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Insurance Terminology You Need To Know: Part V

We believe that people should know and understand exactly what their insurance policies say and mean. But insurance companies purposely use a lot of jargon and complicated terminology that the average person could never (or would never want to) wrap their heads around. That’s why we’re going to do it for you. Here are a few insurance-related terms that you might find in any policy you’ve purchased, and what they mean.

Actual Cash Value

This term refers to the value of repayment requested after a financial loss (most usually due to property damage). You’ll also see it coupled with the word “indemnification,” which refers to the protection of one party when a third party is damaged. 

Actuary.

This term refers to the professional responsible for determining the level of risk that an insurance company might be willing to accept. The actuary determines the equations for calculating premiums, dividends, etc.

Adjuster. 

If you ever need to cash in on a policy, then the insurance adjuster is the one who will investigate your claim. Basically, the adjuster’s job is to never give you an inch and not give you the company’s money unless a certain standard is met. They determine the claim’s worth in relation to the policy’s cash value.

Admitted Assets. 

These are an insurer’s valuations for specific assets. You’ll find them on the balance sheet.

Advance Premiums.

Normal premiums are the price you pay — usually once a month — once you’ve agreed to purchase a policy. An advance premium means you’ve paid…in advance. 

Affiliate.

Insurers refer to anyone who is under the insurer’s control as an affiliate.

Agent.

These are the insurance lackeys who sell their services. They don’t always work for the insurance provider. Sometimes providers will ask a third-party for sales work.

Aggregate.
This word refers to the most money you can have returned from a single loss (total coverage).

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Life Sentence Given To Man After Insurance Collection Plot

Most rational people on planet Earth would recognize the futility of planning a murder (or two or three) in order to collect a massive life insurance settlement. And yet, it keeps happening. Hawthorne resident Ali F. Elmezayen, 45, was sentenced to 212 years in federal prison after the buffoon took out accidental death life insurance policies on his two kids and wife — and then partially carried out the plot when he drove his vehicle off the Port of Los Angeles.

His wife survived, but his two disabled sons died. 

Judge John F. Walter imposed the maximum sentence available when he ruled for 212 years. Walter said, “He is the ultimate phony and a skillful liar…and is nothing more than a greedy and brutal killer. The only regret that the defendant has is that he got caught.”

Elmezayen was also slammed with $261,751 in restitution fees that were paid out as part of the accidental death policy.

An anonymous lawyer for a personal injury law firm (https://www.socalinjurylawyers.com/) commented that these types of cases were surprisingly plentiful: “People don’t realize that they can’t possibly get away with it. The first person they suspect is the closest person in the deceased’s life.”

Acting United States Attorney Tracy L. Wilkison said, “Mr. Elmezayen conceived a cold-blooded plan to murder his autistic sons and their mother, then cash in on insurance policies. He now has ample time to reflect — from the inside of a federal prison cell — on where his greed and self-interest took him. We continue to grieve for those two helpless boys who deserved better from their father, who will never again walk among us as a free man.”

The scheme was poorly planned from the beginning. Before the plot was executed, Elmezayen contacted the relevant insurance companies a number of times — sometimes posing as his wife — in order to ensure the eight insurance policies he had purchased for more than $3,000,000 would pay out without much scrutiny. Prosecutors say one of his motivations was a bankruptcy he filed the year he purchased the policies (which he couldn’t even afford). 

Assistant Director in Charge at the LA FBI Field Office Kristi Johnson said, “Fathers are supposed to protect their children but instead, Elmezayen drove his boys straight to their certain death in exchange for cash. The defendant maliciously planned the death of his autistic sons and gave them virtually no chance of survival. The investigation that led to today’s sentencing won’t give them their lives, but affords them justice in death.”

Insurance policies have a “contestability” period. Once it expires, there are no longer any investigations into the cause of death. Theoretically, Elmezayen could murder his family only days after the contestability window expired and no one would bat an eye. He waited only 12 days. Funny thing: the FBI tends to take notice of such aberrations in the system. Who knew?

