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Word
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Definition
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LAD
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LAD: See Limited Assigned Distribution System.
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Lapse
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Lapse: Termination of an insurance policy because of failure to pay a premium or lack of sufficient cash value to maintain the policy's in-force status. A policy that has lapsed is referred to as a "lapsed policy."
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Lapse Ratio
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Lapse Ratio: The face amount of in-force business that lapses in a given year, expressed as a percentage of in-force business at the beginning of the year. In certain circumstances, this ratio is expressed for the number of policies that lapse without reference to the face amounts of lapsed policies.
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Laser Exclusion
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Laser Exclusion: An endorsement under a claims-made insurance policy that excludes coverage for the risks, persons, classes of property or locations listed in the endorsement. The term refers to zeroing in with sharp focus to exclude specific exposures.
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Last Clear Chance Rule
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Last Clear Chance Rule: A legal doctrine that qualifies a contributory negligence defense by permitting a claimant to prevail in a claim, notwithstanding the claimant's own negligence, if the defendant had a last clear chance to avoid an accident but failed to do so.
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Last to Die
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Last to Die: A form of life insurance policy in which the benefit is payable upon the second death to occur of the two insured lives. This form of policy is used as an estate planning device.
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Law of Large Numbers
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Law of Large Numbers: A concept in probability and statistics that the larger the number of units exposed to loss, the greater the ability to predict loss results accurately.
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Layer
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Layer: The interval between the attachment point and the maximum limit of an excess-of-loss reinsurance policy.
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Lead Insurer
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Lead Insurer: An insurer that sets the terms of coverage and pools a portion of the risk with other insurers.
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Leave of Absence
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Leave of Absence: A temporary absence from active employment for a period of time that
has been agreed to in advance in writing by the Employer.
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Letter of Credit
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Letter of Credit: A form of credit enhancement provided by banks that competes with surety bonds and other forms of financial guarantees provided by insurers.
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Level Commission Life Insurance
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Level Commission Life Insurance: A form of life insurance in which commissions remain constant throughout the term of the policy. In such a policy, an agent receives a smaller commission in the first year of a policy than is normal for other life insurance products.
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Level Premium Life Insurance
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Level Premium Life Insurance: A form of life insurance in which premium levels remain constant throughout the term of the policy. In such a policy, more than the cost of protection is paid in earlier years to compensate for underpayment in later years.
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Leverage Ratios
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Leverage Ratios: Ratios that are used to analyze various aspects of a company's operating performance. See Chapter 8
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Liability Insurance
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Liability Insurance: A form of insurance that covers an insured's liability to third parties, plusassociated expenses.
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Liability Risk Retention Act of 1986
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Liability Risk Retention Act of 1986: Legislation enacted by the federal government to respond to the lack of insurance availability during the hard cycle period of the mid-1980s. This legislation made it possible for purchasing groups to act collaboratively and to circumvent state admission laws.
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License
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License: Certificate of authority issued by a state to an insurer or an insurance agent granting permission to act as such within the state.
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License and Permit Surety Bond
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License and Permit Surety Bond: A surety bond that guarantees that the principal will comply with the laws and regulations governing its activities.
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Life Annuity
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Life Annuity: A form of annuity that produces income during the annuitant's lifetime.
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Life Expectancy
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Life Expectancy: The estimated average number of years of life remaining for a group of persons of a particular age, as set forth in a mortality table.
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Life Insurance
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Life Insurance: A form of insurance on the life of a human being; may include related coverages.
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Lifestyle Fund
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Lifestyle Fund: Asset allocation fund that is designed to simplify and encourage participants' selection of the mix of assets most appropriate to their financial situation, by offering a portfolio of funds that are designed for different phases of their lifecycle, e.g., funds with a higher proportion of equities for younger participants, some with more conservative asset mix for those nearer retirement. Also known as a lifecycle fund.
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Lifetime Disability Benefit
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Lifetime Disability Benefit: A benefit to replace lost income throughout the insured's lifetime as long as disability exists.
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Light Duty
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Light Duty: see transitional work.
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Limited Assigned Distribution (LAD) System
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Limited Assigned Distribution (LAD) System: A system of assigned risk allocation, used primarily in private passenger automobile insurance, in which some carriers buy the assignments of other carriers at a premium and take on full underwriting risk.
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Limits
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Limits: An insurer's aggregate liability for policies in force as of a given date.
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LIMRA International
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LIMRA International: A Farmington, Connecticut-based trade organization providing research for the life insurance industry. Formerly known as Life Insurance Marketing and Research Association.
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Line
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Line: A class of business written by an insurer; also refers to the limit of insurance an insurer is willing to underwrite either for a particular risk or class of risks.
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Line Slip
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Line Slip: See Slip.
