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safety margin
In life insurance, the safety margin is the amount by which
actuaries increase the probability of mortality for each age
group in a mortality table. The safety margin helps protect
the insurance company from adverse experience.
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salaried sales
agents
Insurance sales representatives who are employees of the insurer
and who are usually paid on a salary plus incentive compensation
basis. Salaried sales personnel may work with other agents
or independently, may make sales directly to consumers or
promote the sale of an insurer's products through other intermediaries,
and are often used to distribute group insurance and pension
products. Also known as salaried sales representatives.
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salaried sales
distribution system
A distribution system that uses salaried employees of the
insurance company to sell and service policies. Salaried sales
personnel may work either with agents or independently and
are often used to distribute group insurance products.
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salary continuation
plan
A disability or sick-leave plan which provides for employees
to continue to receive up to 100 percent of their salary for
a limited number of days if they become ill or disabled. The
number of days per year granted to an employee generally increases
as the employee's length of service increases. Most such plans
are self-insured. Also known as a sick-leave plan.
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salary-reduction
plan
A plan whereby an employee authorizes the employer to reduce
the amount of compensation that the employee receives in cash
and to contribute the difference to a group insurance, pension
or other employee-benefit plan.
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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. Sometimes simply called an illustration.
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savings bank
life insurance (SBLI)
In the United States, life insurance coverage sold by authorized
savings banks to people who live or work in the state in which
the insurance is sold. Savings bank life insurance is permitted
in three states -- Massachusetts, New York, and Connecticut.
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savings plan
A defined contribution plan offered by an employer or other
plan sponsor to give employees/participants a vehicle for
investing funds for retirement or other needs. Most plans
feature employer matching of employee contributions, and plan
participation is voluntary. Also known as a thrift plan.
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scheduled dental
plan
A dental plan which pays fixed benefits for specific procedures
according to a schedule. See also combination dental plan
and unscheduled dental plan.
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second-to-die
life insurance
See survivorship life insurance.
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Section 79
Section 79 of the United States Internal Revenue Code, which
provides that employer contributions to purchase group term
life insurance receive preferable tax treatment. It also gives
a list of specifications which a plan must meet in order to
be considered a nondiscriminatory group term insurance plan
for tax purposes.
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Section 401(k)
Plan
In the United States, a qualified cash or deferred profit-sharing
or stock-bonus plan which allows participants to decide how
much of their compensation is deferred. Participant contributions
are not taxable until the funds are withdrawn, and sponsor
contributions as well as investment earnings are also tax-deferred
to the participant. Also called a Cash or Deferred Arrangement
(CODA).
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Section 403(b)
Plan in the United States, a type of employee retirement plan
established by certain tax-exempt organizations (i.e., hospitals,
charities, churches) and educational organizations. Section
403(b) plans were created by Congress to serve as an incentive
for tax-exempt organizations (who could not benefit from the
tax advantages of qualified pension plans) to offer their
employees some form of retirement compensation. Also known
as a tax-deferred annuity (TDA) plan or a tax-sheltered annuity
(TSA) plan.
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Section 415
limits
In the United States, limits placed on the amount of annual
additions (contributions) that can be made on behalf of a
defined contribution plan participant or the amount of benefits
that can be paid to a participant in a defined benefit plan.
These limits are determined under Section 415 of the Internal
Revenue Code. See also contribution limit and maximum benefit.
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Section 3460
In Canada, a set of recommendations contained in section 3460
of the Canadian Institute of Chartered Accounts (CICA) Handbook
which concerns employers' accounting for pension costs and
obligations. Section 3460 recommends that, for defined benefit
plans, the projected benefit method be used to determine pension
costs for accounting purposes.
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segmentation
A process by which an insurer divides its general account
investments into distinct parts, or segments, that correspond
with each of the insurer's major lines of business. For example,
one segment can be used to account for group life insurance
investments, while another can be used to account for individual
life insurance investments.
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segregated account
In Canada, an asset account that stands apart from a company's
general account. Called a separate account in the United States.
See also separate account.
