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Lost in the terminology insurance companies use? Our quick-reference insurance glossary provides easy-to-understand definitions and examples of the terms insurance professionals use.

Malpractice Insurance

Malpractice Insurance refers to insurance that aims to protect against loss or liability incurred by professionals in the course of their practice. This is usually provided to lawyers, doctors, therapists, nurses, and professionals and specialists who are prone to lawsuits filed by clients for alleged error or acts of negligence.

In the event that that the professional is sued for malpractice, the lawsuit may result in very high liability costs (which can even reach millions of dollars) and the insurance covers for this. States require professionals to carry malpractice insurance, where the amount of required coverage changes from state to state.

Managed Care

Managed Care refers to the techniques or methods used to ensure that the proper healthcare is provided to the insured at the best prices.

This involves an arrangement where the insurance company or employer works with a group of selected doctors and medical providers. These providers agree to treat the insured clients or employees following pre-set protocols and procedures. These medical practice guidelines ensure that the services provided is cost effective.

Members of this type of plan are expected to acquire treatment with the list of selected healthcare providers. However, there are also some managed care plans that let the members use other providers that do not belong to the list of selected providers.

The providers and the services they provide are also regularly reviewed to make sure that these are the reasonable. Then the providers are paid for the total services they provide.

Manual

A manual, in the insurance industry, refers to the book that provides relevant information and rules for underwriting policies, classifying risks and providing a comprehensive list of premium rates that will be used when the underwriter writes a policy.

The insurance manual will provide rules for underwriting policies for a certain line of insurance and classification of risk. In the case of the life insurance manual, the underwriter will find the values and premiums given for every $1000 of coverage, the usual policy fee, the premium mode factor to be used, as well as how much extended term insurance, cash value and paid-up insurance will be at the end of the policy year.

The manual also has a glossary that gives the definitions of the terms used in the manual.

Marine Insurance

Marine Insurance refers to the coverage or protection given to businesses that have goods being moved from one place to another. It usually involves protection when the goods are transported or temporarily stored while using not just ocean transport, but land and air transport as well.

The coverage will pay for damages for losses that are a result of piracy, collision, capsizing, sinking, being stranded. This includes not just the cargo, but also to the destruction and damage to the ship's hull as well. The different types of protection may require different coverages - cargo insurance, protection and indemnity insurance and hull insurance.

Marine insurance does not cover damages that result from the normal operations - such as wear and tear, mold and dampness. Acts of war are also not included.

Maturity Date

The Maturity Date specifies the date when insurance or annuity payments are set to begin, in case the insured person or annuitant is still alive.

There is usually a savings period where the cash value of the policy or the fund is built up. Then, when the set time arrives, the insurance owner or the annuitant will start to receive payments from the fund - either as a lump sum or as monthly income payments. The maturity date is also known as the income date in annuities.

For those who have endowment insurance, the maturity date signals the date when the insurance company will pay the endowment guaranteed in the policy.

For the purposes of investments, maturity dates refer to the time when the issuer of a bond is obligated to pay the bondholder at least an amount equal to what he borrowed.

McCarran-Ferguson Act

The McCarran-Ferguson Act provides the state with the continued power to regulate the insurance industry operating within its jurisdiction by enabling it to pass laws. These laws have the effect of regulating the industry. However, it also provides insurance companies with exemptions and limits with regards to federal anti-trust legislation.

The federal anti-trust law was declared not applicable to the insurance industry with the provision that the state continues to regulate it. The federal anti-trust laws will only be deemed applicable in instances where there is intimidation, coercion or a boycott imposed by the insurance companies.

This law was signed in 1945 and was sponsored by Senator Homer Ferguson and Senator Pat McCarran.

Mediation

Mediation refers to one of the methods of arbitration where conflict is resolved between two parties. In the case of the insurance industry, this may refer to conflicts between the insurance company and its employers, policyholders, claimants or vendors. A third party steps in to come up with a solution that is agreeable to two conflicting parties.

