paid-up additions
Additional life insurance purchased with policy dividends. No additional premiums are needed for paid-up additions. Also called dividend additions.

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paid-up policy
An insurance policy that will provide benefits in the future but that requires no further premium payments.

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paramedical report
A report based on a physical examination and a medical history completed by a medical technician, a physician's assistant, or a nurse, rather than a physician. A paramedical report describes the health of a proposed insured and can serve as part of an insurance application.

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.partial disability
A disability that prevents an insured from engaging in some of the duties of his or her usual occupation or from engaging in the occupation on a full-time basis.

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partial disability benefit
A flat amount specified in a disability income insurance policy that is payable when the insured suffers a partial disability. Usually the partial disability benefit is half the full disability benefit. See also residual disability benefit.

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partial plan termination
The termination of a pension or employee-benefit plan for one group of participants but not for another. Sponsors sometimes do this to reclaim some of the assets of an overfunded plan.

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participating policy
A type of life insurance policy or annuity under which policy dividends may be paid to the policyowner. Also called a par policy. See also dividend.

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partnership insurance
A type of business insurance designed to provide funds so the remaining partners in a business can buy the business interest of a deceased or disabled partner. See also business-continuation insurance.

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past service
The period of employment service rendered by an employee before a pension plan was begun or amended or before the employee enrolled in the pension plan. A plan sponsor must decide whether pension benefits will be credited to an employee for the employee's past service or only for current and future service. See also future service.

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payee
The person to whom benefits are payable under a supplementary contract. See also supplementary contract.

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payment of insurance money into court
In the common law jurisdiction of Canada, an action that an insurer takes when the insurer admits liability to pay policy proceeds but cannot determine the proper recipient. Once the insurer pays the money into court, the insurer is discharged of any further liability under the policy. In Quebec, an insurer in such a situation can obtain a valid discharge of liability by paying the policy proceeds to the Minister of Finance. In the United States, the process is called interpleader.

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payroll deduction plan
(1) See salary-reduction plan. (2) A premium payment method for individual insurance under which an individual's employer deducts the employee's premium amount from his or her paycheck and sends the premium to the insurer.

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peer review group
A group of local physicians who help solve insurance claim disputes and promote fair and ethical practices in the health-care industry.

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pension
A life income payable to a person who has retired.

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Pension Benefit Guaranty Corporation (PBGC)
In the United States, the organization which insures benefits in defined benefit pension plans. Its purpose is to make sure that all participants in qualified defined benefit pension plans receive the vested benefits to which they are entitled, even if their pension fund goes bankrupt.

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Pension Benefits Guarantee Fund
In Canada, a fund established in the province of Ontario to guarantee payment of benefits in the case of the insolvency of a defined benefit pension plan.

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Pension Benefits Standards Act (PBSA)
In Canada, federal legislation that governs the administration of pension plans covering federal employees and those individuals whose employment falls under the legislative authority of the Canadian Parliament (including those working in the transportation field, telecommunications workers, and bank workers).

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pension fund
(1) The assets used to pay the pensions of retirees. (2) An investment institution established to manage the assets used to pay the pensions of retirees.

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Pension Index
In Canada, the index used by the Canada Pension Plan and Quebec Pension Plan to vary pension benefit payments to reflect the effects of inflation. The Pension Index is based on the Consumer Price Index.

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per capita beneficiary designation
A class beneficiary designation under which life insurance policy proceeds are shared only by those class members who survive the insured. Contrast to per stirpes beneficiary designation.

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per-cause deductible
A deductible which must be satisfied for each separate accident or illness before major medical benefits will be paid. Also known as a per-disability deductible. Contrast with all-causes deductible.

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per-cause maximum
For any individual, the maximum amount that a medical expense policy will pay for medical expenses resulting from any particular illness or injury.

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percentage contribution
The amount of the premium that a group member pays in a contributory group insurance plan. Also known as employee contribution or member contribution. See also contributory group insurance.

