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LI- Life Insurance
LIFO- Last in, First out; an inventory accounting method by which sales are considered to be from among the latest merchandise or inventory purchased or produced. This method minimizes inventory profits and losses.
LTD- 1) Long-term debt; 2) Long-term disability
Lapse - Termination of a policy because of failure to pay the premium. In Life Insurance, the term refers to nonpayment before the policy has developed any non forfeiture values. If it has, and the premium is not paid, it is said to have lapsed;except as to any non forfeiture benefits that may apply.
Larceny - The unlawful taking of the personal property of another without his consent and with intent to deprive him of ownership or use thereof. It is a broader term than burglary or robbery, largely synonymous with theft.
Laser Beam Endorsement - An endorsement to a "claims made" liability form used to exclude specific accidents, products, work or locations. It earned its nickname because it allows an insurer to zero in with a sharp focus to exclude specific exposures.
Last Clear Chance - A doctrine that liability may attach to a person who, immediately before an accident, has a last clear chance to avoid it and did not.
Latent Defect - A defect which is not immediately apparent.
Law of Large Numbers - This law states that the larger the number of exposures considered, the more closely the losses reported will match the underlying probability of loss. The simplest example of this law is the flipping of a coin. The more times the coin if flipped, the closer it will come to actually reaching the underlying probability of 50% heads and 50% tails.
Layering- The building of an insurance contract by steps, utilizing the excess of loss approach, whereby one insurer writes in excess of lower limits accepted by other insurers.
Legal Hazard - An increase in the likelihood that a loss will occur because of court actions.
Legal Liability - Liability under the law as opposed to liability arising from contracts or agreements. In insurance, it is most often used to refer to the liability that an individual has if he or she should negligently injure another party. For example, an owner of an automobile may be held legally liable if he or she is negligent in the operation of the automobile and injures another person or damages another person's property as a result of that negligence.
Liability- A legally enforceable obligation
Liability Insurance - That insurance which pays and renders service on behalf of an insured for loss arising out of his or her responsibility to others imposed by law or assumed by contract.
Libel - A written statement about someone which is personally injurious to that individual. In maritime law it means legal action brought against the owner of another ship.
Life Expectancy - the average number of years remaining for a person of a given age to live as shown on the mortality or annuity table used as a reference.
Limit of Liability - The maximum amount for which an insurer is liable as set forth in the contract.
Liquidity- The ability of an organization or person to convert assets into cash quickly with little or no loss.
Livery Use - Use of a vehicle for hire to carry persons. Livery use is excluded in Automobile Insurance contracts unless coverage for it is stated in the policy.
Livestock Insurance - A name perils contract that provides a prescribed lump sum payment to an insured upon the death of any animal covered by the policy.
Livestock Transit Insurance - Insurance against accidents causing death or crippling on shipments of livestock while in transit by rail, truck, or other similar means of transportation.
Lloyd's - Generally refers to Lloyd's of London, England, an institution within which individual underwriters accept or reject the risks offered to them. The Lloyd's Corporation provides the support facility for their activities.
Loss - Generally refers to (1) the amount of reduction in the value of an insured's property caused by an insured peril, (2) the amount sought through an insured's claim, or (3) the amount paid on behalf of an insured under an insurance contract.
Loss Adjustment Expense - The cost of adjusting losses excluding the amount of the loss itself.
Loss Assessment-A specially designed property coverage for condominium unit owners. This coverage provides protection for assessments made by the condominium association resulting from loss to the property. The policy is written to pay the assessment if the loss is caused by an insured peril.
Loss Control - Any combination of actions taken to reduce the frequency or severity of losses. Installing locks, burglar or fire alarms and sprinkler systems are loss control techniques.
Loss Conversion Factor- A factor used in the retrospective rating formula that is designed to cover claim adjustment expenses and the cost of the insurer's (or TPA's) claim services.
Loss Development- The difference between the original loss as originally reported to an insurer and its subsequent evaluation at a later date or at the timeof its final disposal.
Loss Development Factor- Ratios that are applied to a current valuation of losses to determine an estimate of ultimate incurred losses. It is assumed that current losses will be paid according to the same pattern as prior losses at similar states of development,. LDFs are frequently calculated separately for incurred losses, paid losses, and claims counts.
Loss Forecasting- Predicting future losses through an analysis of past losses. Past loss data must span a sufficient number of years (usually 5 or more) to achieve some degree of credibility.
