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SALARY SAVINGS INSURANCE [LIFE]

Regular forms of life insurance sold to a group of employees with premiums collected on a monthly basis from the employer who deducts the premiums from the wages of the insured employees.

SALES, TOTAL

The total of all net or gross new business from all sources.

SALVAGE

Property taken over by the insurer as partial reimbursement of loss.

SCHEDULE

(1) Individually insured items, as opposed to "blanket." (2) The list of individual items covered under one policy, as the various buildings or the list of items insured under a floater.

SCHEDULE NOTIFICATION

A means of modifying the fire rate on Sentinel policies to provide an equitable rate for the insurance. It is based on the fact that there is a direct relation between the physical condition, maintenance, management and protection of a building and the loss experience. The premium may be either increased or decreased under this plan.

SCHEDULE POLICY

A policy covering only against certain specified hazards or on certain specified property as distinguished from a comprehensive policy. It requires the attachment of a separate schedule or list to properly describe the subject matter of the insurance.

SCHEDULE RATING

A term used principally in Workers' Compensation Insurance. The basic manual rate is modified to suit the conditions prevailing in some particular plant. The basic rate may be either increased or decreased under this plan.

SECOND SURPLUS

A form of treaty required by companies engaged in business requiring large policies, e.g., industrial risks, providing for the lines which are too large to be embraced in a first surplus treaty. It follows on the plan of first surplus but obviously provides only a much-diminished spread of risks to the reinsurers.

SECONDARY RATING FACTOR

Factor indicating a special exposure in certain commercial auto classifications, e.g., manufacturers, truckers, food delivery, special delivery, waste disposal, farmers, dump trucks, and bobtails. All others, not secondarily rated, receive a special code to indicate that no secondary rating factor is to be applied.

SECURITY

An evidence of debt or of ownership such as a stock certificate or bond representing value in the form of assets and/or a stream of income.

SELECTION

Determination by an insurer of what risks it will insure.

SELF-INSURANCE

Periodically setting aside sums of money which in time will cover losses as they occur. Only very large concerns with widely scattered property can safely afford to self-insure.

SELF-INSURED RETENTION

That portion of any loss which the insured agrees to absorb before policy coverage applies. In liability situations it is distinguished from a deductible because the insurer is not responsible for payment of the self-insured retention portion of any loss to any third party. Some states may require proof of assets available in order to be self-insured.

SERVICE MEMBERS' GROUP LIFE INSURANCE (SGLI)

All SERVICE MEMBERS on active duty are automatically covered for a specified amount of this Group Term life insurance, unless they elect no coverage or lesser amounts. The insurance is written by commercial companies and premiums are deducted from the pay of those who are insured.

SETTLEMENT OPTIONS [LIFE]

Nearly all life insurance policies now issued provide for several optional modes of settlement in lieu of payments in a lump sum. The usual options are: (1) interest, (2) installments for a period certain, (3) life income with specified number of years' payment certain, (4) fixed income as long as proceeds and interest will last.

S.F.A.

Submit For Approval.

S.F.C.

Submit For Classification.

S.F.R.

Submit For Rating.

SHEET METAL [COMMERCIAL]

When used to cover doors, should be at least 16 gauge (1/16" thick) and should be screwed to the door on the inside with heavy screws or bolts not more than 4" apart around all sides.

SHOCK LOSS

If any individual loss exceeds $20,000, the portion of the loss over $20,000 is the "shock loss."

SHORT RATE CANCELLATION

When a policyholder cancels before the end of his/her policy term, premiums are figured at the short rate. Short Rate is higher than the pro rata premium. The additional charge is intended to compensate the insurance company for some of the cost of handling the policy on the books for less than the intended term.

SHORT TERM POLICY

A policy written for a period of less than six months or one year.

SINGLE PREMIUM

The lump sum required to cover the entire cost of a life insurance or annuity contract.

S.I.R.

Self-Insured Retention.

