Glossary of Insurance Terms

S

SIG - A self-insured group. An SIG is a group of risks, usually sharing common characteristics or exposures, that join together in order to generate enough premium volume to justify self-insuring themselves. Members of an SIG often are jointly and severally liable for the losses of one another.

Safe driver plan - Merit rating of automobile insurance. In most states drivers are charged with "points" for (moving) traffic violations and auto accidents. These points translate to surcharges on the drivers’ insurance rates.

Salvage - When an insurer makes a payment for lost or damaged property, the insurer is entitled to the salvage of that property.

Schedule - List of items on a policy declaration, sometimes also showing descriptions and values.

Seasonal risk - A risk that is present only during certain parts of the year. For example: seasonal dwellings such as cottages used for vacations.

Self-insurance - An insurance-like strategy for handling one’s own exposures to loss supported by the financial wherewithal to meet expected losses. Not to be confused with a decision to forego insurance.

Self-Insured Retention (SIR) - That portion of pure risk an insured undertakes to handle on his or her own. A deductible is a form of self-insured retention.

Selling price clause - Applicable to the value of goods which have been damaged or destroyed by an insured peril. This clause insures the profit that would have been earned if the goods had been sold. It sets the insurable value of the property that has been sold, but not delivered, at the amount at which it was sold, less any charges not incurred.

Severability - A provision that insurance applies separately to each insured under the policy.

Shock loss - Name given to any large loss that impacts an otherwise profitable book of business.

Short rate cancellation, see Cancellation.

Short tail - Additional coverage that may be purchased under a claims-made policy that responds to losses that may have occurred during a policy period, but are not reported until after the end of the policy period. Usually available for no longer than a year.

Sidetrack agreement - The contract between a business and a railroad wherein a railroad builds a track onto the business’s property to facilitate shipping, and the business agrees to release the railroad from liability.

Sine Qua Non Rule - A legal rule stating that a person’s conduct cannot be held to be the cause of a loss if the loss would have occurred anyway.

Single interest policy - A policy that insures the interest of only one party in property where there are a number of parties having an insurable interest.

Sinkhole peril - Risk of loss by collapse of a "sinkhole." This is now covered as a basic cause of loss in commercial property policies.

Sistership exclusion - An exclusion in products insurance that eliminates coverage for the withdrawal or recall of products.

Sliding scale dividend plan - Often used with workers compensation insurance, dividend plans are established as a means of returning a portion of the premium to the policyholder if losses are better than expected and the insurance company board of directors declares a dividend. In a sliding scale plan, the amount of the potential dividend slides up or down according to the loss experience. Dividends cannot be guaranteed; they are paid upon declaration by the insurer’s board of directors.

Slip - At Lloyd’s of London, a document that identifies which syndicates are participating on a risk and for what percentage.

Smoke damage - An Extended coverage peril.

Society of Chartered Property & Casualty Underwriters - Professional society of those having attained the CPCU designation. (See CPCU.)

Soft costs and rents - Related to builders risk insurance, these are the necessary expenses that are incurred because a building project is delayed as the result of a covered property loss. Included are expenses such as increases in architectural fees, loss of rents because the project completion date is later than planned, increased interest expense, etc.

Soft market - A term given to a condition in which insurance is relatively inexpensive and easy to obtain.

Solicitor - An employee of an insurance agent or agency who is empowered to sell insurance on behalf of a licensed agent, generally using only those insurers that the agency represents. A solicitor usually does not have binding authority, and the business that is generated by a solicitor usually is owned by the agent, not the solicitor.

Solvency - Insurers must have sufficient assets (capital, surplus, reserves) in order to satisfy statutory financial requirements (investments, annual reports, examinations) and to meet liabilities.

Special agent - An insurer’s representative in a territory. He or she serves as a liaison between the insurer and the agent. The special agent is responsible for the volume and quality of the business written in that territory. Some states require a special license of special agents. Special form - In contrast to the named perils forms in property insurance, those forms that list specific perils for coverage, the special form contract covers simply risk of direct physical loss, relying on exclusions to limit and define the protection intended. See Open perils.

Specific excess reinsurance - Another term for per occurrence/per loss excess reinsurance.

Specific insurance - An insurance policy that covers only property specifically described in the policy, as opposed to blanket insurance, which usually covers all property at specified locations.

Specimen policy form - Specimen policy forms often are requested when non-standard coverage forms are being used. The specimen form may be reviewed to determine the actual policy provisions before coverage is bound.

Speculative risk - Risk which entails a chance of gain as well as a chance of loss. Contrast with Pure risk.

Split limits - As in auto insurance, where rather than one liability amount applying on a per-accident basis, separate amounts apply to bodily injury and property damage liability.

Sprinkler leakage insurance - Insurance that covers damage due to the accidental discharge from an automatic sprinkler system.

Stacking of limits - The application of the limits of one or more insurance policies to a claim or loss.

Standard fire policy, see New York Standard Fire Policy.

Stated amount - Amends the valuation clause on a policy to include an amount that is "stated" as the value of the item(s) being insured. Usually, these policies pay the lesser of the ACV of the damaged property, the cost of repairing or replacing the property, or the stated amount.

Statutory Accounting Principles (SAP) - Statutorily mandated accounting principles and practices that must be followed when an insurance company submits its annual financial statement to the department of insurance. In contrast to Generally Accepted Accounting Principles (GAAP) which are followed by most other businesses.

Steam boiler explosion, see Boiler & machinery insurance.

Stop loss - A provision in an insurance policy that cuts off an insurer’s losses at a given point. In effect, a stop loss agreement guarantees the loss ratio of the insurer.

Strict liability - Liability ascribed to a manufacturer or seller of a defective or dangerous product regardless of any fault or negligence.

Subrogation - The right of one party who has paid for the loss of a second party to obtain recompense from the third party who is responsible for the loss. For example, an insurance company becomes "subrogated" to the rights of its insured to the extent of the insurer’s payment for collision damage caused by the negligence of the other driver.

Subsidence - A form of earth movement, excluded in most property policies.

Substandard risk - A risk falling outside normal underwriting standards. If written at all, it is usually with a substantial premium surcharge.

Sue and labor clause - A marine insurance clause comparable to removal in property insurance.

Superfund - The better-known name for the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) passed by Congress in 1980. Under this law, parties found responsible for polluting a site must clean up the contamination or reimburse the EPA for doing so. Liability is strict, retroactive, joint and several.

Superintendent of Insurance - In some states the Commissioner of Insurance is known as the Superintendent.

Supplemental extended reporting period - An optional reporting period that al-lows coverage for liability claims made after the policy period.

Surety, see Bond.

Surety Association of America (SAA) - A voluntary, non-profit, unincorporated association that is licensed as a rating or advisory organization for surety and fidelity insurance in all states, D.C., and Puerto Rico. The SAA handles statistical information, filings, publications, and surety and fidelity bonds.

Surface water - Commonly known as water on the surface of the ground usually created by rain or snow, which is of a casual or vagrant character, following no definite course and having no substantial or permanent existence. Some insurance policy may include surface water as a covered peril but exclude "flood" when defined as the overflowing of water from its natural boundaries, such as a lake or river.

Surplus - The amount by which an insurer’s assets exceed its liabilities.

Surplus lines, see Excess & surplus lines market.

Surplus share reinsurance - A type of pro-rata or proportional reinsurance agreement under which the insurer and reinsurer agree to share a pre-determined portion of all insurance, premium, and losses. The primary insurer’s retention in a surplus share agreement is stated as a dollar amount of the amount insured.

Syndicate - An association of insurers that work together to insure an especially large or hazardous risk. Also see Pool.