SAA. See Surety Association of America.
Sacrifice. Cargo that is thrown overboard to save the rest of the cargo and the ship. See Jettison.
Safe Burglary. The taking of property from a locked safe or vault by a person unlawfully entering the safe or vault as evidenced by visible marks of forced entry upon its exterior, or the complete removal of a safe from the premises.
Safe Depository Coverage. Two commercial crime coverage forms are available for firms other than financial institutions that rent safe deposit boxes to others. One covers an insured’s legal liability for loss or damage, while the other covers direct losses regardless of liability. Both cover customers’ property on the insured’s premises while in a safe deposit box or vault, or while being deposited or removed from such containers.
Safe Driver Incentive Plan. A system that assigns points for traffic violations and certain accidents, and each point adds a percentage surcharge to the rating factor. It is similar to merit rating. Also called a Safe Driver Incentive Plan.
Safety Consultant. See Engineer.
Safety Responsibility Law. See Financial Responsibility Law.
Salary Savings Insurance (Deductions or Allotment). Insurance issued to an individual employee whose employer agrees to deduct the premiums from the insured’s paychecks and submit them to the insurer.
Sales Representatives. See Special Agent.
Salvage Corps. An organization whose duties are limited to preventing further damage to property during or after a fire. They are established by property insurance companies.
Salvage. (1) Property taken over by an insurer to reduce its loss. (2) Property recoverable by salvagers under maritime law.
SAP. See Statutory Accounting Principles.
Savings Bank Life Insurance. Life insurance sold by mutual savings banks. Allowed only in a few states, such as New York, Connecticut and Massachusetts.
Schedule. (1) A list of the items covered by an insurance policy with their descriptions and valuations. (2) A list of individual items covered underone policy, such as various buildings and contents. (3) A list of specified amounts payable for surgical procedures, dismemberments, ancillary expenses and the like in hospital and medical reimbursement policies.
Schedule Bond. See Name Schedule Bond and Position Schedule Bond.
Schedule Policy. An insurance contract that lists separate kinds of property, locations or insurance coverages and the amount of insurance applying to each.
Schedule Rating Plan. (1) Applying debits or credits within established ranges for various characteristics of a risk that are either below or above average according to an established schedule of items. (2) Under liability and auto insurance, a plan allowing credits and debits for various good or bad features of a particular commercial risk (e.g., an automobile schedule rating allowing credits for driver training classes or fleet maintenance programs).
Scheduled Personal Property. Property that has been inventoried and listed. See Unscheduled Personal Property.
Scheduled Premium Variable Life Insurance. A whole life policy featuring a fixed, level premium and a minimum guaranteed face amount. The performance of the policy is dependent on the separate account.
Schedule, “Q.” See “Q” Schedule.
Seasonal Risk. A risk that is present only during certain parts of the year (e.g., manufacturing concerns such as canners who have seasonal operations and dwellings such as cottages used for vacations).
Seaworthiness, Implied. See Implied Seaworthiness.
SEC Liability. The Federal Securities Act of 1933 and the Federal Securities Exchange Act of 1934 place very stringent obligations on those offering stock issues to the public to disclose full information on the offering. If misrepresentations, intended or not, are made, liability can attach to them.
Second Injury Fund. Special funds set up by each state to pay all or part of the compensation required when a partially disabled employee suffers a subsequent injury. Because the compound effect of two injuries can be greater than the effect of the same two injuries in isolation, employers might be reluctant to hire the handicapped if they had to bear the full burden for a second injury. Second injury funds relieve employers of some of this burden.
Second Residence. A second residence, such as a summer house or a mountain cabin. It must be shown in the policy declarations at the beginning of the policy term. If the additional residence is acquired after the policy’s effective date, automatic coverage is provided for the additional residence for the balance of the policy term.
Second Surgical Opinion. A cost containment technique to help patients and insurance companies determine whether a recommended procedure is necessary, or whether an alternative method of treatment could accomplish the same result. Some health policies require a second surgical opinion before specified procedures will be covered, and many policies pay for a second opinion.
Second Surplus Reinsurance. Reinsurance accepted by a second reinsurer in a surplus treaty. It is the amount that exceeds the total of the original insurer’s net retention and the full limit of the first surplus treaty. See also Surplus Reinsurance.
Secondary Beneficiary. The second person named to receive benefits upon the death of an insured if the first-named beneficiary is not alive or does not collect all the benefits before his or her own death. See also Contingent Beneficiary.
Secondary Care. Medical services provided by physicians who do not have first contact with patients (e.g., specialists such as urologists, cardiologists, etc.) See also Primary Care and Tertiary Care.
Secondary Coverage. Covers payment for charges not covered by the primary policy or plan. See also Coordination of Benefits.
Secondary Rating Factors. Secondary factors that influence how insurance companies look at an insured as an auto risk. A person’s driving record (what insurers call sub-class) is the most important of these factors. Insurance company statistics say that, the more accidents a person has, the more likely he will be involved in another accident. The neighborhood a person lives in is another factor.
Section 125 Plan. A plan that provides flexible benefits. This plan qualifies under the IRS code which allows employee contributions to meet with pre-tax dollars.
Section 302 Stock Redemption. A total stock redemption that qualifies as a capital transaction and not a dividend distribution.
Section 303 Stock Redemption. A partial stock redemption permitted under Section 303 of the IRC for the purpose of providing funds for estate settlement costs.
Secular Trust. An irrevocable trust that provides for current taxation of deferred compensation assets and a degree of security in an informally funded plan.
Securities. Evidences of a debt or of ownership (e.g., stocks, bonds and checks).
Securities Act of 1933. A federal law that requires full and fair disclosure and the use of a prospectus in the sale of securities.
Securities Deposited with Others Coverage Form. A commercial crime coverage form that protects against loss by theft, disappearance or destruction of securities which have been deposited with others, such as a bank, trust company or stock broker.
Securities Exchange Act of 1934. A federal law which requires the registration of companies and agents with the federal government if they are selling securities.
SEGLI. Service Employees Group Life Insurance is issued to members of the armed forces while they are in the service. After separation it is convertible to individual policies from certain private insurers.
Selection. The choosing by an underwriter of risks acceptable to an insurer.
Selection of Risk. (1) See Selection. (2) A phrase used in reinsurance referring to the practice of ceding poorer business to a reinsurer while retaining good risks.
Self-Administered Trusteed Plan. A retirement plan where contributions are paid to a trustee who invests the money, accumulates the earnings and interest and pays benefits to eligible employees.
Self-Employed Person. An individual operating a business or engaged in a profession as a non-incorporated venture. The self-employed person works for himself or herself. This business may be organized as a sole proprietorship or a partnership or the person may operate as an independent contractor. A self-employed person does not meet the Social Security requirements of an employee—but he must still pay Social Security taxes…and therefore can receive benefits.
Self-Funded Plan. Plan of insurance where an employer, which has fairly predictable claim costs, pays the claims rather than an insurance company. See also Administrative Services Only.
