be reimbursed by your insurance company for the amount of their allowable charge.

Beneficiary

In a life insurance policy, a beneficiary is the person or people you choose to receive money — known as a death benefit — when you die. A death benefit is often transferred in one lump sum following your death.

Generally, beneficiaries are the spouse, children, or parents of the policy owner. That said, you can name virtually anyone (or an entity such as a company or a non-profit foundation) as your beneficiary.

Benefits

Benefits are the services or items covered under an insurance policy. Your plan’s covered benefits and exclusions will be defined in the terms of your policy.

Benefit level

A benefit level is the maximum amount an insurance provider has agreed to pay for a covered benefit during your benefit period.

Benefit period

A benefit period, or benefit year, describes the length of time your plan will cover services. Benefit periods are often for one year — though they may not necessarily line up with a calendar year.

Cancer insurance

Cancer insurance is a type of insurance that offers payment after a cancer diagnosis and treatment. Claim payments can typically be used for however the recipient sees fit, including for medications, hospital stays, recovery, childcare, lodging, and general household bills.

Claim

An insurance claim is a request for an insurance company to cover payments. Claims are often made by the policyholder or provider.

Claimant

This is any policyholder who submits a claim to an insurance company for coverage.

Coinsurance

Coinsurance is the percentage of costs you agree to pay each benefit year after meeting your plan’s deductible. Coinsurance only applies to covered services. You may still have to make a copay as well.

Example: If your insurance company pays 85% of a claim, your coinsurance will be 15%.

Comprehensive coverage

Comprehensive coverage — also known as major medical health insurance — is a type of health insurance plan.

Condition

A condition is any type of injury, illness, disease, or disorder diagnosed before or after enrolling in an insurance policy.

Copayment

Also known as a copay, a copayment is the predetermined amount you pay a provider after receiving services, often at the time you receive care. Some plans require you to pay a copay for each covered service. Others don’t require you to pay a copay at all.

Example: Your policy may require you to make a $25 copay every time you see a general physician, a $100 copay when you visit the emergency room, or a $10 copay for each prescription.

Copays may be required in addition to coinsurance charges.

Covered charges

Covered charges include any costs paid for by your insurance plan. Some plans limit covered charges if they’re incurred from providers outside of your plan’s network.

Covered person

A covered person is anyone covered by an insurance plan, including the policy owner and their dependents.

Covered service

A covered service is any service or supplies covered by an insurance plan. These will be outlined in your insurance policy terms.

Critical illness insurance

Critical illness insurance is a type of insurance that provides the policyholder with a lump-sum payment upon the diagnosis of a covered illness. The recipient can use funds however they choose, for example, to help cover certain life expenses — like groceries, rent, childcare, and lost income.

Death benefit

A death benefit is the amount of money a beneficiary will receive when a person with a life insurance policy dies. A death benefit is also known as a life insurance payout. Policy owners choose their death benefit amount when they buy their policies.

Deductible

A deductible is the amount of money you pay for covered services or supplies before your insurance company begins paying. Deductibles are often based on your benefit year and will update at the end of your coverage period.

Example: If your insurance plan has a $1,500 deductible, you’ll pay the first $1,500 of medical costs out of pocket. After you reach $1,500, your insurance provider will pay the remaining amount for expenses that apply to covered services. When your benefit period resets, your deductible will reset as well.

Dependent

A dependent is an individual covered by the primary insurance holder’s plan, such as a spouse or child.

Disability insurance

If you're of out work due to an illness, injury or other disabling event, disability insurance is a type of insurance that can help replace some of your lost income. There are short-term and long-term plans, and may be eligible for coverage through your employer. 

Effective date

The effective date is the date on which insurance coverage begins.

Emergency medical condition

Emergency medical conditions include any medical problem with severe or life-threatening symptoms that require immediate treatment. Generally, an emergency scenario is defined as one in which a person with no medical training may expect the issue to:

• Put a person or unborn child’s health at serious risk
• Result in serious or lasting bodily injury
• Result in severe or lasting organ damage

Exclusion

Exclusions are conditions or treatments that aren’t covered by an insurance plan.