Mediation is non-binding. Meaning, if one party still disagrees or is not satisfied with the proposed solution, he can still go to court.

Mediation, like the other forms of arbitration, is used to save time and expenses for both parties by helping them come into agreement even before they feel they have to go to court.

Medicaid

Medicaid refers to a federal-sponsored program that provides health care to those who cannot otherwise afford it.

The state itself and the federal government becomes responsible for paying doctors and medical practitioners, as well as hospitals for providing medical services to low-income citizens. The federal government matches the funds spent by the state for such expenses.

Medicaid is part of the program that sprang from the Social Security Act Amendment that was signed into law in 1965. All 50 states are currently participating in the program.

The following services are offered through Medicaid - inpatient and outpatient hospital care, doctor's consultation and other services, diagnostic and laboratory services, nursing home care, immunizations, screening family planning and midwife and nurse practitioner services.

Medical Information Bureau

The Medical Information Bureau, currently known as MIB Inc., is a facility that provides and maintains records regarding the health history of people who apply for life and health insurance. However, those who have access to the MIB information should also be a member of MIB.

This central computerized facility enables people from different states to view the health history of an individual, even if this individual is located or used to live in another state.

MIB, Inc. was formed in order to prevent misrepresentation and fraud by applicants of life and health insurance. Insurance companies use this to compare one person's applications for insurance. An applicant may, inadvertently or intentionally, not disclose information that he previously gave to an application where he was rejected.

This benefits honest applicants, since premiums are affected by claims payments, especially if these are payments for fraudulent claims.

Medical Malpractice Insurance

Medical Malpractice Insurance is malpractice insurance purchased specifically for those in the medical field. It protects doctors, nurses, midwives, surgeons and other medical professionals from lawsuits filed against them.

Medical professionals are sometimes required to get coverage for medical malpractice before a hospital hires them or before they are allowed to open a private practice. This kind of coverage is also called personal liability insurance. Medical schools that send students for on-the-job trainings to hospitals also need this kind of insurance to protect their students and faculty.

Medical malpractice insurance is very important as lawsuits involving this field can reach up to millions of dollars.

Medical Payments Insurance

Medical Payments Insurance refers to protection where medical expenses (due to accident) are reimbursed by the insurance company. These reimbursements are made without regard as to who is at fault with the accident. This insurance also provides reimbursement for funeral expenses in the event that the insured person dies.

The medical payments insurance pays up to a specified limit. This insurance includes not just the driver, but also the passengers in the car, a person who is riding in another car, and a person who is walking down the street and gets hit by a car. In this case, the driver's insurance will first come into play. When the limit for this is exhausted, the injured individual's insurance will be the one to pay.

Medical Utilization Review

Medical Utilization Review is used for health insurance products and is a process where claims for medical treatment are reviewed.

The Medical Utilization Review is usually done by a medical practitioner (like a nurse or a doctor) to verify whether the treatments and services received were reasonable and applicable. This is part of the efforts of insurance companies to protect themselves from claims fraud and also to manage costs and keep premium rates on these products at a low level.

Another purpose of the medical utilization review is to ensure the quality of care a client gets.

Based on these goals, the reviewer looks at a treatment plan and may modify, delay, approve or deny treatment recommendations.

Medicare

Medicare is a government-sponsored social insurance program that provides assistance for paying medical services received by people 65 years old or older. This includes medical-related expenses such as hospitalization, doctor's fees, nursing care, home health care and surgery.

Those who are eligible to receive Medicare benefits include people who are U.S. citizens or permanent legal residents (for 5 continuous years) and their spouses who have paid Medicare fees for not less than 10 years. These must be 65 years old or older. Those who are below 65 years of age may still receive Medicare benefits if they are disabled (more conditions apply), are diagnosed with Lou Gehrig's disease or end stage renal disease.

The Hospital Insurance component of Medicare pays part of the medical expenses during a patient's stay in the hospital. Meanwhile, the Medical Insurance aspect of Medicare pays for a portion that is generally received on an outpatient basis.

