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Insurance encyclopedia for clearer coverage decisions.
Use these plain-English definitions to understand common terms before you compare coverage or call for licensed help.
DeductibleA deductible is the amount you may need to pay for covered services before certain insurance benefits begin paying, depending on the plan and service type.CopayA copay is a set dollar amount you may pay for a covered service, such as a doctor visit, prescription, urgent care visit, or specialist appointment.CoinsuranceCoinsurance is a percentage share of covered costs that you may pay after plan rules are applied, often after a deductible is met.PremiumA premium is the regular amount paid to keep an insurance policy active, usually monthly, before separate costs such as deductibles or copays are considered.Out-of-pocket maximumAn out-of-pocket maximum is the most you may pay for covered in-network services during a plan year before the plan pays covered costs at a higher level.HMOAn HMO, or Health Maintenance Organization, is a plan structure that often uses a defined provider network and may require referrals for some specialist care.PPOA PPO, or Preferred Provider Organization, is a plan structure that may offer more provider flexibility than some network types, subject to plan rules and costs.EPOAn EPO, or Exclusive Provider Organization, is a plan structure that usually focuses coverage on a specific network except for emergencies.ACAACA refers to the Affordable Care Act, the federal health law tied to marketplace coverage, essential health benefits, subsidies, and protections for pre-existing conditions.MedicareMedicare is a federal health insurance program mainly for people age 65 or older and certain younger people with qualifying disabilities or conditions.MedicaidMedicaid is a public health coverage program for eligible people with limited income or specific qualifying circumstances, with rules that vary by state.MedigapMedigap, also called Medicare Supplement insurance, is private coverage designed to help pay certain costs left after Original Medicare.Part DPart D is Medicare prescription drug coverage offered through private insurance companies approved by Medicare, either standalone or tied to certain plans.SEPSEP means Special Enrollment Period, a limited window that may let someone enroll in or change coverage after certain qualifying life events.Open EnrollmentOpen Enrollment is a scheduled period when many people can enroll in, renew, or change certain insurance coverage for the next plan period.Life insuranceLife insurance is coverage designed to pay a death benefit to beneficiaries if the insured person dies while the policy is active and payable.Term lifeTerm life insurance provides life coverage for a set period, such as 10, 20, or 30 years, if premiums are paid and policy terms are met.Whole lifeWhole life insurance is permanent life insurance designed to remain in force for life if required premiums are paid and policy rules are met.Hospital indemnityHospital indemnity coverage is supplemental insurance that may pay a set benefit for certain hospital stays or related events, depending on policy terms.Critical illnessCritical illness insurance is supplemental coverage that may pay a benefit after certain covered diagnoses, subject to policy definitions and exclusions.NetworkA network is the group of doctors, hospitals, and other providers that have agreed to specific rates and terms with an insurance plan.In-NetworkIn-network describes a doctor, hospital, or provider that has a contract with your insurance plan to accept agreed-upon rates for covered services.Out-of-NetworkOut-of-network describes a doctor, hospital, or provider that does not have a contract with your insurance plan, which usually means higher costs or no coverage at all.Balance BillingBalance billing is when an out-of-network provider bills you for the difference between what they charge and what your insurance plan paid.FormularyA formulary is the list of prescription drugs a health or Medicare Part D plan covers, usually organized into cost tiers.Prior AuthorizationPrior authorization is approval a health plan requires before it will cover certain services, procedures, or medications.COBRACOBRA is a federal law that lets many people temporarily keep their employer group health coverage after losing a job or reducing hours, usually by paying the full premium themselves.HSA (Health Savings Account)An HSA is a tax-advantaged savings account available to people enrolled in a qualifying high-deductible health plan, used to pay for eligible medical expenses.FSA (Flexible Spending Account)An FSA is an employer-sponsored account that lets you set aside pre-tax money for eligible medical or dependent care expenses, generally within the same plan year.Annual Enrollment Period (AEP)The Medicare Annual Enrollment Period runs October 15 through December 7 each year, when Medicare beneficiaries can switch Medicare Advantage or Part D plans for the following year.Guaranteed IssueGuaranteed issue means an insurer must offer you a policy regardless of your health status, without being able to deny coverage based on pre-existing conditions.Catastrophic Health PlanA catastrophic health plan is a low-premium, high-deductible ACA Marketplace plan generally available to people under 30 or those with a hardship or affordability exemption.Premium Tax CreditA premium tax credit is a subsidy that lowers the monthly premium for an ACA Marketplace plan, based on household income and family size.Coverage Gap (Donut Hole)The Medicare Part D coverage gap, often called the donut hole, was historically a stage where beneficiaries paid a higher share of drug costs after reaching an initial spending limit.Skilled Nursing Facility (SNF)A skilled nursing facility provides short-term, medically necessary nursing or rehabilitation care, and Medicare Part A can cover a stay under specific conditions.Durable Medical Equipment (DME)Durable medical equipment refers to reusable medical equipment like wheelchairs, walkers, and oxygen equipment that Medicare Part B can help cover