Insurance Information
Lapse
Insurance policy termination due to the insured's failure to make premium payments.

Larceny
Theft other than one involving a forcible entry (burglary) or an actual or threatened bodily harm (robbery). Many jurisdictions prefer the term theft.

Last Clear Chance Rule
The last reasonable opportunity to avoid an accident or injury. One who has the last clear chance to avoid an injury and fails to do so is usually held solely responsible, notwithstanding the injured person's own contributory negligence.

Law of Large Numbers
A principle that the larger the number of exposures considered, the more closely will reported losses equal the true probability of loss. This is the basis for the statistical expectation of loss, which determines premium rates.

Legal Reserve
Minimum reserves required by state law or regulation that life insurers must maintain to operate in that state.

Liability
An actual or potential legal obligation, duty, debt, or responsibility to another person; the obligation to compensate, in whole or part, a person harmed by one's acts or omissions. Liability insurance policies provide coverage for an insured's legal liability, excluding criminal acts, most intentional torts, and breach of contract.

Liability Insurance
Insurance that provides indemnity or compensation for a harm or wrong to a third party for which the insured is legally obligated to pay. Usually, the injury or damage is caused by the insured's negligent acts or omissions, but in some situations the law imposes strict liability without regard to negligence, and this may also be covered by liability insurance.

Liability Limits
The stipulated sum or sums beyond which an insurance company is not liable to protect the insured.

License
Legal authority granted by the state for a specified activity or business enterprise. State insurance departments grant licenses to insurance companies, agents, brokers, and other entities to transact insurance-related business within its borders.

License Bond
A bond guaranteeing that a person who has been issued a license will comply with the laws, regulations, and ordinances associated with the issuance of the license.

Lienholder
The financial institution that holds title of a vehicle until the loan is paid off.

Life Expectancy
The length of time a person of a given age can be expected to live, based on mortality tables.

Limited Collision
Physical damage protection for the insured's vehicle when damage results from impact with another object or upset. Paid ONLY if insured is LESS than 50% at fault. No deductible applies. Coverage only available in state of Michigan.

Liquidation
The conversion of an insolvent organization's assets into cash in order to pay creditors. An insurance department takes this action after it has determined that an insolvent insurer cannot be rehabilitated. Its business is wound up, and any remaining assets are used to pay policyholder claims and other creditors.

Liquor Liability Law
State or local statutes ("dram shop acts") that establish the liability of a business that sells or serves alcoholic beverages to customers for injuries caused by intoxicated customers to third parties. Laws sometimes also include people who serve alcohol to guests.

Living Trust
An ordinary trust established by a person while living to manage and distribute assets to other living persons.

Long-Term Care
Custodial care provided by a rehabilitation facility, nursing home or mental hospital on a continuum basis for chronically ill, disabled or retarded individuals. The care may be on an inpatient, outpatient, or at-home basis.

Loss
The happening of the event for which insurance pays. The amount the insurer is required to pay because of a happening against which it has insured.

Loss Avoidance
The elimination of a loss exposure by ceasing or never undertaking an activity that produces the exposure. In making this decision, the person or organization must weigh the potential value of the activity against the potential loss.

Loss Control
Prevention and reduction of losses. An insured, often in consultation with an underwriter or loss control specialist, takes measures to reduce the frequency of losses and to minimize the financial impact or severity of a loss.

Loss Expense - Allocated
An expense assigned to and recorded with a specific claim, including defense and investigation costs. Allocated claim expenses have more significance in liability insurance because of the legal costs involved in defending liability claims.

Loss Expense - Unallocated
An expense that cannot be assigned to and recorded with a specific claim. This includes claim department operating expenses such as rent, heat and electricity, and other overhead expenses.

Loss of Use / Services
Applies to a policyholder's exposure to financial loss if the part of the residence premises where the insured lives is damaged so badly that it is "not fit to live in".

Loss Payable Clause
A property insurance policy provision that authorizes the insurer to make a loss payment to a person (loss payee) other than the insured to the extent that the loss payee has an insurable interest in the property.

Loss Prevention
Measures designed to reduce the probability that a loss will occur. See also loss prevention services and loss reduction.

Loss Prevention Services
Survey, consultation, or loss control management services provided to policholders by an insurer to reduce the likelihood of accidents.

Loss Ratio
A formula used by insurers to relate loss expenses to income. Formula: (incurred losses + loss adjustment expenses) divided by earned premiums. See also accident year statistics, burning ratio, expected loss ratio, insured loss ratio.

Loss Reduction
A loss control measure designed to reduce the severity of loss occurrences.

Loss Reserve
An insurer's estimate of the amount an individual claim will ultimately cost. On an insurer's financial statement, it is the amount of estimated liabilities for known claims not yet paid and incurred but not reported claims.