Medigap (Medsup)

Medigap or Medsup insurance is a type of insurance, which pays for the part of expenses not paid for by Medicare. This is a way for those who are covered under Medicare to receive more assistance, as Medigap Insurance works as a supplement to Medicare. This kind of insurance is not provided to those who are already covered with Medicaid.

For instance, if Medicare is now covering the cost of prescription drugs, Medigap will not pay for prescription drug coverage.

There are a variety of plans under medigap insurance. There are plans that pay for the co-payments required in Medicare. Co-payments are what the insurance would require that the insured patient will pay before the insurance payments start doing the payment. Other plans cover costs not covered with Medicare such as medical expenses incurred overseas (for medical emergencies only) or associated costs during home recovery.

MIB, Inc.

MIB, Inc., formerly known as the Medical Information Bureau, is a centralized and computerized information system that provides insurance companies with data that applicants for insurance have admitted to in their applications.

There may be a situation where an applicant for insurance states his health condition while applying for life or health insurance and he gets rejected or rated because of the information he divulged. He may decide not to disclose the same information when he tries to again apply for insurance from another insurance company.

To prevent misrepresentation or fraud from happening, an insurance company will check with MIB, Inc. to see if there are previous information disclosed by the proposed insured that he withheld from his current application.

MIB is a non-profit organization.

Mine Subsidence Coverage

Mine Subsidence Coverage is a protection that pays for losses in the event that a house sinks due to a mine shaft located under the house. This can be placed as an endorsement to a homeowners' insurance policy. This is usually not covered by a standard homeowners' policy, in the same way that earthquakes and other forms of earth movement are excluded.

Houses that lie above mineshafts face the real threat of collapse, or vertical or lateral movement. This happens when the mine below the ground caves in. Since this risk has a great chance of happening, mine subsidence coverage is only available using state-sponsored FAIR (Fair Access to Insurance Requirements) plans.

Misrepresentation

Misrepresentation refers to the act of giving a misleading or false statement.

With respect to insurance, this means that the statement provided caused the insurance company to issue the policy that it would not have issued had it known all the facts.

During the contestable period, the insurance company has the right to cancel the policy or deny the claims once the misrepresentation is uncovered. However, when the contestable period has passed, the insurance company is obligated to continue providing the coverage as stated in the policy and to honor all valid claims. However, for misrepresentation for age or sex, the death benefits or other benefits payments will be adjusted and premiums will be added or deducted to reflect the right age or sex.

Misstatement of Age or Sex Provision

The Misstatement of Age or Sex Provision states that a life insurance, annuity or health insurance policy is adjusted in order to reflect the correct sex or age.

The age or sex of a person may have been misstated during the application of the policy. These two factors are important in determining the premiums for the coverage being applied. The older a person is, the more expensive the premiums will be. Thus, if a person misstated his age at the time the policy was issued and he gave a younger age, that means that the person paid less than what he should pay for the same amount of coverage priced at his correct age. If the person provided an age higher than his actual age, he is paying more premiums than he should.

The insurance company will make adjustments once misstatement is discovered. It may ask the insured person to make up for the lacking premiums or refund the insured person the extra premium he paid. The insurance company may also adjust the policy amount to reflect the right age and the actual premiums paid.

Misstatement of age or sex can usually be adjusted even after the contestable period has passed. This is done if an honest mistake has been made, and there is an absence of fraud. If misstatement was done as an attempt to intentionally defraud or mislead, the insurance company may cancel the policy if it is within the contestable period.

Modified Premium Policies

Modified Premium Policies are insurance policies that allow the insured to pay lower premiums at the start of the policy and then a higher premium later in the life of the policy.

Modified Premium Policies are offered to those who want a high amount of coverage but could not afford it at the moment. The calculations are such that the premiums paid during the first years of the policy are lower than the amount the insured would normally pay. But he will have to make up for it during the latter part of the policy, when he will pay higher premiums than what he would normally pay.

This kind of policy is also called a Graded Premium Whole Life policy.

