Lapsed Policy:
A life or health insurance policy terminated as a result of
non payment of a premium before the end of the grace period.
Law of Large Numbers:
The theory of probability on which the business of insurance
is based. Simply put, this mathematical premise says that
the larger the group of units insured, such as sport-utility
vehicles, the more accurate the predictions of loss will be.
Legal Expense Insurance:
Insurance to reimburse policyholders for legal fees incurred
for defense from lawsuits involving areas of civil law not
covered by standard liability insurance. Examples include:
discrimination, wrongful discharge, contract disputes and
patent disputes.
Level Premium Life Insurance:
Insurance for which the cost is distributed evenly over the
period during which premiums are paid. The premium remains
the same from year to year and is more than the actual cost
of protection in the earlier years of the policy and less
than the actual cost in the later years. The excess paid in
the early years builds up a reserve which helps meet the costs
in later years.
Liabilities:
An insurance company’s liabilities consist of its immediate
or contingent policy obligations and unpaid claims, as well
as the usual obligations arising out of doing business such
as taxes, payroll, etc.
Liability Insurance:
Provides protection for the insured against loss arising out
of his/her legal liability to third parties.
Liability Limits:
The stipulated sum or sums beyond which an insurance company
is not liable to protect the insured.
License—Agent or Broker:
Certification issued by a state’s department of insurance
that an individual is qualified to solicit insurance applications
in the state for the period covered.
License—Company:
Certification issued by a state’s department of insurance
that an insurance company is qualified to do business in
the
state.
Limit:
The maximum amount of benefits that an insurer agrees to pay
in the event of a loss.
Line:
A type or kind of insurance.
Liquidation:
Enables the state insurance department as liquidator or its
appointed deputy to wind up the insurance company’s
affairs by selling its assets and settling claims upon those
assets. After receiving the liquidation order, the liquidator
notifies insurance departments in other states and state guaranty
funds of the liquidation proceedings. Such insurance company
liquidations are not subject to the Federal Bankruptcy Code
but to each state’s liquidation statutes.
Liquidity:
The ability and speed with which a security can be converted
into cash.
Liquor Liability:
Coverage for bodily injury or property damage caused by an
intoxicated person who was served liquor by the policyholder.
Litigation:
The process of a lawsuit.
Lloyd’s of London:
A marketplace where underwriting syndicates, or mini-insurers,
gather to sell insurance policies and reinsurance. Each syndicate
is managed by an underwriter who decides whether or not to
accept the risk. The Lloyd’s market is a major player
in the international reinsurance market as well as a primary
market for marine insurance and large risks. Originally, Lloyd’s
was a London coffee house in the 1600s patronized by shipowners
who insured each other’s hulls and cargoes. As Lloyd’s
developed, wealthy individuals, called “Names,” placed
their personal assets behind insurance risks as a business
venture. Increasingly since the 1990s, most of the capital
comes from corporations.
Lloyds:
Corporation formed to market services of a group of underwriters.
Does not issue insurance policies or provide insurance protection.
Insurance is written by individual underwriters, with each
assuming a part of every risk. Has no connection to Lloyd’s
of London, and is found primarily in Texas.
Long-term Care Insurance:
Coverage that, under specified conditions, provides skilled
nursing, intermediate care, or custodial care for a patient
(generally over age 65) in a nursing facility or his or her
residence following an injury.
Loss:
A reduction in the quality or value of a property, or a legal
liability.
Loss Adjustment Expenses:
The sum insurers pay for investigating and settling insurance
claims, including the cost of defending a lawsuit in court.
Loss Control Representative:
Insurance company employees, also called safety engineers,
that perform loss control surveys or inspections, and prepare
written loss control reports that outline their findings.
Loss Control Service:
Engineering or inspection service which assists the insured
in reducing its exposure to loss.
Loss Costs:
The portion of an insurance rate used to cover claims and
the costs of adjusting claims. Insurance companies typically
determine their rates by estimating their future loss costs
and adding a provision for expenses, profit, and contingencies.
Loss Expense—Unallocated:
Salaries and other expenses incurred in connection with the
operation of a claims department of a property and liability
insurance carrier which cannot be charged to individual claims.
Loss Exposure:
The possibility that a loss may occur.
Loss of Use:
A provision in homeowners and renters insurance policies that
reimburses policyholders for any extra living expenses due
to having to live elsewhere while their home is being restored
following a disaster.
Loss Ratio:
In property and liability insurance, the percent that losses
bear to premiums for a given period.
Loss Reserve:
The estimated liability on an insurer’s balance sheet
for unpaid insurance claims or losses that have occurred
as
of a given reporting date. On an individual claim, the loss
reserve is the estimate of what will ultimately be paid out
on that case.
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