Glossary of Insurance Related Terms

Salary Savings Insurance (Deductions or Allotment)

Insurance issued to an individual employee whose employer agrees to deduct the premiums from his paychecks and submit them to the insurer. (LI)

Sales illustration

A graphic representation used by an agent to help explain an insurance product to a potential customer. Sales illustrations often consist of numeric charts describing the customer’s goals and the cost elements and mechanics of the insurance product being proposed.

Sales Representatives

See Special Agent. (LI)

Saving Age

A procedure for making the effective date of a policy earlier than the application date. Backdating is often used to make the age of the insured at issue lower than it actually was in order to get a lower premium. Most policies can be backdated up to six months. Also referred to as Saving Age.

Savings Bank Life Insurance

Life Insurance sold by mutual savings banks. Allowed only in a few states, such as New York, Connecticut, and Massachusetts. (LI)

Schedule "Q"

A schedule of the business expenses of a Life insurer required by the New York State Code to be filed to determine compliance with the state's limitation on total expenses. This limitation has the effect of setting a ceiling on commissions. (LI)

Scheduled Premium Variable Life Insurance

A whole life policy which features a fixed, level premium and a minimum guaranteed face amount. The performance of the policy is dependent on the separate account. (LI)

Scheduled Premiums

Refers to planned premiums that are scheduled at the time of issue.

Second insured rider

A rider that may be added to a permanent life insurance policy to provide term insurance coverage on the life of an individual other than the policy’s insured.

Second-To-Die

A type of life insurance policy that insures the lives of two people, typically a husband and wife. The death benefit proceeds are payable upon the second death and used to satisfy the estate tax. Available as either Whole Life or Universal Life, these policies feature premiums that are often less expensive than buying two separate policies. Also referred to as Joint and Last Survivorship Life Insurance or Joint Survivorship Life Insurance.

Second-to-die life insurance

Whole life insurance that covers two persons and provides for payment of the proceeds when both insureds have died. It is generally designed to pay estate taxes.

Secondary beneficiary

The party designated to receive life insurance policy proceeds if the primary beneficiary should die before the person whose life is insured dies.

Section 401(k) Plan

Internal Revenue Code 401(k) is an employer-sponsored, salary-reduction retirement savings program. The employee defers a percentage of current salary on a pre-tax basis and the employer often matches some portion of that amount. There is a cap on the annual contribution, and a 10% penalty is levied on moneys withdrawn before age 59 1/2.

SEGLI

Service Employees Group Life Insurance, which 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. (LI)

Select Mortality

Descriptive of the mortality experience of newly underwritten insured's. This period of discernibly different (favorable) mortality usually lasts 5 to 15 years.

Self-Funded Plan

Plan of insurance where an employer, which has fairly predictable claim costs, pays the claims rather than an insurance company.

Settlement

(1) See financial settlement. (2) In the United States, an irrevocable action that relieves the plan or plan sponsor of the obligation for a pension benefit and that eliminates the risk to the plan assets used to carry out the settlement. One example of a settlement is payment of a lump-sum benefit to a plan participant, thus discharging any further benefit obligation to the participant. Settlement is defined in FASB Statement No. 88.

Settlement options

Choices available to the policyowner or the beneficiary of a life insurance policy regarding the method by which the insurer will pay policy proceeds.

Short Term

Preliminary Term insurance, not to exceed 11 months, which may be attached to a policy to change the anniversary date for the purpose of more conveniently spacing premium payments.

Short-term disability income insurance

Disability income insurance that provides a benefit for a short disability or for the first part of a long disability. Group short-term disability generally specifies a maximum benefit period of less than one year, commonly 13, 26, or 52 weeks. Individual short-term disability insurance features a maximum benefit period of from one to five years.

Simplified Underwriting

An underwriting process that applies a less strict analysis of risk factors. Participants in group plans may qualify for this abbreviated form of underwriting.

Simultaneous death act

A state or provincial law which provides that if the insured and the primary beneficiary both die under conditions in which it is impossible to determine which one died first, the insured will be presumed to have survived the primary beneficiary unless there is a policy provision to the contrary.

Single Premium Life Insurance

A life insurance plan that requires only one premium and is guaranteed to remain paid-up throughout the insured's lifetime.

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. (LI)

Single-Pay Life

A whole life insurance policy purchased with one premium payment.

Social Security

In the United States, a federal program that provides monthly income benefits to qualified workers who retire or become disabled and to the surviving spouses and dependent children of covered workers who have died.

Society of Actuaries (SA)

An association of actuaries organized in 1948 as the successor to the Actuarial Society of America and the American Institute of Actuaries. It grants the designation Associate of the Society of Actuaries upon completion of five examinations and Fellow of the Society of Actuaries upon the completion of five additional examinations. (LI)

Sole proprietorship insurance

Insurance on the life of the sole proprietor of a business. Sole proprietorship insurance is used either to pay the salary of someone hired to run the business after the owner’s death or disablement or to compensate the owner’s family for the loss of potential income due to the failure of the business after the owner’s death or disability.

Spendthrift Clause

A clause in most Life Insurance policies which prevents the creditors of a beneficiary from claiming any of the benefits payable to him before he 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. (LI)

Split Dollar Coverage

An arrangement under which 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. (LI)

Split Dollar Plan

An arrangement in which two parties, usually an employer and employee, jointly purchase the policy, pay premiums and share in the policy's benefits.

