Transfer Payment

What Does Transfer Payment Mean?

A transfer payment is a payment made from one party to another. It differs from other types of payments because it does not require the receiving party to provide anything of value in return. In contrast, most other types of payments involve an exchange of value in some form.

Insuranceopedia Explains Transfer Payment

Transfer payments are usually made by governments to support social welfare programs, such as grants, unemployment benefits, and disability pensions. Because government disability programs often don’t fully replace a worker’s lost income, many people buy private disability insurance to cover the gap if illness or injury keeps them from working. The methods and programs for transfer payments vary across countries. For instance, in Canada, the federal government provides transfer payments to provinces, which then administer the social benefit programs. In contrast, in the United States, the federal government directly distributes transfer payments to individual citizens through programs like welfare. Workers’ compensation is structured along similar lines at the state level, since an injured employee receives benefits without having to give anything in return beyond proof of the injury.