LOMA Glossary

The LOMA Glossary of Insurance and Financial Services Terms

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table of retention limits. See retention schedule.

table of underwriting requirements. For each insurance product, a document that specifies the kinds of information the underwriter must consider in assessing the insurability of a person who is proposed for coverage under that policy. Also known as an age and amount requirements chart.

table rating method. A method for adjusting individual life insurance premium rates to compensate for extra mortality that divides substandard risks into broad groups or tables according to their numerical ratings; the extra mortality for each substandard group is expressed as a percentage added to standard mortality as has been shown by the insurer’s actual mortality experience. Contrast with flat extra premium method.

tabular mortality rate. A mortality rate shown in a mortality table.

tabular reserve. See contractual reserve.

tactical planning. See operational planning.

tail risk. Generally, a reference to risks of low probability but high impact occurrences; the statistical outcomes represented in the tails of probability distribution curves.

tangible asset. An asset that has a physical form. Also known as tangible property. Contrast with intangible asset.

tangible property. See tangible asset.

target examination. See target market conduct examination.

target market. A group of consumers to whom a business will attempt to sell a particular product.

target market conduct examination. In the United States, a market conduct n examination by state insurance regulators of one or more specific areas of an insurer’s operations to ensure that those operations are in accordance with state insurance laws and regulations. Also known as a target examination. Contrast with comprehensive market conduct examination.

tax-deferred basis. The accumulation of interest and other income on which income taxes are not payable until the accumulated funds are actually received.

technical design. See technical product design.

technical product design. For an insurance product, the phase of product development that involves creating the financial structure, product language, product provisions, and underwriting and issue specifications. Also known as financial design.

telemarketing. A direct response sales method that uses the telephone to produce sales.

teleunderwriting. A method by which a home office employee or a vendor, rather than the producer, gathers most or all of the information needed for underwriting life insurance.

temporary flat extra premium. In individual life insurance, an amount added to the premium for an impairment for which the extra mortality risk is expected to decrease and eventually disappear over a limited time period. See also flat extra premium method. Contrast with permanent flat extra premium.

temporary insurance agreement (TIA). A contract between an insurer and an applicant that provides temporary coverage on the proposed insured before a policy is issued and delivered; such coverage may be subject to certain conditions. See also binding premium receipt and conditional premium receipt.

term life insurance. Life insurance that provides a death benefit only if the insured dies during the period specified in the policy. Contrast with cash value life insurance.

terminal illness (TI) benefit. A supplemental life insurance policy benefit under which the insurer pays a portion of the policy’s death benefit to a policyowner-insured who suffers from a terminal illness and has a physician-certified life expectancy of less than a stated time, generally 12 or 24 months.

termination. The complete cancellation of a reinsurance agreement for both new business and in-force business.

termination for new business. An agreement by the parties to a reinsurance agreement to no longer cede or assume new business, although reinsurance coverage continues on business already in place.

termination of reinsurance. The process by which a direct writer cancels the reinsurance covering a policy it issued.

third-party administrator (TPA). A company or organization that provides various administrative services to insurers, including underwriting, premium collection, and claims processing.

third-party distribution system. A distribution system in which financial institutions or other organizations distribute to their own customers insurance products issued by other companies.

third-party policy. A policy purchased by one person or business on the life of another person.

thrift. See savings and loan association.

TI benefit. See terminal illness benefit.

TIA. See temporary insurance agreement.

time deposit account. An account into which funds are deposited with the expectation that they will remain on deposit for a period of time.

time limit on certain defenses provision. A provision in individual medical expense insurance policies which states that after the policy has been in force for a specified period—usually two or three years—the insurer cannot use a material misrepresentation in the application to contest the policy or deny a claim unless the misrepresentation was fraudulent.

time limitation clause. A life insurance policy provision which specifies that the insured’s death must occur within a certain period of time—usually 90 days—from the date of an accident for accidental death benefits to be payable.

time value of money. A concept which states that the value of a sum of money will change over time as a result of the effects of interest.

top-down budgeting. Budgeting that begins with a company’s strategic plan, as well as financial information about the company’s activities in prior years, and that is passed down from senior management to lower-level management. Contrast with bottom-up budgeting.

top-heavy plan. A group retirement plan under which, for a given plan year, the present value of accrued benefits for key employees exceeds a specified percentage of the present value of accrued benefits for all employees.

total asset turnover ratio. A critical activity ratio that measures how efficiently a company has used its total assets to generate total revenues.

total disability. A disability that meets the requirements of a disability benefit provision in an insurance policy or policy rider and that qualifies a covered person to receive disability income benefits.

total-needs programming. In insurance sales, the practice of bringing together all a prospect’s financial needs and offering multiple financial or insurance products to meet those needs.

TPA. See third-party administrator.

traditional indemnity reinsurance. A type of indemnity reinsurance arrangement that is used to transfer a portion of a direct writer’s accepted risk on an ongoing basis and that is intended to be a permanent transfer. Contrast with finite reinsurance.

traditional IRA. In the United States, a type of individual retirement arrangement that allows people with earned income to make tax-deductible contributions, and the investment earnings are tax-deferred until the funds are withdrawn. A traditional IRA may be either an individual retirement account or an individual retirement annuity. Also known as a regular IRA. Contrast with a Roth IRA.

trail commission schedule. See asset-based commission schedule.

Treasury bill. Discount debt security issued by the United States Treasury that operates very much like a zero-coupon bond with an initial maturity of one year or less.

Treasury bond. A bond issued by the United States Treasury that has a maturity at issue in excess of ten years. In practice, Treasury bonds are issued for much longer maturities, usually in the range of 20 to 30 years.

treasury operations. Within an insurance company, the management and maintenance of records and reports for all of an insurer’s cash transactions, specifically money deposited or withdrawn from accounts at a bank or other financial institution. Also known as cash management or cash accounting.

treasury stock. A company's stock that has been repurchased at market price by the issuing company with the intention of reselling the stock at a later date.

trust. A legal arrangement whereby one or more persons—called the trustees—hold legal title to property on behalf of another person—called the trust beneficiary—and are responsible for administering the property for the benefit of the trust beneficiary.

trust beneficiary. In a trust, the person for whose benefit the trustee holds title to property.

trustee. In a trust, the person who holds title to property for the benefit of another.

turnover ratios. See activity ratios.

twisting. A prohibited practice that occurs when an insurance producer misrepresents the features of a policy to induce the customer to replace an existing policy, often to the disadvantage of the customer.

tying arrangement. An organization conditioning the sale of one product or service on the sale of one or more of the organization’s other products or services.

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