[L135]
L.A.A.A.
(See Latin American Agents Association.)
[L137]
L.A.A.I.A.
(See Latin American Association of Insurance Agents.)
[L000]
Labor and material bond
A bond given by a contractor to guarantee payment to specific laborers and suppliers for the labor and material used in the work performed under the contract.
[L001]
Landlords protective liability
If an owner of a property leases the entire premises to others who assume full control, the chance of being held liable for accidents occurring on the premises is diminished. The owner can insure the liability as "landlords protective liability," at lesser rates than for the normal owner's, landlord's, and tenant's form of policy. This type of policy is rarely requested or used since the advent of the commercial general liability and the use of additional insured endorsements.
[L016]
Landominiums
Trendy reference to (residential) structures that are entirely owned by the unit owners but all land is owned and maintained by an association.
[L002]
Lapse
The termination of a policy for nonpayment of premium, used commonly in life insurance. If the insurance contract becomes void for other reasons, it is also said to have lapsed.
[L003]
Lapse ratio
A ratio based on the number of policies that were allowed to lapse during a specified period of time as compared to those in force at the start of that same period of time.
[L004]
Larceny
Theft of personal property; modern criminal laws include obtaining property under false pretenses and embezzlement, which common law did not include in theft.
[L129]
Large deductible plans
An arrangement in which the insurer pays the entire loss and the insured is then obligated to pay a huge (sometimes up to a million dollars) deductible on an installment (monthly or quarterly) basis.
[L005]
Large risk
An object of insurance, the loss of which would seriously affect the operating results of the insurer or the local insurance market over a period of years.
[L006a]
Laser beam endorsements
A type of endorsement that may be attached to the claims-made version of the commercial general liability policy (CGL) for the purpose of excluding specific accidents, products, work or locations.
[L006b]
Laser devices
As it relates to business or personal auto coverage, it is defined as equipment designed to detect or defeat speed or traffic control or detection devices including both radar and laser.
[L006]
Laser endorsement
A type of endorsement that may be attached to the claims-made version of the commercial general liability policy (CGL) for the purpose of excluding specific accidents, products, work, or locations.
Laser exclusion
(See laser beam endorsements.)
Last clear chance rule
Refers to a successful contributory negligence defense created by evidence that a claimant had a distinct chance to avert an accident; therefore, contributed to the loss.
[l130]
Last surety on bond form
The surety incurs all liability for paying self-insured workers compensation claims but is released from all liability if a replacement security is posted.
[L007]
Latent defect
A defect found in a product that is not readily visible or discernible at the time of manufacture and not discovered until later, usually when in use.
[L136]
Latin American Agents Association
An agency association acting as an advocate for the growing Hispanic insurance market. Its other primary goal is to enhance the image of Hispanic insurance professionals. Headquarters: El Monte, CA.
[L138]
Latin American Association of Insurance Agents
An association formed as an advocate of its membership's rights. Its focus is on active participation in the communities served by its members. It promotes consumer education, network opportunities, and active involvement in community service and politics. Headquarters: Miami, FL.
[L008]
Law of large numbers
A mathematical concept which postulates that the more times an event is repeated (in insurance, the larger the number of homogeneous exposure units), the more predictable the outcome becomes. In a classic example, the more times one flips a coin, the more likely that the results will be 50% heads, 50% tails.
[L009]
Lawyers professional liability insurance
Protects an attorney or law firm against claims for negligent acts, errors or omissions in the performance of professional legal services.
[L010]
Lay-up refund
In a policy insuring a vessel, the company may agree to refund a certain proportion of the premium in the event that the vessel be laid up or not in use. Also applicable to automobiles.
[L011]
Lay-up warranty
A provision in a policy insuring a vessel, whereby the policyholder agrees that the vessel will not be in use at certain times.
[L113]
Layer
A term typically found in reinsurance. i.e., the first, second and third layer of coverage. Layers represent horizontal breaks in coverage, e.g., the first layer is up to $1,000,000. The second layer is above $1,000,000 but less than $2,000,000.
[L012]
Layering
Risks that have high limits or high exposure to loss are often protected by purchasing policies to cover limits in layers. The first layer of coverage is called the primary layer and responds first to loss. When that limit has been exhausted, the second and subsequent layers respond. Because of the structure of layering, the second layer and above are normally much less expensive than the primary and, therefore, this method of protection can be cost effective.