Split funding

A method of funding a pension plan in which a portion of the total contributions to the plan are used to purchase an allocated funding instrument while the remainder of the contributions are placed in an unallocated fund.

Split Life Insurance

A combination of Installment Annuity and Term Insurance under which 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. (LI)

Split-dollar insurance plan

A type of business insurance in which an employee is covered by individual life insurance that is paid for jointly by the employee and the employer. The employee names the beneficiaries. Each year the employer pays the portion of the premium that is equal to the increase in the policy’s cash value for that year, and the employee pays the balance of the premium. If the employee dies, the employer will receive an amount of the proceeds equal to the cash value of the policy, while the beneficiaries of the policy will receive the remaining benefits.

Spousal Discount

A discount for purchasing coverage together as husband and wife from the same insurance company.

Spouse and children?s insurance rider

A rider that may be added to a permanent life insurance policy to provide term insurance coverage on the insured’s spouse and children.

Standard or Standard Plus

An underwriting rate classification for non-smokers who have minor health impairments.

Standard premium rate

The premium rate charged for insurance on a member of the standard risk class.

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. (LI,H)

Standard Risk

An average risk, not subject to rate loadings or restrictions because of poor health.

Standard risk class

A risk class made up of individuals whose anticipated likelihood of loss is not significantly higher or lower than average. Most insureds are included in the standard risk class.

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. (LI)

Step-Rate Premium

A rating structure in which the premiums increase periodically at pre-determined times such as policy years or attained ages.

Stock insurance company

An insurance company that is owned by people who buy shares of the company’s stock.

Stock Life Insurance Company

A life insurance company owned by stockholders who elect a board to direct the company's management. Stock companies, in general, issue nonparticipating insurance, but may also issue participating insurance.

Straight Life Insurance

Whole life insurance on which premiums are payable for life.

Straight Life Policy

A Whole Life policy for which premiums are paid continuously as long as the insured lives. Same as Straight Life Policy. Life insurance that remains in force during the insured’s entire lifetime, provided premiums are paid as specified in the policy. Whole life insurance also builds a savings element (called the cash value).

Sub-Standard Risk

An individual, who, because of health history or physical limitations, does not measure up to the qualification of a standard risk.

Substandard premium rate

The premium rate charged for insurance on an insured person classified as having a greater than average likelihood of loss. This premium rate is higher than a standard premium rate.

Substandard risk class

A risk class made up of people with medical or nonmedical impairments that give them a greater than average likelihood of loss. Substandard risks pay higher-than-standard premiums. Members of this risk class are called special class risks.

Successor beneficiary

The party designated to receive life insurance policy proceeds if the primary beneficiary should die before the person whose life is insured dies.

Successor owner

A person designated to become the owner of a life insurance policy if the owner dies before the person insured by the policy dies. In Quebec, known as the contingent owner.

Suicide clause

Life insurance policy wording which specifies that the proceeds of the policy will not be paid if the insured takes his or her own life within a specified period of time (usually two years) after the policy’s date of issue. Also called suicide exclusion provision.

Superstandard risk class

The risk category that is composed of proposed insureds who present a significantly less-than-average likelihood of loss.

Supplemental Contract

A rider usually relating to the method of settlement of the proceeds of a Life Insurance policy. (LI)

Supplemental executive retirement plan (SERP)

A nonqualified deferred compensation retirement plan designed to provide benefits for a group of executives, without regard to benefits provided under a qualified retirement plan.

Supplemental group life insurance

Life insurance over and above the basic coverage provided by a group policy. The supplemental coverage may provide an additional amount of the same type of insurance or may provide a different type of insurance. Supplemental coverage is usually contributory and subject to stricter underwriting standards than is the basic group coverage.

Surplus

The amount by which the value of an insurer's assets exceeds its liabilities, i.e., the net worth of an insurance company.

Surrender

To terminate or cancel a life insurance policy before the maturity date. In the case of a cash value policy, the policy holder may exercise one of the non-forfeiture options at the time of surrender.

Surrender charge

(1) Expense charges sometimes imposed when a policyowner surrenders a universal life policy. (2) A charge imposed if the contractowner surrenders a deferred annuity policy within a stated number of years after it was purchased.

Surrender Charge Period

The number of years during which the insurance company would charge the owner a fee if the owner chooses to surrender the life insurance policy or annuity contract.

Surrender Charge Schedule

A schedule showing the fee the insurance company charges for making early withdraws from the annuity contract.

Surrender Value

The amount of cash due an insured who surrenders Cash Value Life Insurance. Such surrender, with consequent termination of all insurance benefits, is sometimes called "cashing out" or "cashing in" a policy. The benefits, as printed in a life insurance policy, that the insurer guarantees to the policyowner if the policyowner stops paying premiums. These amounts may be used in a variety of nonforfeiture options.

Survivors

Individuals, usually family members, who face emotional and sometimes financial setbacks because of your death.

Survivorship Annuity

See Reversionary Annuity. (LI)

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. (LI)

Survivorship life insurance

Whole life insurance that covers two persons and provides for payment of the proceeds when both insureds have died. It is generally designed to pay estate taxes.