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What The Judges Are Saying About COVID In The Workplace

Everyone knew that a storm of sorts was coming. Many businesses — non-essential and otherwise — remained open during the coronavirus pandemic. This resulted in many people becoming sick because they were allowed to work. Not all employers took the necessary precautions to protect them. Could those businesses be held liable for employee damages? What does insurance have to say about it? What about Workers Comp?

You can see that the equations judges have to balance are complicated — and the law might not have all the answers. But we finally have some insight into how judges are ruling in cases like these. Suffice it to say, judges are ruling against businesses in COVID-19 lawsuits.

The University of Pennsylvania Law School tracked COVID legislation starting early. 

Many of the cases involved businesses that wanted insurance companies to cover COVID-19 losses because they had purchased “business interruption” policies. But the problem is simple: those policies rarely cover this kind of public health crisis. Business owners would have to voluntarily purchase a policy that does. Most don’t.

Judges ruled against business owners who built these lawsuits. The Penn data shows that there were thousands of such lawsuits over the past 12 months. In federal courts, insurers won lawsuits more than three-quarters of the time. Many more cases were “resolved” by the judge’s outright dismissal of the case.

Civil lawsuits are generally filed against the person or organization mostly responsible for financial damages. In this case, they should probably be filed against the United States government. The arguments would be obvious enough. The Trump administration failed to invoke many laws that would have increased production of PPE or attempted to standardize COVID restrictions from state to state. At the very least, he could have tried to limit travel. But in the name of business, that’s not what happened.

Unfortunately, those lawsuits would also fall flat — because the U.S. government would claim immunity.

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What Are “Nuclear Verdicts” And How Do They Affect Insurance Rates?

We rarely think about how the transport industry works. But maybe we should. Every year, millions of trucks — gasoline-fueled missiles, rather — travel from one end of the United States to the other. We’re talking hundreds of millions of miles traveled on an annual basis. With those kinds of numbers, accidents are inevitable. And what happens when those accidents lead to massive lawsuits that wind up in court?

Mike Card is president and CEO of Combined Transport. He took over the business from his father, who started it in 1980. And suffice it to say, business is better than ever. This is in part because of the reliance on material goods during the coronavirus pandemic. The government relies on some trucking services to get vaccines and PPE from one region to the next. But Card says the bigger the business gets, the more he worries.

He commented, “If someone wins $20 million from the jury, my insurance companies only pay the first $5 [million]. I would have to pay the next $15 million. We couldn’t afford that. We’d have to shut our doors.”

It’s a legitimate concern. From 2010 to 2019, the number of trucking accidents with fatalities blew up 43 percent. Overall injuries rose 7 percent. Needless to say, most of the casualties were passengers or drivers in other vehicles.

Combine that with the epidemic of “nuclear verdicts” — or the ballooning costs and jury awards from those crashes in excess of $10 million, and you get a lot of worried business owners. The aforementioned 43 percent increase in fatalities doesn’t come close to the whopping 1000 percent increase in jury awards during the exact same time period.

Why are the awards getting so high so fast? Liberty Mutual Insurance says that the main reason is the idea that the system in general is broken (and hint: it is). 

But the trucking industry is more likely to receive a punitive judgement (i.e. a punishment from the judge) for gross negligence than many other industries. That’s because truck drivers are often fatigued behind the wheel. Coupled with the fact that some drivers are allowed to keep their drives even without a flawless driving record, and it’s easy for a personal injury lawyer to win a case for injured plaintiffs.

An anonymous lawyer from Koonz McKenney Johnson & Depaolis LLP (https://koonz.com/) said, “99 percent of the time, it’s the business owner’s fault. It’s the hiring practices, the overtime hours, the broken laws and regulations that lead to the majority of these accidents. Ordinary people are the ones who pay the price with their lives. Why shouldn’t we take the owners to town for their mistakes? Someone has to reimburse victims for the damage done, and it’s got to be the ones responsible. The drivers are just tools for those business owners. And so we target the business owners.”

