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L | Top
lapse
The termination of an insurance policy because premiums were not paid when
they came due.
late-remittance offer
A means of encouraging reinstatement of lapsed insurance policies. A late-
remittance offer specifies that the company will accept an overdue premium after
the grace period ends and will reinstate the policy without requiring the
policyowner to complete a reinstatement application or submit evidence of
insurability. Also called a late-payment offer.
late retirement age
Retirement after the normal retirement age (usually age 65) contained in a
pension plan. In the United States, a qualified pension plan generally cannot
force a plan participant to retire at the normal retirement age or any other age
and generally cannot stop accruing pension benefits for a plan participant who
elects to work beyond the normal retirement age. See also early retirement age
and normal retirement age.
law of large numbers
The theory of probability which specifies that the greater the number of
observations made of a particular event, the more likely it will be that the
observed results will approximate the results anticipated by the mathematics of
probability.
legal actions provision
In an individual health insurance policy, a provision that limits the period during
which a claimant may sue the insurer to collect a disputed claim amount and
which specifies that no suit may be brought against an insurer until a specified
period after a claim is filed.
legal reserve
See statutory reserve. See also reserve for a list of many different kinds of
reserves.
level premiums
Premiums that remain the same each year that the life insurance policy is in
force.
level premium system
A life insurance pricing system whereby the purchaser pays the same premium
amount each year the policy is in force.
level premium whole life insurance
A type of whole life insurance for which equal premiums are payable throughout
the premium payment period.
level term insurance
A type of term insurance that provides a death benefit that remains the same
during the period specified. Premiums for level term insurance policies usually
remain the same throughout each term of coverage.
leveraged ESOP
An employee stock ownership plan (ESOP) that borrows money and uses the
borrowed funds to buy stock of the employer. The employer then makes regular
contributions to the plan on behalf of the participating employees. The ESOP
uses this contributed money to pay back the loan and allocates the stock little by
little to the employees. The employer's contributions are tax deductible for the
employer and tax deferred for the employee.
liabilities
A company's debts and future obligations. For an insurance company, liabilities
include amounts owed to creditors and the actual and expected claims of its
policyowners and their beneficiaries.
liability insurance
A kind of insurance that provides a benefit payable on behalf of a covered party
who is held legally responsible for harming others or their property.
licensed broker
An insurance salesperson who is not under an agency contract with any
insurance company, and who is usually considered to be an agent of the client
rather than of the insurer. Also known as a pure broker.
life annuity
A series of payments that are made at regular intervals as long as a designated
person, the annuitant, is then alive.
life annuity with period certain
A life annuity which promises that if the annuitant dies before the end of a
designated period (usually 5, 10, or 20 years), the insurer will continue payments
to a contingent payee until the end of the designated period. Also called a life
income with period certain annuity.
life income option
A life insurance settlement option under which the insurer uses the policy
proceeds and interest to pay the beneficiary a series of equal payments for as
long as the beneficiary lives.
life income option with period certain
A life insurance settlement option in which the insurer guarantees to pay the
beneficiary a series of equal payments for a designated period, such as 10 years;
thereafter, the payments will continue only as long as the original beneficiary
lives. If the original beneficiary dies during the guaranteed period, payments will
be made to a recipient designated by the original beneficiary until the end of the
guaranteed period, at which time all payments will stop.
life income option with refund
A type of life income settlement option in which the insurer guarantees that if the
beneficiary dies before the total amount paid under the option equals the
proceeds of the policy, then the insurer will pay the difference to a contingent
payee. Also called a refund life income option. See also cash refund option,
installment refund option, and settlement options.
life insurance
Insurance that provides protection against the economic loss caused by the
death of the person insured.
lifetime maximum
For any individual, the maximum amount that a medical expense policy will pay
for all the eligible medical expenses the individual incurs while insured under the
policy.
life underwriter
See insurance agent.
limited coverage policy
A type of medical expense policy designed to cover only those medical expenses
caused by a specified disease, such as cancer, which is named in the policy.
Also called a dread disease policy.
limited-payment whole life insurance
A type of whole life insurance that does not require premium payments during the
entire lifetime of the insured. Some limited-payment policies specify the number
of years during which premiums are payable, while other policies specify an age
after which premiums are no longer payable. Single-premium whole life
insurance, in which only one premium payment is made, is an extreme type of
limited-payment insurance.
living benefit rider
A life insurance policy rider which allows the insured to receive all or part of the
policy's death benefit before the insured's death if certain conditions are met.
This type of provision is often used to help an insured pay health care costs if he
or she becomes terminally ill.
loading
A charge that the insurer adds to the net premium to produce the gross premium
actually paid by the policyowner. The loading is designed to cover the operating
expenses of the company, to compensate the company for the loss of income
when policies lapse and to provide margins for profits and contributions to
surplus.
location-selling distribution system
A system that distributes insurance products by locating insurance offices and
agents in places where consumers generally shop for other items or take care of
other business matters, such as department stores, grocery stores, and banks.
Also known as the retail outlet distribution system.
lock-box banking
A method of premium collection in which premium payments are received at a
specified post office box. The insurer authorizes a bank to have access to that
box and to remove and open the mail. All premium payments are deposited
immediately in the bank, and the returned portions of the premium notices, along
with a record of deposits, are sent to the insurer.
long-form reinstatement application
A reinstatement application similar to a policy application in that both address the
long-term health history of the insured.
long-term care (LTC) insurance
Coverage available on an individual or group basis to provide medical and other
services to patients who need constant care in their own home or in a nursing
home.
long-term disability income insurance
Disability income insurance which typically provides disability income benefits
that begin at the end of a specified waiting period and that continue until the
earlier of the date when the insured person returns to work, dies, or becomes
eligible for pension benefits. See also disability income insurance and short-term
disability income insurance.
loss ratio
In pricing health insurance, the loss ratio is a means of comparing claims losses
to premium earnings. To determine its loss ratio, an insurer divides the dollar
amount of claims it incurred during a given year by the dollar amount of
premiums it earned during the same year.
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