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Glossary of Insurance Terms
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- Labor-Management Relations Act of 1947
(Taft-Hartley Act): Law which controls
conditions under which an employer may pay any
money to a representative (eg., union
representative) of employees.
- Lapse: The termination or
discontinuance of an insurance policy due to
non-payment of a premium.
- Lapsed Policy: (1) A policy
terminated for non-payment of premiums. (2) A
policy terminated for non-payment occurring
before the policy has a cash or other
surrender value.
- Larceny: The unlawful taking,
carrying, leading or riding away of another
person's property.
- Last Clear Chance Rule: Statutory
modification of the contributory negligence
law allowing the claimant endangered by his or
her own negligence to recover damages from a
defendant if the defendant has a last clear
chance to avoid the accident but fails to do
so.
- Law of Large Numbers: Concept that
the greater the number of exposures, the more
closely will actual results approach the
probable results expected from an infinite
number of exposures.
- Leasehold Interest Insurance:
Coverage designed to protect a tenant in the
event his or her lease is terminated. It is a
form of time element coverage that serves to
provide coverage for the difference between
the old rental and a new, likely more
expensive rental.
- Legal Reserve: The minimum reserve
which a company must keep to meet future
claims and obligations as they are calculated
under state insurance regulations.
- Legal Reserve Life Insurance Company:
A life insurance company operating under state
insurance laws specifying the minimum basis
for the reserves the company must maintain on
its policies.
- Level Commission Scale: A
commission scale providing for payment of
commissions at the same rate every year the
policy is in force.
- Level Premium: A premium which
remains unchanged throughout the life of a
policy.
- Level Premium Life Insurance: Life
insurance for which the premium remains the
same from year to year. The premium is more
than the actual cost of protection during the
earlier years of the policy and less than the
actual cost in the later years. The building
of a reserve is a natural result of level
premiums. The overpayments in the early years,
together with the interest that is earned,
serve to balance out the underpayments of the
later years.
- Liability: Any legally enforceable
obligation.
- Liabilities: Portion of an
insurer's balance sheet which denotes legal
obligations of the company, including
anticipated future payments of losses covered
under policies issued.
- Liability Insurance: Insurance
designed to protect the policyholder from
financial loss due to liability resulting from
injuries to other persons or damage to their
property.
- Liability Limits: The sum or sums
stipulated in an insurance contract beyond
which an insurance company is not liable to
protect the insured.
- Liability Without Fault: Principle
on which workers compensation is based,
holding the employer absolutely liable for
occupational injuries or disease suffered by
workers, regardless of who is at fault.
- License and Permit Bond: Type of
surety bond guaranteeing that the person
bonded will comply with all laws and
regulations that govern his or her activities.
- Life Annuity: A contract that
provides for a series of payments under which
payments, once begun, continue throughout the
remaining lifetime of the annuitant but not
beyond.
- Life Annuity With 10 Years Certain:
A annuity contract which pays an income for as
long as the annuitant lives, but if death
occurs within 10 years after the annuity
payments begin, payments are continued to a
named beneficiary for the remainder of the 10
years.
- Life Expectancy: The average number
of years of life remaining for a group of
persons of a given age according to a
particular mortality table.
- Life Income Option: Life insurance
settlement option in which the policy proceeds
are paid during the lifetime of the
beneficiary. A certain number of guaranteed
payments may also be payable.
- Life Insurance: Insurance providing
for payment of a specified amount on the
insured's death, either to his or her estate
or to a designated beneficiary; or in certain
cases to the policyholder at a specified date.
- Life Insurance in Force: Amount
reported in an insurance company's financial
statements that sets out the sum of the face
amounts, plus dividend additions, of life
insurance polices outstanding at a given time.
Additional amounts payable under accidental
death or other special provisions are not
included.
- Life Insurance Programming:
Systematic method of determining the insured's
financial goals, which are translated into
specific amounts of life insurance, then
periodically reviewed for possible changes.
- Lifetime Disability Benefit: A
benefit to help replace income lost by an
insured person as long as he/she is totally
disabled.
- Lifetime Disability Benefit:
Disability income payable for the life of the
insured as long as he is totally disabled.
- Limited Payment Life Insurance:
Whole life insurance on which premiums are
payable for a specified number of years or
until death (if death occurs before the end of
the specified period).
- Limited Policy: An insurance
contract which covers only certain specified
diseases or accidents.
- Liquidation: The process of
dissolving a company by selling its assets for
cash.
- Living Benefits Rider: A rider that
allows insureds who are terminally ill or who
suffer from certain catastrophic diseases to
collect part of their life insurance benefits
before they die, primarily to pay for the care
they require.
- Living Trust: A trust created while
the creator of the trust is living. Also known
as an inter vivos trust.
- Loading: The amount that must be
added to the pure premium for expenses,
profit, and a margin for contingencies.
- Long-Term Care: The continuum of
broad-ranged maintenance and health services
to the chronically ill, disabled, or retarded.
Services may be provided on an inpatient
(rehabilitation facility, nursing home, mental
hospital), outpatient, or at-home basis.
- Long-Term Disability Income Insurance:
Insurance issued to an employer (group) or
individual to provide a reasonable replacement
of a portion of an employee's earned income
lost through serious and prolonged illness or
injury during the normal work career. (See
also Integration.)
- Loss: The occurrence of the event
for which insurance pays.
- Loss Avoidance: A risk management
technique whereby a situation or activity that
may result in a loss for a firm is avoided or
abandoned.
- Loss control: Any conscious action
(or decision not to act) intended to reduce
the frequency, severity, or unpredictability
of accidental losses.
- Loss Expense--Allocated: Handling
expenses, such as legal or independent
adjuster fees, paid by an insurance company in
settling a claim which can be definitely
charged to that particular claim.
- Loss Expense--Unallocated: Salaries
and other expenses incurred in connection with
the operation of a claim department of an
insurance carrier which cannot be charged to
individual claims.
- Loss of Maintenance Fees Insurance:
Coverage designed to protect an association
(such as a condominium association) against
the loss of maintenance fees when occupancies
have been interrupted or impaired by the
occurrence of any insured peril. This is a
form of business interruption insurance for
the association. It assures continuous income
while a building is un-tenantable.
- Loss Payable Clause: Means of
protecting a mortgagee's interest in property
by directing the insurer to make a loss
payment to the mortgagee in the event of a
loss.
- Loss Prevention: Any measure which
reduces the probability or frequency of a
particular loss but does not eliminate
completely all possibility of that loss
- Loss Ratio: The percent which
losses bear to premiums (either earned or
written) for a given period.
- Loss Reserve: The amount set up as
the estimated cost of a claim. (See IBNR
Reserve)
- Lump-Sum Distribution: Payment
within one taxable year of the entire balance
payable to an employee from a trust which
forms part of a qualified pension or employee
annuity plan on account of that person's
death, separation from service or attainment
of age 59 1/2.
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