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percentage participation
See coinsurance.

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period certain
The specified time during which the insurer unconditionally guarantees that benefit payments will continue under a settlement option or annuity.

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permanent and total disability
A condition that prevents an insured from returning to any gainful employment.

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persistency
The retention of business that occurs when a policy remains in force as a result of the continued payment of the policy's renewal premiums.

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personal interview report
A report that contains the same types of information as an inspection report, except that the personal interview report relies on the proposed insured as the only source of information. See also inspection report.

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personal producing general agency (PPGA) system
A personal selling distribution system that relies on the use of PPGAs.

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personal producing general agent (PPGA)
A type of general agent who more closely resembles a broker than an agency manager. Most PPGAs are under contract to several insurance companies and spend the majority of their time selling insurance rather than building and managing an agency office.

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personal selling distribution system
An insurance distribution system that uses commissioned or salaried sales personnel to sell products through oral presentations made to prospective purchasers.

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per stirpes beneficiary designation
A class beneficiary designation under which the descendants of a deceased class member receive the deceased class member's share of the life insurance policy proceeds. Contrast to per capita beneficiary designation.

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physical examination provision
A health insurance policy provision that grants the insurer the right to have an insured who has submitted a claim examined by a doctor of the insurer's choice at the insurer's expense.

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plan document
A written document that is adopted by an employer and that specifies the terms of a pension plan. A plan document identifies the benefits the participants are to receive and the requirements they must meet to become entitled to those benefits.

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plan participant
A person on whose behalf contributions are made or benefits are accrued under a pension or employee-benefit plan.

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plan sponsor
An entity which has adopted and maintains a pension or employee-benefit plan. The plan sponsor is often an employer, but may be a union, a trade or professional association, or a committee composed of representatives of a number of employers or associations.

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point-of-service (POS) plan
A type of managed care plan combining features of health maintenance organizations (HMOs) and preferred provider organizations (PPOs), in which individuals decide whether to go to a network provider and pay a flat dollar copayment (say $10 for a doctor's visit), or to an out-of-network provider and pay a deductible and/or a coinsurance charge.

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policy
A written document that serves as evidence of an insurance contract and contains the pertinent facts about the policyowner, the insurance coverage, the insured, and the insurer.

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policy acquisition costs
Costs that are directly attributable to the production of new business. Also called acquisition expenses.

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policy anniversary
The anniversary of the date on which a policy was issued. Sometimes simply called the anniversary.

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policy charge
An amount that an insurer adds to the gross premium to help cover the insurer's expenses. This amount is the same regardless of the size of the policy. Also called a policy fee.

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policy filing
The process of obtaining legal permission to sell an insurance product in a specific jurisdiction.

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policyholder
(1) The company or organization that owns a group insurance contract (called the group policyholder in Canada). The policyholder of a group insurance contract does not have the same ownership rights under the contract that a policyowner has under an individual contract. (2) In Quebec, the owner of an individual life insurance policy (called the policyowner in the United States and the insured in the rest of Canada). Also sometimes called the owner in Quebec. (3) Often used interchangeably with policyowner.

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policy loan
A loan that is made to a life insurance policyowner by an insurer. A policy loan is secured by a policy's cash value and cannot exceed the cash value. When the policy benefits are paid, the amount of any outstanding policy loan made against the policy is deducted from the benefits.

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policyowner
The person or party who owns an individual insurance policy. The policyowner is not necessarily the person whose life is insured. The terms policyowner and policyholder are frequently used interchangeably.

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policy proceeds
The amount that the beneficiary actually receives from a life insurance policy after adjustments have been made to the basic death benefit for policy loans, dividends, paid-up additions, late premium payments, and supplementary benefit riders. Compare to basic death benefit and death benefit. Also called net policy proceeds.

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policy provisions
The statements, following the face page of an insurance policy, that describe the operation of the insurance contract.