Money Supply

Money Supply is the term used for the supply of money that is currently in circulation as well as in savings and checking accounts in banks and other depository institutions.

Money supply is controlled by the Federal Reserve. The level of money supply and the interest rates that the Federal Reserve uses to manipulate or adjust it are important in ensuring the economic stability of a country.

The central bank regularly monitors money supply data and publish this to economists and analysts both in the public and private sector. The level of money supply is important as it can impact economic variables such as inflation, the price level and the business cycle.

Moral Hazard

Moral Hazard, in insurance terms, refers to the possibility that an individual will perform acts that will affect his insurability. These comprise the person's character and actions - which will have a strong impact on his health, his propensity to meet with accidents of different types. The insurance company looks at moral hazard to see whether a person will provide an attractive business prospect or not.  It also is an important consideration as the insurance company decides whether it will take on his risks (insure him) or not.

Moral Hazard may also be used to describe an insurance applicant's propensity to hide information that may cause the application to be rejected.

For instance, the insurance company finds out that the applicant (in a previous application) stated that he smokes and hid this fact in the current application. This points to the possibility that the applicant will not act in good faith in other matters related to the insurance policy and coverage. It is then the insurance company's underwriter to appraise whether the moral hazard is within a range that is acceptable to the company.

Morbidity Rate

Morbidity Rate refers to the rate at which members in a defined group of people will get sick, be ill or contract a disease. This group is categorized based on age, as well as other factors like occupation, health habits and so on. This may be taken for a given disease or for illness in general.

The morbidity rate is normally express as instances or cases per million or per hundred thousand in a year. Morbidity rates are used to compute premiums both for insurance, especially accident and health insurance. The better the morbidity rate, the lower the premiums will be.

This is contrasted with mortality rate.

Mortality and Expense (M&E) Risk Charge

Mortality and Expense (M&E) Risk Charge refers to the fees that pay for related expenses in an annuity and insurance policies. Annuities and life insurance policies are computed with expense loadings such as death benefits and insurance fees. This is the fee paid to the insurance company for taking on the risks that are related to the annuity during the life of the annuity contract or policy.

The Mortality and Expense Risk Charge is usually an annual fee. This is charged depending on the age and health condition of the person to be insured. For instance, if someone who is aged 30 applies for insurance, there will usually be no mortality and expense risk charge. However, if someone who is already 75 years old applies for life insurance, a mortality and expense risk charge will be tacked on to the premium.

Mortality Rate

The Mortality Rate refers to the rate at which someone from a specified group (categorized by gender and age) dies. This rate is expressed as the number of deaths out of a thousand, a hundred thousand or a million. The mortality rate may be used to refer to how many die from a specified disease in a given group, or it can also be used to describe the rate of deaths from any reason within a given population.

For instance, a cancer mortality rate of one in one thousand would mean that in a town with 100,000, there will be 100 people who will die of cancer.

Mortality rate is also used when computing for life insurance policies and annuities.

Mortgage Guarantee Insurance

Mortgage Guarantee Insurance provides protection for a lender (in this case an institution who issues a mortgage) in case the borrower (the mortgage holder) is unable to pay for the loan.

When there is a mortgage loan default, the insurance will be the one that will cover the loan, up to the specified limit. Mortgage guarantee insurance may cover 20 to 50% of the mortgage amount. At times, this percentage can be higher.

This is also known as private mortgage insurance or PMI. Mortgage Guarantee Insurance is paid by either the lender or the borrower. However, those who want to avail of a mortgage are required to have this coverage first before a mortgage is written.

Mortgage Insurance

Mortgage Insurance is a coverage that protects the mortgage holder's life within the duration of the mortgage.

Mortgage insurance is usually a decreasing term life insurance which pays the lender the death benefit to cover for the unpaid balance of the mortgage. The face amount is designed to decrease over time as the mortgage holder provides the mortgage payments. Mortgage insurance protects the interest of the bank or depository institution that issued the mortgage. It may be faced with a huge loss when the mortgage holder dies.

