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lapse
The termination of an insurance policy because premiums were
not paid when they came due.
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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.
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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.
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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.
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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.
letters patent
In Canada, a procedure used by insurance companies wishing
to incorporate through the federal government or in the provinces
of Quebec, New Brunswick, Prince Edward Island, and Manitoba
to petition the appropriate government agency for incorporation.
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level commission
schedule
A commission schedule that provides the same commission rate
for the first and renewal years.
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levelized commission
schedule
A commission schedule that provides different percentages
for first-year and renewal commissions, but the differences
between these percentages are smaller than the differences
between first-year and renewal commissions under traditional
commission schedules. Also known as a heaped commission schedule.
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level premium
annuity
A deferred annuity for which the purchaser of the annuity
pays equal premium amounts at regular intervals, such as monthly
or annually, until the date the benefit payments are scheduled
to begin.
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level premiums
Premiums that remain the same each year that the life insurance
policy is in force.
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level premium
system
A life insurance pricing system whereby the purchaser pays
the same premium amount each year the policy is in force.
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level premium
whole life insurance
A type of whole life insurance for which equal premiums are
payable throughout the premium payment period.
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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.
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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.
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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.
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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.
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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.
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life annuity
A series of payments that are made at regular intervals as
long as a designated person, the annuitant, is then alive.
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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.
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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.
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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.
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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 call a refund life income option. See also cash refund
option, installment refund option, and settlement options.
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life income
with period certain annuity
See life annuity with period certain.
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life insurance
Insurance that provides protection against the economic loss
caused by the death of the person insured.
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life insured
In the common law provinces of Canada, the person whose life
is insured by an individual life insurance policy. Called
the insured in the United States and Quebec. (For the purposes
of this glossary, we have used the United States term "insured",
except in definitions of purely Canadian terms, in which cases
we have made it clear that "life insured" is a Canadian term.)
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lifetime limit
A cap on the benefits paid under a policy. Many policies have
a lifetime limit of $1 million, which means that the insurer
agrees to cover up to $1 million in covered services over
the life of the policy.
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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.
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life underwriter
See insurance agent.
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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.
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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.
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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.
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living benefits
See accelerated benefits.
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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.
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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.
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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.
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long-form reinstatement
application
A reinstatement application similar to a policy application
in that both address the long-term health history of the insured.
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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.
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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.
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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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