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policy reserve
(1) A liability account that identifies the amount of assets that, together with the future premiums to be received from in-force policies, is expected to be sufficient to pay future claims on those in-force policies. (2) The actual assets that guarantee that the insurer will have sufficient funds to pay future claims. See reserve for a list of reserves.

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policy summary
A document, often in the form of a computer printout, that contains certain legally required data regarding the specific policy being considered by an applicant.

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policy year
The 12-month period between a policy's anniversaries.

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pooling
In group insurance, the practice of underwriting a number of small groups as one large group.

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portability
The ability of an individual to transfer from one health insurer to another health insurer without regard to preexisting conditions or other risk factors.

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portfolio
(1) A group of investments managed or owned by an individual or organization. (2) All of the products offered by an insurance company.

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portfolio method
A method of accounting among insurers in which each customer or policyowner receives a rate of interest equal to the average rate of interest earned on the entire portfolio of assets in the insurer's general account. Compare to the investment year method (IYM).

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post-notice
As required by the Fair Credit Reporting Act, a form that the insurer must send to an applicant in cases in which the insurer has made an adverse decision based on information contained in a report from a consumer reporting agency.

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power of agency
An agent's right to act for an insurer. The power of agency is established through agency contracts between an insurer and its agents.

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preadmission review
A component of a utilization review program that requires an insured person, or that person's physician, to obtain prior authorization from an insurer before any non-emergency hospitalization.

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preauthorized payment system
A cost containment feature of many group medical policies whereby the insured must contact the insurer prior to a hospitalization or surgery to receive authorization for the service.

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preauthorization
A cost containment feature of many group medical policies whereby the insured must contact the insurer prior to a hospitalization or surgery and receive authorization for the service.

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predetermination of benefits provision
A provision often included in dental policies which specifies that when dental treatments are expected to exceed a stated level, such as $100, $150, or $200, the dentist should submit to the insurer the proposed treatment plan for the patient so that the insurer can determine the amount payable by the dental plan. Also known as a preauthorization of benefits provision, precertification of benefits provision, or pretreatment review provision.

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preexisting condition
A health problem that existed before the date your insurance became effective. Many insurance plans will not cover preexisting conditions. Some will cover them only after a waiting period.

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preexisting conditions provision
A provision in most medical expense insurance policies stating that until the insured has been covered under the policy for a certain period, the insurer will not pay benefits for any preexisting condition.

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preference beneficiary clause
Life insurance policy wording which states that if no specific beneficiary is named, the insurer will pay the policy proceeds in a stated order according to a list of individuals included in the policy.

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preferred beneficiary
In Canada, a class of beneficiaries applicable to policies issued before June 20, 1962, and consisting of the spouse, children, parents, and grandchildren of the insured. The policyowner can change the beneficiary of a policy from a preferred beneficiary to a beneficiary who is not a preferred beneficiary only with the consent of the preferred beneficiary.

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preferred provider organization (PPO)
A network of health-care providers with which a health insurer has negotiated contracts for its insured population to receive health services at discounted costs. Health-care decisions generally remain with the patient as he or she selects providers and determines his or her own need for services. Patients have financial incentives to select providers within the PPO network.

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preferred risk class
In life insurance, a risk class that consists of individuals whose anticipated mortality is lower than the norm established for the standard risk class. Among other things, people in the preferred risk class are in excellent physical condition, have good family medical histories, and do not smoke. Sometimes called the superstandard risk class.

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preliminary inquiry form
A type of application form used when there is a high probability that a policy either will not be issued or will be issued with such a high substandard rating that the policy premium will be unacceptable to the applicant. Using a preliminary inquiry form usually brings a quick response from the underwriting department. Also called a trial application.

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premium
The monthly amount you or your employer pays in exchange for insurance coverage.

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premium deposits
Amounts that are left on deposit with the insurer for the payment of future premiums.

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premium receipt
An acknowledgement of an insurer's receipt of an initial premium.

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premium receipt book
A book given to the policyowner when a home service agent makes a policy sale. The premium receipt book contains prenumbered receipts that are signed by the agent when the agent collects a premium.