Self-Inflicted Injury. An injury to the body of the insured inflicted by himself or herself.
Self-Insurance. Financial preparations to meet pure risks by appropriating sufficient funds in advance to meet estimated losses, including enough to cover possible losses in excess of those estimated. Few organizations are large or dispersed enough to make this a sound alternative to insurance.
Self-Insured Retention (SIR). The portion of a risk or potential loss assumed by an insured. It may be in the form of a deductible, self-insurance or no insurance. Also called a retained limit in some policies.
Self-Reinsurance. The creation of a fund by an insurer to absorb losses beyond its normal retention. It is used in place of buying reinsurance.
Selling Price Clause. See Market Value Clause.
Separate Account. (1) An investment company (usually a unit investment trust) registered with the SEC that owns and holds assets for the benefit of participants in variable contracts. Because of the investment risk, insurers are required to keep their variable contract portfolios separate from their fixed investment portfolios. (2) An account established or maintained by an insurer under which the income, gains and losses of that specific account are credited or charged without consideration of the income and investment results of the other assets of the insurer. Separate accounts are used to fund variable contracts and provide the participant with a hedge against inflation.
Separate Structure. A separate structure on the property (e.g., a garage, shed or guest house) that’s usually covered in addition to the face amount.
Service Area. The area, allowed by state agencies or by the certification of authority, in which a health plan can provide services.
Service Benefits. Medical expense benefits provided by service associations whereby benefits are identified in terms of days of coverage instead of monetary values.
Service Plans. Plans of insurance where benefits are the actual services rendered rather than a monetary benefit. See Blue Cross and Blue Shield.
Set-Off Provisions. Provisions that limit one kind of coverage when another has been claimed (e.g., if an insured has valid coverage for automobile medical payments, the damages that can be recovered from the owner or operator of an uninsured motor vehicle shall be reduced for purposes of uninsured motorists coverage by the amounts paid or due to be paid under such automobile medical payments insurance.
Settle. When a liability claim is made against an insured, the insurer has a choice of whether it will settle (pay the damages) or defend.
Settlement. (1) A policy benefit or claim payment. An agreement between both parties to the policy contract as to the amount and method of payment. (2) Conclusion of litigation by the mutual agreement of parties involved prior to final verdict; certain settlements must be court-approved.
Settlement Options. The various methods for the payment of the proceeds or values of a life insurance policy that may be selected in lieu of a lump sum.
Settlement Tables. Tables depicting the dollar amounts per $1,000 of insurance for the option selected. The tables are simply rows of numbers representing periods of time, adjusted ages of insured people and benefit amounts.
SEUA. See Southeastern Underwriters Association.
Severability of Insurance. Each insured, as defined in the policy, has the same rights and obligations that would exist had a separate policy been issued to each insured. However, this severability does not increase the limits of liability under the policy.
Share Reinsurance. See Pro Rata Reinsurance.
Shared Ownership. As a member of a condo association of unit owners, each individual unit owner has shared ownership in the building structure. Disputes over shared liability can result in large legal judgments against individual owners.
Sherman Antitrust Act. An antitrust law from which insurance is exempted to the extent that it is regulated by state law.
Shock Loss. A catastrophic loss so large that it has a material effect on the underwriting results of a company.
Shoppers Guide. A consumer publication that describes the coverage being offered, and provides general information to help an applicant for life or health insurance compare different policies and reach a decision about whether the proposed coverage is appropriate. Also known as Buyers Guide.
Short Rate Cancellation. A cancellation procedure in which the premium returned to the insured is not in direct proportion to the number of days remaining in the policy period. In effect, the insured has paid more for each day of coverage than if the policy had remained in force for the full term. Contrast with Pro Rata Cancellation.
Short Rate Premium. The premium required to issue a policy for a period less than its normal term.
Short-Term Disability Income Policy. A disability income policy with benefits payable for short-term, usually less than two years, as opposed to a long-term disability income policy.
Short-Term Disability Insurance. A group or individual policy usually written to cover disabilities of 13 or 26 weeks duration, though coverage for as long as two years is not uncommon. Contrast with Long-Term Disability Insurance.
Short-Term Policy. A policy written for a period of less time than is normal for that type of policy.
Sick Pay Plan. A formal program for continuing the compensation of key employees—including the business owner and working stockholders. It is usually best funded with disability insurance (individual or group disability policies may be used).
Sickness Insurance. A form of health insurance against loss by illness or disease. It does not include accidental bodily injury.
Sickness. A disease or illness that first manifests itself while the policy is in force. Includes physical illness, disease, pregnancy, but does not include mental illness. See Pre-Existing Conditions.
Sidetrack Agreement. Any agreement between a railroad and a customer who is served by a railroad sidetrack built on the customer’s premises. Among other things, it provides that the customer hold the railroad harmless for losses resulting from certain types of accidents.
Sidetrack Insurance. See Sidetrack Agreement.
Simple Probability. See Probability.
Simplified Employee Pension Plan (SEP). A plan where the employer contributes a specific amount into an eligible employee’s IRA on behalf of the employee.
Simplified or Progressive Underwriting. Group underwriting may take the form of three or four medical questions asked of the individual. Due to the size of the group membership, relatively minor medical problems may be overlooked and policies issued. Nevertheless, even with simplified underwriting, it is possible for a member to be declined for the insurance.
Sine Qua Non Rule. A rule stating that a person’s conduct is not held to be the cause of a loss if the loss would have occurred anyway.
Single Carrier Replacement. A situation where one carrier replaces several other carriers who had been providing services.
Single Interest Policy. Insurance protecting the interest of only one of the parties having an insurable interest in property, such as insurance protecting a mortgagee but not a mortgagor or protecting a seller but not a buyer.
Single Limit. Insurance coverage that is expressed as a single amount of insurance, or a single limit of liability. Contrast with Split Limit.
Single Payment Deferred Straight Life Annuity. An annuity purchased with a single payment that provides a payout for life. Even if an annuity option is elected at the time of purchase, it may (and probably will) be changed at the annuity period to reflect your changing needs.
Single Premium Funding Method. A method of accumulating money for future payment of pension benefits under which the money required to pay for each year’s accumulated benefits is paid to an insurance company or paid to the trust fund annually.
Single Premium Policy. A life insurance policy paid for in one single premium in advance rather than in annual premiums over a period of time.
Single Premium Whole Life. A whole life policy that is paid with a single premium payment at the time of purchase. Compare with Continuous Premium Whole Life and Limited Payment Whole Life.
Sinkhole Collapse. The peril of a sudden sinking or collapse of land into underground empty spaces created by the action of water on limestone or similar rock formations. It is covered by the latest commercial property forms. Other forms of earth movement continue to be excluded in most cases.
SIR. See Self-Insured Retention.
Sistership Exclusion. A products insurance exclusion that denies coverage for the withdrawal and recall of products from the market.
Skilled Nursing Care. Daily nursing and rehabilitative care that is performed only by or under the supervision of skilled professional or technical personnel. Skilled care includes administering medication, medical diagnosis and minor surgery.
