Glossary Index

Glossary on General Insurance Terms starting with L


LISTED COMPANIES : Companies whose shares are listed on stock exchanges for trading; respective stock exchange where the shares are listed provide regulatory guidelines for such companies related to accounts publications and disclosure norms and other details; which is why listed companies are more transparent

LOSSES DISCOVERED OR CLAIMS MADE BASIS : Term related to excess of loss reinsurance treaties implies all discovered losses that are reported or made during the period of treaty irrespective of date of inception of the original policies or the occurrence; such cover may sometimes be used when there is difficulty in determining the precise date of the occurrence

LOSSES OCCURRING BASIS : Related to excess of loss reinsurance treaties means cover that can be provided under such arrangement on occurring losses basis; implying all occurring losses during the treaty period irrespective of the start date of original policy/ies covered by the treaty

L.C.R. : Largest Claims Reinsurances; method more appropriate for liability reinsurances where statistical survey of larger losses taken on last 5 years and prescribed limit of the largest loss fixed so that reinsurance companies are liable to pay losses that are over this limit

L.P.G. GAS DEALERS INSURANCE : Comprehensive insurance package for the benefits of LPG gas dealers that provide cover for insured, office and service personnel, building and fixtures, contents inclusive of gas cylinders and other fixtures etc. against accidental personal injury and property damage, assured's liability towards employees under the workers compensation act and also his liability to third parties and assured's financial losses arising out of infidelity on behalf of employees

LABEL CLAUSE : Clause related marine cargo insurance; relates to canned or similar kind of goods that are labeled for identification of products where such labels may be damaged due to contact with water or other cargo insurance company's liability is restricted to cost of repackaging and relabeling as per the clause

LAG : Period elapsing between claims actually occurring and when paid in actual

LANDED BUT MISSING : Situation where import or export cargo can be lost after landing at the destination port due to theft, over issue or incorrect carriage to another location; in all these cases Port Authorities will after some search issues certificate known as Landed but Missing or C Certificate

LANDING REMARKS : Remarks made by the dock authorities in their records displaying marks and numbers, condition, weight, etc., of landed goods; insurance companies need an extract of these records with respect to claim for loss or damage to insured cargo as evidence for the stage at which loss to cargo may have occurred

LAPSED POLICY : Insurance cover that has closed earlier to the actual expiration date because of non-payment of the payment of premium; relating to non-life insurance this situation would arise only in respect to marine hull policies or other plans issued for durations exceeding one year where the facility of installment premium is extended; when the assured fails to pay installment on or before this date the policy lapses on the due date

LARGE LOSSES INFORMATION : Information on large losses that is provided to reinsurance companies for the purpose of reviewing performance of treaties; either proportional or excess of loss treaty; related to proportional treaties, loss is considered "Large loss" when the amount is more than "cash loss limit" provided in the wordings; relating to excess of loss reinsurance loss is considered large loss when it is over 50% of underlying limit

LATENT DEFECT : Terminology used for referring to hidden flaws or defects within the structure of machinery or ship that is not readily discoverable by competent individual/s using reasonable skills in ordinary inspection; any damage or loss caused due to latent defect can be recovered under marine hull insurance plan providing coverage according to ITC (Hull) or IVC (Hulls)

LAW OF LARGE NUMBERS : Concept that is larger than number of exposures; more closely will be the actual results to the expected outcomes providing more credibility of predictions; this law forms basis for deriving the statistical expectation of loss on the basis of which premium is determined for covering different risks

LAWFUL ADVENTURE : Implied warranty related to marine insurance contracts to the effect whereby the adventure must be legal

LAY UP WARRANTY : Hull plans covering minor vessels like fishing and sailing boats carry "Lay up warranty" offering the insured ship be laid up out of commission during specific time period that is winter and monsoon months; vessels can be laid on mud, afloat, or hard

LAYOUT PLAN : Representation of the horizontal shape of building; ground floor shape is always taken and by including additional details plan is built-up to incorporate all features of the different storeys and the roof; plans comprise concise and clear form of important matters that cannot be covered in the inspection report

LAY-UP RETURNS : In marine hull insurance, scale of premium refund agreed by International Marine Insurance market at the time when insured ship must be laid up during the insurance duration; as risk to the insurance provider during this period is less compared to navigational risks return of premium is allowed by the insurance company during this laid up duration; return on premium is subject to certain terms and conditions imposed by the insurance company. For motor insurance, if automobile is laid up in garage risks covered with motor comprehensive insurance policy are limited to burglary, fire, or theft; which is why some portion of the premium is refundable as per the provisions of All India Motor Tariff