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self-administered
group insurance plan
Under this type of group insurance plan, the group policyholder
rather than the insurer performs most of the administrative
work for the plan. The policyholder maintains detailed records
of group membership, processes routine requests, such as requests
for beneficiary changes and name and address changes, prepares
its own premium statements, and, in some cases, prepares certificates
for new group members.
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self-insured
group insurance
A form of group insurance in which the group sponsor, not
an insurance company, is financially responsible for paying
claims made by group insureds. A group may be partially or
fully self-insured. See also administrative services only
(ASO) contract.
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separate account
An account maintained separately from a life insurance company's
general accounts to help manage the funds used for nonguaranteed
insurance products. By maintaining separate accounts, insurance
companies are able to modify some of their investment strategies
without affecting the funds in the general accounts. Called
a segregated account in Canada. See also general account and
investment-sensitive life insurance.
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separate account
contract
A pension plan funding vehicle in which a pension's assets
are invested through an insurer's separate account. A separate
account contract usually does not guarantee investment performance.
Also called an investment facility contract.
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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.
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settlement agreement
The arrangement made between an insurer and a policyowner
(or beneficiary) concerning the manner in which the insurer
will pay the policy proceeds to the beneficiary. See also
settlement options.
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settlement option
payments
Periodic payments made by an insurance company in lieu of
an immediate lump-sum payment of life insurance policy proceeds.
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settlement options
Choices given to the policyowner or the beneficiary of a life
insurance policy regarding the method by which the insurer
will pay policy proceeds. Also known as optional modes of
settlement. See also fixed amount option, fixed period option,
interest option, joint and survivorship option, life income
option, life income option with period certain, life income
option with refund, and straight life income option.
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settlement option
table
A table showing the various amounts that the insurance company
will pay as periodic payments in the settlement of a life
insurance policy.
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short-form reinstatement
application
A reinstatement application that asks a few questions designed
to guard against reinstatements by insureds whose conditions
have changed drastically since the premium due date. A short-form
reinstatement application is generally used for reinstatements
requested within a comparatively short period, such as 30
to 90 days, after the end of the grace period.
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short-term disability
income insurance
Disability income insurance which provides a benefit for a
short disability or for the first part of a long disability.
See also disability income insurance, long-term disability
income insurance, and weekly indemnity plan.
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simplified employee
pension (SEP)
In the United States, a pension plan in which an employer
contributes money to an individual retirement account (IRA)
for each employee covered by the plan. The IRA is owned by
the employee, not the employer. A SEP is especially useful
to employers who cannot afford the time or money needed to
administer and maintain a more complicated pension plan. SEPs
may also be used by self-employed persons.
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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.
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single premium
annuity
An annuity that is purchased with only one premium payment.
A single premium annuity can be an immediate annuity or a
deferred annuity.
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single-premium
deferred annuity (SPDA)
A deferred annuity for which only one premium payment is made.
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single-premium
method
In group creditor insurance, a premium-paying arrangement
for contributory plans whereby, at the inception of the loan,
the entire premium amount for the insurance is either paid
in a lump sum by the borrower or added to the principal of
the loan. Contrast with monthly outstanding balance method.
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single purchase
annuity contract
A group contract in which a single premium is applied to purchase
annuities for participants in a pension plan that is terminating.
Immediate annuities are purchased for current retirees in
the plan, and deferred annuities are purchased for participants
who have not yet reached retirement age.
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six and six
exclusion
A preexisting conditions exclusion commonly used in credit
disability policies, which states that an insured's disability
is not covered if the insured (1) was treated for the condition
within six months prior to the effective date of coverage
and (2) becomes disabled from that same condition within six
months after the effective date of coverage.
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small estates
statutes
Legislation that enables an insurer to pay relatively small
amounts of policy proceeds to an estate without involved court
proceedings.
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small group
insurance plan
A type of group life insurance plan that uses group underwriting
techniques but adds some degree of simplified individual underwriting
and is designed to cover groups containing 2 to 25 people.
Also called a baby group plan.
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social insurance
supplement policy
A medical expense policy sold by insurance companies to provide
benefits that complement the benefits available from a specified
government health insurance program.
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Social Security
In the United States, a program of the United States federal
government that provides retirement income, health care for
the aged, and disability coverage for eligible workers and
their dependents.