Skilled Nursing Facility (SNF). A facility designed for treating Medicare eligible people, including rehabilitation and other care such as 24-hour nursing coverage, physical, occupational and speech therapies, etc.
Slander. Oral defamation of someone that is personally injurious to the individual.
Sliding Scale Commission. A commission adjustment under a formula whereby the actual commissions paid by a reinsurer to a ceding insurer vary inversely with the loss ratio, subject to a maximum and minimum.
Slip. A paper submitted by a broker to the underwriters at Lloyd’s of London that identifies syndicates accepting the risk and notes the extent of their participation.
Slow-Burning Construction. See Mill Construction.
Small Group Pooling. The combining of several small group businesses into one pool for computing more accurate premium rates for members of the pool.
Smoke Damage. Damage caused by the smoke from a fire in contrast to damage caused by the actual combustion.
SMP. See Special Multi-Peril.
SNF. Skilled Nursing Facility.
Social Health Maintenance Organization (SHMO). A demonstration project funded by the Health and Human Services Department that combines the delivery of acute and long-term care with adult day care services and transportation.
Social Host Liability. See Host Liability.
Social Insurance. Compulsory insurance legislated to provide minimum economic security for large groups of people, particularly those with low incomes. It is primarily concerned with the costs and loss of income resulting from sickness, accidental injury, old age, unemployment and premature death of the head of a family. See also Legislated Coverages and Social Security.
Social Security. (1) The programs provided under the Social Security Act of 1935, plus amendments and addition. Also called Old Age, Survivors, Disability and Health Insurance. (2) Any government program that provides economic security for portions of the public (e.g., Social Insurance, Public Assistance, Family Allowances, Grants-in-Aid, etc.).
Social Security Disability Income Benefits. Eligibility for disability benefits under Social Security requires that a person be both fully insured and disability insured. In addition, the person must be under age 65, the disability must be expected to last for at least 12 months or end in death, and the disability must be a total disability.
Social Security Insurance Supplements. Supplements to disability income policy benefits. They may be added to the policy by a rider.
Social Security Rider. An optional disability income rider that provides an additional benefit depending on the amount of disability benefits payable by Social Security. See also All or Nothing Rider and Offset Rider.
Social Security Tax. A tax paid by workers and employers on wages earned. The taxes support the benefit programs under the Social Security System.
Society of Chartered Property and Casualty Underwriters (CPCU). The society of people who have been awarded the CPCU designation. Its primary purpose is the continuing education of its members. It also encourages insurance research.
Society of Insurance Research. An organization that encourages insurance research and promotes the exchange of ideas and methods of research.
Sole Proprietorship. A business enterprise owned by a person who is its manager and employee.
Sole Proprietorship Insurance. Life and health insurance that handles the business continuity problems of a sole proprietorship (e.g., to enable the heirs of the sole proprietor to bring the value of the business back to the level where it was prior to the death of the owner, etc.).
Sole Representative. The first named insured shown on the information page. This person acts on behalf of all other insured parties to change the policy, receive return premiums and to give or receive notice of cancellation.
Solicitor. An individual appointed and authorized by an agent to solicit and receive applications for insurance as the agent’s representative. Solicitors are not usually given the power to bind coverage but are required to be licensed.
Solvency. With regard to insurers, having sufficient assets (capital, surplus, reserves) and the ability to satisfy financial requirements (investments, annual reports, examinations) to be eligible to transact insurance business and meet liabilities.
Sonic Boom. Noise, pressure and shock waves resulting from an aircraft or missile exceeding the speed of sound. Modern commercial property forms and homeowner policies now cover losses by sonic boom.
Southeastern Underwriters Association (SEUA). A property insurance rating organization which was the defendant in the 1944 United States Supreme Court decision declaring insurance to be commerce and thus subject to regulation by federal law. This pronouncement was later modified by Public Law 15. See also Public Law 15.
Special Acceptance. A specific agreement by a reinsurer to accept a risk that would not be automatically included within the terms of a reinsurance contract.
Special Agent. An insurer’s representative in a territory that services the insurer’s agents and is responsible for the volume and quality of the business written in that territory. In the property and liability fields this person is a special agent or marketing representative, and in the life field he is known as a sales representative.
Special Auto Policy. An auto policy with a single limit of liability applying to bodily injury and property damage and a corresponding limit applying to medical payments. Broad physical damage coverage can be added. See Personal Auto Policy.
Special Building Form. A form that provides open perils (all risk) coverage on commercial buildings, subject to certain exclusions. Largely replaced by the Building and Personal Property Coverage Form.
Special Coverage Form. Any of the commercial or personal lines property forms which provide coverage on an open perils (all risk) type basis. These forms provide the broadest coverage and do not list covered perils, but do include a lengthy list of exclusions. See also Open Peril and Named Peril.
Special Multi-Peril (SMP). A business policy that combines into one contract the coverages normally purchased under several. Property and liability coverages are mandatory, crime and boiler and machinery are optional. Largely replaced by new commercial forms. See Commercial Package Policy.
Special Personal Property Form. A form that provides open perils (all risk) coverage on the personal property (contents) of commercial risks with certain exclusions. Largely replaced by the Building and Personal Property Coverage Form.
Special Power of Appointment. A donee authorized to appoint interest in property to specific individuals to the exclusion of others.
Specialty Coverages. Additional coverages available to the insured (e.g., personal property coverage that includes mysterious disappearance or utility disruption).
Specific Insurance. A policy that describes specifically the property to be covered. This is in contrast to a policy covering on a blanket basis all property at one or more locations without specific definitions. In the case of overlapping coverages, specific insurance is considered the primary one.
Specific Rate. A rate applying to an individual piece of property.
Specific Reinsurance. See Facultative Reinsurance.
Specified Causes of Loss. A commercial automobile physical damage coverage for loss by the specified perils of fire, lightning, explosion, theft, windstorm, hail, earthquake, flood, vandalism, or the sinking, burning, collision or derailment of any conveyance transporting a covered auto. Comprehensive coverage is slightly broader.
Specified Disease Policy. See Dread Disease Policy.
Specified Perils. See Named Perils.
Speculative Risk. Uncertainty as to whether a gain or loss will occur (e.g., a business enterprise where there is a chance that the business will make money or lose it). These risks are not normally insurable. Contrast with Pure Risk.
Spendthrift Clause. A clause in most life insurance policies that prevents the creditors of a beneficiary from claiming any of the benefits before the beneficiary actually receives the money. The purpose of this clause is to keep those to whom he is in debt from taking legal action to require the insurer to pay the proceeds directly to them.
Split Dollar Coverage. (1) An arrangement of disability income insurance in which the employer and employee each pay a portion of the premium. The employer purchases coverage for the sick pay or paid disability leave provided as an employee benefit. The employee pays for disability coverage beyond what the employer provides as a benefit. (2) An arrangement where an employer pays that part of the premium that equals the annual increase in the cash value of a policy, while the employee pays the rest. Under assignment upon the death of the employee, the employer recovers the total of its payments from the proceeds of the policy, with the remainder going to the employee’s beneficiary.