LEAD INSURER : Insurance company among co-insurers related to joint insurance by the service providers that has the largest share; lead insurer deals with the insured on all matters that relate to insurance, such as collecting the entire premium, issuing documents, servicing other client matters including claim settlement for all fully assessed loss; customary for coinsurers to issue the leader letter of authority for facilitating the leader to conduct the various functions on their behalf that is binding on them; normally ex-gratia settlement claim do not come under this purview; periodic settlements are effected as between the coinsurers and leader related to release of coinsurer's premium share and collecting their share from the resulting losses

LEADER/LEADING REINSURER : Excess of loss reinsurance treaty terms are negotiated with a leader that quotes the rates and other terms and offers support with leading share; reputed leader makes it easy for completing placement of the good securities; other reinsurers agree to follow the leader; proportional treaty do not have a leader but there may be leading reinsurer with greater share

LEAKAGE FROM AUTOMATIC SPRINKLER INSTALLATIONS : Accidental leakage or discharge of water from automatic sprinkler installation arising from damage to sprinkler head due to impact from certain object or heat from some source/s other than fire resulting in sprinkler head to operate; damage or loss to insured property from such leakage is covered under standard fire and special perils insurance plan

LEASE : Contract where the owner of any fixed assets allows its use to the contracting party for a predefined time period in exchange for consideration in the form of rent; owner is known as lessor and user is the leasee

LEGAL LIABILITY : Financial liability imposed under civil laws towards third party/ies

LEGAL LIABILITY INSURANCE POLICY : Insurance cover providing indemnity to the insured with relation to financial consequences of legal liability; when such liability arises under civil law damages are payable; in addition there may be certain legal costs awarded against insured and defense of the claim that are reimbursed under the policy

LEGAL OPINION : Opinion offered by legal professionals in relation to some issue/s describing what is lawful or legal

LEGALITY OF THE CONTRACT : An essential component for any contract to be legally valid; applicable to insurance contracts; content in the contract should be legal

LENDER : Firm or individual extending money to borrower/s with an undertaking that such amounts will be repaid often with interest; lenders providing such loans against assets (moveable or immovable) have insurable interest in these assets

LESSEE : Individual in whose favor lease is provided; tenant under lease

LETTER OF CREDIT : Document providing authority for payment of certain amount to any person named at the insurance company's risk; when expressed as irrevocable authority cannot be withdrawn

LETTER OF INDEMNITY : In case original policy is lost by the claimant, letter of indemnity is procured from her or him by the insurance company to the effect that if subsequently another individual presents any claim on the company with original policy, s/he will reimburse the claim amount paid and also hold the insurance company harmless for effecting settlement with her or him without producing the original policy; relevant to marine insurance due to free assignment-ability

LETTER OF TRANSFER (G.A) : Related to general average, it is letter procured from the insured by the insurance company after paying on behalf of the insured general average deposit that is payable by insured for general average; on its strength insurance company can receive from ship owner any excess deposit amount over the actual amount of contribution

LIABILITY : Legally enforceable obligation

LIABILITY INSURANCE : Insurance cover for protecting policy holder from financial losses due to any liability arising from injuries to other individuals or their property/ies

LIABILITY LIMITS : Sum or sums as stipulated in the insurance contract up to which the insurer needs to meet the claims made by the insured

LIABILITY OF CARRIER (CARRIAGE BY SEA) : Under affreightment contract, carrier is obliged to supply the ship that is cargo and sea worthy; in addition to providing competent crew to manage the ship he must carry, care, and deliver the cargo at its destination in same good condition when delivered to him; if due to account of failure of the carrier to discharge his obligations cargo is damaged, he is liable to reimburse such loss; vessel owner's liability towards cargo is limited; carrier's liability is insured through P&I Clubs and not within the regular marine insurance business segment

LICENSE : Legal authority provided to the companies, brokers, agents, or consultants for transacting insurance business within the applicable framework of legal guidelines and/or acts and/or regulations currently in force

LICENSE FEE : Amount paid by insurers or other companies or individuals as determined by the regulatory authorities for doing business as per the authority granted by the license

LIEN : Legal right of an individual on the property of another until the latter has satisfied the former's liability

LIFE POLICY FOR 2 WHEELERS : Insurance coverage for 2 wheelers covering 3rd party risks and being valid until the vehicle is duly registered; provide continuous coverage for 3rd party liabilities for small vehicle owners

