Glossary

Lapse
Historically, the termination of an insurance policy due to non-payment of premium by the end of the grace period. At that point, the policy will either terminate without value or fall under one of the non-forfeiture options (reduced paid-up coverage, extended term coverage, etc.). With variable and interest-sensitive life insurance policies, lapse may result when there is inadequate cash value in the policy to pay the next mortality and expense charge.

Legal Reserve
The amount an insurance company must keep available to meet future claims and obligations.

Level Premium
A premium which remains unchanged throughout the life or term of the policy. With a whole life policy, the premium remains level for the insured's life. With level term insurance, the premium remains level for the life of the term; it may increase at each renewal, or the start of a new term.

Level Term Insurance
Term life insurance on which the face value remains unchanged from the date the policy goes into force to the date the policy expires.

Liability Insurance
Coverage to meet expenses resulting from legal, financial obligations to others. For example, if you are sued because you are found to have caused an injury to another person (such as if your dog bites the paper boy) and the incident is covered under your homeowners' policy, the insurance company will assume the responsibility of paying legal fees and costs that result according to the terms and limits of the policy.

Life Expectancy
The average number of years of life remaining for a group of persons of a given age.

Life Income
A pension, annuity or life insurance payment option that guarantees the recipient an income for life.

Life Insurance
A financial tool indemnifying against the loss of a particular person (the insured). A policy under which the insurance company promises to pay a death benefit upon the death of the person insured.

Life Insurance Trust
A trust established for the purpose of distributing life insurance proceeds and, in many cases, to remove those proceeds from the insureds' estate, thereby reducing estate taxes.

Lifetime Transfers
The term often used to describe the process of transferring assets from one person (the donor) to another (the donee) during the donor's lifetime, generally to reduce estate tax consequences on the donor's estate. Sometimes also referred to as a "Living Gift."

Life Underwriter
An insurance agent.

Living Benefits
These are benefits available to owners of life insurance policies while the insured is still alive. Living benefits include policy loans, the right to make collateral assignments, and, in some cases, the right to take benefits in the event of the insured's terminal illness.

Living Benefits Rider
With some life insurance policies, this rider enables insureds to receive a specified portion of the policy's death benefit before the policyowner insured's death if certain conditions are met.

Living Gift
(See "Lifetime Transfers.")

Living Trust
A trust created to take effect during the lifetime of the grantor. It is sometimes called an inter vivos trust.

Loading
In insurance, the amount added to net premiums to cover the company's operating expenses and contingencies.

Loan
In life insurance, money loaned at interest by the insurance company to a cash value life insurance policyowner, using the policy's cash value as security for the loan. Policy loans will effect the death benefit.

Long-Term Care
Broad-based care (which may include custodial, rehabilitative, home-health or nursing home care) for the chronically ill or disabled.

Long-Term Care Insurance
Coverage that provides medical and other services to insureds who need constant care in their own home or in a nursing home.

Loss-of-Income Benefits
Benefit paid because the insured is disabled and unable to work.

LTC Option
The Long-Term Care Benefit Payment Option used to calculate the Monthly Benefit for Long-Term Care. Applicable to Asset Preserver Universal Life policies.

Lump Sum
In general, the receiving of annuity, pension or life insurance death benefits in a single payment.

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