S.I.T.

See Storage In Transit.

SOUND VALUE

Same as Actual Cash Value.

SPECIAL AGENT

A field representative who works for one company only and whose duty is to stimulate business for that particular company in his/her territory. The Farmers Insurance Group does not use this term, but our Agents and Division Managers do work of a similar nature.

SPECIAL FORM

This form covers buildings for accidental direct physical loss which includes more perils than are named in the Broad Form.

SPECIAL PERSONAL PROPERTY FORM

This form provides accidental direct physical loss coverage on the contents, or personal property, of commercial risks except for those perils specifically excluded.

SPECIAL RATING

The application of rates which are different than those produced by the average experience of a given carrier. In the case of companies writing at manual rates, special rating is the application of other than manual rates to a given risk.

SPECIFIC CONDITIONS

Usually, if there are two contradictory clauses covering the same matter, one being a general clause and the other a specific clause, the specific clause governs.

SPECIFIC RATES

Rates provided by ISO State Officers for particular risks. They are based on a physical survey and on the application of rating schedules.

SPENDTHRIFT PROVISION [LIFE]

A policy provision stipulating that, to the extent permitted by law, the policy proceeds shall not be subject to the claims of creditors of any beneficiary or contingent beneficiary or any legal process against any beneficiary or contingent beneficiary.

SPLIT POLICY YEAR

A special statistical fiscal period which is a modification of the policy year. In the case of annual business, the policies assigned to a given policy year extending over two calendar years are assigned to that year as a policy year. Since the aggregate of policies assigned to a given policy year extend over two calendar years, the policy year statistics with reference to losses can be split into divisions, depending upon the year in which the accident takes place. This segregation of policy year statistics between the two calendar years is known as the split policy year method of analysis.

SPREAD LOSS REINSURANCE TREATY

Pays the excess over a given figure on single losses, and logically requires a sufficient number of losses exceeding the given figure to enable the excess amounts to average out over the years. Five years is the usual period, with the premium adjustable within fixed minimum and maximum limits according to the company's experience.

SPRINKLER LEAKAGE INSURANCE [PROPERTY]

A fire policy covers damage caused by discharge of water from a sprinkler system when the operation of the system is due to fire, but not otherwise. Damage caused by some fault in the system may be covered by a sprinkler leakage policy.

STANDARD RISK

A person who according to a company's underwriting standards is entitled to insurance protection without extra rating or special restrictions.

STATE FUND, COMPETITIVE

An insurance organization created by the act of the legislature of a state to write insurance (generally workers' compensation), as required by the law of that state, in competition with private carriers.

STATE FUND, MONOPOLISTIC

An insurance organization created by the act of the legislature of a state, in which persons are required to carry insurance, (generally workers' compensation) unless provision is made for self-insurance. Such a fund is operated by the state to the exclusion of private carriers.

STATED VALUE POLICY

A policy for property insurance which states the maximum amount the company will pay in case of loss.

STATUTE

A law enacted by a legislative branch of government.

STATUTORY

Relating to laws of the Federal or State Government.

STOCK COMPANY

One that is owned and controlled by a group of stockholders whose investment in the company provides the safety margin necessary in the issuance of guaranteed, fixed premium, non-participating policies. The stockholders share in the profits and losses of the company. Some stock companies also issue participating policies.

STOCK INSURANCE COMPANY

A carrier owned by stockholders whose ownership is evidenced by shares of stock. Stockholders control the company and Participate in any surplus remaining from the premium and investment income after the insurance losses and costs of doing business have been paid.

STOCK REINSURANCE TREATY

A very specialized form of reinsurance usually applicable to branches of insurance showing wide variation, like hail insurance, in which perhaps four good years might be followed by a calamitous one. Reinsurance could enter to protect against a company's loss ratio exceeding in a calamitous year, 70% or 80% or 90%, as may be agreed.