[L114]
Lead reinsurer
Where there are multiple reinsurers, one typically will lead, negotiating conditions, terms, rates and first signs the reinsurance slip. The reinsurers who then sign below the lead reinsurer (who agree to the terms the lead reinsurer has negotiated) are called the following reinsurers.
[L013]
Lead underwriter
A concept or structure used by Lloyd's companies that signifies the underwriter whose name is the first to appear and the first to respond on a Lloyd's slip. Because the prestige of the lead underwriter may influence others to participate (or not participate), the lead underwriter must be reviewed carefully.
[L139]
Leaking Underground Storage Tank Trust Fund
This is a federally established fund that is used to pay the costs associated with supervising and monitoring cleanups from underground storage tanks that have leaked and that threaten the environment (contaminated ground water). The fund is also used to enforce mandated cleanups and to pay the cleanup costs for abandoned sites (where the owners are unknown).
[L141]
Lease
To permit another party to take possession of one's property (real or personal) via a formal agreement and for a specified period of time.
[L014]
Leased worker
A person leased to an employer by agreement with a labor leasing firm to perform the employer's business. This does not refer to temporary workers, who are considered separately.
(See temporary worker.)
[L015]
Leasehold insurance
Protection against the lessee's (tenant's) loss of value when a lease is canceled because a fire or other peril renders the property unusable, the value being the excess of the rental value of the property over the rental payable in the lease. The insurance against the loss of such value is "leasehold" insurance against whatever perils may be written. More popular with long leases in periods of rising rental values.
[L016]
Ledger cost
A life insurance accounting method used to determine the actual cost of a life insurance policy. It is determined by taking gross premiums paid for a policy and subtracting dividends and the cash value of the policy at a specified period of time. The amount remaining is the cost of the policy for that period of time.
[L126]
Legacy system
A generic reference to an organization’s computer system that is usually older than recent technology, using procedures and codes that may be obsolete, but enjoy continued use because of the time and cost involved in replacing the system.
[L017]
Legal expense insurance
Insurance covering legal costs, written generally on a group basis. Includes the indemnification through providing agreed legal services, as well as the payment of money to compensate the insured for costs. Also referred to as prepaid legal insurance.
[L018]
Legal liability
Liability imposed by law, as opposed to liability arising from an agreement or contract.
[L019]
Legal reserve
The minimum reserve required by law for an insurer for the specified line of insurance, in the jurisdiction where the insurer is operating.
[L127]
Legal risk
An exposure to loss represented by the occurrence of some court related activity.
Lender lawsuits
Lawsuits filed by stockholders of financial institutions that alleged financial harm due to board of director decisions in approving inadequate lending policies.
[L142]
Lessee
The party that is granted or that assumes a lease obligation and who also assumes the companion rights to use the property. Under an insurance contract, a lessee acquires a separate insurable interest in the property.
[L143]
Lessor
The party who grants permission to another party to take possession of and to use property. The lessor typically also determines how the property may be used and, under insurance contracts, retains an insurable interest in the property.
[L020]
Letter of credit
1) A commitment made by an issuing bank or other party at the request of a customer to honor drafts or other demands for payment presented to the bank under the terms of the credit and, if the commitment is a documentary draft, upon presentation of the required documents of title.
2) In reinsurance, a commitment made by a bank to a reinsured which can be drawn upon to cover any of the reinsurer's liabilities to the reinsured under their reinsurance agreement.
[L021]
Level death benefit option
A life insurance policy that allows an option in which the beneficiary may choose either to receive the face amount of the policy at the time of death of the insured, or a preset percentage of the total value, whichever is greater.
[L115]
Level premium annuity
The premiums remain level throughout the accumulation phase of the annuity.
[L022]
Level premium life insurance
A life insurance policy where the premium remains the same throughout the term of the policy. Although the premium is unchanged, it is proportionately higher than actually needed by the insurer in the early years to offset the fact that the premium becomes lower than needed by the insurer in the later years.
[L023]
Level term life insurance
A term life insurance policy, whose face value does not change throughout the term of the contract.
(See term insurance.)
Leverage
Also called capitalization. Regarding insurance, it refers to the level of a carrier’s capital assets compared to their level of financial and operating liabilities, with a high leverage reflecting a reduced ability to meet, primarily, expected claims payment demands.
