Insurance Terms

Laddering

A method of staggering the purchase of certificates or bonds whereby, when the investment matures, the funds can be reinvested in short or long-term investments depending on the current interest rate.
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Lapse

The expiration of a right or privilege when one party does not live up to its obligations during the time allowed.
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Last In First Out (LIFO)

This refers to a method used to distribute cash value withdrawals for universal life policies where the withdrawals are treated as first coming out of interest and are considered taxable income.
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Levy

To assess, exact, or collect, as with a tax or a fine. Levy can also mean to obtain money by legal process through the seizure and sale of property.
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Liabilities

A claim on the assets of a company or individual to satisfy a debt.
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Liability insurance

Coverage for sums that an insured becomes legally obligated to pay because of bodily injuries and/or property damage or financial losses caused to other people.
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Lien

A creditor's claim against assets to secure a debt. Liens may also be granted by courts to satisfy judgments.
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Life Annuity

An annuity that makes regular (e.g., monthly, quarterly, etc.) income payments for the life of a person (the annuitant). The annuitant cannot outlive the payments. Upon his/her death, however, all income payments cease and there are no beneficiary benefits.
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Life Estate

A form of property ownership, also known as a life interest, giving the holder (the life tenant) an interest in the property to possess, use, and enjoy the property, or income from the property, for the duration of their life. Upon the death of the holder, the remainder interest automatically reverts to the original owner or passes to a beneficiary (known as the remainder person).
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Life Expectancy

The number of years a person is expected to live as determined by actuaries using mortality (actuarial) tables This information is used to calculate annuity payments, life insurance premiums, and annual minimum distributions from IRAs.
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Life Expectancy Tables

Mortality tables that are used to calculate life expectancy figures.
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Life Insurance

A legal contract between an insurance company and an owner/insured to provide protection against adverse financial consequences of the death of an individual in the form of payment to a beneficiary.
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Life Insurance Trust

An agreement that establishes a trust for the designated beneficiary(ies) of a life insurance policy. Upon the death of the insured, the trust is legally obligated to pay the death benefit proceeds in the manner specified in the trust agreement.
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Life Insurance Underwriting

The process by which an insurance company examines, accepts, or rejects insurance risks so as to charge the proper premium for the coverage and to spread the risk among a pool of insureds in a manner that is both fair to the insureds and profitable for the company. The company classifies the accepted applicants into different risk categories in order to charge the proper premium.
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Life Interest

A form of property ownership, also known as a life estate, giving the holder (the life tenant) an interest in the property to possess, use, and enjoy the property, or income from the property, for the duration of their life. Upon the death of the holder, the remainder interest automatically reverts to the original owner or passes to a beneficiary (known as the remainder person).
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Lifetime Gift

A gift made during someone's life, as opposed to a post-mortem gift.
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Limitations

The maximum amount of insurance coverage that is available under a policy. Coverage limitations can often be increased for an additional premium.
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Limited Health Insurance

A health insurance contract that provides limited coverage in special circumstances.
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Liquidity

The ability to buy or sell an asset quickly, or to convert an asset to cash quickly, and in large volume without substantially affecting the price of the asset.
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Living Benefits Provision

In the event of a terminal illness where medical and long term care costs occur, life insurance benefits that are payable to the insured prior to death through the use of an accelerated death benefit rider (ADBR). Accelerated or 'living' benefits paid will reduce the amount of death benefits payable to the beneficiary upon the insured's death.
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Living Trust

A revocable or irrevocable trust created during the life of the grantor that is also known as an inter vivos trust.
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Long-Term Care Insurance

An insurance contract that pays benefits in the event the insured needs long-term medical care in a facility other than a hospital.
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Long-term Coverage

Disabilities that last more than two years are said to be long-term. Disability policies that pay benefits for long-term disabilities are said to offer long-term coverage.
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Long-term Disability Insurance

A disability insurance policy that provides coverage in the form of monthly income payments for as long as the insured remains disabled (usually up to age 65).
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Look-Back Period

The period of time, currently 36 months, during which a hospitalized or institutionalized individual may be ineligible for benefits payable under a state Medicaid plan when assets are transferred for less than their fair market value for the purpose of qualifying for payment.
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Loss Frequency Method

Procedure used by insurance companies to project the number of future losses within a given time frame. This prediction of future losses is used as the basis for setting policyholder premiums.
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Loss of Income

A definition of disability based on income loss, not on loss of occupation. Loss-of-income disability definitions are used in residual disability (income replacement) policies.
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Loss of Use

Part of a standard homeowners policy that covers financial losses (up to a certain limit) you suffer when your home is damaged and temporarily unfit to live in. These losses generally refer to living expenses (e.g., hotel, dining, telephone) that you must incur in order to maintain your usual standard of living until you move back into your house.
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