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Link Ratio
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Link Ratio: The ratio determined by dividing loss amounts at one development point (for example, 60 months) by the loss amount of a previous point (for example, 48 months). This ratio is used as a tool by actuaries in estimating loss development during comparable development periods in the future.
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Liquidated Damages
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Liquidated Damages: The amount of damages to be awarded in the case of a breach of a contract agreed upon in advance by both parties.
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Little Miller Acts
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Little Miller Acts: State legislation patterned after the federal Miller Act requiring surety bonds for those providing goods and services to state governments. See Miller Act.
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Living Benefits Rider
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Living Benefits Rider: An optional provision of a life insurance policy that offers an insured the option to collect all or a portion of available life insurance benefits upon the occurrence of terminal or other catastrophic illness. See Viatica! Settlement Companies.
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Lloyd's
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Lloyd's: A London-based insurance marketplace, whose underwriting members (or Names) have considerable worldwide influence in property-casualty markets, particularly those dealing with marine and aviation insurance. Approximately one-third of Lloyd's premiums is derived from the United States.
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Lloyd's American Trust Fund
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Lloyd's American Trust Fund: A trust fund maintained with an American bank as security for the payment of claims by Lloyd's of London arising within the United States.
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LMX
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LMX: See London Market Excess.
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LMX Spiral
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LMX Spiral: The practice once prevalent within Lloyd's and other London markets of retroceding a portion of the reinsurance assumed. Thus, once a loss occurs, it works its way (or "spirals") through the various layers of retrocessionaires.
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Loading
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Loading: An insurer's marketing and administrative expenses added to the pure premium being charged. See also Pure Premium.
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Lock-In Provisions
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Lock-In Provisions: State laws or regulations that impede the ability of insurers to withdraw from unprofitable lines of business.
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London Market Excess (LMX)
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London Market Excess (LMX): This term is used to refer to an excess-of-loss reinsurance treaty written in the Lloyd's market or in other London markets.
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Longshoremen and Harbor Workers Act
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Longshoremen and Harbor Workers Act: Federally administered legislation that
provides coverage similar to workers' compensation benefits for individuals in the named
occupations.
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Long-Term Care
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Long-Term Care: Health care service provided to chronically ill or incompetent persons, whether provided on an inpatient or outpatient basis or at home.
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Long-Term Disability
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Long-Term Disability: Similar to disability income, but the coverage is for an employed group and is offered as an employee benefit.
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Long-Term Disability (LTD) Plan
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Long-Term Disability (LTD) Plan: Benefit plan that replaces a portion of income (usually
50%, 60%, or 66-2/3%) lost because of an injury or illness that lasts for an extended period
of time and prevents an employee from performing all the material duties of his or her job.
After a waiting period (e.g., 90 or 180 days), benefits are payable until the employee retires
or reaches a specified age, provided the disability is continuous.
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Loss
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Loss: The amount an insurer is required to pay to a claimant.
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Loss Adjuster
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Loss Adjuster: See Claim Adjuster.
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Loss Adjustment Expense (LAE)
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Loss Adjustment Expense (LAE): Expenses related to the settlement of an insurer's claims, including legal and other fees and expenses, and the portion of an insurer's general expenses allocated to claim settlement costs. Subdivided into Allocated (ALAE) and Unallocated (ULAE). Allocated LAE are expenses that relate directly to a particular claim; Unallocated LAE are general, or overhead, expenses that cannot be assigned directly to a claim.
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Loss Control
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Loss Control: Activities designed to minimize losses through the design and implementation of safety prevention programs.
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Loss Cost
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Loss Cost: Losses incurred divided by the number of units insured. For example, if an insurer incurs $10,000 in losses on its book of automobile insurance business and it insured 1,000 automobiles in a given period, its loss cost per unit would be $10.
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Loss Development
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Loss Development: See Development.
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Loss Frequency
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Loss Frequency: See Frequency.
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Loss Portfolio Transfer
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Loss Portfolio Transfer: See Portfolio Transfer.
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Loss Prevention
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Loss Prevention: See Loss Control.
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Loss Ratio
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Loss Ratio: The ratio of incurred losses and loss adjustment expenses to earned premiums; may also refer to individual components. The ratio of incurred losses to earned premium is the Pure Loss Ratio.
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Loss Reserve
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Loss Reserve: An amount set aside by an insurer to cover outstanding claims — those that have been reported to the insurer, as well as those incurred but not yet reported.
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Loss Severity
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Loss Severity: See Severity.
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Lump Sum
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Lump Sum: Money provided in a single payment.
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Lump Sum Distribution
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Lump Sum Distribution: A defined contribution plan participant's taking the assets in his or her account as a single sum, instead of as an annuity (upon retirement), or rolling the assets over into an IRA or a new employer's plan. A few defined benefit plans allow participants to take their assets as a lump sum, as well.
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