Loss Limits or Limitations- A term used in workers compensation retrospective rating formulas. It is designed to limit the effect of catastrophic losses that would otherwise be considered in full in figuring the final retrospective premium.
Loss Rating- Rating techniques to establish the prospective rate to be applied to an exposure base
Loss Ratio - The losses divided by the premiums paid. The numerator (losses) can be losses incurred or losses paid, and the denominator (premium) can be earned premiums or written premiums, depending on what use is going to be made of the loss ratio.
Loss Report- A listing of reported claims providing such information as the date of occurrence, type of claim, amount paid and amount reserved for each as of the report's valuation date.
Loss Reserve - The estimated liability for unpaid insurance claims or losses that have occurred as of a given evaluation date. Usually includes losses incurred but not reported, losses due but not yet paid, and amount not yet due. The above describes a loss reserve as it would appear in an insurer's financial statement. As to individual claims, the loss reserve is the estimate of what will ultimately be paid out on that case.
Loss Trending- Adjusting historical losses to account for inflationary trends so that the ultimate value is more current or meaningful. Loss trend factors are multiplied by actual historical losses to trend losses.
Losses Incurred- Total losses paid or unpaid that are sustained during a given period
Loss versus Claim -
Loss: a reduction in value; Claim: a demand or obligation for payment as a result of a loss.
Lump sum - a method of settlement whereby the beneficiary receives the entire proceeds of a policy at once rather than in installments.
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Maintenance Bond - A bond guaranteeing against defects in workmanship or materials for a stated time after the acceptance of completed work. 2 years is a common term for a construction bond.
Malicious Mischief - Similar to vandalism. Purposely damaging the rights or property of another.
Malpractice - Professional misconduct or lack of ordinary skill in the performance of a professional act which renders the practitioner liable to suit for damages.
Malpractice Insurance - Insurance on a professional practitioner that will (1) defend suits instituted against him for malpractice, and/or (2) pay any damages, subject to policy limits.
Manual Rates - Rates as promulgated by a rating bureau before application of any credits, discounts, surcharges, or deviations. Such rates are referred to as "manual rates" because they are published in a rating manual.
Manufacturers Selling Price Clause - Values unsold finished goods at the price at which they could have been sold at the time of a loss.
Market Value - The price for which something would sell, especially the value of certain types of assets, such as stocks and bonds. It is based on what they would sell for under current market conditions. For example, common stock market value would be the price of the stock as of a specified date.
Masonry Noncombustible Construction - A building which has exterior walls constructed of masonry materials, such as adobe, brick, concrete, gypsum block, hollow concrete block, stone, tile, or other similar materials, with floors and roof constructed of metal or other noncombustible materials.
Material Fact - In insurance, it refers to a fact which is so important that the disclosure of it would change the decision of an insurance company, either with respect to writing coverage, settling a loss, or determining a premium. Usually, the misrepresentation of a material fact will void a policy.
Maximum Possible Loss - The worst possible loss that could occur
Maximum Retrospective Premium- A percentage of the standard premium determined by multiplying the maximum retrospective premium factor by the standard premium. It is the greatest amount of premium to be paid by the insured subject to the retrospective rating plan. It has the effect of placing a maximum dollar amount of the financial responsibility of the insured. Once the maximum retrospective premium has been paid, all additional losses are the responsibility of the insurer, subject to the limit of liability of the insurance policies. The excess loss premium may be included in the maximum or in addition ot the maximum, depending on the retro agreement.
Maximum Retrospective Premium Factor - Established by agreement between the insured and the insurance carrier. When multiplied by the standard premium, determines the maximum retro premium.
Medical Payments Insurance - A form of coverage, optional in Automobile and other Public Liability policies, that provides for the payment of medical and similar expenses without regard for liability.
Mental (or Emotional) Distress - Usually not covered if a claimant was a bystander to an accident, but usually covered if he was physically involved.
Merit Rating - A type of rating plan used in several forms of insurance but most commonly in Personal Auto. It is a method whereby the insured's premium will vary up or down depending on his past loss record.
Messenger Robbery Insurance - Coverage on money and other property in the possession of persons who are away from the premises. An example would be an employee taking a deposit to the bank.
Mini-Tail - Automatic 60 day extended reporting period allowing for the making of claims after expiration of a "claim made" liability policy.