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premium reduction option
A life insurance policy dividend option under which policy dividends are applied toward the payment of renewal premiums.

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pre-notice
As required by the Fair Credit Reporting Act, advance notice to an insurance applicant from an insurer that an investigative consumer report may be made on the applicant.

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preretirement survivor annuity
A pension plan provision which specifies a benefit for the surviving spouse of a vested plan participant if the participant dies before retirement. In the United States, qualified plans are required to include this provision, as are registered plans in Canada.

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prescribed annuity contract (PAC)
In Canada, a kind of annuity that meets the criteria established by the Income Tax Regulations to qualify as exempt from accrual taxation.

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present value
The amount of money that must be invested on a certain day, sometimes called the evaluation date, in order to accumulate to a specified amount at a later date.

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present value factor
The number by which an amount of money to be paid later is multiplied in order to derive the present value of that money.

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presumptive disability
A condition that, if present, automatically causes an insured to be considered totally disabled. Examples of presumptive disabilities are total and permanent blindness or loss of two limbs.

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prima facie rate
In group creditor insurance in the United States, the standard premium rate recommended by state government regulators for a contributory policy. An insurer can not charge more than the prima facie rate when a contributory group creditor insurance policy is first issued. Contrast with deviated rate.

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primary beneficiary
The party or parties who have first rights to receive policy benefits when the benefits of an insurance policy become payable.

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primary care physician
Usually your first contact for health care under a health maintenance organization (HMO) or point-of-service (POS) plan. This is often a family physician, internist, or pediatrician. A primary care physician monitors your health, treats most health problems, and authorizes referrals to specialists, if necessary.

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primary provider of benefits
In a coordination of benefits situation, the medical expense plan that pays the full benefits provided by its plan before any benefits are paid by another medical expense plan.

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principal
A party who authorizes another party, the agent, to act on the principal's behalf in contractual dealings with third parties. Called the mandator in Quebec.

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probability
The likelihood of some event occurring. In mathematics, probability is the number of times that something is likely to occur out of a number of possible occurrences. Probability theory is an essential aspect of the mathematical foundations of insurance.

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probationary period
See waiting period.

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proceeds
The amount of money that the insurance company is obligated to pay for the settlement of a life insurance policy, endowment insurance policy, or annuity.

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professional reinsurer
An insurance company whose only or major line of business is reinsurance.

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profit sharing pension plan
In Canada, a money purchase pension plan in which employer contributions are linked to company profits. Employers must make a minimum contribution of 1% of employee earnings, regardless of whether they make a profit, and the plan is subject to the same legal requirements as pension plans.

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profit sharing plan
An employee-benefit plan whereby the employer pays a portion of the company's profits to the employees. The employer's contributions are discretionary and may be (1) paid in cash or stock when profits are determined, (2) deferred to individual accounts for each employee, or (3) distributed by a combination of the two methods. Profit-sharing plans can be used as a source of retirement income or as a more short-term savings/investment vehicle.

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property insurance
A type of insurance that provides a benefit if insured items are damaged or lost because of fire, theft, accident, or other cause described in the policy.

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proposal form
In Canada, a document that is given to a prospective purchaser of an insurance policy and that contains personalized information about the policy and policy values.

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prototype plan
A standardized form of pension or other employee-benefit plan developed to simplify plan drafting for plan sponsors. Similar to a master plan.

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provider
Any person (doctor, nurse) or institution (hospital, clinic, laboratory) that provides medical care.

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provider fraud
A type of medical insurance fraud that is initiated by a medical care provider on patients' claims in order to increase the provider's own income. Contrast with individual fraud.

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proximate cause of death
An event that is directly responsible for a death or an event that initiates an unbroken chain of events that lead to death.

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prudent expert rule
The legal requirement that the sponsor or manager of a pension plan exhibit certain standards of competence and prudence in accounting for assets in a pension plan and investing the pension plan's funds.

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