Explanation of benefits

An explanation of benefits (EOB) is an insurance company’s breakdown of how a claim was paid. It includes information about what the provider paid and what portion of the cost, if any, the policyholder is responsible for.

Flexible spending account (FSA)

A flexible spending account, or FSA, is usually set up through an employer-sponsored insurance plan. With an FSA, you can set aside pre-tax money for medical services, dependent care, or healthcare supplies.

Group health insurance

Group health insurance is a plan offered by an employer or another organization. Group health insurance plans cover the individuals in that organization and their dependents under one policy.

Health maintenance organization (HMO) plan

A health maintenance organization (HMO) plan is a medical care system that offers healthcare for policyholders in a specific region. HMOs usually require policy owners to use certain in-network providers.

Health reimbursement arrangement (HRA)

A health reimbursement arrangement (HRA) is a benefit your employer may offer that can help you cover certain healthcare expenses. HRAs are funded by employers and reimburse eligible employees and family members for covered services. HRAs may offer tax benefits for employees and employers.

Health savings account (HSA)

A health savings account (HSA) is an account that’s used to save for future medical expenses. Money saved in an HSA is federal income tax exempt when deposited. HSA funds can build up year to year and don’t have to be spent within a certain period. HSAs are often paired with high-deductible health insurance plans (HDHPs).

High-deductible health insurance plan (HDHP)

A high-deductible health insurance plan (HDHP) is an insurance plan with a higher deductible than a traditional insurance plan. HDHPs may come with more out-of-pocket costs, and your insurance may not cover medical expenses (other than preventative care, if included) until you’ve met your deductible.

They’re often paired with an HSA that allows you to save tax-exempt money for medical costs.

Hospital indemnity insurance

Hospital indemnity insurance is a type of insurance that offers payment following a hospital stay. The recipient can use the payment however they see fit.

Identity theft insurance

Identity theft insurance is a type of insurance that helps cover expenses if your identity is stolen.

In-network provider

An in-network provider is a professional, company, or organization that’s part of an insurance plan’s network.

Services from in-network providers are usually less expensive than out-of-network care. Insurance companies often negotiate discounted prices from providers in exchange for referrals.

Indemnification

Indemnification is when an insurance provider pays to help cover a loss or damages.

Individual health insurance

Individual health insurance is coverage purchased by individuals to cover themselves and their dependents. It’s not associated with an employer-sponsored group coverage plan. In other words, it’s insurance someone purchases independently, not through their employer.

Inpatient services

Inpatient services are medical services administered following admittance to a hospital and after an overnight charge is posted.

Insurable interest

As a policyholder, having an insurable interest means having a financial stake in what your insurance covers. Essentially, you benefit from having coverage and would suffer financial loss or hardship if something happens to the insured person or object.

Example: If something happens to your insured car, you’d suffer financial loss. Thus, you have an insurable interest in your car.

Insurance policy

An insurance policy is a contract between an insurer (the insurance company) and the insured (the individual, business, or entity being covered). An insurance policy defines the insurance terms and conditions, along with costs associated with coverage.

Insurer

An insurer is a company or organization that provides insurance coverage.

Legal insurance

Legal insurance is a type of insurance that provides policyholders access to a network of legal experts. 

Life insurance

Life insurance provides your beneficiaries with money in the event of your death. This can help provide them with financial stability. A life insurance calculator can help you figure out what kind of coverage you may need.

Medicaid

Medicaid is a federally funded, state-managed health insurance program. Since its launch in 1965, Medicaid has offered healthcare coverage for low-income individuals who can’t afford or don’t qualify for other federal or commercial policies.

Medicare

Medicare is a federal insurance program offering benefits to American citizens over the age of 65. Following its creation in 1965, Medicare has expanded to include disabled individuals and people with certain conditions under the age of 65.

Medicare is broken into three parts: Part A, Part B, and Part D. Part A provides coverage for hospital care, Part B covers other medical care — like necessary doctor visits — and Part D covers prescriptions.