LIFT (THIRD PARTY LIABILITY) INSURANCE : Insurance plan for owners of passenger lifts for taking liabilities arising from usage and operations of the lifts; plan provides indemnity for legal liabilities of insured for paying compensation to 3rd parties for loss of life or bodily injuries or damage to third party property; legal expenses incurred by the insured with consent from the insurance company for defending legal action/s by third parties is payable under the coverage; policy contains 2 limits; one for single accident and other for all claims during the duration of the policy representing maximum liability of the insurance company

LIGHT MOTOR VEHICLE (LMV) : Transport vehicle or omnibus whose gross vehicle weight of either tractor, motor car, or toad roller, unladen weight does not exceed 7500 kilos

LIGHTNING : Flash of light in the sky caused due to atmospheric electricity discharge from one cloud to another or between earth and cloud; it may result in crevices in buildings or fire damages; it is a peril covered under fire as related to standard fire and special perils policy

LIMIT FOR ANY ONE LOSS : Maximum liability amount of the insurance company under the policy for any one kind of loss or series of losses due to a single event

LIMIT OF LIABILITY : Monetary limit to which insurance company or reinsurer is liable for single risk; when relating to reinsurance is expressed either as sum insured basis or probable maximum loss basis

LIMIT OF LOSS WITH REINSTATEMENT PROVISION : In excess of loss reinsurance treaties there exists a limitation to aggregate losses that are payable under the period of coverage by the reinstatement provision; if the limit is exhausted prior the expiry date XL cover is deaden prior to expiration

LIMIT PER ACCIDENT : Maximum liability of the insurance company for all claims arising from one accident

LIMIT PER BOTTOM : Maximum limit to which single shipment is covered under the open cover by the insurance company; limit per bottom clause appears in all open coverages for exports and imports

LARCENY : Fraudulent or wrongful carrying away or taking by any individual of personal property of another

LEGAL LIABILITY : Liability that is enforceable under existing laws or acts

LIABILITY : Portion of insurance company's balance sheet that denotes legal obligations of the firm including the estimated future payouts for losses covered under issued policies

LOSS ADJUSTMENT EXPENSE : Sum insurance companies pay towards the investigation and settlement of insurance claims including cost of defending lawsuits in the court

LOSS AVOIDANCE : Risk management method where any situation or activity may result in loss for the firm is abandoned or avoided

LOSS CONTROL : Actions adopted for reducing the frequency and/or the severity of the losses

LABOR-MANAGEMENT RELATIONS ACT OF 1947 (TAFT-HARTLEY ACT) : Law controlling conditions under which employer may pay money to the representative of the employees

LAPSE : Termination or discontinuance of insurance policy because of non-payment of premium

LARCENY-THEFT : Unlawful taking, leading, carrying, or riding away with another individual's property

LAST CLEAR CHANCE RULE : Statutory modification of contributory negligence law allowing claimant endangered by her or his own negligence for recovering damages from defendant if defendant has final clear chance for avoiding accident but fails to do so

LEGAL RESERVE : Minimum reserve that a company must maintain to meet future obligations and claims as these are calculated under state insurance code

LEGAL RESERVE LIFE INSURANCE COMPANY : Life insurance company operational under state insurance laws that specify maximum basis for the reserves organization requires to maintain on its policies

LEVEL COMMISSION SCALE : Commission scale that provides payment of commissions at standard rate every year during which the policy remains in force

LEVEL PREMIUM : Premium remaining constant during the entire tenure of the policy

LEVEL PREMIUM LIFE INSURANCE : Life insurance for which the premium amount is constant every year; premium is more than actual protection cost during the earlier years of the plan and lower than actual cost during the later years; building reserve is natural due to the premium levels; overpaying initially combined with interest earned serves to balance the lower payments in the later years

LIABILITY WITHOUT FAULT : Principle on which basis workers compensation is calculated; holding the employer absolutely liable for occupational injuries or illness to workers irrespective of fault

LICENSE AND PERMIT BOND : Kind of surety bond that guarantees the bonded individual to comply with all the laws and regulations governing his or her activities

LIFE ANNUITY : Series of payments when commence are continued for the entire life duration of the annuitant and beyond

LIFE ANNUITY WITH 10 YEARS CERTAIN : Annuity paying income to annuitant for as long as s/he survives; but if demise occurs within 10 years from the commencement of the annuity, payments continue to the beneficiary for the remainder of 10 years

