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Glossary of Insurance Terms - R

Glossary of terms used in insurance - R

  1. Reasonable And Customary Plans: The average fee charged by a particular health care provider in a geographical territory. It often refers to an amount the company is willing to pay for a particular service. If the costs are higher than the amount, the individual has to bear the additional costs. Sometimes, the provider may reduce his charges to the reasonable amount agreed on by the company at the insistence of the individual.
  2. Rider: A clause added or removed to a plan which limits or expands the scope of a plan.
  3. Risk: This is the amount a company may expect to pay as compensation to an applicant. For an individual, risks include probability of surgical complications; side effects of medication, probability of contracting an illness etc. for e.g. a smoker will pose a higher risk than a non smoker because of the chance that he might contract cancer.
  4. Referral: This is a procedure under managed health care programmes. Under this system, a primary care physician refers a member to a specialist when he feels the need. This reference is called a referral.
  5. Radiation Therapy: Treatment of a disease or illness with the help of x rays or high energy particles.
  6. Respiratory Therapy: This refers to the treatment of a disease by the introduction of certain gases into the lungs.
  7. Retrospective Review: A review of the claims and procedures presented by the provider to an insurance company. It checks the appropriateness of the procedures conducted and also the medical necessity for the procedures.
  8. Rate: The total pricing of the insurance plans which determine the premiums to be paid by the member.
  9. Reimbursement: The paying of the costs actually incurred by the member. These costs may be due to the treatment of the sicknesses and illnesses or injuries. The maximum amount is specified by the plan beforehand.
  10. Reinstatement: The resumption of a coverage which has lapsed.
  11. Renewal: The continuation of a policy which has lapsed. The coverage is continued as the new premium is paid.
  12. Rescission: This is the termination of a health insurance on the grounds of provision of wrong information by a member. This must take place within the contestable period of time. It must take effect as on the date of issue of plan.
  13. Rate Regulation: This is the process by which the insurance companies’ rates are regulated by the state. These are either done by prior approval method or by open competition.
  14. Rated Policy: This refers to a policy which is deemed to have higher risks than an average policy. These are usually issued with greater exclusions and higher premium rates. It also carries a reduced face amount or a combination of both.
  15. Rating Agencies: These are the agencies which determine the financial strength and ability of the companies to pay for claims. There are six major agencies which do this. They are Duff and Phelps Inc., Moody’s Investor Services, AM Best Co., Fitch Inc, Standard and Poor’s Corp and Weiss Ratings Inc. the factors considered while giving the credits are earnings of the company, operating leverage and capital adequacy. Other factors include liquidity, management skills reinsurance programmes ad experience of the company and its management. However, the concept is different from consumer satisfaction ratings.
  16. Rating Bureau: One of the foundations of the insurance business lays in adequately spreading out risks so that they can be predicted more accurately. For e.g. it would be easier to predict losses in 1000 homes than in 10. Previously, the companies used rates provided by the agencies. Nowadays the companies have their own statistics to develop rates. Smaller insurers who do not have such data usually fall back on agencies like insurance services office to provide them with suitable data on which rates can be based. These companies can get estimates on future losses, and adjustment expenses like legal defense costs.
  17. Real Estate Investments: These generally refer to investments usually owned by life insurance companies including real property and mortgage loans.
  18. Receivables: These refer to the amounts owed to a business for services or goods provided.
  19. Reciprocal Exchange: These are unincorporated associations which are organized to write insurance for members. Each of these members assumes a share of the risks that are covered.
  20. Red Lining: This is a reference to the underlining of special areas to receive special treatment. It is illegal to refuse insurance to a person solely on the basis of his location.
  21. Reduced Paid up Insurance Option: It is one of the non forfeiture options provided in life insurance policies. It provides the owner the chance to discontinue payments of premium and to use the net cash value to buy paid up insurance of the same plan as the previous policy.
  22. Registered Principal: This is a manager or officer of the National Association of Securities Dealers. He is usually involved in the daily operations of the securities business and has an NSAD series 24 or 26 registration.
