Glossary (L-Z)



(See Latin American Agents Association.)


(See Latin American Association of Insurance Agents.)

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.

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.


Trendy reference to (residential) structures that are entirely owned by the unit owners but all land is owned and maintained by an association.


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.

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.


Theft of personal property; modern criminal laws include obtaining property under false pretenses and embezzlement, which common law did not include in theft.

large deductible plans

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.

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.

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.

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.

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.

last surety on bond form

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.

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.

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.

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.

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.

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.

lay up warranty

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.

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.

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.


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.

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.

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.

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).


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.

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.)

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.

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.

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.

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.

legal liability

Liability imposed by law, as opposed to liability arising from an agreement or contract.

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.

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.


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.


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.

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.

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.

level premium annuity

The premiums remain level throughout the accumulation phase of the annuity.

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.

level term life insurance

A term life insurance policy, whose face value does not change throughout the term of the contract. (See term insurance.)


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.


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.

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.)

liability loss exposure

Any condition or situation presenting the possibility of a claim alleging legal responsibility of a person or business for damage or injury suffered by another party.

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.


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.

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.

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.


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.”

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.


A legally enforceable claim held by one entity on another entity’s property. The claim exists until the property owner satisfies the claim.

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.


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.

life annuity

A settlement option that pays a fixed and regular annuity payment for the life of the annuitant.

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.

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.

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.

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.

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.

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.

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.

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.

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.

lifetime disability benefit

A disability benefit providing income payments to the insured as long as the insured is disabled.

lifetime maximum

The most in benefits a health insurance policy will pay for the life of a participant.

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.

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.)


When a policy contains limitations or exceptions to coverage otherwise insured by the contract.

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.)

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.

limited liability company

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.

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.

ACORD—Association for Cooperative Operations Research and

Development Development A nonprofit insurance facility dedicated to serving the independent agency system in the USA by developing and maintaining standard application forms, providing electronic data interchange standards and other support of agency automation. ACORD is located in Pearl River, NY.

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.

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.)


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.

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.

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.

line of business (LOB)

The general classification of insurance written by insurers, such as fire, allied lines and homeowners, among others.

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.


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.

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.

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.


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.

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.)

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.)

liquor license bond

Any bond required by federal, state or municipal authorities to comply with regulations for the handling and sale of liquor.

litigation management

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.


A motor vehicle used for the transport of persons or goods for hire. Also known as public livery conveyance.