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GLOSSARY OF INSURANCE TERMS

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Term Definition
SALVAGE

Damaged property an insurer takes over to reduce its loss after paying a claim. Insurers receive salvage rights over property on which they have paid claims, such as badly-damaged cars. Insurers that paid claims on cargoes lost at sea now have the right to recover sunken treasures. Salvage charges are the costs associated with recovering that property.

SCHEDULE

A list of individual items or groups of items that are covered under one policy or a listing of specific benefits, charges, credits, assets or other defined items.

SECONDARY MARKET

Market for previously issued and outstanding securities.

SECTION 1035 EXCHANGE

A section of the Internal Revenue Code that provides that no gain or loss is recognized on the exchange of life insurance policies insuring the same person.

SECURITIES AND EXCHANGE COMMISSION / SEC

The organization that oversees publicly-held insurance companies. Those companies make periodic financial disclosures to the SEC, including an annual financial statement (or 10K), and a quarterly financial statement (or 10-Q). Companies must also disclose any material events and other information about their stock.

SECURITIES OUTSTANDING

Stock held by shareholders.

SECURITIZATION OF INSURANCE RISK

Using the capital markets to expand and diversify the assumption of insurance risk. The issuance of bonds or notes to third-party investors directly or indirectly by an insurance or reinsurance company or a pooling entity as a means of raising money to cover risks. (See Catastrophe bonds)

SELF-INSURANCE

The concept of assuming a financial risk oneself, instead of paying an insurance company to take it on. Every policyholder is a self-insurer in terms of paying a deductible and co-payments. Large firms often self-insure frequent, small losses such as damage to their fleet of vehicles or minor workplace injuries. However, to protect injured employees state laws set out requirements for the assumption of workers compensation programs. Self-insurance also refers to employers who assume all or part of the responsibility for paying the health insurance claims of their employees. Firms that self insure for health claims are exempt from state insurance laws mandating the illnesses that group health insurers must cover.

SEPARATE ACCOUNT*

In the United States, an investment account maintained separately from an insurer’s general account to help manage the funds placed in variable insurance products such as variable annuities. Contrast with general account. (See Segregated account)

SETTLEMENT OPTIONS

Choices the owner or beneficiary have in a life insurance regarding how the insurer will pay the policy’s proceeds if the owner does not receive the payments in a single payment. The owner has options such as electing to leave the proceeds with the insurer, have proceeds paid in installments, have proceeds paid in re-selected sum, or have insurer tie the payment of proceeds to the life expectancy of a named individual through a life annuity.

SEVERITY

Size of a loss. One of the criteria used in calculating premiums rates.

SEWER BACK-UP COVERAGE

An optional part of homeowners insurance that covers sewers.

SHARED MARKET

See Residual market

SHORT-TERM DISABILITY INCOME INSURANCE

A form of disability income that offers a disability income for a period ranging from one to five years.

SINGLE PREMIUM POLICIES

A policy that is paid-up with a one initial premium payment.

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