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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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