Insurance Glossary

L-SHARE VARIABLE ANNUITIES

A type of variable annuity contract that typically features shorter surrender periods but higher mortality and expense risk charges compared to other annuity share classes.

LADDERING

An investment strategy that involves staggering bond maturities and diversifying bond types to manage interest rate risk and improve cash flow.

LAW OF LARGE NUMBERS

A probability principle stating that as the number of insured units increases, loss predictions become more accurate. This concept forms the foundation of insurance underwriting.

LIABILITY INSURANCE

Insurance coverage that protects the policyholder against legal responsibility for bodily injury or property damage caused to others.

LIMITS

The maximum amount an insurance policy will pay for a covered loss, as stated in the policy declarations.

LINE

A specific category or type of insurance, such as personal lines or commercial lines.

LIQUIDATION

A regulatory process in which a state insurance department winds up an insolvent insurer’s affairs by selling assets and paying claims under state liquidation laws.

LIQUIDITY

The ease and speed with which an asset or security can be converted into cash without significant loss of value.

LIQUOR LIABILITY

Insurance coverage for bodily injury or property damage caused by an intoxicated person who was served alcohol by the insured.

LLOYD'S OF LONDON

An international insurance and reinsurance marketplace where underwriting syndicates assume risk. Lloyd’s is known for insuring complex and high-value risks.

LLOYDS

A corporation that markets the services of independent underwriters, primarily in Texas, and is not affiliated with Lloyd’s of London.

LONG-TERM CARE INSURANCE

Insurance that pays for services assisting individuals who cannot perform activities of daily living or who require supervision due to cognitive impairment.

LOSS

A reduction in value of property or the creation of a legal obligation due to damage, injury, or liability.

LOSS ADJUSTMENT EXPENSES

Expenses incurred by insurers to investigate, manage, and settle claims, including legal defense costs.

LOSS COSTS

The portion of an insurance rate allocated to paying claims and claim adjustment expenses.

LOSS OF USE

Coverage in homeowners and renters insurance that reimburses additional living expenses incurred when a residence becomes uninhabitable due to a covered loss.

LOSS RATIO

A financial measure showing the percentage of premium income an insurer spends on claims.

LOSS RESERVES

Funds set aside by insurers to pay future claims, representing an estimated liability on the insurer’s balance sheet.