STORAGE IN TRANSIT

Temporary off-vehicle storage incidental to or in the course of transit from consignee to consignor.

STRAIGHT LIFE

See Ordinary Life.

SUBROGATION

The substitution of one party (insurer) for another party (insured) to pursue any rights the insured may have against a third party liable for a loss paid by the insurer. The right of subrogation is stated in the policy and gives the carrier, in the event it makes a payment under the policy, an opportunity to reimburse itself by recovering from any third party responsible for the loss.

SUBSTANDARD RISK

One, which does not measure up to the company's underwriting requirements.

SUBSTANDARD RISK [LIFE]

A person who is considered an under-average or impaired insurance risk because of physical condition, family or personal history of disease, occupation, residence in unhealthy climate, or dangerous habits.

SUICIDE PROVISION [LIFE]

Most life policies provide that if the insured commits suicide within a specified period, usually two years, after date of issue, the company's liability will be limited to a return of premiums paid.

SUPERSEDED SURETYSHIP RIDER

See Discovery Period.

SUPPLEMENTAL TAIL

An optional provision of an expiring CGL "claims -made" policy that essentially converts it to an occurrence policy for an additional premium charge. This option reinstates the policy limits and must be exercised within sixty days of the termination date of the policy. The additional premium is fully earned at the inception of the coverage.

SUPPLEMENTAL TERM INSURANCE

A supplemental agreement available in some policies, providing for the payment of an additional specified sum in the event the insured dies during the given term period.

SURETY

In bonds, this means the company providing the bond is guaranteeing the behavior of the principal.

SURETY BOND

A bond guaranteeing the faithful performance of a contract, or the faithful performance of a duty or trust.

SURETYSHIP

The function of being a surety. Stated in its terms, suretyship embraces all forms of obligations to pay the debt or answer for the default of another.

SURPLUS

The excess of all assets over all liabilities.

SURPLUS ACCOUNT

A company's surplus is the difference between its assets and liabilities. Net surplus includes contingency reserves and unassigned funds, while gross surplus also includes surplus assigned for payment of dividends.

SURPLUS TO POLICYHOLDERS

The total capital, if any, and unassigned (surplus) funds, including voluntary and general reserve-funds, and special reserve funds not in the nature of liabilities; the amount beyond liabilities available to meet obligations to policyholders.

SURRENDER CHARGE [LIFE]

The amount charged for fully or partially surrendering a policy.

SURRENDER VALUE

See Cash Surrender Value.

SURVIVORSHIP ANNUITY

A life insurance policy, rather than an annuity contract, which provides a life annuity to the beneficiary beginning at the death of the insured. The actual amount of insurance required depends upon the age of the beneficiary as well as the age of the insured since the sum required to provide a life annuity of a given amount decreases with the advancing age of the beneficiary. Survivorship annuities are sometimes called "reversionary" annuities.

SURVIVORSHIP LIFE ANNUITY

See Joint Life and Survivorship Annuity.

SUSPENSION

A temporary discontinuance of insurance.

TENTATIVE RATE

Fire rate used on a building not yet specifically rated by ISO. Rate of a similar building and occupancy may be used, but will be adjusted from the inception date of the policy when the specific rate is received.

TERM

The period of time for which an insurance policy is issued.

TERM INSURANCE [LIFE]

Insurance protection for a limited number of years, but expiring without value if the insured survives the stated period. The protection period may be one or more years but ordinarily is 5 to 20 years since such periods usually cover the needs for temporary protection.

TERRITORY MULTIPLIER

See Multiplier.

TEST AUDIT

Audits made by or under the supervision of various State Compensation Rating Bureaus or other regulatory bodies for the purpose of checking the correctness and accuracy of payroll audits made by insurance companies.

TESTATE

Having left a will.

TESTATOR

The person making a will.

TESTING EXCLUSION

A provision that excludes from coverage those objects undergoing tests.

