LOMA Glossary

The LOMA Glossary of Insurance and Financial Services Terms

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labor union group. A group that consists of members of a labor union or all of any class or classes of union members other than the union officials, agents, or representatives.

lagging indicator. A statistical variable that tends to change after gross domestic product (GDP) changes. Contrast with coincident indicator, leading indicator. See also gross domestic product.

lapse. The termination of an insurance policy for nonpayment of premium.

lapse rate. The percentage of a group of policies in force at the beginning of a specified period, such as a year, that are terminated by the end of that period for reasons other than the death of the insured. Contrast with persistency rate.

last survivor life insurance. A variation of joint whole life insurance under which the policy benefit is paid only after both people insured by the policy have died. Also known as second-to-die life insurance or survivorship life insurance. See also joint whole life insurance.

last-in-first-out (LIFO) rule. See earnings first rule.

late enrollee. In group insurance, members of a group and their eligible dependents who are not enrolled when group coverage is first offered to the group but later decide to enroll in the plan.

late-remittance offer. See reinstatement.

leading indicator. A statistical variable that tends to change before gross domestic product (GDP) changes. Contrast with coincident indicator, lagging indicator. See also gross domestic product.

legal actions provision. A provision in individual health insurance policies that limits the time during which a claimant who disagrees with an insurer’s claim decision has the right to sue the insurer to collect the amount the claimant believes is owed under the policy.

legal reserve. See contractual reserve.

lessee. The individual or organization that leases a building from the building’s owner.

lessor. A building owner that leases a building to another individual or organization.

letter of intent (LOI). A short document issued to confirm the essential terms of a reinsurance arrangement while the reinsurance treaty is being drafted. Also known as a reinsurance slip.

level face amount term life insurance. See level premium term life insurance.

level premium system. A life insurance pricing system that allows a policyowner to pay the same premium amount each year a policy is in force.

level premium term life insurance. Term life insurance that provides a policy benefit that remains the same over the term of the policy. Also known as level face amount term life insurance or guaranteed level premium term insurance.

leverage. See leverage effect.

leverage effect. A financial effect in which the presence of fixed costs—either operating costs or financing costs—automatically magnifies the potential risks and returns to the company’s owners. Also known as leverage.

leverage ratios. Financial ratios used to compare the amount of an insurer’s obligations with the insurer’s ability to meet those obligations.

liabilities. A company’s debts and future financial obligations. Contrast with assets.

liability insurance. Insurance that provides protection for the insured against financial responsibility for harming others or their property.

liability portfolio. In asset-liability management (ALM), the portfolio that represents the insurer’s obligations to customers. Also known as a product portfolio. Contrast with asset portfolio.

license. See certificate of authority.

lien. A term used to describe a claim against property resulting from a debt or other obligation.

life and health insurance company. A company that issues and sells products that insure against financial losses that result from personal risks such as death, disability, illness, accident, and outliving one’s savings.

life and health insurance guaranty association. In each state in the United States, an organization that protects policyowners, insureds, beneficiaries, annuitants, payees, and assignees against losses that might result from the impairment or insolvency of a life or health insurer that does business in the state. Insurers are required to participate in a state’s guaranty association in order to be licensed in that state.

life annuity. An annuity that provides periodic income payments for at least the lifetime of the annuitant.

life annuity with period certain. A life annuity which guarantees that the insurer will make periodic income payments throughout the annuitant’s life and guarantees that the payments will be made for at least a certain period, even if the annuitant dies before the end of that period.

life annuity with refund. A life annuity that provides periodic income payments throughout the lifetime of the annuitant and guarantees that at least the purchase price of the annuity will be paid out. Also known as a refund annuity.

life event-oriented marketing. In insurance sales, the practice of timing sales and promotional efforts around significant events in customers’ lives, such as marriage or the birth of a child.

life income option. A life insurance policy settlement option under which the insurance company agrees to use the policy proceeds to provide a life annuity for the policy's payee. See also straight life annuity, life annuity with period certain, life annuity with refund, and joint and survivor annuity.

life insurance. Insurance that pays a benefit upon the death of a named person.