But senior vice president of the American Transportation Research Institute Dan Murray says, “In most states there’s a disconnect between your level of negligence and your level of liability. There are states where you can be identified as 10 percent of 15 percent negligence and still be vulnerable for 100 percent of the financial liabilities.”

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Insurance Terminology You Need To Know: Part IV

Welcome to part four of our series in insurance terminology you should definitely know — especially if you’re a new buyer of any kind of insurance. It never hurts to brush up when you’re rusty. Today we will look at a few terms like HMO, HRA, and HSA that are abbreviated to become more confusing than they have to be. 

What is an HMO?

HMO stands for “Health Maintenance Organization.” When you see HMO on your plan, it means you can only go through the specific HMO providers outlined by that plan. Usually, this means choosing one doctor in the network to be your primary care physician. Should you need to see a specialized doctor, your primary care physician will provide you with the right referral.

What is an HRA?

HRA stands for “Health Reimbursement Account.” An HRA is usually a benefit shared through an employer, and it allows you to deposit money from your paycheck to funnel toward healthcare expenses as needed — but this is purely a savings account with no tax benefits. It’s good for people who have trouble hanging onto their money for more than a day.

What is an HSA?

HSA stands for “Health Savings Account.” Another benefit normally shared through an employer, but an HSA normally allows the user to avoid federal taxes on anything deposited into the account. Funds deposited into an HSA do not need to be spent in a given timeframe, which makes them a great way to complement insurance. 

What is a PPO?

PPO stands for “preferred provider organization.” A PPO is similar to an HMO, except they usually cost more through higher premiums — and also provide limited coverage for when healthcare providers are used outside of the network. These plans are great for people who like to travel or move often for work, because they still offer some coverage in case you’re not where you normally are.

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What Is Credit Insurance?

One of the scariest decisions an adult will ever make is putting a mortgage on their first home. These are the most detailed business arrangements that most of us will ever sign, and when you’re unaccustomed to reading contracts — especially contracts with an excessive amount of jargon contained within — it can be a stressful endeavor. Whether or not it’s worth it depends a lot on the contract signed, so it’s better to be safe than sorry. Credit insurance might prevent even more stress.

But what is credit insurance and when is it applicable? Here we go! First things first: many loans you might take out can come with a credit insurance stipulation already attached, mortgages included. When a person’s financial situation changes or the payments become too much of a burden, the credit insurance kicks in. 

One thing you should know before signing any agreement is that it’s actually illegal for a creditor to include this type of insurance without specifically telling you. This is according to the Federal Trade Commission (or FTC). Keep that in mind if you ever find that there were a few extra clauses slipped into your agreement — also keep in mind that this is why a mortgage or other big loan requires that you read the contract. This isn’t one of those that you can just skip over.

What types of credit insurance are there? Credit life insurance, credit disability insurance, involuntary unemployment insurance, and credit property insurance. 

Credit life insurance is what you buy when you’re worried that you might pass away before you get the opportunity to completely pay off your loan. This is a big concern for homeowners who will likely be paying off a mortgage for over a decade with a fixed plan. You won’t be able to leave that home to your beneficiaries without their willingness to take over the money owed on the loan, so credit life insurance is a way to offset this possibility.

Credit disability insurance kicks in when you become injured or disabled and can no longer make payments on your loan because you can no longer work. Involuntary unemployment is exactly what it sounds like — it kicks in when you are fired or laid off from your job, as long as the reason for your termination was not your fault.

Credit property insurance is similar to homeowners or renters insurance in that it protects against many different types of loss. That means if an arsonist sets fire to your house and you lose everything, the credit property insurance will kick in to help pay what remains of the loan. Just keep in mind you’ll need actual homeowners insurance if you want the property rebuilt, though.