THEFT

"The word 'theft' comprehends the willful taking-of one person's property by another, wrongfully. To recover indemnity, intent to permanently deprive the owner of his/her property need not be established. Some courts might disagree, but the tendency is to be more and more liberal in construing the policy in favor of the insured.

THIRD PARTY (UNDER A LIABILITY INSURANCE POLICY)

A person, not a party to the insurance contract, who has an alleged or actual right of action for injury or damage against the person insured under the policy.

THREE-FOURTHS LOSS CLAUSE

A clause attached to some fire policies which provides that the insurance company shall not be liable for more than three quarters of the amount of any loss. This considerably reduces the moral hazard.

THREE-FOURTHS VALUE CLAUSE

A clause attached to some fire policies which provides that the insurance company shall not be liable for more than three quarters of the value of the property insured. This also reduces moral hazard.

TITLE INSURANCE

A policy insuring the owner of real estate against loss, which might arise from a defective title to his/her property.

TON MILE [COMMERCIAL]

A unit of measure of transportation. The movement of a ton of freight one mile.

TOTAL DISABILITY

Frequently defined as the inability to perform any of the duties of one's occupation. Some disability policies narrow their coverage to "inability to perform any of the duties of any occupation.

TOTAL DISABILITY ANNUITY

A disability coverage that can be added to a life insurance policy providing a specified amount of income per thousand of face amount in the event of total disability of the insured.

TOWNHOUSE

A form of real estate ownership in which the individual owner has: (1) a fee simple title to the individual dwelling unit and to the land on which it is located and (2) joint ownership with others of the common property in the development that is not owned individually. A townhouse may have the physical appearance of: (1) a single-family dwelling, (2) a row of single-family dwellings with abutting or adjoining walls or, (3) a garden apartment dwelling.

TRANSACTION

Operations involving premiums and losses each separately identified on punch cards for statistical and accounting purposes.

TRANSITION PROGRAM

A program to offset sizeable premium swings for classes of business that have received substantial premium increases due to the revisions of the exposure base (formerly rated on area but not rated on gross sales). It places upper and lower limits on premium changes caused by alterations in exposure base. This program will exist for not more than five years beginning January 1, 1987.

TREATY

The aristocratic name given to a type of business contract, whereby reinsurers undertake to follow the unknown fortunes of an insurance company on the basis of the utmost good faith. Many reinsurance treaties are not cancelable within any twelve-month period. For different forms see quota share, excess of loss, first surplus, second surplus, spread loss, stop loss, catastrophe.

TRESPASSER

One who enters upon the property of another without invitation or permission, expressed or implied.

TRIP INSURANCE CERTIFICATE

Certificates issued by authorized Agents to provide coverage for occasional and infrequent trips beyond the insured's prescribed mileage limitation. No more than six trip certificates will be issued on any one truck in any six-month period. Risk requiring more than six trip certificates will be reclassified to the proper mileage classification.

TRUCKERS

Those hauling "for hire."

TRUST

An arrangement in which property is held by a person or corporation (trustee) for the benefit of others (beneficiaries). The grantor (person who transfers the property to the trustee) gives legal title to the trustee, subject to the terms set forth in a trust agreement. Beneficiaries have equitable title to the trust property.

TRUST AGREEMENT

A supplemental settlement agreement, which distributes the proceeds in a special way, much as a regular fiduciary trust does. Insurance companies cannot enter into trust agreements.

TRUST DEEDS

Established trusts conveying legal title of property to trustees, and which state their authority and the conditions, which bind them in dealing with the property, held in a fiduciary capacity.

TRUSTEE

One who holds the legal title to the property for the benefit of another. This may be either an individual or a company such as a bank and trust company.

TWISTING

The practice of inducing a policy owner in one company to lapse, forfeit, or surrender a policy for the purpose of taking out a policy in another company. Generally classified as a misdemeanor, subject to fine, revocation of license, and sometimes imprisonment. See Defamation and Misrepresentation.