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Social Security
Disability Income (SSDI)
In the United States, a long-term disability income program
that provides benefits to disabled workers who are under age
65 and who have paid a specified amount of Social Security
tax for a prescribed number of quarter-year periods.
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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.
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soliciting agent
Typically, an insurance agent who works under a general agent
or a branch manager. The soliciting agent is the person who
actually contacts prospective customers, delivers policies,
and collects initial premiums. See also insurance agent.
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specified expense
coverage
Health insurance coverage which provides benefits for specific
medical supplies or treatments or for specific illnesses.
Examples include dental expense coverage, vision care coverage,
prescription drug coverage, long-term care (LTC) coverage
and dread disease coverage. See also limited coverage policy
and long-term care (LTC) insurance.
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spendthrift
trust clause
A life insurance policy provision that protects, under certain
conditions, policy proceeds held by the insurer from being
seized by a beneficiary's creditors.
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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.
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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.
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spouse and children's
insurance rider
An addition to a life insurance policy that provides coverage
for a spouse and/or children.
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spouse's allowance
In Canada, a benefit available to some spouses of Old Age
Security (OAS) recipients. The benefit is designed to ensure
that a married couple in which one spouse is age 60 to 65
receives a minimum monthly pension that is comparable to the
monthly pension of a married couple in which both spouses
are over the age of 65.
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stacking
The practice of ignoring benefits payable under public pension
plans in the design or selection of private pension plans.
When no attempt is made to integrate benefits from a public
and a private pension plan, the two plans are said to be "stacked."
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Standard Nonforfeiture
Law
A law, which is virtually uniform in all states, specifying
the minimum cash values required to be provided by life insurance
policies.
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standard plan
termination
In pension and employee-benefit plan terms, the process of
terminating a plan which has sufficient funds to cover all
the benefit amounts to which the plan's participants are entitled.
Contrast to distress termination. See also involuntary plan
termination and voluntary plan termination.
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standard premium
rate
The premium rate charged for insurance on a person classified
as having an average likelihood of loss.
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standard risk
class
A risk class made up of individuals whose anticipated likelihood
of loss is regarded as average. People in the standard risk
class pay standard premium rates. Most insureds are included
in the standard risk class.
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Standard Valuation
Law
A law, which is virtually uniform in all states, specifying
minimum standards for calculating, or valuing, insurance reserves.
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status clause
A type of war hazard exclusion that excludes payment of benefits
for any loss occurring while an insured is in military service.
Contrast with result clause.
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statutory accounting
practices (SAP)
The accounting methods and principles that apply to the completion
of the statutory Annual Statement which life insurance companies
are required to submit to regulatory authorities.
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statutory reserve
A reserve that is reported to government authorities, as required
by statutes. Also called a legal reserve. See also policy
reserve.
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stock bonus
plan
An employee-benefit plan whereby part of the employees' compensation
is in the form of the employer's stock. Most stock bonus plans
are maintained in the same fashion as profit-sharing plans,
but the employer's stock contributions are not necessarily
related to profits. As with profit-sharing plans, employer
contributions are most often discretionary, and the plan may
not be intended as a retirement plan.
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stock insurance
company
An insurance company that is owned by people who buy shares
of the company's stock.
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stock option
incentive
An incentive plan for executives whereby an employer offers
to sell the company's stock to the executive at a certain
price on a certain date. It is in the executive's interest
for the company to do well and the stock's value to rise.
If the stock's value does rise, the executive may, by exercising
the stock option, be able to buy the company's stock at a
price below the stock's market value, thus making a paper
profit (if the stock is or must be held) or a realized profit
(if the stock is sold at the higher price).
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stock repurchase
insurance
Life insurance intended to finance the purchase of stock from
the estate of a deceased stockholder by other stockholders
in the same company. Typically used for closely-held corporations
that have few stockholders. See also business-continuation
insurance.
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stop-loss provision
A health insurance policy provision specifying that the insurer
will pay 100 percent of the insured's eligible medical expenses
after the insured has incurred a specified amount of out-of-pocket
expenses under the coinsurance feature.
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straight life
annuity
An annuity that provides periodic payments to the annuitant
for as long as the annuitant lives and that provides for no
benefit payments after the annuitant's death.