Split Dollar Plan. A method of purchasing life insurance whereby the employer and employee jointly purchase the policy, pay premiums and share in the policy’s benefits.
Split Life Insurance. A combination of installment annuity and term insurance where the amount of annuity consideration (premium) paid determines the amount of one-year renewable term insurance an annuitant can purchase and place on the life of anyone designated.
Split Limit. Any insurance coverage which is expressed in different amounts for different types of losses. For example, auto liability of 50/100/50 means bodily injury limits of $50,000 per person, $100,000 per accident and a property damage limit of $50,000 per accident. Contrast with Single Limit.
Sponsor Plan. An employer that establishes or maintains a plan for its employees; or an employee organization that establishes or maintains a plan for the employees of the organization; or in the case of a plan established and maintained by two or more employers, the committee, Board of Trustees or relatives of the parties who establish or maintain the plan.
Spousal Impoverishment Act. Protects a portion of the income and assets that a stay-at-home spouse may retain without terminating Medicaid eligibility for a confined spouse.
Spread Loss Reinsurance. (1) The working cover subject to a prospective rating plan. (2) A form of excess reinsurance wherein each year’s premium rate is determined by the amount of the ceding insurer’s excess losses for a specified number of preceding years. A form of experience rating.
Sprinkler Leakage Insurance. Coverage for damage resulting from the accidental discharge of water from an automatic sprinkler system, as contrasted with discharge because of heat from a fire.
Sprinkler Leakage Legal Liability Insurance. Insurance covering the legal liability of an insured who has a sprinkler leakage loss which damages the property of others, on a floor below or in adjoining premises, for instance.
Stacking of Limits. Applying the limits of more than one policy to an occurrence, loss or claim. In some cases, courts have required a stacking of limits when multiple policies, or multiple policy periods, cover an occurrence.
Staff Model HMO. An HMO where physicians are employed and all premiums are paid to the HMO, which then compensates the physicians on a salary and bonus arrangement.
Staged Accidents. An accident where vehicles with prior damage are brought together and made to appear to have been involved in an accident.
Stamping Bureau. See Audit Bureau.
Standard Annuity Table. The 1937 Standard Annuity Table; a mortality table widely used for annuities.
Standard Class Rate (SCR). This is a rate which is arrived at by using a base rate per participant multiplied by a factor to allow for group demographic information.
Standard Exception. In workers’ compensation insurance certain classes of employees are classified separately for rating, rather than being included in the main classification for a risk (e.g., clerical office employees, outside sales representatives, draftsmen, drivers, chauffeurs and their helpers).
Standard Fire Policy. See New York Standard Fire Policy.
Standard Limit. See Basic Limit.
Standard Policy. (1) Coverage which has identical provisions regardless of the issuing insurer. Many common policies are standardized. (2) Insurance issued to a standard risk.
Standard Premium. Most often used in connection with retrospective rating for workers’ compensation and general liability insurance. It is the premium of which the basic premium is a percentage and is developed by applying the regular rates to an insured’s payroll. See also Retrospective Rating and Basic Premium.
Standard Provisions. (1) Provisions prescribed by state law that must appear in all policies issued in that jurisdiction. (2) Provisions adopted by the NAIC to apply to group life insurance as minimum protection. They are required by law in most states. (3) Formerly, a set of prescribed provisions regulating the operating conditions of a health insurance policy required by law in most jurisdictions between about 1912 and 1950. They are now superseded by uniform provisions for individual accident and health insurance policies which contain an NAIC model bill. These have been enacted in virtually all jurisdictions.
Standard Risk. A risk on par with those on which the rate has been based in the areas of health, physical condition and morals. These risks are part of the standard cost of a policy, and are not subject to rate loadings or restrictions.
Standard Ownership Rules. Under these rules, an eligible vehicle must be owned or leased by an individual or married couple who are residents of the same household. See Joint Ownership Coverage.
State Agent. An outmoded term meaning an agent who has an exclusive territory of one or more states. Also, an obsolete term for special agent. See Special Agent.
State Associations of Insurance Agents. Each state may have one or more associations of insurance agents. These organizations are made up of individual agents who have joined forces to discuss common problems and promote the American agency system.
State Death Taxes. A tax imposed by states on beneficiaries who receive property from a decedent.
State Fund. A fund set up by a state government to finance a mandatory insurance system, such as workers’ compensation, non-occupational disability benefits, or, in Wisconsin, state-offered life insurance. Such a fund may be monopolistic, i.e., purchasers of the type of insurance required must place it in the state fund; or it may be competitive, i.e., an alternative to private insurance if the purchaser desires to use it.
Stated Amount. An agreed amount of insurance shown on the policy, and paid in the event of total loss regardless of the actual value of the property.
Statement Blank. See Convention Blank.
Statement of Policy Information. For universal life policies, this document is prepared at the end of each year giving complete information on all transactions affecting the policy, such as premium paid, current death benefit, interest credited, loans outstanding, monthly charges and cash surrender value.
Statement of Values. Sometimes property is written using a blanket rate and one single limit of liability applying to all locations. In order to determine the blanket or average rate, a rating bureau or company requires an insured to submit a declaration of the amounts of value at each separate location on this form.
Statewide Average Weekly Wage (SAWW). A statistical computation that is periodically updated and is used to determine compensation benefit amounts. Many benefits are set forth as a percentage of the SAWW.
Statute of Fraud. A statute stating that certain contracts must be in writing in order to be enforceable (e.g., any contract involving the sale of real estate).
Statute of Limitations. The time limit set by law during which a person must bring legal action on a case.
Statutory Accounting Principals (SAP). Principals required by statute which must be followed by an insurance company when submitting its financial statement to the state insurance department. Such principles differ from generally accepted accounting principles (GAAP) in some important respects. For one thing, SAP requires that expenses must be recorded immediately and cannot be deferred to track with premiums as they are earned and taken into revenue.
Statutory Earnings (or Losses). Earnings or losses shown on the NAIC convention blank, in contrast to earnings or losses that are shown if generally accepted accounting procedure statements are used.
Statutory Reserve. A reserve, either specific or general, required by law.
Statutory. Required by or having to do with law or statute.
Step-Rate Premium. Premium is increased at times specified in the policy, based on a predetermined attained age, or number of policy years in force.
Stock. Merchandise held in storage or for sale, raw materials and in-process or finished goods, including supplies used in their packing or shipping, as distinguished from furniture, fixtures or equipment.
Stock Bonus Plan. A profit sharing plan whereby contributions to the plan and benefits derived from the plan are in the form of the company’s stock.
Stock Insurer. An incorporated insurer with capital contributed by stockholders, to whom the earnings are distributed as dividends on their shares. Contrast with Mutual Insurer.
Stock Option Plan. Surviving stockholders have the option to purchase or not purchase the shares of a deceased stockholder.
