*Terms marked with an asterisk are from LOMA’s Glossary of Insurance and Financial Services Terms. Copyright © 2002 LOMA (Life Office Management Association, Inc.). Used with permission from LOMA. Click here for more information

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L-SHARE VARIABLE ANNUITIES

A form of variable annuity contract usually with short surrender periods and higher mortality and expense risk charges.

LADDERING

A technique that consists of staggering the maturity dates and the mix of different types of bonds.

LAW OF LARGE NUMBERS

The theory of probability on which the business of insurance is based. Simply put, this mathematical premise says that the larger the group of units insured, such as sport-utility vehicles, the more accurate the predictions of loss will be.

LIABILITY INSURANCE

Insurance for what the policyholder is legally obligated to pay because of bodily injury or property damage caused to another person.

LIFE INSURANCE

See Ordinary life insurance; Term insurance; Variable life insurance; Whole life insurance

LIMITS

Maximum amount of insurance that can be paid for a covered loss.

LINE

Type or kind of insurance, such as personal lines.

LIQUIDATION

Enables the state insurance department as liquidator or its appointed deputy to wind up the insurance company's affairs by selling its assets and settling claims upon those assets. After receiving the liquidation order, the liquidator notifies insurance departments in other states and state guaranty funds of the liquidation proceedings. Such insurance company liquidations are not subject to the Federal Bankruptcy Code but to each state's liquidation statutes.

LIQUIDITY

The ability and speed with which a security can be converted into cash.

LIQUOR LIABILITY

Coverage for bodily injury or property damage caused by an intoxicated person who was served liquor by the policyholder.

LLOYD'S OF LONDON

A marketplace where underwriting syndicates, or mini-insurers, gather to sell insurance policies and reinsurance. Each syndicate is managed by an underwriter who decides whether or not to accept the risk. The Lloyd's market is a major player in the international reinsurance market as well as a primary market for marine insurance and large risks. Originally, Lloyd's was a London coffee house in the 1600s patronized by shipowners who insured each other's hulls and cargoes. As Lloyd's developed, wealthy individuals, called "Names," placed their personal assets behind insurance risks as a business venture. Increasingly since the 1990s, most of the capital comes from corporations.

LLOYDS

Corporation formed to market services of a group of underwriters. Does not issue insurance policies or provide insurance protection. Insurance is written by individual underwriters, with each assuming a part of every risk. Has no connection to Lloyd's of London, and is found primarily in Texas.

LONG-TERM CARE INSURANCE

Coverage that, under specified conditions, provides skilled nursing, intermediate care, or custodial care for a patient (generally over age 65) in a nursing facility or his or her residence.

LOSS

A reduction in the quality or value of a property, or a legal liability.

LOSS ADJUSTMENT EXPENSES

The sum insurers pay for investigating and settling insurance claims, including the cost of defending a lawsuit in court.

LOSS COSTS

The portion of an insurance rate used to cover claims and the costs of adjusting claims. Insurance companies typically determine their rates by estimating their future loss costs and adding a provision for expenses, profit, and contingencies.

LOSS OF USE

A provision in homeowners and renters insurance policies that reimburses policyholders for any extra living expenses due to having to live elsewhere while their home is being restored following a disaster.

LOSS RATIO

Percentage of each premium dollar an insurer spends on claims.

LOSS RESERVES

The company's best estimate of what it will pay for claims, which is periodically readjusted. They represent a liability on the insurer's balance sheet.

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