LIFE EXPECTANCY : Average number of years of living remaining for group of persons of any given age as per the specific mortality table

LIFE INCOME OPTION : Life insurance settlements whereby the policy proceeds are paid during the life of the beneficiary; certain number of guaranteed payments may also be paid

LIFE INSURANCE : Insurance cover providing payments for specified amount on the demise of the insured either to her or his estate or designated beneficiary; in case of endowment policy, to the holder on specified date

LIFE INSURANCE IN FORCE : Sum of face values and the dividends of life insurance plans outstanding at particular time; additional amounts payable under accidental death or special provisions are excluded

LIFE INSURANCE PROGRAMMING : Systematic technique to determine insured's financial goals that are translated to specific amounts of life insurance then periodically reviewed for possible modifications

LIFETIME DISABILITY BENEFIT : Benefit for helping replacement of income lost by an insured individual as long as s/he is totally disabled, even if it is for entire lifetime

LIMITED PAYMENT LIFE INSURANCE : Whole life insurance coverage where premiums are payable for specified number of years or until demise if death occurs prior to the specified time period

LIMITED POLICY : Contract covering only certain kinds of accidents or diseases

LIQUIDATION : Dissolving a firm through sale of assets for cash


LIVING BENEFITS RIDER : Rider allowing insured individuals who are terminally sick or suffering from some catastrophic illnesses for collecting portion of their life insurance benefits prior to their death; primarily for the medical care required for them

LIVING TRUST : Trust created while the creator of trust is alive; also known as inter vivos trust

LLOYD'S OF LONDON : Insurance marketplace where brokers who represent their clients with insurable risks deal with Lloyds underwriters in turn representing investors; investors are grouped in syndicates providing capital for risk insurance

LOADING : Amount that needs to be added to pure premium for profit, expenses, and contingency margins

LONG-TERM CARE : Continuum of broad ranged maintenance and health services to chronically sick, disabled, or retarded; services can be provided in-patient (nursing home, rehab center, mental hospital) or outpatient or at home basis

LONG-TERM DISABILITY INCOME INSURANCE : Insurance cover issued to employer group or individual for providing reasonable replacement of part of employee's earned income lost due to serious and prolonged sickness or injury during normal work

LOSS : Occurrence of an event that is payable through insurance

LOSS ADJUSTMENT EXPENSE : Expenditures incurred during the process of defending, paying, and evaluating claims

LOSS CONTROL : Conscious action to decrease the frequency, unpredictability, or severity of accidental loss/es

LOSS EXPENSE - ALLOCATED : Handling expenditures like adjuster fees or legal charges paid by insurers for settling claim/s that are definitely chargeable to the specific claim/s

LOSS EXPENSE - UNALLOCATED : Salaries and other costs incurred for the operations of the claims department of an insurance company that cannot be charged to any specific claim/s

LOSS PAYABLE CLAUSE : Protecting mortgagee's interest in property by directing insurance company to make a loss payment to the mortgagee in case of any loss

LOSS PREVENTION : Any measure for reducing frequency or possibility of particular loss but does not eliminate completely all possibilities of loss

LOSS RATIO : Ratio calculated through division of claims in premiums; can be calculated in different ways using paid premium or earned premiums and the use of paid claims without or with modifications in claim reserves and without or with modifications in active reserves

LOSS RESERVE : Amount set up as the estimated cost of any claim

LOSS RESERVE DEVELOPMENT : The latest estimate of an insurer's claim obligations compares for an earlier projection

LUMP-SUM DISTRIBUTION : Payment within one taxable year of the complete balance payable to any employee from a trust that forms part of qualified pension or employee annuity plan on account of the demise of that individual separate from attainment of 59 years or separation of service

LEASEHOLD INSURANCE : Insurance cover for tenanted property leased against loss of value of lease or profit through sub-lease by terminating the lease by insured peril or fire

LESSEE (LEASEE) : Party in whose favor lease is granted

LESSOR : Party that grants the lease to the leasee

LOCATION CLAUSE : Used in cargo open policies limiting underwriters' liability in a single location

LOSS OF USE INSURANCE : Insurance cover against loss due to the inability of using the property due to damage or destruction

LOSS OF HIRE INSURANCE : Marine insurance policy designed for paying for continued expenses and profits loss to ship owners while unable to function post claim/s; implies providing the means to pay for the loans, premium on insurance cover/s, key clerical employees, essential crew, captain, and other expenditures