Stock Purchase Agreement. A formal buy-sell agreement whereby each stockholder is bound by the agreement to purchase the shares of a deceased stockholder and the heirs are obligated to sell.
Stock Redemption Agreement. A formal buy-sell agreement whereby the corporation is bound by the agreement to purchase the shares of a deceased stockholder and the heirs are obligated to sell.
Stop Loss. A provision designed to cut off an insurer’s losses at a given point. In effect, a stop loss agreement guarantees the loss ratio of the insurer.
Stop Loss Insurance. Reinsurance that is taken out by a health plan or self-funded employer plan. The plan is written to cover excess losses over a specified amount either on a specific or individual basis, or on a total basis for the plan over a period of time such as one year.
Stop Loss Reinsurance. (1) See Aggregate Excess of Loss Reinsurance. (2) A form of reinsurance where the reinsurer reinsures the ceding insurer for an amount by which the latter’s incurred losses in a calendar year for a specified class of business exceed a specified loss ratio.
Storekeepers Burglary and Robbery Insurance. A package crime policy for a storekeeper that provides coverage on seven different crime hazards. A specific amount of coverage is purchased and the limits apply separately to each of the coverages. There is very little flexibility in that the insured must buy the package. See also Broad Form Storekeepers Insurance.
Storekeepers Liability Policy. A single limit package policy covering bodily injury and property damage liability claims in the operation of the storekeeper’s business. It includes limited coverage on contractual and products liability.
Straight Life Income Option. An option for paying the proceeds of a life insurance policy to beneficiaries that continues to pay for as long as the beneficiary lives, but all obligations of the insurance company end as soon as that person dies.
Straight Life Policy. A whole life policy that stretches the premium payments over the insured’s lifetime (to age 100). Also known as continuous premium whole life. See Ordinary Life Policy.
Stranded. A ship that has run aground.
Strict Liability. Usually used when referring to products coverage. The liability that manufacturers and merchandisers may be subject to for defective products sold by them, regardless of fault or negligence. A claimant must prove that the product is defective and therefore unreasonably dangerous. See also Absolute Liability.
Strike-Through Clause. A clause providing that, in the event of the insolvency of a ceding insurer, the reinsurer continues to be liable for its share of losses, which will then be payable directly to the insured rather than to the liquidator of the insolvent ceding insurer. See also Insolvency Clause.
Structured Settlements. The amount of the scheduled installment payments on the policy. This is based on the adjusted age of the payee when benefit payments begin and the remaining life expectancy (calculated by using mortality tables). The younger a person is when benefits begin, the smaller the amount paid—because the insurance company expects to continue paying longer.
Sub-Agents. Agents who report to other agents or general agents, and not directly to the company.
Sub-Broker. An intermediary from whom another intermediary obtains reinsurance business to be placed.
Subchapter S Corporation. A corporate form of business in which all profits and losses are shared by the stockholders and thus the corporation is taxed on an individual basis as opposed to corporate taxation.
Subject Premium (Base Premium, Premium Base or Underlying Premium). A ceding company’s premium to which the reinsurance premium rate (factor) is applied to produce the reinsurance premium. In other words, the reinsurance premium is a percentage of the ceding company’s premium.
Sublimit. Any limit of insurance which exists within another limit (e.g., special classes of property may be subject to a specified dollar limit per occurrence, even though the policy has a higher overall limit; a health insurance policy may limit certain benefits to fixed dollar amounts or maximum amounts per day, even though the overall coverage limit is higher).
Submitted Business. Applications for insurance submitted to an insurer but not yet acted upon.
Subordination. Putting below in importance. Sometimes the creditors of a contractor subordinate their interests in the obligations owed them until a construction project is completed. This increases the contractor’s working capital.
Subrogation. (1) The right of a surety, in its name or in the name of the obligee under a bond, to pursue a course of action against the principal or any other party liable for a loss paid by the surety. (2) The right of one who has taken over another’s loss to also take over the other person’s right to pursue remedies against a third party. It is never used in life insurance and seldom in health.
Subrogation Clause. A clause giving an insurerthe right to pursue any course of action, in its own name or the name of a policyowner, against a third party who is liable for a loss that has been paid by the insurer. This ensures that an insured does not make any profit from his or her insurance. It prevents collecting from both the insurer and a third party. It is never part of a life insurance policy.
Subrogation Release. A release taken by an insurer upon indemnifying an insured. It contains a provision that says the insurer will be subrogated to the rights of recovery that the insured has against any person responsible for the loss.
Subrogation Waiver. A waiver by the named insured giving up any right of recovery against another party. Normally a policy requires that subrogation (recovery) rights be preserved. In commercial property insurance, a written waiver of subrogation rights is permitted if it is executed before the loss occurs.
Subscriber. A person or organization who pays the premiums, or a person whose employment makes him or her eligible for membership in the plan.
Subscriber Contract. An agreement that describes the individual’s benefits under a health care policy.
Subscription Policy. A policy where two or more insurers may subscribe, indicating in the policy the share of the risk to be borne by each insurer.
Subsidence. Movement of the land on which property is situated. A structure built on a hillside may slide down the hill after heavy rains. This is different from earthquake damage.
Substandard Risk. (1) A risk not measuring up to underwriting standards. It may still be written but usually at a surcharged premium. (2) See Impaired Risk.
Sue and Labor Clause. A provision permitting and requiring an insured to take all practical measures to protect any salvage, without prejudicing any right to claim against the insurer. The intent of this clause is to ensure that the insured does not fail to use proper care to preserve the property. One effect of it is that in case of a total loss an insurer may pay the loss plus the cost of salvage.
Summary Annual Report. A summary of a qualified plan’s operation that is required to be given to each participant annually.
Summary Plan Description. A recap or summary of the benefits provided under the plan. It is used most often with employees covered by self-funded plans.
Superbill. A form that specifically lists all of the services provided by the physician. It cannot be used in place of the standard AMA form.
Superintendent of Insurance. The title of the head of a state or provincial insurance department used in some jurisdictions.
Superseded Suretyship Rider. An endorsement or provision on a new bond under which the new bonding company assumes liability for claims that cannot be recovered from the prior bond because its discovery period has ended. The discovery period of a bond is normally one year, during which it will cover any loss which occurred during the term of the bond.
Supplemental Actuarial Value. A variation of actuarial present value. The value of all benefits expected to be paid under a plan, reduced by the present value of future adjustments (including any contributions by plan participants). See Actuarial Present Value.
Supplemental Contract. A rider usually relating to the method of settlement of the proceeds of a life insurance policy.
Supplemental Dental Plan. See Dental Plan, Supplemental.
Supplemental Extended Reporting Period. An optional “maxi tail” or “full tail” that extends for an unlimited period of time after expiration of a “claims-made” liability policy, and covers claims made after the policy period.
Supplemental Medical Insurance (SMI). Part B of Medicare is a voluntary program that generally covers physician’s services and various outpatient services. A premium is charged for electing Part B coverage.
Supplemental Services. Additional services over and above the basic coverage of a health plan.
