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Glossary of terms used in insurance - S

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Glossary of Insurance Terms - S

Glossary of terms used in insurance - S

  1. Second Opinion: It is an opinion provided by a second doctor or expert when the first doctor has recommended a particular procedure or surgery to a person. People are encouraged to obtain second opinions whenever a serious diagnosis is made.
  2. Second Surgical Opinion: These are specifically obtained when a doctor recommends surgery to a person.
  3. Short Term Disability: A temporary injury or illness that may keep a person from earning his livelihood. The definition differs from company to company. It is designed to cover a person’s earnings for a particular time when he is ill. The injury cannot be work related.
  4. Short Term Medical: Short term coverage designed to cover a period between 30 days to 6 months.
  5. Small Employer Group: A group with less than 199 employees. However, definitions vary from company to company.
  6. State Mandated Benefits: When a state regulation requires the provision of certain benefits in a health plan.
  7. Stop Loss: The claims in dollars filed for an expense after you have paid the full out of pocket amount. This is the time the company begins to pay 100% of the costs. Stop loss is reached when the person has paid the maximum amount of deductibles.
  8. Self Funded Insurance Plan: An insurance plan funded by an employer, not by an insurance company. The health insurance company looks after the administration part of the plan. The cost of the claims paid is handled by the employer. He does this through the creation of a fund.
  9. Service Area: The geographical are within which coverage for a plan is provided. Some plans do not provide coverage outside these areas.
  10. Skilled Nursing Care: Expert nursing care, usually round the clock, provided under a supervisor. It is usually given after a prescription by a doctor and is usually conducted on an inpatient basis. It may also include medications, dressings, minor surgery and tube feeding.
  11. Subscriber: The term may denote one of two things. (1) It may refer to an organization or person paying for the insurance. (2) It may also refer to a member of a group who is eligible for cover.
  12. Speech Therapy: This refers to the treatment provided to correct any problems in the speech of a person due to congenital or other reasons.
  13. Subrogation: This is the procedure by which the responsibility for the costs of a certain member is assigned to another insurer. This is usually done because the condition being treated is due to the actions of that insurer. These may take place because the member was covered under a separate plan, worker’s compensation or insurance under automobile policies. The word literally means substitution. This typically helps a company where costs have been incurred due to the negligence of a particular party. However, the payment of insurance has to be made before it is subrogated.
  14. Substance Abuse or Chemical Dependency: These may include: (1) mental disorders caused by psychoactive substances. (2) Dependence on psychoactive substances. (3) Use and abuse of psycho active substances. The word chemical dependency does not include the usage of tobacco or food items.
  15. Section 125 Plan: A flexible plan providing benefits and qualifying under the IRS codes. It helps a person in getting tax reliefs on employee contributions.
  16. State Department of Insurance: This is a state government department dealing with insurance. It regulates insurance and provides public information on it.
  17. Salvage: This refers to the damaged property that is taken over by an insurer to lessen its loss after the payment of claims. The insurers are provided with salvage rights on a property over which they have paid claims. The companies who pay claims on lost cargo now have the rights to recover the sunken treasures. The costs associated with the recovery of salvaged property, is called a salvage charge.
  18. Schedule: This refers to a list of such items as are covered by a single policy. It also lists the charges, particular benefits and assets including other defined items.
  19. Section 415: This is a part of the internal revenue code. It provides dollar restrictions on contributions and benefits under particular retirement plans. It also includes the provision that these must be revised annually each year in order to match with cost of living.
  20. Securities and Exchange Commission (SEC): This is the organization that regulates insurance companies that are publicly held. The companies make disclosures to the SEC at particular periods of time. They also provide an annual financial statement and a quarterly one. They are also obligated to disclose any material factor that might affect their stock.
  21. Securities Outstanding: These refer to the stock held by the stockholders.
  22. Securitization of Insurance Risks: This is the procedure by which capital markets are used to diversify and widen the assumption of risks in insurance. There are various methods of doing this. These include pooling in order to gather money to cover risks. It also includes the issuing of bonds and notes to investors.