Leverage ratios
Mathematical formulas used to determine the efficiency and health of an insurance operation.
[L024]
Liability
1) An obligation imposed by law or equity.
2) Money owed or expected to be owed. In an insurance company financial statement, the two columns it contains are its "assets" (or the amounts it owns) and the "liabilities" (or the amount it owes or expects to owe). Liabilities generally are defined by state statute or insurance department regulation for use in the annual statement of an insurer. The term is also defined for special purposes by other regulatory officials, such as the Securities and Exchange Commission.
[L025]
Liability insurance
Protection which pays sums that an insured is legally obligated to pay, or that the insurer has agreed to pay, as damages to others as a result of the insured's negligence. Usually provides coverage for bodily injury or damage to property of others.
(See bodily injury liability insurance and property damage liability insurance.)
[L145]
Liability Risk Retention Act
This federal act became law in 1986 as an expanded version of the 1981 Products Liability Risk Retention Act. The law facilitated the legal formation of group captive insurers (risk retention groups) as a way to encourage increased insurance availability as well as a more competitive insurance marketplace.
[L026]
Libel
1) To publish defamatory statements about another. The general distinction between libel and slander is that the first must be in writing or similar permanent form, while the latter is oral. The distinction at law is not as simple.
2) In maritime law, the word for a legal action directed against a ship.
[L027]
Libel insurance
Insurance against claims arising from purported libel, slander, defamation, etc. Bought principally by those engaged in the publishing or advertising business and radio and television. Now commonly included in the personal injury endorsement of commercial liability policies.
[L027a]
Liberalization clause or provision
A provision in some standard property and casualty insurance policies that states that should the insurer, within a specified period of time such as 45 days of issue or renewal, begin offering a broadened version of the current policy and there is no premium charge for the increased coverage, then that increased coverage will apply to the current policy.
[L028]
License
1) The certificate of authority granted by a state to insurance companies, agents, brokers, and (in some states) loss adjusters as a permit to engage in the insurance business within the state.
2) The fee or tax paid to secure a certificate of authority; for example, insurance accounting terminology refers to an insurer's "premium taxes, licenses, and fees."
[L029]
License or permit bond
A surety bond often required by municipalities and other public authorities to indemnify them against loss from breach of any regulation or ordinance under which the license or permit is issued.
[L029a]
Lien
A legally enforceable claim held by one entity on another entity's property. The claim exists until the property owner satisfies the claim.
[L030]
Lien plan
A life insurance plan offering coverage on substandard insureds at a standard premium and giving standard coverage, but which is issued with an outstanding lien against it to be paid off at time of payout of benefits. This type of plan is rarely used in the USA, and in some states it is illegal. It is used regularly in Canada and the United Kingdom.
[l030a]
Lienholder
The person or entity that possesses a legal claim on the property of another. In insurance, it generally refers to a lender on real or personal property.
[L116]
Life annuity
A settlement option that pays a fixed and regular annuity payment for the life of the annuitant.
[L117]
Life annuity with period certain
A settlement option that pays a fixed and regular annuity payment for the life of the annuitant, but if the annuitant should die before the end of the period certain (e.g., 10 years) the remaining installments are paid to the annuitant's contingent payee.
[L031]
Life care contracts
A type of contract used most often by older adults to provide simple medical services and room and board for the remainder of the insured's life, or for a prolonged period, most often in excess of one year.
[L032]
Life expectancy term insurance
Term insurance developed and offered to an insured for the average number of years an individual of a given age is expected to live as based on mortality tables.
[L033]
Life income option
A benefit payout option available in some life insurance policies, whereby the beneficiary is able to have the benefits converted into an annuity which is based upon the individual's life expectancy and payable as long as the beneficiary is still alive.
[L034]
Life income with period certain option
A benefit payout option available in some life insurance policies, where the beneficiary is able to have the benefits converted into an annuity which is based upon the individual's life expectancy and payable as long as the beneficiary is still alive. This option has one additional twist; a set period of benefits is guaranteed, regardless of whether or not the beneficiary survives the entire period.
[L118]
Life income with refund
A settlement option that pays a fixed and regular annuity payment for the life of the annuitant, but if the annuitant should die before all of the original annuity proceeds are paid out, the remainder (lump sum refund) is paid to the annuitant's contingent payee.