Supplementary Payments. A provision in most liability policies under which the insurer agrees to pay defense costs, premiums on various bonds, interest accruing after a judgment and other reasonable expenses in addition to the limit of liability.
Surety Association of America (SAA). An association of bonding companies that establishes rules and regulations, rates and rating plans and forms and collects information on rating that is supplied to members.
Surety. One who guarantees the performance or faithfulness of another. A surety can be either a corporation or an individual, but it is usually an insurance company.
Surety Bond. A bond guaranteeing that a principal will carry out the obligation for which he is bonded. A surety bond is most often issued to a contractor, a person seeking a license or permit or someone involved in a court case.
Surety Bond Guarantee Program. A federal Small Business Administration (SBA) program for minority contractors. The SBA agrees to back the surety company in the event of loss under a construction contract bond.
Suretyship. The means by which one person or entity, the surety, guarantees another entity, the obligee, that a third entity, the principal, will or will not do something. It differs from insurance by being a three-party contract, but most sureties today are insurers.
Surgical Insurance Benefits. Health insurance against loss due to surgical expenses.
Surgical Schedule. Part of a basic medical expense plan which itemizes various surgical procedures and the monetary benefit allocated to each procedure. See Schedule.
Surgi-Center. A separate facility (from a hospital) that provides outpatient surgical services.
Surplus. (1) A reinsurer’s portion of a risk; that part which remains after deducting the retention established by the ceding company. (2) The amount by which assets exceed liabilities.
Surplus Lines. A risk or a part of a risk for which there is no market available through the original broker or agent in its jurisdiction. Therefore, it is placed with non-admitted insurers on an unregulated basis, in accordance with the surplus or excess lines provisions of the state law.
Surplus Reinsurance. (1) Pro rata reinsurance wherein the reinsurer accepts that part of each risk written in excess of a specified retention. The part reinsured is usually a multiple of the retention. See also Lines. (2) The amount of any risk that exceeds the net line retained by the ceding company. The reinsurer receives premiums and contributes to the payment of losses in proportion to its share of the risk.
Surplus Release. The use of admitted reinsurance on a portfolio basis to offset extraordinary drains on policyholder’s surplus. See also Portfolio Reinsurance.
Surplus Share. See Surplus Reinsurance.
Surplus to Policyholders. See Policyholder’s Surplus.
Surrender. To give up a whole life policy. The insurer pays the insured the cash value that the policy has built up if it is surrendered.
Surrender Value. See Cash Surrender Value.
Survivor. The beneficiary of an annuity contract, i.e., the annuitant’s survivor.
Survivorship Annuity. See Reversionary Annuity.
Survivorship Benefits. Funds available to pay an annuitant who survives longer than statistically expected from premiums paid by annuitants who died before they had collected amounts equal to their contributions.
Suspension of Insurance Endorsement. An endorsement normally issued after a policy is written that temporarily stops coverage for a vehicle that is not in use. This endorsement states that the premium will be refunded if coverage is suspended for at least 30 consecutive days. But it does not indicate how long the insurance is to be suspended.
Swap Maternity. A provision granting immediate maternity coverage in a group health plan but terminating coverage on pregnancies in progress upon termination of the plan. “Swap” means providing the coverage at the beginning of the policy where it is not usually provided, but not providing it after the end of the policy where it usually is provided.
Switch Maternity. A provision for group health maternity coverage on female employees only when their husbands are included in the plan as dependents.
Symbol. A number assigned by the insurance company to represent the cost of a car when new. Both the symbol and model year (or age) of covered autos are used to determine the policy premium.
Symbol Group. A rating code developed by adjusting a vehicle’s price upward or downward to reflect the physical damage loss experience for that particular model. Two automobiles of different makes and models might have the same market value, but be assigned to different symbol groups if one tends to suffer greater damage in an equal crash, or if it is more expensive to repair equal damage in one model because of the cost of individual parts. The rating symbol group code is based on the first eight characters of a vehicle’s VIN.
Syndicate. A group of insurers or underwriters who join to insure property that may be of such total value or high hazard that it can be covered more safely or efficiently on a cooperative basis. See also Pool.
24-Hour Care Coverage. A health insurance concept that blends occupational and non-occupational benefits to provide round-the-clock coverage for injuries or diseases whether or not they are work related.
“3-D” Policy. See Dishonesty, Disappearance and Destruction Policy.
1035 Exchange. A nontaxable exchange of life insurance policies and annuities as provided under Section 1035(a) of the Internal Revenue Code.
Tabular. Of or pertaining to a table. Tabular cost is the cost of mortality, morbidity or other claims, according to the valuation tables and assumptions used by the insurer.
Tabular Plan. A retrospective rating plan, which uses tables to furnish the various values for the rating formula.
Tail. This term describes both the exposure that exists after expiration of a policy and the coverage that may be purchased to cover that exposure. On “occurrence” forms, a claims tail may extend for years after policy expiration, and the losses may be covered. On “claims made” forms, tail coverage may be purchased to extend the period for reporting covered claims beyond the policy period. See Mini, Midi and Maxi Tail.
Tangible Damages. A medical bill or the cost to repair a damaged vehicle. If one driver is liable for an accident, then the other party may be entitled to compensation for injuries or damage or both.
Target Benefit Plan. A qualified plan that is a combination of a defined benefit and defined contribution plan whereby an employer is required to fund a specific targeted benefit for plan participants. Target benefit plans impose defined contribution limitations for plan funding.
Target Risk. (1) Certain high-value bridges, tunnels, and fine art collections that are excluded from an automatic reinsurance contract to permit specific handling of the capacity problem and to release the reinsurer from the potential heavy accumulation of liability on any one risk. (2) A large, hazardous risk on which insurance is difficult to place. (3) A large, attractive risk that is considered a target for competing insurance companies.
Tariff Rate. A specialized insurance rate established by a rating organization, which comes from the tables, schedules and rules found in the tariff of rates.
Tax Basis. Money that has yet to be taxed, usually part of a qualified plan benefit or distribution.
Tax Equity and Fiscal Responsibility Act. A federal law intended to prevent group term life insurance plans from discriminating in favor of key employees, and which amends the Social Security Act to make Medicare secondary to group health plans.
Tax Factor (or Tax Multiplier). A factor applied in retrospective rating to an insurance premium in order to increase it to cover state premium taxes.
Tax Sheltered Annuity (TSA). An annuity program under which contributions reduce the taxable income of participating employees, and the benefits are not taxable until distributed.
Taxable Estate. This equals the adjusted gross estate less the marital deduction property and any charitable deductions.
Tax-Free Rollover. The tax-free transfer of assets from one qualified retirement plan to an IRA or annuity, and vice versa.
TDB. See Temporary Disability Benefits.
Teachers Insurance and Annuity Association. An organization selling life and health insurance and annuities to college and university staff members.
TEFRA. See Tax Equity and Fiscal Responsibility Act.
Temporary Agent. A person licensed to act as an agent for a brief period of time (usually 90 days) without taking a written examination. Temporary licenses are commonly granted to allow someone to continue the business of an agent who has died, become disabled or entered active military service.