Minimum Retrospective Premium - A percentage of the standard premium determined by multiplying the minimum retrospective premium factor by the standard premium. It is the least amount of premium to be paid by the insured subject to the retrospective rating plan.
Minimum Retrospective Premium Factor - Established by agreement between the insured and the insurance carrier. When multiplied by the standard premium, determines the minimum retro premium.
Misrepresentation - The use of oral or written statements that do not truly reflect the facts either by an insured on an application for insurance or by an insurer concerning the terms or benefits of an insurance policy.
Mitigation of damages - sometimes referred to as the Doctrine of Avoidable Consequences, "imposes on injured party the duty to exercise reasonable diligence and ordinary care in attempting to minimize damages after injury or loss.
Mobile Equipment - A term defined in General Liability policies as land vehicles, including machinery an apparatus attached thereto, whether or not self-propelled, and (1) not subject to motor vehicle registration, or (2) used exclusively on the insured's premises, or (3) designed principally for use off public roads, or (4) designed or maintained for the sole purpose of providing mobility for permanently attached equipment such as cranes, loaders, pumps, generators, or welding equipment.
Monoline Policy - Any insurance coverage written as a single line policy.
Monopolistic State Fund - Requires that all businesses buy Workers' Compensation Insurance from the State. Private insurers cannot compete in these states.
Moral Hazard - A condition of morals or habits that increases the probability of loss from a peril. An extreme example would be an individual who previously burned his own property to collect the insurance.
Mortality Rate - The number of deaths in a group of people usually expressed as deaths per thousand. It can be the rate for the total population, called the crude mortality rat, or it can be refined by factors such as age groupings or causes of death.
Mysterious Disappearance - A disappearance of property that cannot be explained. Crime Insurance policies use this term to give very broad coverage as opposed to policies which narrow definitions to specific perils such as robbery and burglary.
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NAIC - National Association of Insurance commissioners
Named Insured - any person, firm, or corporation, or any member thereof, specifically designated by name as the insured(s) in a policy. Others may be protected as insureds even though their names do not appear on the policy. A common application of this latter principle is in Automobile policies where, under the definition of insured, protection is extended to cover other drivers using the car with the permission of the named insured.
National council on Compensation Insurance (NCCI) - An association of insurers selling compensation coverage and operating as a rating organization. NCCI collects statistics, develops rates and policy forms, and makes state filing for its members. It is involved only with worker's comp, and does not operate in all states.
Negligence - Failure to use that degree of care which an ordinary person of reasonable prudence would use under the given or similar circumstances. A person may be negligent by acts of omission or commission or both.
Net Income - The balance of funds remaining after all of an organization's expenses are subtracted from gross sales; the excess of revenues over expenses; profit. Net income is the amount that can be distributed to an organization's owners or be kept as retained earnings.
Net Worth - The total value of all assets minus liabilities
No-Fault Insurance - Many states have passed laws permitting the individual automobile accident victim to collect directly from his or her own insurance company for medical and hospital expenses regardless of who was at fault in the accident.
Non-assignable - A policy that the owner cannot assign to a third party. Most policies are nonassignable unless approval is given by the insurer.
Non-combustible Construction - Exterior walls, floor, and supports made of metal, asbestos, gypsum, or other noncombustible materials.
Non-insurance Risk Transfer - The transfer of risk from one party to another party other than an insurance company. This risk management technique usually involves risk transfers by way of hold harmless or indemnity provisions in contracts and is also called "contractual risk transfer."
Non-ledger Assets - Assets that are due and payable but have not yet been entered into the balance sheet.
Non-owned Auto - Any autos not owned, leased, hired, or borrowed which are used in connection with the business.
Non-subject Premium - A premium that is not a part of a loss sensitive rating formula. For example, in a retrospective rating plan, the non-subject premium usually purchases the excess insurance (over the loss limits, not to be confused with insurance in excess of primary or SIR). The expression "non-subject" refers to the fact that the premium is a guaranteed cost and not adjustable based on losses. Non-subject premium is not subject to the retro formula.
Notice of Cancellation - Written notice by an insurer of intent to cancel insurance or written notice by an insured requesting cancellation.
Notice of Loss - Notice to an insurer that a loss has occurred. Notice of loss is a condition of most policies, and it is frequently required within a given time and in a particular manner.
Nuisance Value - An amount that an insurance company will pay to settle a claim not because it is a valid claim but because the company considers it worth that amount to dispose of it.