[L035]
Life insurance
The promise to pay at the death of the insured, or at another determined time if earlier, an amount larger than the accumulated value of the consideration paid for the promise.
[L036]
Life insurance trust
A life insurance policy that has a trust named as the beneficiary instead of an individual. The trust then makes payouts and disbursements of funds based upon the terms and conditions that the trust was formed under.
[L037]
Life maintenance contracts
Specially designed life, health and disability insurance policies, where conditions are set in the policy that the insured maintain a specific type of lifestyle in order to collect coverage. Most common are nonsmoking, nondrinking, or abstinence from substance abuse conditions, or guarantees of weight controls or exercise.
[L038]
Lifetime disability benefit
A disability benefit providing income payments to the insured as long as the insured is disabled.
[L119]
Lifetime maximum
The most in benefits a health insurance policy will pay for the life of a participant.
[L039]
Lightning clause
A clause formerly attached to a fire insurance policy extending the coverage to include damage done by lightning. Since the fire policy now covers lightning damage, the term is of historical interest only.
[L040]
Limit or limit of liability
According to the terms of a given policy, the most an insurer will pay for any one loss.
(See aggregate limit.)
[L041]
Limitations
When a policy contains limitations or exceptions to coverage otherwise insured by the contract.
[L120]
Limited coverage policy
Often called a cancer policy because it covers only one or more dread disease: cancer, heart disease, or other major malady.
(See also cancer policy.)
[L042]
Limited health service plan
A health insurance plan that provides only specific types of services or areas of medical specialty, such as a plan for mental illnesses or substance abuse rehabilitation.
[L042a]
Limited liability corporation
A hybrid between a partnership and a corporation. The operation of the limited liability company is handled by managers on behalf of members who, on one hand, have the protection of a corporation in that personal assets are protected and only company assets can be assessed. On the other hand, the income and profit that is earned by the limited liability company is not taxed against the company but is the obligation of the members as individuals.
[L043]
Limited life insurance policy
Life insurance policies that provide benefits only if the insured dies of a specified type of illness, injury or disease, such as cancer.
[L044]
Limited-payment life insurance
A type of life insurance policy for which the insured pays a premium during a limited number of years or for a specified period of time, after which the policy is paid in full.
(See paid-up at age life insurance.)
[L045]
Limited risk health insurance policy
A limited type of health insurance that usually has very low limits and limited benefits; it is often a Medicare supplement.
[L046]
Line
1) Either the limit of insurance to be written on a class of risk which a company has fixed for itself ("net line"), or the actual amount which it has accepted on a single risk or other unit ("gross line").
2) A class or type of insurance (fire, marine or casualty, among others), also known as line of business.
3) The word "line" in reinsurance usually pertains to surplus reinsurance and means the amount of the reinsured's retention in regard to each risk. Thus, reference to a "two-line" reinsurance treaty pertains to a treaty which affords reinsurance for up to 200% of the reinsured's retention.
[L047]
Line card
1) When a risk does not appear on the Sanborn Map, fire insurance companies are accustomed to listing the details of it on a location card to determine if and when the company is offered another line on the same piece of property.
2) In an agent's office, the card on which all the insurance sold to one customer is listed.
[L048]
Line guide
A list of the maximum amounts of insurance which a company is prepared to write on various classes of risks. It usually includes a suggested net retention for each class of risk and is used to instruct an insurer's agents and underwriters. Also known as a line sheet.
[L049]
Line of business (LOB)
The general classification of insurance written by insurers, such as fire, allied lines and homeowners, among others.
[L050]
Line sheet
A list of the maximum amounts of insurance which a company is prepared to write on various classes of risks. It usually includes a suggested net retention for each class of risk and is used to instruct an insurer's agents and underwriters. Also known as a line guide.
Liner negligence
Refers to a large vessel equipment breakdown caused by failure of ship’s owners or operating personnel to properly inspect and maintain such equipment.
[L051]
Liquidation
With respect to insurers, when an insurer becomes insolvent and is not capable of rehabilitation, the state insurance department authorizes that insurer's remaining assets to be liquidated and converted to cash. The cash funds are administered to pay outstanding claims against the insurer by both insureds and other creditors.
[L052]
Liquidation charge
With respect to annuities and mutual funds, the liquidation charge is the penalty assessed against an insured for the early withdrawal of funds.
[L053]
Liquidation period
With respect to annuities, it is that period of time in which the insurer is paying out the accumulated benefits of the annuity.