Life Insurance Buyer's Guide. In the United States, a standardized publication that explains to insurance customers in general language the basic types of life insurance, how to determine the amount of life insurance coverage they need, and how to compare the costs of similar types of policies. Many states have enacted legislation that requires insurers to provide prospective buyers of certain insurance and annuity products with a Life Insurance Buyer’s Guide. Also known as a Buyer’s Guide. Contrast with policy summary.

life insurance mortality table. A type of mortality table that shows the projected mortality rates and survival rates for a population of life insureds only. Contrast with annuity mortality table.

life only annuity. See straight life annuity.

life settlement. A financial transaction in which the owner of a life insurance policy, typically a senior adult with a diminished life expectancy but who is expected to live more than twenty-four months, sells the policy to a third party for more than its cash value but less than its face value. See also viatical settlement company.

life settlement company. See viatical settlement company.

life with refund annuity. See life annuity with refund.

Life-1 Report. A financial report that insurers operating in Canada must submit to the Office of the Superintendent of Financial Institutions (OSFI) and to the regulators of every province in which the insurer does business.

lifecycle mutual fund. A diversified portfolio of investments with a target year in its name whose asset allocations grow increasingly conservative as the target year approaches. Also known as a target retirement mutual fund.

lifestyle mutual fund. A diversified portfolio of financial investments designed to match the risk tolerance of an investor.

lifetime benefit period. A feature in long-term care (LTC) insurance policies that provides for payment of a daily benefit amount for the remainder of the insured person’s life, provided the insured person is receiving custodial care.

lifetime maximum benefit. The maximum amount that an insurer will pay for all eligible expenses an insured incurs under a medical expense or long-term care insurance policy. When an insured reaches the lifetime maximum benefit amount, the policy will not pay any more benefits.

LIFO rule. Last-in-first-out rule. See earnings first rule.

limitation. Any insurance policy provision that restricts coverage and that is not an exclusion or a reduction.

limitations on asset concentrations. See diversification criteria.

limited-payment whole life policy. A whole life insurance policy for which premiums are payable only for a stated period of time or until the insured’s death, whichever occurs first.

liquid assets. Cash or assets that can be converted to cash quickly for an approximation of true value.

liquidation. (1) In general, the process in which a corporation that is being dissolved pays its debts or makes arrangements to pay those debts. If any assets remain after the debts are paid, then those assets are distributed on a pro rata basis to the corporation’s stockholders in the order of their priorities. (2) In the United States in an insurance receivership, a process by which a receiver either transfers all of an impaired insurer’s business—including its reserve liabilities—and assets to other insurers or sells the insurer’s assets and terminates the insurer’s business. See also receivership. Contrast with rehabilitation.

liquidation period. See payout period.

liquidity. The ease with which an asset can be converted to cash for an approximation of its true value.

liquidity ratios. Financial ratios that measure a company’s ability to meet its maturing short-term obligations.

liquidity risk. The risk of not having adequate liquidity to meet obligations as they come due.

living benefit. See accelerated death benefit.

loan coverage. See creditor insurance.

location-selling distribution system. A method for distributing insurance products that is designed to generate customer-initiated sales at an office or information kiosk in a store, shopping mall, or other non-insurance business establishment.

LOI. See letter of intent.

long-term assets. Assets that a company plans to hold indefinitely or for a long time—generally, more than a year—to generate income. Also known as noncurrent assets.

long-term care (LTC) insurance. Health insurance that provides benefits to eligible insureds who need care for an extended period either at home or in a qualified care facility. Benefits are typically provided for a range of formal and informal services, including medical care as well as personal care.

long-term care (LTC) insurance benefit. A supplemental life insurance policy or annuity contract benefit under which the insurer agrees to pay a monthly benefit to a contract owner if the insured requires constant care for a medical condition. See also accelerated death benefit.

long-term group disability income coverage. Group disability income coverage that provides a maximum benefit period of more than one year. Contrast with short-term group disability income coverage.

long-term individual disability income coverage. Individual disability income coverage that provides a maximum benefit period of five years or more. Contrast with short-term individual disability income coverage.

long-term liabilities. Liabilities that do not have to be paid in full during the current accounting period, usually one year. Also known as noncurrent liabilities.

loss. A monetary excess of expenses over revenues. Sometimes known as a net loss. See also expense and revenue. Contrast with profit.

loss ratio. A measure of the reasonableness of health insurance policy benefits, calculated as the ratio of total premiums received to total claims incurred for a group of policies. It measures the percentage of premiums that are paid out in policy benefits without considering administrative expenses, state premium taxes, reserves, and other costs involved in issuing and maintaining the policies.

LTC. See long-term care insurance.

LTC insurance. See long-term care insurance.

lump-sum distribution. For an annuity, the distribution of the accumulated value in a single payment.

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