Risk & Insurance Glossary - L


LAPSE – When premium payments are in default, an insurance contract becomes void, and is said to have "lapsed."
LARCENY – The unlawful taking of the personal property of another without his consent and with intent to deprive him of the ownership and use of it.
LATENT DEFECT – A defect not immediately apparent.
LAW OF LARGE NUMBERS – The rule that with an increase in exposure units, the prediction of future losses increase in reliability.
LAYER – An excess insurance program is sometimes written in layers; that is, one or more insurers issue policies with a specific range of coverage within the total of the excess insurance program.
LEASEHOLD – The right to occupy premises as set forth in a lease.
LEASEHOLD INSURANCE – Insurance against loss of the value of a lease or of profit derived from a sublease through termination of the lease by fire or other peril insured against.
LEGAL LIABILITY – An obligation enforceable by law.
LEGAL RESERVE – The minimum reserve that a state requires an insurance company to maintain in order to meet its future claims and obligations.
LESSEE – The party to a lease that obtains a right to occupy premises as set forth in the lease.
LESSOR – An owner of property or of a leasehold interest of property who rents it to others under the terms of a lease.
LIABILITY – (1) A debt or obligation, usually financial; (2) The probable cost of meeting an obligation.
LIABILITY INSURANCE – Insurance against loss due to liability; as specified in the insurance contract; covers both damages and expenses connected with alleged or actual liability.
LIBEL – (1) A written defamatory statement about another; (2) In maritime law, libel means legal action against a ship.
LICENSE BOND – A bond guaranteeing that the person to whom a license is, or is to be, issued will comply with the law or ordinance regulating the privilege for which the license is issued.
LIEN – A charge upon real or personal property to satisfy a debt.
LIFE INSURANCE – Insurance based on the life expectancy of the insured with payment being made to a designated beneficiary upon the death of the insured or in some policies, to the insured after a specified time either in lump sum (endowment) or in periodic payments (annuity).
LIMIT – The maximum amount the insured can collect under the terms of a policy. Limits may be aggregate, combined single, per occurrence, or split.
LIMITATION OF RISK – The maximum amount an insurance company may assume on any one risk.
LINE – (1) A kind of insurance; (2) The maximum amount of loss on a particular sort of risk to which an insurer will expose itself; (3) An amount of insurance.
LINE SHEET – (1) A guide prepared by an insurance company for its underwriters, setting forth the amount of liability it is willing to assume on various classes of insurance; (2) A listing of policies in effect for a given purchaser, usually prepared by the purchaser or his/her broker, briefly describing the policies, including insurer, policy number, expiration date, type of coverage, limits and premium.
LIVESTOCK INSURANCE – Insurance against loss due to death of livestock.
LIVING EXPENSE CLAUSE – A provision in a policy which provides payment to the insured by reason of increase in living expenses resulting from the damage or loss covered by the policy.
LLOYD'S ASSOCIATION – A voluntary unincorporated association of individuals for the purpose of writing insurance. Liability is several and proportioned according to the association agreement.
LLOYD'S, LONDON – A corporation that maintains facilities for the insurance business of underwriting and broker members, regulates membership, and collects and disseminates information.
LLOYD'S REGISTER – A catalogue of ships describing registry, dimensions, age, place of construction, ownership, etc.
LOADING – (1) Amounts or percentages added to the pure premium to provide for expenses, contingencies, or profit, or to adjust the premium rate for special situations; (2) An amount added to the fire insurance rate in determining the inland marine insurance rate.
LOSS – (1) The basis for a claim for indemnity or damages under the terms of an insurance policy; (2) Any unintentional diminution of quantity, quality, or value of property (3) With reference to policies of indemnity, this term means a valid claim for recovery thereunder; (4) In its application to liability policies, the term refers to payments made on behalf of the insured.
LOSS CONSTANT – A flat charge added to the premium of smaller risks to bolster the otherwise inadequate premium; used particularly in workers' compensation and sometimes fire insurance.
LOSS OF MARKET – Lost profits resulting from a lack of demand for the insured's products or services in its market.
LOSS OF USE – The inability to use an automobile, premises or equipment due to damage to the vehicle, premises or articles.
LOSS OF USE INSURANCE – Insurance against loss due to insured's inability to use property, such as a vehicle.
LOSS PAYABLE CLAUSE – A clause in an insurance contract providing for payment of loss, for which the insurer is liable to the insured, to someone other than the insured; e.g., mortgagee or lien holder.
LOSS PREVENTION SERVICE – Engineering and inspection work done by insurance companies or independent organizations for the purpose of recommending the change or removal of conditions that would likely cause a loss.
LOSS RATIO – The percentage of losses to premiums. The proportion which losses incurred bear to the earned premiums.
LOSS RESERVE – That portion of the assets of an insurance company kept in a readily available form to meet probable claims provided for the payment of losses which have been incurred but not yet due.
LOSSES INCURRED – The amount of loss, paid and outstanding, for which the insurer has become liable.
LOSSES OUTSTANDING – The amount of loss for which the insurer is liable and which it expects to pay in the future.
LOSSES PAID – The amount of loss for which money has been disbursed by the insurer.
LOST POLICY RELEASE – A statement signed by the insured releasing the insurance company from all liability under a lost or mislaid contract of insurance.