Another form of mortgage insurance covers against the possibility that the mortgage holder becomes unemployed.

Mortgage insurance is only issued when a number of requirements are met. These requirements involve the kind of property the mortgage is issued for, the size (monetary amount) of the mortgage, as well as information like the borrower's qualifications.

Mortgage-Backed Securities

Mortgage-backed securities are securities, which are guaranteed by a pool of mortgages. The bearers of the mortgage-backed securities are authorized to receive the mortgage payments from the pool. That means that whenever someone sends a payment for his mortgage, a portion of the payment will be given to those who bear mortgage backed securities.

This kind of security is usually issued by a government entity or investment firm, which buys the mortgages issued from the bank. The result is a pool of mortgages that investors can buy into. The securities are prized according to their portion in the pool, as well as the credit rating of the selected section of the pool.

Mortgage-backed securities help in spreading the risk, so that the "exposure" is not that great and there is a guaranteed level of return. Since there is a pool with a big amount of mortgages, the impact of the default from one or two mortgage bearer will not be that big.

Multiple Peril Policy

A Multiple Peril Policy provides protection against various perils or risks. This is usually provided for business and homeowners insurance and provides coverage for liability, casualty and property. In short, a group of insurance products wrapped up in one.

This kind of policy is also considered as all-risk insurance. It should be differentiated from a multiple protection insurance (which is for life insurance coverage and provides a combination of whole life and term insurance).

Examples of multiple peril insurance geared towards businesses (commercial lines) include Commercial General Liability (CGL), Business Crime, Inland Marine Insurance, Commercial Property Insurance, Business Automobile, Farmowners and Ranchowners Insurance, as well as Boiler and Machinery Insurance.

Municipal Bond Insurance

Municipal Bond Insurance provides coverage in case the bond issuer is unable to pay for the principal provided by the investors, as well as the interest earnings of the bond. This is to protect investors who buy municipal bonds issued by government agencies.

The city, municipality or state releases these bonds, called munis, to raise money for its housing, infrastructure and development projects. And they protect the bonds they sell with municipal bond insurance so as to increase the credit ratings of the bond and thus make the bonds more attractive to investors. If the insurance is provided by an insurance company with a high credit rating, the municipal bond will also be given a high credit rating.

Municipal Liability Insurance

Municipal Liability Insurance covers liabilities that a municipality or city may incur. Up to certain limits, the insurance company will be the one to shoulder the liability payments.

There are times when a citizen brings a lawsuit against a government agency, and when the government agency loses the case, the damages it may have to pay may reach the millions. These lawsuits are mostly for wrongful acts that result to bodily injury or property damage. In a society that has become more litigious, government entities are becoming a target since it is perceived that they have "deep pockets" to pay for large damages.

Municipals and villages should look into their municipal liability insurance coverage to check the liability limits, as well as what activities may result into claims or lawsuits against them.

Mutual Holding Company

A Mutual Holding Company refers to a company that is a hybrid of a mutual company and a pure stock company. It has the characteristics of a mutual company since its customers have control over the company (such as the right to vote its board of directors). But here, the company holds a majority of the stocks and control.

For a mutual holding insurance company, the policyholders are the ones that own the company, but the company also holds a major stake in its stocks.

Policyholders are given part of the profits of the company through dividends. The rest of the company's assets is used as a surplus cushion in case there are unexpected or large claims.

Mutual Insurance Company

A Mutual Insurance Company is a company that has its customers (the policyholders) as the owners.

For this kind of company, there are no stocks or shareholders. Instead, the policyholders (or a specified class of policyholders) vote the members of the company's board of directors. The elected board of directors will be the one to select the officers that will run the company. The policyholders also vote on any plan to demutualize the company.

The policyholders are also entitled to a portion of the profits by way of dividends. These dividends from the company are neither taxable nor guaranteed.

The disadvantage of mutual companies is that it may find it hard to raise capital. So some companies have decided to demutualize in order for them to be able to offer shares of stocks and thus raise capital.

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