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straight life
income option
A life insurance policy settlement option under which payments
to the beneficiary-payee will continue until the payee's death,
after which no further payments are made.
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straight life
insurance
See continuous-premium whole life insurance.
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substandard
broker
A general agent who runs a brokerage shop specializing in
finding coverage for substandard cases or selling the products
of several insurers with expertise in underwriting substandard
risks.
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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.
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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.
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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.
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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.
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summary information
folder
In Canada, a document that is used in marketing variable life
insurance products. The document discloses all of the material
facts about the particular variable contract and contains
certain statements of financial information about the contract's
segregated funds.
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Summary Plan
Description (SPD)
(1) In the United States, a document required by ERISA to
provide information about a pension plan to plan participants
in simple language. The SPD must, among other requirements,
identify the plan's administrator and those who are responsible
for managing the plan's assets, must explain the plan's eligibility
requirements and the circumstances under which a plan participant
could forfeit his or her benefits under the plan, and must
explain the procedures for making claims under the plan. (2)
In the United States, a description of various aspects of
a group insurance plan which must be provided to all plan
participants and to the Department of Labor.
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superimposed
major medical plan
A major medical plan that is coordinated with various basic
medical expense coverages and that provides benefits for expenses
that exceed these coverages.
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Superintendent
of Insurance
In Canada, the director of a provincial Office of the Superintendent
of Insurance.
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Superintendent's
Guidelines
In Canada, a series of recommendations made by the Canadian
Council of Insurance Regulators (CCIR) to insurance companies
concerning a variety of matters, such as variable life insurance
contracts, health insurance contracts, and group insurance
contracts.
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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.
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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.
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supplemental
major medical insurance
Major medical insurance providing benefits over and above
those benefits paid by basic hospital-surgical expense insurance.
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supplementary
benefit rider
A rider that is added to an insurance policy to provide additional
benefits. Some typical supplementary benefit riders are accidental
death coverage, waiver of premium, and the guaranteed insurance
option. See also rider.
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supplementary
contract
A contract between the insurer and the beneficiary of a life
insurance policy. A supplementary contract is formed when
policy proceeds are applied under a settlement option.
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supplementary
contract with life contingencies (WLC)
A supplementary contract or annuity in which the duration
of the payment period depends on the lifetime of the beneficiary.
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supplementary
contract without life contingencies (WOLC)
A supplementary contract or annuity in which the proceeds
of a life insurance policy are held at interest or paid in
installments over a specified period.
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supplementary
notice
As required by the Fair Credit Reporting Act, notice to a
consumer of the nature and scope of the investigation mentioned
in the pre-notice form that an insurance company has already
sent to the consumer.
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supplementary
statement
Under the NAIC Model Privacy Act, a written statement made
by a person who has been investigated. The supplementary statement
is intended to correct what the investigated person believes
to be incorrect information in his or her file. This statement
must remain with the disputed information in the person's
file and must be made available to anyone reviewing the disputed
information.
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surgical schedule
The part of a health insurance policy that describes the maximum
benefit amounts payable for specified surgical procedures.
See also fee schedule and relative value schedule.
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surplus
The amount by which an insurance company's assets exceed its
liabilities and capital.
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surrender charge
(1) An amount of money deducted from a policy's reserve to
arrive at the policy's cash value. (2) The expense charges
applied when the owner of a back-loaded policy surrenders
the policy for its cash value.
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surrender cost
index (SCI)
See interest-adjusted cost.
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surrender cost
index (SCI) method
See interest adjusted net cost (IANC) method.
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survivor income
benefit insurance
A type of group life insurance which provides income benefits
if the insured is survived by a "qualified survivor." Usually
the qualified survivor category includes only the insured's
spouse and children.
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survivorship
clause
A life insurance policy provision, inserted at the request
of the policyowner, which provides that the beneficiary must
survive the insured by a stated number of days in order to
receive the death benefit. Also called a delay clause or a
time clause.
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survivorship
life insurance
A type of whole life insurance which insures two people and
pays benefits only after the second person dies. It is generally
designed to provide funds to pay estate taxes. Also called
second-to-die life insurance.
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