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Glossary of Insurance Terms

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target-benefit pension plan
A defined contribution plan where the contribution amount is designed to provide the participant with a specific (or "target") benefit. However, the sponsor does not guarantee the benefit, so no adjustment is made if actual investment results (or other variables) differ from initial projections. At retirement, the funds in the employee's account may be paid in a lump sum or used to purchase an annuity.

tax-deferred annuity (TDA) plan
See Section 403(b) Plan.

Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA)
United States federal legislation designed to increase tax revenues through a variety of means such as restrictions on the tax deductibility of certain investments, including some life insurance and pension products, and the elimination of distinctions in tax law applicable to partnerships and sole proprietorships.

tax-sheltered annuity (TSA) plan
See Section 403(b) Plan.

temporary insurance agreements
Legal agreements between an insurer and a proposed insured that provide a guaranteed amount of temporary life insurance coverage for a specific period of time, usually the underwriting period. Also known as interim insurance agreements and temporary insurance receipts.

temporary life annuity
A series of regular periodic payments, each of which is made only if a designated person is then alive, with the number of such payments limited to a specified number.

ten-day free look
See free examination period.

terminal policy dividend
A substantial extra dividend or pro-rata dividend covering the period between the last policy anniversary date and the termination date of the policy.

termination expenses
The cost of processing death benefit claims and cash surrenders.

term insurance
Life insurance under which the benefit is payable only if the insured dies during a specified period. See also convertible term insurance, credit life insurance, decreasing term insurance, deposit term insurance, family income insurance, increasing term insurance, level term insurance, mortgage redemption insurance, and renewable term insurance.

territory
(1) The geographical area for which a home service agent has exclusive responsibility. Home service districts are divided into territories. Also called an account, an agency, or a debit. (2) The geographical area for which an insurance agent or general agent has responsibility.

testamentary disposition
In life insurance, the use of a will to indicate the person or party to whom the proceeds of a life insurance policy should be distributed.

third-party administrator (TPA)
An organization that administers an insurance contract for a self-insured group but that does not have financial responsibility for paying claims. The self-insured group pays its own claims. See also administrative services only (ASO) contract and self-insured group insurance.

third-party application
An insurance application submitted by a person or party other than the proposed insured.

third-party endorsement
A method of marketing individual insurance to groups. In the third-party endorsement method, a life insurance company makes an agreement with an organization (such as a club, a business, or a professional association) to sell individual insurance to members or employees of the organization. The organization endorses the insurer's products, but the group members are free to buy the products or not.

third-party insurance
Insurance coverage applied for by someone other than the proposed insured.

third-party payer
Any payer of health-care services other than you. This can be an insurance company, an HMO, a PPO, or the federal government.

three-factor contribution method
A method for calculating policy dividends, considering separately the contributions arising from interest, mortality, and loading.

thrift plan
See savings plan.

top-heavy plan
In the United States, a pension plan or employee-benefit plan which provides more than 60% of its accrued benefits to the owners, executives or most highly paid employees of a company (known as key employees). To remain qualified, a top-heavy plan must provide certain minimum benefits to nonkey employee participants. See also key employee.

total disability
When a disability begins, it is typically considered a "total disability" if it prevents an insured person from performing the essential duties of his or her regular occupation. Under many insurance policies, the definition of total disability changes at the end of a specified period after the disability begins, usually two years. Therefore, insureds are considered totally disabled only if their disabilities prevent them from working at any occupation for which they are reasonably fitted by education, training, or experience. See also disability.

total-needs programming
A basis for selling life insurance in which the agent takes into consideration all the prospect's financial needs, calculates the amount of money required to take care of all those needs, determines the amount of funds that will be available when the prospect dies, and calculates the amount of life insurance required to provide the difference. Sometimes called financial planning. Contrast to single-need selling.

traditional net cost (TNC) method
An insurance policy cost comparison method that is prohibited by the NAIC Model Life Insurance Solicitation Regulation primarily because it ignores the time value of money.

travel accident benefit
An accidental death benefit often included in group insurance policies issued to employer-employee groups. This benefit is payable only if an accident occurs while an employee is traveling for the employer.

triple indemnity
A type of accidental death benefit coverage that pays an additional benefit equal to twice the policy's basic death benefit if the accident is sustained while the insured is a passenger in a public conveyance operated by a licensed common carrier, such as a bus, train, or airplane.

trust agreement
In a trusteed pension plan, the contract between the plan sponsor and the trustee that describes the trustee's authority and responsibilities for investing and administering plan assets. Trust agreements are also found when group insurance is provided through a multiple-employer trust (MET).

trusteed pension plan
A pension plan in which the plan sponsor chooses a trustee to be responsible for investing the plan's assets or for choosing an investor for the plan's assets. Also known as a pension trust.

trust fund plan
A pension plan under which employer and employee contributions are forwarded to a trustee, who is responsible for investing the contributions and is often responsible for making benefit payments to plan participants. The duties of the trustee, who may be an individual or an institution such as a bank trust department, are spelled out in a trust agreement. A trustee generally does not guarantee that the trust fund will be adequate to pay current and future pension benefits.

twisting
A form of misrepresentation in which an agent induces a policyowner to cancel an insurance policy and use the cash value of that policy to buy a new policy. In the process, the agent does not inform the policyowner of the differences between the two policies nor the financial consequences of the replacement. Twisting involves a misleading or incomplete comparison of the policies to the disadvantage of the policyowner. Twisting is a prohibited insurance sales practice.

Written by the Insurance Center

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