When shopping around for credit insurance, there are plenty of questions you might ask to make the process easier — not the least of which is “how much does the premium cost?” If you’re not in the mood to shop around, you can always ask the creditor directly. Chances are they will have plenty of options for you to choose form, and can provide help choosing the best type of coverage for you.

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Insurance Terminology You Need To Know: Part III

This is part three of our series on insurance terminology. We decided to define many of the words associated with insurance coverage to ensure that those seeking a working knowledge would be able to obtain it. Not sure what a particular term means? You’ll find it here sooner or later, and they aren’t that difficult to sift through since they’re in alphabetical order. Here are a few more terms.

What is creditable coverage?

Creditable coverage usually refers to the person whose coverage comes from another source, including Medicare or Medicaid, which are two of the most common creditable coverage plans. Others include group health plans, military healthcare plans, Indian Health Service (and other tribal programs), risk pools, the Federal Employees Health Benefits Program, a Peace Corps Act health plan, etc.

What is a dependent?

A dependent is basically someone who relies on another for support. For example, a parent might claim one or more dependents (his or her children) when filing tax forms. Dependents usually provide a taxpayer with credits or other benefits. There are other examples of dependents, such as someone who is disabled.

What is an emergency medical condition?

On a healthcare plan, you’ll want to make sure you understand anything outlined under the emergency medical condition clause. These are conditions that put your health at risk, but sometimes specific conditions are outlined in a particular plan while others are left out. 

What is an FSA?

A flexible spending account (or FSA) is usually provided through an employer. These plans allow a person to set aside funds for certain contingencies. The money is considered “pre-tax” which means you won’t have to pay taxes on the FSA funds until the money is removed from the account. These funds can be used for specific reasons, like paying copays, hospital fees, physical rehabilitation costs, or dental expenses. Vaccines are also included.

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What Does Workers Comp Actually Cover?

Workers comp is a type of liability insurance that protects two parties: both the employer and the employee. Both parties typically pay into a pool of money with each paycheck. When an employee is injured on the job, the employer can dot the “I”s and cross the “T”s to make sure that the employee can use that aforementioned pool of money for healthcare resulting from the injury, regardless of whether or not the employee has health insurance. It also helps protect employers by reducing the chance that an employee will file a personal injury lawsuit.

Workers comp covers accidental workplace injuries. An employee may be allowed to dip into the pool of money to cover healthcare costs, costs associated with lost wages or earning potential, costs of physical therapy, or funeral expenses if the worst should happen. Believe it or not, workers comp might even pay more if an employee is scarred because of the injury! Employees probably won’t need a slip and fall attorney for a simple accident, and that’s thanks to workers comp.

But there are exceptions to every rule, and workers comp is no different. What isn’t covered? It depends on where you live and what happened. For your state rules and regulations, check with your employer (or a lawyer if you don’t trust your employer). 

Here’s what we can say for sure. If the accident was caused by an employee — and keep in mind there’s a very stark legal difference between cause and effect — then the employee might not be covered. One obvious example involves fighting. If an employee tries to punch another employee or customer in the face, misses, and is whacked in retaliation, then workers comp absolutely will not cover his broken nose. He started the fight, after all. On the other hand, if the employee is hurt in a fight they didn’t start, then workers comp would absolutely cover medical expenses. 

The first thing an employer will likely do after an employee is injured in an accident is ask the employee to submit to a drug test. Don’t want to take the drug test? That’s legally fine, but you’re sure to lose your job. Take the drug test and it comes back positive? Bye Felicia. You’re sure to lose your job. Keep in mind that some drug tests will come back positive even if you consumed alcohol a full 24 hours prior. So even though the tests aren’t always fool-proof, an employee could still be screwed over — and need to pay for their own medical expenses after an accident. 

If you are an employee and were hurt while working, then you should have already contacted your direct supervisor. Failure to do so might make it more difficult for you to make a workers comp claim later, especially if there’s no video footage of the accident or no one around to corroborate your story. When reporting the injury, provide a full accounting — including your written story, if possible — and make it as detailed as you can.