Liquidity
The ability of an entity, insurer or insured to convert assets into cash. With reference to an insurer, the intent is to have the funds quickly available to pay claims. When the reference is to the insured, it is used in the underwriting analysis as one of the factors used to determine the financial stability of the account.
[L055]
Liquor liability insurance
Coverage where the basis for legal liability is a dram shop, liquor control, or alcoholic beverage law. The laws vary, but most provide that the owner of an establishment which serves alcoholic beverages is liable for injury or damage caused by an intoxicated person if it can be established that the liquor licensee caused or contributed to the intoxication of the person.
(See liquor liability laws.)
[L056]
Liquor liability laws
State laws that hold a person or entity legally responsible for loss arising out of that party's providing alcoholic beverages to another, intoxicated party.
(See dram shop laws, liquor liability insurance, and dram shop liability insurance.)
[L057]
Liquor license bond
Any bond required by federal, state or municipal authorities to comply with regulations for the handling and sale of liquor.
[l131]
Litigation management
Refers to the management of legal claims that are in the process of being arbitrated, litigated or mediated. The goal is to improve the quality of their handling and cost control. The process typically involves managing the use of internal and external legal and claims resources, facilitating communications and distributing pertinent information to interested personnel.
[L057a]
Livery
A motor vehicle used for the transport of persons or goods for hire. Also known as public livery conveyance.
[L058]
Livestock insurance
Covers horses and other cattle against injury and death. Much of it is written by specialty companies which write only this one class.
[L059]
Livestock mortality insurance
Policies designed for farm or ranch operations to protect the insured against losses resulting from the death of livestock from specified causes of loss. Normally these causes of loss are fire, lightning, accident, acts of God, acts of persons other than the owner or employees, and necessary destruction for humane purposes.
(See animal mortality insurance, and poultry insurance (chickens.)
[L060]
Livestock transit
Inland marine insurance designed to cover farmers and ranchers for loss resulting from the death or injury to livestock while being transported by truck, rail, air, or ship/boat.
[L061]
Living benefits
With the advent of many long-term and financially draining illnesses, insurers have responded by offering benefit options where the cash value or proceeds of life policies are paid to a terminally ill insured to provide funds for the financial burden of the illness. Cancer and AIDS are the most common illnesses provided for.
[l132]
Living trust
A trust that is arranged during the creator's lifetime.
[L125]
LLC--limited liability corporation
A hybrid between a partnership and a corporation. The operation of the limited liability company is handled by managers on behalf of members who, on one hand have the protection of a corporation in that personal assets are protected and only company assets can be assessed. On the other hand, the income and profit that is earned by the limited liability company is not taxed against the company but is the obligation of the members as individuals.
[L062]
Lloyd's
A group, acting as individuals, to share in making contracts of insurance.
(See lloyd's of london, and american lloyd's.)
Lloyd's American Trust Fund
An account set up in the same manner of the institution's Premium Trust Fund, but this account is kept with a U.S. bank to respond to exposures written in that country.
[L063]
Lloyd's association
The name given to any association of individuals or group that participates together in the same format as Lloyd's of London when assuming a risk(s).
[L064]
Lloyd's audit
In order to make sure that the underwriters participating in coverage of Lloyd's accounts are solvent and able to meet their commitments, an annual audit is performed.
[L065]
Lloyd's broker
A broker accredited to deal with underwriters at Lloyd's, London. Only accredited persons are permitted to place insurance with the organization.
[L066]
Lloyd's member
Once an individual is able to show proof of a rather significant financial net worth and is willing to participate as a member by putting that net worth on the line as collateral, that individual must then be elected by the Lloyd's membership in order to become a member of Lloyd's of London. These persons are also known as "Lloyd's names." Individuals are insurers; the group is Lloyd's.
[L067]
Lloyd's name
Once an individual is able to show proof of a rather significant financial net worth and is willing to participate as a member by putting that net worth on the line as collateral, that individual must then be elected by the Lloyd's membership in order to become a member of Lloyd's of London. These persons are also known as "Lloyd's names." Individuals are insurers; the group is Lloyd's.
[L068]
Lloyd's of London
A collection of individuals who assume policy obligations as the individual obligations of each. The formal name is Underwriters at Lloyd's, London. Also, Lloyd's of London is a service organization which provides a central marketplace and ancillary services (such as policywriting, accounting, inspections, and adjusting) for its various members.