  23. Segregated Account: This is an investment account found in Canada. It is maintained separate from a general account. It helps in managing funds that have been placed in variable products.
  24. Self Insurance: This is the assumption of a financial risk by an individual himself. Every policy holder self insures himself to a certain extent. This is done through deductibles and co payments. Large companies insure losses such as harm to vehicles or injuries at the workplace. State laws stipulate that workers be compensated according to provisions. It also refers to employers who take up the responsibility of the employees in paying for health insurance claims. The companies that offer self insurance are offered relief under state laws.
  25. Settlement Options: This is an option given to the owner of a life insurance policy. This option decides exactly how the proceeds of a policy will be disbursed if the payment is not made in single installment. Te owner can opt for one of the following four options. 1) He can leave the sum with the insurer and earn an interest on the amount. 2) He can opt for a periodic payment of the amount. 3) He can opt for installments of specified amounts for the remainder of the policy. 4) Lastly, he can attach the proceeds to the life expectancy of a person through a life annuity. These are also known as optional modes of settlement.
  26. Severity: This is the size of a loss incurred. It is one of the factors which determine the premiums to be paid.
  27. Sewer Backup Coverage: This is a part of a homeowner’s policy and the owner may or may not opt for it.
  28. Single Premium Annuity: It is an annuity plan that is paid in full right at the time it is bought.
  29. Single Premium Policies: This is a type of life insurance or annuity plan that is bought by paying a single lump sum. A single payment deferred annuity (SPDA) is a contract that is bought with a single payment. The payments for such a contract do not begin in the near future. A single premium immediate annuity (SPIA) is a contract bought with a single premium payment. It makes periodic payments after one period has passed since the issue of the contract.
  30. Soft Market: This refers to a market condition where insurance is available in plenty. It is also called a buyer’s market.
  31. Solvency: This refers to the capacity of an insurance company to repay the claims of its members. Certain regulations are provided in states to secure the solvency of a company. These may be minimum surplus and capital requirements, mandatory accounting rules, and restrictions on investments by insurance companies, disclosure of financial data and tests of financial ratios.
  32. Specified Disease Coverage: This is a type of coverage that provides benefits for the treatment and diagnosis of a particular disease e.g. cancer. It is also called dread disease coverage. It is the opposite of critical illness coverage.
  33. Spendthrift Trust Clause: This is a life insurance provision that offers protection of the policy payouts of the owner against activities of creditors.
  34. Split-Dollar Life Insurance Plan: This refers to a life insurance plan provided by a business to certain employees who share in paying the costs of the policies.
  35. Spread of Risk: This refers to the spreading of insurance over multiple areas and multiple people so as to minimize the chances of occurrence of simultaneous losses. Most companies prefer to have the risks spread out so that the perils are minimized. An example of poor spread of risk can be a flood insurance plan as all the people living near a river or a water body may be open to losses suffered from it.
  36. Stacking: This is a practice that is followed to ensure more flows of money in order to pay for auto insurance claims. Certain states allow this practice by law. Under this practice, a policy holder who has insured several cars under a single policy or multiple cars under different policies is allowed to sum up the liabilities for each individual car.
  37. Standard Risk Class: This refers to a group of people who, under laws of insurance offer similar or acceptable risks to the insurer. Therefore these people pay average premiums relative to others of similar insurability. This is the opposite of preferred risk and declined risk classes.
  38. Statutory Accounting Principles: These are imposed by state laws emphasizing the solvency of insurance companies. The standards are conservative as compared to GAAP. These rules ensure that sufficient funds will be available to the company to meet its anticipated obligations. It is done by recognizing liabilities faster or by valuating them higher than GGAP. Additionally, assets are valued lesser or later. For instance, a SAP provision requires that the expenses from selling be recorded immediately rather than amortizing them throughout the life of the policy.
  39. Stock Insurance Company: This is an insurance company that is owned by stock holders sharing in the profits. The share in profits is ensured through increases in stock value and shares in earnings distributions.