  23. Registered Representative: This refers to a sales representative who belongs to the NSAD. He discloses the background details and has passed at least one NSAD examination. The registered representative involves in the securities business as a representative of an NSAD member.
  24. Relation Of Earnings To Insurance Clause: This is a clause included in some disability policies. It restricts the amount an insurer will pay if it is found that the total benefits paid by all the insurers are more than the income of the individual.
  25. Renewable Term Insurance Policy: This is a term life insurance which gives the owner the chance to continue cover after the specified period without providing evidence of insurability. However, the premiums charged are usually higher and is based on the age attained by the individual at the time.
  26. Renters Insurance: This is a kind of insurance which covers the belongings of the insured against various perils. It also provides personal and liability covers. Loss –of- use covers are also provided. This is provided if the person has to move to a new location till his dwelling is being mended. It may also include cover for improvement of property. The property can be covered for replacing them or for the actual value minus depreciation.
  27. Residual Disability: This refers to a condition where the person is not totally disabled but is still unable to function as before. If this makes him unable to earn as he was before, he is liable to be covered under these plans. The reductions are typically considered at levels of 20 to 25 percent. The disability percentage is specified in the disability income plan. It is also referred to as partial disability.
  28. Residual Market: These are facilities like FAIR plans and assigned risk plans. They provide coverage for people who cannot get it in the regular market. The providers usually take part in these pools. It is also known as the shared market.
  29. Retention: This refers to the risk retained by an insurance company which is not reinsured.
  30. Retrocession: This is the reinsurance purchased by reinsurers to protect their financial stability.
  31. Retrospective Rating: This is a method by which the final premium for a risk is allowed to be adjusted. This is subject to a maximum and minimum limit based on loss experience. Large commercial insurance buyers are provided with this facility.
  32. Return on Equity: This is the amount obtained after dividing net income by total equity. It displays how invested capital is being used and therefore how profitable the concern is.
  33. Revocable Beneficiary: This refers to a beneficiary of an insurance plan whose benefits may be reduced or cancelled by the policy owner before his death. It is the opposite of an irrevocable beneficiary.
  34. Risk Based Capital: This is the idea that the insurance companies must be capitalized according to the inherent riskiness of their venture. Insurances with higher risks as in liability insurances generally require higher levels of capital.
  35. Roll Over: This is a transfer of pension funds from one plan to another. It does not go through the owner and so does not have any tax liability for the owner. It is also known as direct transfer or direct roll over.
  36. Re Entry: This is the facility given to policy owners of term insurance to qualify for another period with same levels of premiums. The facility is generally forwarded with new evidence of insurability.
  37. Re Insurance: This is the insurance purchased by insurance companies to protect themselves. The risk of loss is distributed so that a large loss does not revert on a single company. It helps an insurance company in expanding its capacity. It also helps the company in financing its expansions, getting protection against shock losses and balancing its underwriting results.
  38. Reinsurance Ceded: This is the insurance that is transferred to a reinsurer by the said company, i.e. the ceding company.
  39. Reinsurance Recoverable to Policy Holder Surplus: This is a measure of the dependence of the company on its reinsurers. It also measures the exposure of the companies to adjustments on this reinsurance.
  40. Replacement Costs: This basically measures the amount needed in dollar terms to replace property that has been damaged or destroyed. There is a ceiling on the maximum amount that can be paid. Depreciations are not deducted in estimating the value of the property.
  41. Reserve: This refers to an amount that reflects potential or actual liabilities maintained by an insurer. It is done for the purpose of covering debts to policy holders.
  42. Risk Class: This refers to a group of individuals who, for purposes of insurance, have a similar level of risks. The typical risk classes include smokers and non smokers, standard and substandard etc.
  43. Risk Management: This is the management of pure risks by the company. It takes into account all possibilities of loss and determines how to minimize these losses.
  44. Risk Retention Groups: These are insurance companies providing liability insurance and owned by the policy holders. The members are usually people belonging to the same business or activity. The purpose of this design is to spread out the risks. It also provides an alternative to financing of risks in liabilities. They are formed under the Liability Risk Retention Act Of 1986.


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