Temporary Disability Benefits (TDB). Legislated benefits payable to employees for non-occupational disabilities under TDB laws in certain states. See also Disability Benefits Law.
Temporary Living Allowance. Coverage for extraordinary expenses that occur when an insured has been displaced from home. Includes boarding a pet in a kennel, renting furniture—or paying to store furniture that survived a loss—and eating at restaurants while staying in a hotel or motel without kitchen facilities.
Temporary Partial Disability. A condition where an injured party’s capacity is impaired for a time, but he is able to continue working at reduced efficiency and is expected to fully recover.
Temporary Total Disability. A condition where an injured party is unable to work while recovering from injury, but is expected to recover.
Ten Day Free Look. A notice, placed prominently on the face page of the policy, advising the insured of his or her right to examine a health policy, and if dissatisfied, return the policy within 10 days for a full refund of premium and no further obligation.
Ten Year Funding. Primarily for older individuals, this type of funding requires that premiums be payable for 10 years even though retirement is permitted within 10 years.
Tenancies for Years. Ownership of real property for a specific period of time.
Tenants Improvements and Betterments. Property affixed to an owner’s building by the lessee or tenant that may not be legally removed at the end of the rental period.
Tenants in Common. Where two or more persons have undivided ownership and possession of real property, but (unlike joint tenancy) each owner may transfer or dispose of their share of ownership. Contrast with Fee Simple and Joint Tenancy.
Tenants Policy. A homeowners policy specifically designed for people who rent; often called
an HO-4 policy.
Term. The period of time for which a policy or bond is issued.
Term Insurance. A life insurance policy that provides protection only for a specified period of time. A common policy period would be one year, five years, 10 years, or until the insured reaches age 65 or 70. It does not build up any of the nonforfeiture values associated with whole life policies. See also Decreasing Term Insurance, Increasing Term Insurance and Term Insurance. Contrast with Whole Life Insurance.
Term Rule. The provision in a rating manual that states the periods for which coverages run, and discounts, if any, that apply to the rates or premiums of policies issued for more than one year.
Terminal Funding. A form of retirement funding by which an employer sets aside a single sum of money when the participant retires. This sum will fund the individual’s retirement benefit.
Terminally Ill. A term referring to a person who will normally die within six months of a specific illness or sickness. Often refers to the terminally ill requirement for hospice care.
Terminal Reserve. A percentage of a reinsurance contract set aside to protect the reinsurer in case of an immediate claim.
Termination. (1) The time the coverage under an insurance policy ends, either because its term has expired or because it has been canceled by either party. (2) The cessation of premium paying for a whole life or endowment policy before the agreed upon time. This ends the coverage, and the insured receives one of the nonforfeiture values. The cessation of a policy that does not or has not yet developed a cash value is termed a “lapse.”
Territorial Limitation. See Geographical Limitation.
Territorial Rating. In most states, territorial rating of automobile risks is permitted and insurance companies consider the neighborhood in which you live. This means the primary rating factor also depends on the territory where the vehicle is parked.
Tertiary Beneficiary. A beneficiary designated as third in line to receive proceeds or benefits if the primary and secondary beneficiaries do not survive.
Tertiary Care. Services provided by such providers as thoracic surgeons, intensive care units, neurosurgeons, etc.
Testamentary Capacity. The ability to form a legally valid will.
Testamentary Transfer. Transfer of the assets of an estate according to the provisions of the deceased person’s last will and testament. Contrast with Inter Vivos Transfer.
Testamentary Trust. A trust created after the grantor’s death, according to the provisions of the deceased person’s last will and testament. Contrast with Inter Vivos Trust.
Testing Exclusion. In boiler and machinery insurance, a provision that excludes coverage for any object while it is being tested.
Theatrical Floater. An inland marine form used to cover theatrical properties, such as costumes and scenery.
Theft. The act of stealing, including larceny, burglary and robbery. Does not include coverage for theft of materials or supplies to be used for construction of a dwelling. Theft by a member of the insured’s household is not covered nor is property stolen from a room rented out.
Theft, Disappearance and Destruction Coverage Form. A commercial crime coverage form covering money and securities against the causes of loss described in its title.
Theory of Probability. The mathematical principle upon which insurance is based. See also Degree of Risk, Law for Large Numbers, Odds and Probability.
Therapeutic Alternatives. Alternate drug products that may be different in chemical content, but provide the same effect when administered to patients.
Therapeutic Equivalence. Different drugs that control a symptom or illness exactly the same as other drugs used to control that illness.
Third Party Administration (TPA). Accounting and actuarial services as well as filing of various reports required by the IRS and the Department of Labor provided by organizations that administer qualified plans.
Third Party Administrator (TPA). A firm that provides administrative services for employers and other associations having group insurance policies. The TPA is also involved with certifying eligibility, preparing reports required by the state and processing claims.
Third Party Beneficiary. A person who is not a party to a contract but who has legally enforceable rights under the contract. It might be a life insurance beneficiary or a mortgagee.
Third Party Insurance. A term for liability insurance. Liability always involves a third party, the one who has suffered a loss, in addition to the insurer and the insured. See also Liability Insurance.
Third-Party Payor. Any organization such as Blue Cross/Blue Shield, Medicare, Medicaid or other commercial insurance company that is the payor for coverages provided by a health plan.
Three-Fourths Value Clause. A clause stating that the maximum loss the insurer will pay is three-fourths of the actual cash value of the property.
Threshold Level. The point at which the insured may bring tort action under a modified No-Fault Auto Plan. Many of these plans prohibit tort action for pain and suffering unless medical bills exceed some figure, like $1,000, or disfigurement or death occurs.
Thrift Plan. Any retirement plan in which an employee savings feature is added.
Ticket Policy. See Transportation Ticket Policy.
Ticket Reinsurance. A note attached to a daily report setting forth the details of any reinsurance that has been effected.
Time Element Insurance. Insurance that covers expenses consequent to damage or destruction by an insured peril. The amount paid depends on the length of time when expenses accumulate (e.g., business interruption insurance pays for the loss of earnings during the time it takes to repair the property).
Time Limit on Certain Defenses. One of the uniform individual accident and sickness provisions required by state law to be included in every individual health policy. It sets a limit on the number of years after a policy has been in force that an insurer can use as a defense against a claim the fact that a physical condition of the insured existed before the policy was issued, but was not declared at that time.
Time Limits. The limits of time within which notice of a claim and proof of a loss must be submitted.
Time of Payment of Claims. A health insurance provision that requires that claims be paid immediately upon receipt of proofs of loss. Some states specify a number of days in place of the word “immediately.”
TIRB. Transportation Insurance Rating Bureau. See Transportation Insurance.
Title Insurance. Insurance that indemnifies the owner of real estate in the event that his clear ownership of property is challenged by the discovery of faults in the title. Title insurance is not the same as—or even part of—homeowners insurance. It is a separate coverage designed especially for disputes that may occur over the legal status of the land bought along with a house.