  40. Straight Life Annuity: This is a type of annuity contract providing periodic payments as long as the owner lives but none after the death of the annuitant.
  41. Structured Settlement: These refer to the legal payments that are made to a designated person. This is usually one who has been injured. He is paid a particular amount of money at specified periods of time, normally throughout his life. This is in contrast to a policy which provides a lump sum benefit at any given time.
  42. Substandard Premium Rates: These refer to the premium rates that are charged from individuals who are considered to be of substandard risks by the insurers. They are also known as special class rates.
  43. Substandard Risk Class: This is a term used in insurance circles to refer to the class of people who provide higher than usual risks to the insurance companies. These are determined by the underwriting practices of the company. They are also referred to as special class risk. They are the opposite of standard risk class, preferred risk class and declined risk classes.
  44. Suicide Exclusion Provision: This is a provision present in a life insurance that provides that no proceeds will be paid if the death of the insured is due to a suicide as defined within a particular period after the date of issue of the policy.
  45. Superfund: This refers to a federal law that was enacted in 1980 to start a cleanup of the nations dump sites which were hazardous. It is also supposed to respond to accidents which released dangerous substances into the environment. The law was called the Comprehensive Environmental Response, Compensation and Liability Act.
  46. Surety Bond: This is a contract that guarantees the performance of a particular act. It is a three party agreement. One party, the surety company, guarantees the second company, the owner or creditor, that a particular act will be performed by a third company. The surety company answers for the default, non performance or debts of the second company. Contractors working on public projects are often required to buy these bonds. If the contractor fails to perform, the surety company has to be responsible for carrying out the work or paying for the loss up to the level of the penalty.
  47. Surplus Lines: These refer to the casualty or property covers that are not sold by the licensed insurers in a state. These must be bought from non admitted companies. These may be available for various causes. The prevalent rate in a state may be lower than is acceptable by a company. Also, the risks on the policy may be such that it requires more than justified flexibilities in the policy.
  48. Surrender Cost Comparison Index: This is a comparison of insurance companies based on a cost index. It decides on the value of a policy by considering the time value of money. It calculates how much an insurance policy will cost after 10 to 20 years assuming that the owner presents it for cash value at the end of the term. It is the opposite of net payment cost comparison index.
  49. Swaps: This is the buying, selling or exchange of securities on a simultaneous basis by investors. This is done to change maturities or if investment objectives have changed.
  50. Secondary Market: This is the market comprising of buyers who are willing to pay fair market value.
  51. Section 1035 Exchange: This is a part of the internal revenue code allowing owners to replace an annuity or insurance without becoming eligible for taxes due to it.
  52. Section 7702: This is also a part of the internal revenue code. This determines the conditions on which an insurance policy may become tax deductible. It determines the conditions under which life policy may become a life insurance contract, the latter having tax advantages.
  53. State Of Domicile: This is the state in which the company is registered or chartered. The company is admitted in that state and is licensed to carry on with the business in those particular lines.
  54. Statutory Reserve: This is the specific or general reserve that is stipulated by law.
  55. Subaccount Charge: These are the charges to be paid for the management of a subaccount. A subaccount is an investment option in products that are variable. It is separate from a general account.
  56. Successive Periods: This is a provision under hospital income protection. Under this provision, if a patient is hospitalized more than once for the same cause or within a time difference accepted by the company, the stay is considered to be the same i.e., the confinements are considered to be one.
  57. Surplus: The net amount of assets over liabilities.
  58. Surrender Charge: This is the charge that is to be paid by the owner of a policy when he is surrendering a policy for its cash value. It covers the administrative costs of the policy. It also covers the costs of putting the policy on the books of the company.
  59. Surrender Period: This is a specified amount of time during which a majority of the money has to be kept in an annuity contract. Most periods last between 5 to 10 years. Under most contracts, about 10% of the accumulated value can be taken out in a year. This is true in case of the surrender period also. If the person takes out more than the stipulated 10%, he has to pay a surrender charge on the balance.


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