(See insurance exchanges and Lloyd's.)
[L069]
Lloyd's Premium Trust Fund
A trust fund established by Lloyd's of London. The underwriters or Lloyd's members are obligated to place the premiums received for insuring an account into this trust fund. The fund holds the premium for specified periods of time, and claim payments for that account are made from the trust fund. Any premiums remaining, including the interest or profits earned by the trust fund, are returned to the underwriter or Lloyd's member at the end of the specified period of time.
[L070]
Lloyd's register
A catalogue of ships which describes each vessel, its dimensions, age, place of construction, registry, ownership, etc. A necessary tool of the ocean marine underwriters. Similar information is published by the American Bureau of Shipping.
[L071]
Lloyd's syndicate
A group of underwriters at Lloyd's of London whose business is handled by an underwriter on behalf of all in the group.
(See syndicate.)
[L072]
Lloyd's underwriter
An individual who, after proving their significant financial net worth and after agreeing to use that net worth as collateral to assume insurance risks, is elected by the Lloyd's membership to become a member. Lloyd's underwriters are responsible only for their own assumptions of risk. They are not obligated for any risk assumed by others even if in the same syndicate, on the same account, or otherwise a part of the Lloyd's organization.
LMX
(See London Market Excess.)
[L073]
Loading
1) As an insurance term, an amount added to an insurance "pure risk" rate applicable to a class of risk, either to compensate the insurer for additional hazards present with an individual risk, or for the insurer's expenses, or both.
2) In marine language, the process of placing merchandise or cargo on board a ship or vehicle.
[L074]
Loan value
In life insurance, the amount of money insureds can borrow against the cash value of their own individual policy. As the cash value of the policy increases, so does the loan value.
[L075]
LOB--line of business
The general classification of insurance written by insurers, such as fire, allied lines and homeowners, among others.
[l133]
LOC (letter of credit)
1) A commitment made by an issuing bank or other party at the request of a customer to honor drafts or other demands for payment presented to the bank under the terms of the credit and, if the commitment is a documentary draft, upon presentation of the required documents of title.
2) In reinsurance, a commitment made by a bank to a reinsured which can be drawn upon to cover any of the reinsurer's liabilities to the reinsured under their reinsurance agreement.
[L076]
Local agent
The person in direct contact with the public as a licensed representative of an insurer for selling insurance.
[L077]
Local board
A trade association of local agents banded together to discuss their business, exchange ideas and promote good practices.
[L078]
Lockbox plan
A plan or arrangement between either an insurer or agent and a bank to use the bank as the premium collection facility. Insureds send payments to a post office box or bank lockbox controlled by the bank. The bank processes the payment directly to the proper account, for a service fee. Using this method speeds up the entire collection process, freeing up the accounting staff of the agent or insurer, and making premium funds available more quickly to earn investment income.
Lock-in provisions
State insurance laws or insurance department regulations that act to restrict an insurer's ability to exit a given state's insurance market.
London market excess
Refers to any excess of loss reinsurance treaty written by London insurers, including Lloyd's.
[L128]
Longshore and Harbor Workers Compensation Act
This act governs the work-related compensation cases of all United States maritime employees, as well as closely related occupations such as longshore workers who load/unload vessels, harbor workers and ship builders.
[L146]
Longshore and harbor workers coverage
A form of employee benefits protection for workers who are exempt from standard workers compensation coverage. It applies to longshore activities (ship cargo-handling, etc.), ship repair, shipbuilders and ship breakers, including persons while performing work on docks, wharfs, piers, and areas next to navigable waterways.
[L079]
Long-tail
A colloquialism referring to the lengthy period of time between the occurrence of an event giving rise to a third-party claim and the claim itself. While this lengthy period is common to all kinds of third-party claims, as opposed to direct damage claims, it is most pronounced in professional liability insurance written on an "occurrence" basis, as opposed to a "claims-made" basis.
(See claims-made.)
[L080]
Long-tail liability
Covered liability occurrences may take many years to fully develop into claims, be investigated, and settled. This development process is called long-tail. As a result, liability rates are not as responsive to losses, nor are they as credible as other lines of insurance.
[L121]
Long term care insurance
Sold either on a group or individual basis. Pays for nursing home or home health care costs including room, board and medical expenses.
[L081]
Long-term disability insurance
A disability insurance designed to offer income payments for long-term injuries, illnesses or disabilities. Long-term is often considered over 90 days.
[L082]
Loss
1) The amount the insurer is required to pay because of a happening against which it has insured.
2) A happening that causes the company to pay. For example, any reduction in quantity, quality or value of insured property resulting from a covered cause of loss.
3) The overall financial result of some operation, as opposed to "profit."
4) The amount suffered by a person or property, with or without insurance.
[L122]
Loss adjustment expense (LAE, ULAE, ALAE)
The expenses associated with settling claims include salaries of adjusters, legal fees, court costs, expert witnesses and investigation costs. ULAE are unallocated loss adjustment expenses which are not claim-file specific but are calculated en mass, usually for a line of insurance. ALAE are allocated loss adjustment expenses. Here the expenses associated with a particular claim are allocated to that claim.
[L083]
Loss assessment coverage
A specially designed property coverage for condominium unit owners. This coverage provides protection for assessments made by the condominium association resulting from loss to the property. The policy is written to pay the assessment if the loss is caused by an insured peril.
[L084]
Loss constant
Used primarily in workers compensation insurance, a flat charge added to the premium of small risks to offset the higher loss ratios produced by such risks. Also used in some states in fire insurance premiums for low-valued dwelling risks to offset the higher loss ratios they produce.
[L085]
Loss control
The steps and processes made by a risk to reduce, eliminate or control the frequency of loss from occurring and the severity of the loss once it has occurred.
[L086]
Loss control policy statement
A formal written policy statement that clarifies a risk's position on loss control. Normally written by a loss control or risk management specialist, it clarifies intent and establishes procedures or protocol for the accomplishment of the loss control objectives.
[L087]
Loss cost
1) The ratio of actual (or "as if") reinsured losses to a ceding company's subject matter premium (either written or earned premium) for the same period. Used to analyze past experience and to predict future experience of a per-risk excess cover.
2) In order to reduce the allegations of rate-fixing and prevent antitrust suits and litigation, many rating bureaus and rate organizations have now eliminated the development of rates. Instead, they are providing only base statistics called a loss cost, which is the percent of each exposure base for each classification that is directly attributed to the amount of loss experienced by that class. To the loss cost, each insurer must then add its own loading for expense, contingencies, profit, etc.
[L088]
Loss department
The personnel of a company dealing with claims or losses. In casualty operations the department is referred to as the claim department.
(See claim department.)
[L089]
Loss development
A comparison in the amount of and the development of the amount of losses that have occurred from a given point in time to a point at a later date.
[L123]
Loss event
A reinsurance term. ABC reinsurer may have a reinsurance treaty with XYZ covering all homeowner losses in excess of $200,000 per claim. A tornado ravages a heavily insured town of the primary insurer, XYZ. All of the losses ABC will have to pay that are associated with that tornado will be considered a loss event by ABC.
[L090]
Loss Executives Association
A group of loss department executives of stock insurance companies formed to discuss loss and adjustment problems.
[L091]
Loss expectancy
Based on past experience, data, and statistics, an estimate is generated to predict the probable occurrence(s) of loss for a given period for either a specific insured or class of business.
[L092]
Loss experience
The loss history for an account, a line of business, a book of business, or some other defining category. Loss experience may include the date of loss, type of loss, amount of loss, whether the loss is open or closed, and a summary of the details of the loss.
[L093]
Loss exposure
Loss potential.
[L094]
Loss frequency
Loss frequency is the calculation of how often a type of loss occurs to an account, a line of business, a book of business, or some other defining category within a given period of time (usually one year).
[l134]
Loss incurred
1) Events which have happened and which will cause claims to be made to insurers. 2) The total amount shown in an insurer's operating statement as its obligations for policy claims, whether paid or not, during a given period (usually one year). The composition of incurred losses in such a total is derived by the following formula: losses paid during the year, plus loss reserves existing at the end of the year, minus loss reserves existing at the beginning of the year.
[L095]
Loss loading
A loading that is applied to a premium or rate based upon the losses experienced by the account, line of business, book of business, or some other defining category.
[L096]
Loss of income benefit
A benefit in health, accident, or disability insurance policies to provide for loss of the insured's wages or income while ill, injured or disabled.
[L097]
Loss of use insurance
Insurance which compensates the policyholder for the inability to use property destroyed or damaged by an insured peril. For example, if a car is stolen, loss of use insurance will pay or contribute to the cost of hiring a substitute car.
[L098]
Loss payable clause
A condition in a policy whereby the company may be directed by the policyholder to pay any loss due the policyholder to some other party designated in the policy. Usually the payment is made by check or draft payable to both the insured and the designated payee.
[L124]
Loss payee
Most often used with personal property--vehicles, equipment, etc. It is the company that holds the loan note on personal property.
Loss pick
(See loss expectancy.)
[L099]
Loss pocket
A folder in which are placed all the documents pertaining to a certain loss.
[L100]
Loss prevention
Loss control, inspection and safety engineering work that is performed by an account in an attempt to prevent losses from occurring. Loss prevention work applies to property, liability, automobile, workers compensation, and most other P&C insurance. It is also known as safety engineering or accident prevention.
[L101]
Loss prevention services
Loss control, inspection and safety engineering services offered by an insurer in an attempt to prevent losses from occurring. Loss prevention work applies to property, liability, automobile, workers compensation, and most other P&C insurance. It is also known as safety engineering or accident prevention.
[L102]
Loss ratio
Losses incurred expressed as a percentage of premiums, most commonly earned premiums, although written premiums are sometimes used.
[L103]
Loss reduction
The loss control measure taken in an effort to reduce the severity of the consequences of a loss, damage, or injury once it has occurred.
[L104]
Loss report
A written statement made by an agent, an insured, a claimant, or a beneficiary containing details of the claim being made under an insurance policy.
[L105]
Loss reserve
An estimate of the amount an insurer expects to pay for reported and estimated claims. May include amounts for loss adjustment expenses.
(See IBNR--incurred but not reported, reserve and incurred losses.)
Loss Run (Report)
A report that lists a variety of details on losses experienced by a given business. The report is usually for a three to five year period and is meant for analyzing the business’ loss vulnerability. Typically, the automated report includes (at least) a loss date, whether the loss has been resolved (paid or pending), a claim number, loss description, claimant(s), loss (or loss reserve) amount.
[L106]
Losses incurred
1) Events which have happened and which will cause claims to be made to insurers.
2) The total amount shown in an insurer's operating statement as its obligations for policy claims, whether or not paid, during a given period (usually one year). The composition of incurred losses in such a total is derived by this formula: losses paid during the year plus loss reserves existing at the end of the year, minus loss reserves existing at the beginning of the year.
[L107]
Losses occurring
One way of defining coverage under a per-risk excess reinsurance agreement. Under a "losses occurring" cover, a loss is covered if it occurred during the term of the reinsurance, no matter when the policy suffering the loss was issued.
(See policies attaching.)
[L108]
Losses outstanding
Losses which have been incurred but which are not yet paid.
[L109]
Losses paid
The sum of losses for which money has been disbursed, as opposed to losses incurred, which includes losses outstanding but still unpaid.
[L109a]
Lost instrument bond
A bond given by the owner of a valuable security such as stock, bond, certified check, etc., which has been lost or destroyed.
[L110]
Lost or not lost
A clause used in ocean marine insurance which states that the insurer will pay even if the loss insured against has occurred prior to the effecting of the insurance. The company would, of course, not be liable if the policyholder knew that the loss had occurred when ordering the insurance. A ship could easily be lost or damaged and the owner not know until later, during which time the owner might want to insure it, which is possible with this clause.
[L111]
Lost policy release (LPR)
An agreement signed by the policyholder relieving the insurer from liability under an insurance contract which has been lost, misplaced or is otherwise unavailable. The lost policy release form is used to fulfill the requirement that a policy be returned when the insured requests that coverage be canceled.
[L111a]
LPR--lost policy release
An agreement signed by the policyholder relieving the insurer from liability under an insurance contract which has been lost, misplaced, or is otherwise unavailable. The lost policy release form is used to fulfill the requirement that a policy be returned when the insured requests that coverage be canceled.
[L147]
LRRA
(See Liability Risk Retention Act.)
[L112]
Lump sum or lump sum distribution
One method of payment of benefits, most often occurring in life insurance, where the beneficiary receives the entire face value or payout of the policy at once, rather than in installments, monthly income, or various other options.
[L140]
LUST
(See Leaking Underground Storage Tank Trust Fund.)