when medically necessary.Medicare Advantage (Part C)Medicare Advantage, also called Part C, is an alternative way to get Medicare benefits through a private insurance company, often bundling Part A, Part B, and usually Part D together.Extra HelpExtra Help is a federal program that helps people with limited income and resources pay for Medicare Part D prescription drug plan costs.Dual EligibleDual eligible describes someone who qualifies for both Medicare and Medicaid at the same time, typically based on limited income and resources.Creditable CoverageCreditable coverage is health or drug coverage that's considered at least as good as Medicare's, which can let you delay Medicare enrollment without a late penalty.Pre-Existing ConditionA pre-existing condition is a health issue you had before a new insurance policy's coverage started.Waiting PeriodA waiting period is a span of time after a policy starts during which certain benefits aren't yet payable, common in some life, disability, and supplemental insurance products.Cash ValueCash value is the savings component that builds inside a permanent life insurance policy, like whole life or universal life, which the policyholder may be able to borrow against or withdraw from.BeneficiaryA beneficiary is the person, people, or entity designated to receive the death benefit from a life insurance policy.Death BenefitThe death benefit is the amount a life insurance policy pays to the named beneficiary when the insured person dies, generally income-tax-free.UnderwritingUnderwriting is the process an insurer uses to evaluate risk and decide whether to offer coverage, and at what price, often based on health, age, and lifestyle factors.Contestability PeriodThe contestability period is typically the first two years of a life insurance policy, during which the insurer can investigate and potentially deny a claim based on misstatements on the application.RiderA rider is an optional add-on to an insurance policy that changes or expands its coverage, often for an additional cost.Grace PeriodA grace period is a set number of days after a missed premium payment during which a policy stays in force before it lapses.Long-Term Care InsuranceLong-term care insurance helps cover costs for extended personal or custodial care, like a nursing home, assisted living, or in-home care, that Medicare generally doesn't cover.Universal Life InsuranceUniversal life insurance is a type of permanent life insurance with flexible premiums and a cash value component that earns interest, often at a rate that can change over time.POS Plan (Point of Service)A POS plan is a health plan type that combines features of an HMO and a PPO, generally requiring a primary care doctor and referrals but offering some out-of-network coverage at a higher cost.Explanation of Benefits (EOB)An Explanation of Benefits is a statement from your insurance plan showing what a provider billed, what the plan paid, and what you may owe -- it is not a bill itself.AnnuityAn annuity is an insurance contract that converts a lump sum or a series of payments into a stream of income, often used to help guard against outliving your savings.Disability InsuranceDisability insurance replaces a portion of your income if you become unable to work due to a covered illness or injury, generally split into short-term and long-term policies.Final Expense InsuranceFinal expense insurance is a small whole life policy, often guaranteed or simplified issue, designed to cover funeral and end-of-life costs rather than income replacement.Coordination of BenefitsCoordination of benefits is the process insurers use to determine which plan pays first when a person is covered by more than one health plan at the same time.SubrogationSubrogation is the right of an insurer that paid a claim to seek reimbursement from a third party responsible for the loss, such as an at-fault driver in an accident.Birthday RuleThe birthday rule is a common coordination-of-benefits rule that decides which parent's health plan is primary for a dependent child: whichever parent's birthday falls earlier in the calendar year.Minimum Essential CoverageMinimum essential coverage is the category of health coverage that counts as qualifying insurance under the ACA, including most employer plans, Marketplace plans, Medicare, and Medicaid.Qualifying Life EventA qualifying life event is a change in circumstances -- like losing coverage, marriage, or having a baby -- that opens a Special Enrollment Period to enroll in or change health coverage outside open enrollment.Free Look PeriodThe free look period is a set number of days after receiving a life insurance policy during which you can cancel it for a full refund of any premium paid, no questions asked.Surrender ChargeA surrender charge is a fee an insurer may charge if you withdraw money from, or cancel, a permanent life insurance policy or annuity during an early surrender period.Policy IllustrationA policy illustration is a document showing projected values of a permanent life insurance policy over time, based on assumptions like interest rates or dividend performance.Waiver of Premium RiderA waiver of premium rider is an optional policy add-on that waives future premium payments if the policyholder becomes disabled, keeping the policy in force.Term Conversion RiderA term conversion rider (or privilege) lets you convert some or all of a term life policy into a permanent policy without new medical underwriting, generally within a set window.Guaranteed RenewableGuaranteed renewable means an insurer must renew your policy as long as premiums are paid on time, though it can still raise premiums for an entire class of policyholders.CapitationCapitation is a payment model where a doctor or medical group is paid a fixed amount per patient per period, regardless of how many services that patient actually uses.Look-Back PeriodA look-back period is the span of time an insurer or program reviews your history -- like recent medical treatment or, in Medicaid long-term care planning, asset transfers -- when evaluating an application or eligibility.
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