Glossary of Terms



  • Actuary. A specialist in the mathematics of insurance who calculates rates, reserves, dividends and other statistics. (Americanism: In most other countries the individual is known as "mathematician.")


  • Benefit Period. In health insurance, the number of days for which benefits are paid to the named insured and his or her dependents. For example, the number of days that benefits are calculated for a calendar year consist of the days beginning on Jan. 1 and ending on Dec. 31 of each year.


  • COBRA benefits. COBRA stands for “Consolidated Omnibus Budget Reconciliation Act of 1985,” which requires companies with 20 or more employees to offer separating employees the option to continue their group health-care coverage at their own expense.
  • Copayment. A provision in insurance policies that requires the insured to pay a flat fee for certain medical expenses.


  • Defined network plan. Any health benefit plan that requires or creates incentives for an enrollee to use providers that are owned, managed, or under contract with the insurer offering the plan.  This type of plan is sometimes referred to as a managed care plan under the terms of Preferred Provider Organization (PPO), Point of Service (POS), and Health Maintenance Organization (HMO).
  • Defined benefit plans. Defined benefit pension plans provide employees with guaranteed retirement benefits based on benefit formulas. A participant's retirement age, length of service, and pre-retirement earnings may affect the benefits received. Definitions, key provisions, and related terms follow.
  • Disability insurance. A type of health insurance that pays a monthly income to the policyholder when he or she is unable to work because of an illness or accident.




  • Frozen retirement plans. Frozen retirement plans are benefit plans that typically are closed to new enrollees and that may limit future benefit accruals for some or all active plan participants. These plans may be of different types. Some may no longer allow participants to accrue additional benefits. Others may change the plan's prospective benefit formula in such a way as to limit future benefit accruals. Other may use a prospective benefit formula to limit or cease accruals of benefits for some of the active participants.
  • Future Purchase Option - Life and health insurance provisions that guarantee the insured the right to buy additional coverage without proving insurability. Also known as "guaranteed insurability option."




  • Health insurance. A general term for insurance against loss by sickness or bodily injury.  This usually includes coverage for medical expenses such as doctor visits and hospital stays and can cover normal and preventive care such as check-ups, prenatal care, and well-baby care.
  • Health Maintenance Organization (HMO).  Prepaid group health insurance plan that entitles members to services of participating physicians, hospitals and clinics. Emphasis is on preventative medicine, and members must use contracted health-care providers.
  • Health Reimbursement Arrangement. Owners of high-deductible health plans who are not qualified for a health savings account can use an HRA.
  • Health Savings Account. Plan that allows you to contribute pre-tax money to be used for qualified medical expenses. HSAs, which are portable, must be linked to a high-deductible health insurance policy.










  • Medical Loss Ratio. Total health claims divided by total premium.
  • Medical payments insurance. A form of coverage, optional in various liability policies such as auto insurance, that provides for the payment of medical and similar expenses regardless of liability.






  • Portability. Portability is a participant's ability to maintain and transfer accumulated pension benefits when changing jobs. Portability provisions in defined benefit plans generally cover portability of assets, portability of credited service, or both.
  • Portability of assets. Participants can withdraw their accumulated pension benefits or transfer them to another retirement arrangement.
  • Portability of credited service. Participants are allowed to count the years of service with a previous employer when determining benefits from their current employer.












  • Vesting. Vesting refers to the amount of time a participant must work before earning a non-forfeitable right to a retirement benefit. Once the participant is vested, the accrued benefit is retained even if the worker leaves the employer before reaching retirement age.
  • Cliff vesting. No vesting occurs until an employee satisfies the service requirements for 100-percent vesting-for example, 5 years.
  • Graded vesting. An employee's nonforfeitable percentage of employer contributions increases over time, until reaching 100 percent.


  • Worker’s compensation. A policy conforming to state law which pays benefits to an employee (or an employee’s family) if the employee suffers a job-related injury (including death) or occupational injury.