Medicare supplement plans

Medicare supplement plans are health insurance programs offered by commercial insurance providers to provide coverage for Medicare benefit gaps. For instance, you may select a Medicare supplement plan to pay for hospital visits after you run out of coverage on your existing Medicare policy.

Network

A network includes the healthcare providers, hospitals, and pharmacies contracted by an insurance company to offer discounted services.

Non-covered charges

Non-covered charges are healthcare costs that aren’t covered by your existing health insurance program. These may include services like plastic surgery, chiropractic care, or psychological services.

Open enrollment period

An open enrollment period is an annual window when individuals can enroll in or change insurance benefits. If an individual misses open enrollment, they may qualify for a special enrollment period.

Out-of-network provider

Also known as a non-network provider, an out-of-network provider is one outside your insurance program’s network. Medical services from out-of-network providers are usually more costly than those covered by your insurance policy.

Out-of-pocket costs

Out-of-pocket costs are healthcare expenses you're required to pay for yourself following treatment or services.

Out-of-pocket maximum

The out-of-pocket maximum is the highest dollar amount you’ll pay for healthcare services during a benefit period. Your out-of-pocket maximum includes costs like copayments, coinsurance, and deductibles. It doesn’t include your premiums.

Once you reach your out-of-pocket maximum, your insurance company will assume financial responsibility for the remainder of your coverage period — but only for services covered by your plan.

Outpatient services

Outpatient services are those that don't require overnight hospitalization. Often, these services or treatments are conducted in a doctor’s office, clinic, or hospital.

Policyholder

An insurance policyholder — or policy owner — is the individual who purchased, pays for, and is covered by the insurance policy.

Point-of-service (POS) plan

A point-of-service plan is an insurance policy that allows policyholders to use non-network providers. However, you’ll likely pay higher deductibles or coinsurance costs for out-of-network care.

Preferred provider organization (PPO)

A preferred provider organization (PPO) is a type of insurance plan in which policyholders can receive care from in-network and non-network providers. PPO policyholders may receive some coverage for medical treatments and services provided by non-network physicians. However, most PPO plans offer better benefits and lower costs of treatments from in-network providers.

Premium

A premium is the amount of money that's paid to an insurance provider each month in exchange for coverage. Individuals or employers may be responsible for paying monthly premiums.

Provider

A provider is a physician, licensed healthcare professional, clinic, doctor’s office, hospital, or medical facility. Providers may be in-network or non-network.

Riders

A rider is an optional or additional coverage option you can add to your existing insurance plan at an extra cost. Examples of riders include maternity, critical illness, accidental disability, and hospital cash riders.

Special enrollment period (SEP)

A special enrollment period (SEP) is a time when you can sign up for or change your insurance coverage outside of the annual open enrollment period. QLEs and certain complex situations out of your control — like natural disasters, technical issues, and temporary illness or impairment — are typically required to receive an SEP.

Depending on the type of SEP you qualify for, you may have up to 60 days before or after the event to enroll in a new health insurance plan or make changes to your current coverage.

Statement of Health

A statement of health is a short questionnaire used to determine overall health, medical history, and lifestyle — all of which may have an impact on your life insurance coverage.

Supplemental health insurance

Supplemental health insurance is a type of insurance that provides payment you can use to pay for expenses your standard health insurance may not cover. The different types can include accident insurance, hospital indemnity insurance, critical illness insurance, cancer insurance, and more.

Underwriting

Underwriting is a process through which health insurance providers decide to offer coverage to a potential enrollee. Providers may set a policy premium during the underwriting process as well.

Voluntary benefits

Voluntary benefits are supplemental insurance policies available through your workplace. Employers can offer many types of benefits, including dental, vision, life, pet, legal, and disability insurance.

Waiting period

A waiting period is the window of time before a new employee becomes eligible for insurance coverage under an organization’s healthcare plan. It may also refer to the window of time between a policy’s effective date and the date when a provider will pay for some pre-existing conditions.