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Insurance Terminology You Need To Know: Part II

Welcome to part two of our series on insurance terminology. Some of these definitions are common knowledge, while others might be more obscure. If you’re a new buyer, then you’ll want to know what you’re getting yourself into before you make any final decisions. That’s where we come in. Here are a few more terms to know before exercising your purchasing power!

What is an allowed amount?

The allowed amount is the highest dollar amount that an insurance company will ever pay. Here’s an example of the world’s worst healthcare plan: 75% coinsurance, $9,900 deductible, with a $25 allowed amount. This scam means the highest amount the company would pay is $25, and only after you’ve paid the $9,900 deductible. Plus, you’ll have paid another $75 to obtain their $25 via coinsurance. Whoops! Buyer beware.

What is a condition?

In healthcare, a condition is the illness or disease covered or not covered by insurance. Be wary of insurance contracts that don’t cover common health problems like heart disease or cancer. They might serve for a broken leg, but nothing else. 

What is a copayment? 

Many insurance contracts involve some sort of a copayment when you use a particular service. Let’s say you need to visit the doctor for a health problem you recently noticed. The plan might note that the deductible is irrelevant for this service, but that there is a $25 copay. That means the visit is covered by insurance, and all you’ll have to pay is the $25. Not too shabby.

What is a covered charge?

Covered charges are exactly what they sound like: they’re charges made to the insurance provider for covered services. This is of particular relevance to those who might be traveling, because they’re more likely to need the healthcare services of an out-of-network establishment. Most insurance providers will place a strict limit on the covered charges when venturing out-of-network.

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What Is Divorce Insurance?

Divorce insurance is something that many married couples “Google search” for when tying the knot — and no wonder, because 9 out of 10 people will marry by the time they reach age 50 and up to half of those couples will inevitably divorce. But unfortunately divorce insurance doesn’t actually exist. There was a sort of divorce insurance “test” back in 2010, but big shock: it didn’t work out for the insurer. The theory was simple enough. Married couples can experience financial upset during divorce, so why not offer them a backup plan?

Probably the biggest problem with the actual “divorce insurance” concept is that there are already fail-safe measures that can be preemptively taken by couples if they want to protect their financial interests against divorce. But even those measures are scrutinized and stigmatized because marriage is supposed to be a lifetime vow — a commitment. Take the prenup, for example: the legal contract can stipulate what would happen should divorce take place, and is signed before the marriage licenses are obtained.

The difference between a prenup and the doomed divorce insurance was simple enough, though. A prenup is an agreement between two committed partners, while divorce insurance was an agreement between a business and just one of those assumedly committed partners.

But the problems with divorce insurance are equally obvious. Do you think an insurance company willingly pays out a settlement unless forced? Not a chance. When you’re in a car accident between two or more parties, the insurance company literally sends out highly qualified and well paid individuals to make sure the story you provide is the right one. If you were the cause of the accident, don’t expect to get anything that isn’t owed.

But how do you make an agreement that basically says “if you divorce this person, you’ll receive this benefit”? The coverage basically becomes about what would happen under set conditions, just like any other insurance. Your spouse cheated on you and you want a divorce? Great. Your divorce insurance benefit should pay up. But first you need to provide beyond any shadow of a doubt that your spouse actually cheated. Any footage of that event? Hint: you’re probably breaking a half-dozen laws by having footage of that event, much less sharing it.

So you can see why the coverage options were likely doomed from the beginning.

But there’s probably no replacement for a traditional divorce attorney. Looking for one? You can visit website of any local attorney you choose, and most will always offer a free consultation to see if you’re a good match.

An attorney can also help relevant parties come to a marriage settlement, which is typically an agreement made to iron out details of who pays what (think alimony or child support) after marriage. The might also include more immediate concerns like assets, child custody, child visitation rights, etc. It’s always a good idea to know what you want out of a marriage — and what you want out of a divorce.

Check out some of the coverage when divorce insurance was first offered: