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LAPSE

The termination of a policy because of the failure of the insured to pay the renewal premium.

LAPSE [LIFE]

This term applies to the situation which exists when an insurance policy premium due is not paid; however, valuable benefits may still be available after lapse.

LARCENY

The unlawful taking and carrying away of personal things with intent to deprive the rightful owner of its use against his/her will or without his/her consent. Larceny usually involves stealth, since if force is used or even threatened, the crime becomes robbery.

LASER ENDORSEMENT

A type of endorsement that may be attached to the claims-made version of the CGL for the purpose of excluding specific accidents, products, work, or locations.

LAW OF LARGE NUMBERS

The reasonable certainty with which the number of occurrences of certain events can be forecast in a large group of similar risks. It is the foundation of insurance.

LEASE

A contract for the use and possession of land; buildings or parts thereof for a specified time and cost.

LEASEHOLD

The term of a lease agreement.

LEASEHOLD INSURANCE

Protection against loss of a leasehold in case the lease is terminated as a result of fire, etc.

LEDGER COST

A method of determining the net cost of a life insurance policy over a period of years. First the dividends, if any, are subtracted from the gross premiums. From this figure is subtracted the cash surrender value. That remaining is the ledger cost for the given period.

LEGAL LIABILITY

The liability imposed by law for negligence and carelessness which results in injuries or death to persons or damage to someone else's property.

LEGAL REPRESENTATIVE

A person appointed by law to take charge of the assets of another. The term includes executors, administrators, receivers, trustees, guardians, etc. Most insurance policies protect the legal representative of the named insured.

LEGAL RESERVE COMPANY

An advance premium company which maintains loss reserves, unearned premium reserves, and other miscellaneous reserves as prescribed by the laws of the states. Practically all companies are legal reserve companies.

LEGAL RESERVES

The amount of money which most insurance carriers are required by law to set aside for the payment of claims and for unearned premiums.

LESSEE

The person to whom a lease is granted, often called a tenant.

LESSOR

The person who grants the lease, often called the landlord.

LESSORS RISK

Applies to that part or all of a commercial premises not occupied by the owner. Tenants/lessees are expected to provide primary coverage for occupied premises usually naming the landlord as an additional insured. Lessors risk coverage is excess of any primary coverage.

LEVEL PREMIUM INSURANCE

A policy where the premium remains the same throughout the term of the policy.

LIABILITIES

All debts owed by a person, whether immediate or contingent.

LIABILITIES [LIFE]

An insurance company's liabilities consist of its immediate or contingent policy obligations, unpaid claims, funds left under settlement options, assigned surplus, and miscellaneous debts.

LIABILITY INSURANCE

Insurance protecting the insured against financial loss arising out of legal liability imposed upon him/her in connection with bodily injuries (or death) suffered, or alleged to have suffered, by persons of the public, or damage caused to property other than property owned by or in the custody of the insured as a result of the maintenance of the premises, or the business operations of the insured.

LICENSE

Certification issued by a State Department of Insurance, that an individual is qualified to solicit insurance applications for the period covered. Usually issued for a period of one year, renewable on application without necessity of the individual's periodic repetition of the original qualifying requirements. Agents should study carefully the licensing laws and regulations of their own states.

LICENSEE

A person who comes upon your property with your permission, either expressed or implied, but who is there for his/her own benefit rather than for yours. Some authorities hold that you owe ordinary care to licensees; others hold that you owe them no care except that you must not willfully harm them.

LIEN

A charge upon real or personal property for the satisfaction of some debt or duty. The right to detain the property of another until a claim against that person has been satisfied.

LIFE ANNUITY

An annuity which is payable during the continued life of the annuitant. No provision is made for the guaranteed return of the unused portion of the premium.

LIFE EXPECTANCY

The average duration of the life remaining to a number of persons of a given age, according to a given mortality table. The term life expectancy should not be confused with probable lifetime. The latter refers to the difference between a person's present age and the age at which death is most probable, i.e., the age at which most deaths occur.

LIFE EXPECTANCY TERM INSURANCE

A special policy type, issued at each individual age for that age's "expectation of life" at the required premium. As an example, with a standard life expectancy at age 24 of 43 additional years, this would simply be "Term to Age 67," with the insurance expiring if the insured lives beyond age 67.

LIFE INSURANCE

Insurance in which the risk insured against is the death of a particular person, the insured, upon whose death within a stated term, or whenever death occurs if the contract so provides, the insurance company agrees to pay a stated sum or income to the beneficiary.

LIFE INSURANCE TRUST

Life insurance companies usually cannot act as trustees or guardians, nor exercise discretion in making payments to beneficiaries. In some cases, it is advisable to have the policy proceeds paid to a trust company and distributed under the terms of a trust agreement, thereby permitting greater flexibility in the distribution of the proceeds. Such an agreement constitutes an "unfunded" life insurance trust. Under a "funded" life insurance trust, the trustee is given control not only over the policy proceeds but also securities or other property to provide funds to pay the premiums.

LIFE PAYMENT POLICY

A policy, which provides for payment of the premium for a period of years less than the period of protection provided under the contract.

LIFE UNDERWRITER TRAINING COUNCIL (LUTC)

An institutionally supported organization that conducts intermediate training programs for agents.

LIMIT FACTOR

Commercial Liability: An up charge to convert a base limit rate to the selected higher limits. This is an additive, in other words, a limit factor of 46 means 46% of the base rate is added to the base rate. This may be computed in one step by multiplying the base rate by 146% (1.46). If the limit factor is 124, the premium would be computed by multiplying the base rate by 224% (2.24). Compare with Multiplier.

LIMITS, EXCESS

Any limits as stated in the policy or endorsement which are greater than standard limits. These are based on manual increase limits tables. (See Limits, Standard.)

LIMITS, STANDARD

This term applies to bodily injury and property damage lines. A policy written with standard bodily injury limits restricts the liability of the carrier to an amount usually not in excess of $5,000 (called the "lower limit") for injuries to one person, and subject to such limit per person, to an amount not in excess of $10,000 (called the "upper limit") for any one accident involving two or more persons. A policy written with standard property damage limits restricts the liability of the carrier to an amount of $5,000 (in the case of automobile insurance for each accident in damage to property).

LIMITS OF LIABILITY

The maximum sums of money which an insurance company agrees to pay in the event of a loss covered by the policy.

LIME

Colloquial term with several meanings. It may be used in connection with a particular type of insurance. It may be used to describe all the various types of insurance written for a property owner and sometimes the company's net retention on reinsured business. The term is sometimes used to describe the amount of insurance on a given property.

LINE SHEET (or Table of Line Limits)

The guidance schedule a company keeps for showing the top lines which can be written, inclusive of reinsurance, on different classes of risk.

LIVERY USE OF AUTOMOBILE

Use of a vehicle for hire to carry persons. Livery use is excluded in automobile insurance contracts unless coverage for it is stated in the policy.

LLOYDS OF LONDON

A clearing house of maritime information. Lloyds is best known to most people for the underwriting activities of its members, but the Lloyds Corporation itself is not an insurance company.

LLOYDS ORGANIZATION

An unincorporated group of individual underwriters.

LOADING

The amount added to net premiums to cover the company's operating expenses and contingencies. The loading includes the cost of securing new business, collection expenses, and general management expenses. Precisely: The excess of the gross premiums over net premiums.

LOAN VALUE

A determinable amount which can be borrowed from the issuing company by the policy owner using the value of the policy as collateral. In the event the policy matures by death or as an endowment with the debt either partially or fully unpaid, then the amount borrowed plus any accrued interests is deducted from the face amount.

LOCAL AGENT

The Exchange's representative who makes actual contact with the public and writes the applications for insurance. An insurance agent's first duty is to the company he/she represents, but they must also protect the bona fide interests of their policyholders.

LOCATION

Two or more floors in the same building or communicating floors (by foot) in adjoining buildings.

LONG HAUL VEHICLE

Any commercially rated automobile operating in excess of 200 miles.

LOSS

The liability incurred, for the damages suffered or alleged to have been suffered, by the claimant. The extent of the liability or loss is the basis for the amount which the claimant seeks to recover from the carrier. Such terms as "losses incurred" and "losses paid" refer to the aggregate amount of the losses incurred or paid.

LOSS CONSTANT

A flat amount included in the premium for a risk too small for experience rating to be applied. Customary in Workers' Compensation insurance and included in the minimum premium for each classification.

LOSS CONTROL SPECIALIST

A Company employee trained in the technicalities of commercial insurance such as Property, Workers' Compensation, Commercial General Liability, Commercial Auto, etc., with the major function being loss control.

LOSS CONVERSION FACTOR

Under a retrospective rating plan, an amount added to actual losses to provide for the expenses of an insurance company in handling claims.

LOSS EXPENSE

The cost of investigation and adjustment of claims, as distinguished from the amount of a claimant's recovery from the insurance carrier under the policy. Unallocated loss expenses are included in office overhead. Allocated loss expense is for expenses outside the organization.

LOSS EXPENSE, ALLOCATED

The aggregate net expenses of investigating and adjusting specific claims which are charged directly to the individual claim file.

LOSS EXPENSE, UNALLOCATED

General expenses of investigating and adjusting specific claims which are of such nature that they cannot be allocated to a specific claim file.

LOSS PAYABLE

That clause in an insurance policy which designates to whom the loss is payable (the mortgagee).

LOSS RATIO

The portion which the losses and expenses incurred bear to the amount of premium earned.

LOSS RATIO, INCURRED BASIS

The percentage of losses incurred to the premiums earned during a given period.

LOSS RATIO, PAID BASIS

The percentage of the losses paid to the premiums written during a given period.

LOSS RESERVE

A liability set aside for payment of losses incurred but not yet paid.

LOSSES INCURRED

The total losses sustained whether paid or unpaid.

LOSSES INCURRED, CALENDAR-ACCIDENT BASIS

Losses which take place during a given calendar year.

LOSSES INCURRED, CALENDAR YEAR BASIS

Losses paid during the year, plus losses outstanding at the end of the year, minus losses outstanding at the beginning of the year.

LOSSES INCURRED, POLICY YEAR BASIS

The sum of losses paid and outstanding losses under policies issued effective in a given calendar year with losses computed to the expiration of all such policies. Thus, two full years make up a policy year.

LOSSES OUTSTANDING

The estimated total amount yet to be-paid to settle all open reported claims as of a given date. This term refers to the total amount of losses outstanding as recorded on a case basis. This figure does not include any provision for incurred but not reported losses or for any Schedule P liability. Consequently, it is important not to confuse losses outstanding with "total loss liability" or "reserve for losses", each of which figures include incurred but not reported losses and Schedule P liability.

LOSSES PAID

The aggregate of loss payments, less deductions for all credits except that no deduction is made for reinsurance recoveries, during a given period.

LOWER LIMIT

The term used in liability insurance to indicate the maximum amount the company will pay for the death or injury of one person in any one accident.

LUMP SUM

Payment of the entire proceeds of a life insurance policy in one sum. The method of settlement provided by most policies unless an alternate settlement is elected by the policy owner before the insured's death or thereafter by the beneficiary before receiving the payment.