Title XIX Benefits. See Medicaid.
Tobacco Sales Warehouses Coverage Form. A commercial property coverage form used to insure tobacco warehouse operations.
Tort. A private wrong, independent of contract and committed against an individual, which gives rise to a legal liability and is adjudicated in a civil court. A tort can be either intentional or unintentional, but it is mainly against liability for unintentional torts that one buys liability insurance.
Tort Liability. Liability imposed by law in the absence of any contract or agreement.
Tortfeasor. A person who has committed a tort.
Total Disability. Injury or illness that prevents the insured from performing the duties of any occupation for remuneration or profit.
Total Loss. A loss of sufficient size such that there is nothing left of value. The complete destruction of the property. The term is also used to mean a loss requiring the maximum amount a policy will pay. Compare with Partial Loss.
Total Policy Premium. The final line of the Declarations Page includes space for entering this value, which is the total amount the insured pays for all coverages for which limits and premiums are shown and for any additional endorsements that are attached.
Towing and Labor Costs. Coverage for road service, such as jump-starting your car, changing a flat tire and towing.
Townhouse. A group of usually six buildings placed side by side with one contiguous wall between each unit. Units usually have at least two levels and include access to land that may be divided by privacy fences. Each unit has a private entrance. Commonly bought as a fee simple property or condominium.
TPA. See Third Party Administrator.
Trailer Interchange Agreement. An arrangement whereby one trucker transfers a trailer containing a shipment to a second trucker for continued transportation.
Trailer Interchange Coverage. Coverage for the legal liability of truckers for loss or damage to nonowned trailers and equipment that are in the insured’s possession under a written trailer interchange agreement.
Trans Union. One of three major credit report companies.
Transacting Insurance. The solicitation, inducement and preliminary negotiations affecting a contract of insurance and the subsequent carrying on of business pertaining to it.
Transfer of Risk. Shifting all or part of a risk to another party. Insurance is the most common method of risk transfer, but other devices, such as hold harmless agreements, also transfer risk. One of the four major risk management techniques. See Risk Management.
Transit Policy. A policy that provides coverage for loss to property while in transport.
Transition Program. In commercial liability insurance, rules designed to offset wide differences in premiums for mercantile risks because of a change in the rating base from area to gross sales. It limits maximum and minimum premium changes resulting solely from the change in the rating base.
Transplant and Cosmetic Surgery Benefit. This provides total disability benefits for elective medical procedures, such as donating an organ.
Transportation Expenses. Automobile coverage for transportation expenses incurred by the named insured only in the event of theft of an entire covered auto. Coverage begins after a 48-hour waiting period and is subject to a daily limit and maximum dollar limit, and it applies only when the insured has physical damage coverage for theft.
Transportation Insurance. Usually an open form policy that covers the insured’s property in the course of transportation. It can include all modes of transportation, including ocean vessels.
Transportation Ticket Policy. An accidental death and dismemberment and disability benefit policy issued with a common carrier ticket and limited to the risks of travel and the duration of the trip for which the ticket has been purchased.
Traumatic Injury. An injury to a person’s physical body caused by an outside source, as distinct from physical disability caused by sickness or disease.
Travel Accident Insurance. A form of health insurance limiting coverage to accidents occurring while the insured is traveling.
Treatment Facility. Any facility, either residential or nonresidential, authorized to provide treatment for mental illness or substance abuse.
Treaty Reinsurance. A contract of automatic reinsurance setting forth the conditions for reinsuring a class or classes of business. Contrast with Facultative Reinsurance.
Trend Factor. The factor applied to rates that allows for such changes as increased cost of medical providers, the cost of new and expensive medical technology, etc.
Trespasser. An individual who enters another person’s property without any legal right to do so. The only duty that the owner of the property owes a trespasser is not to intentionally harm or set a trap for him or her.
Triage. A method of ranking sick or injured people according to the severity of their sickness or injury in order to ensure that medical and nursing staff facilities are used most efficiently.
Trial Work Period. An incentive for a disabled worker under Social Security to attempt a return to work. The individual may work nine months in a five-year period without loss of Social Security disability income benefits. If a disabled worker refuses rehabilitation without a just reason, benefits may cease.
Trigger. See Coverage Trigger.
Trip Transit Insurance. Coverage for goods in transit for a specified trip and by a specified mode of transportation.
Triple Indemnity. See Multiple Indemnity.
Triple Option. A plan where employees have their choice among different types of providers such as HMO, PPO or basic indemnity plan. Usually, their choice depends on how much they want to pay for the coverage.
Triple Protection. Life insurance that combines whole life and twice as much term insurance. The term portion applies until a stated date. This policy might be used to provide maximum protection to an individual at an earlier age when the need for insurance is greater but the ability to pay is less.
Truckers Coverage Form. A commercial automobile insurance coverage form used to insure truckers who are engaged in the business of transporting goods for others.
Truckers Liability. See Motor Cargo Policy-Carriers Form and Interstate Commerce Commission Endorsement.
True Group Insurance. Group insurance issued under a master contract with certificates of insurance that are not policy contracts issued to persons included in the group. This would be in contrast to franchise or wholesale “group” insurance, under which a covered person is issued an individual policy contract.
Trust. A legal arrangement whereby property is held and managed by a trustee for the benefit of beneficiaries.
Trust Agreement. (1) A supplemental agreement attached to and made a part of a life insurance policy setting forth the manner in which the proceeds are to be paid, in lieu of having them paid in a lump sum or under one of the other installment settlement options in the policy itself. (2) An agreement or instrument under which a corpus (fund/property) is given over to the management of the trustee named in a trust instrument for the benefit of the beneficiaries of the trust. (3) A written agreement between two parties—the employer and the trustee —setting forth the provisions of a pension plan.
Trust and Commission Clause. A provision found in some property, ocean marine and inland marine policies enabling a person to insure his interest in the property of another.
Trust Fund Plans. A type of qualified plan in which contributions are made to a plan trustee or a corporate trustee. The trustee in turn provides retirement benefits for plan participants.
Trustee. A person appointed to manage the property of another.
Trustees. Persons who, by entering into trust agreement with the employer, assume the impartial supervision of a retirement plan. They may be employees, a trust company or outside individuals.
“T” Tables. The factors used to properly fund retirement benefits for employees of varying types of industries incorporating the ideas of interest, mortality and turnover.
Tuition Fees Insurance. An adaptation of business interruption coverage. It protects a school against the indirect loss of tuition fees that may result from a fire or other peril covered by the policy that closes the school.
Turnkey Insurance. Insurance coverage that includes General Liability for Contractors and Architects Errors and Omissions.
Turnover. The number of persons hired within a stated period to replace those leaving or dropped; also, the ratio of this number to the average workforce maintained. In pension plans, turnover refers to the ratio of participants who leave employment through quits, discharges, etc. to the total of participants at any age or length of service.
Twisting. Misrepresenting a policy or making incomplete comparisons of policies to induce a policyowner to change or replace an existing policy.