The following "glossary of terms" will help you make the most of the strategies outlined in David Petersen's article "Why Planning Ahead is Important" and other articles in the Affording Care Bulletin. There are many terms you need to know to be able to understand personal finance issues, to discuss your situation cogently and to plan your affairs with precision. This glossary will be repeated in future issues of this bimonthly report.
An early payment of life insurance death benefits to a terminally-ill policy-holder by the insurance company (the second party).
The exchange of one insurance policy providing temporary or group coverage for another individual policy, for example, when a person ceases working and an individual policy is issued to replace employer group coverage. No evidence of medical insurability is required (no medical tests or questionnaires).
The length of time within which a conversion can be elected.
Disability Income Insurance (DI)
A form of health insurance that provides periodic payments to replace lost income when the insured is unable to work because of illness or injury.
The time within which something may happen and outside of which something may not happen.
(Also sometimes called a waiting period.) A provision designed to eliminate disability benefits for the first number of days specified for each period of disability; the elimination period may run from as little as three days to as long as one year.
Guaranteed Issue Life Insurance
A form of life insurance which the insurance company will sell regardless of health status; the company requires no medical examination or tests. The death benefits are usually small and only paid out if death occurs more than two or three years after purchase; the premiums are high.
A provision stating that the insurance company agrees to refrain from challenging claims for benefits because of alleged application misstatements by the insured after a stipulated period has passed, usually one or two years.
The time during which an insurance policy provision is not applicable.
Accelerated benefits and viatical settlements combined; the proceeds of a life insurance policy received by the policy-holder prior to death.
Pre-existing Condition Exclusion
Period of time after issuance of an insurance policy during which benefits will not be paid in connection with a pre-existing condition, usually 3-12 months.
The length of time required before the insured becomes eligible for a specific benefit.
The proceeds from the sale of a life insurance policy to a third party by a terminally-ill individual.