Business Insurance Glossary

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Lapse

The termination of an insurance policy due to the failure of the policyholder to take some required action, usually the payment of premiums. Other reasons a policy may lapse include failing to perform required duties within the policy such as notifying the insurer in a timely manner of a change of address.

Leased vehicle

A car or truck rented under a long-term contract or lease. The company leasing the vehicle retains ownership of the vehicle and is listed on the insurance policy as an additional insured.

Lessee

The person or "party" who is renting the property.

Liability

A legal obligation or responsibility for the injury or damage suffered by another person, and enforced by law.

Liability insurance

Insurance coverage that offers protection against claims alleging that a property owner’s negligence or inappropriate action resulted in bodily injury or property damage to another party.

Limit

Refers to the maximum amount of coverage purchased by the policyholder.

Liquor liability

Liquor liability insurance provides coverage for bodily injury or property damage for which an insured may be held liable by reason of the following:

  • Causing or contributing to the intoxication of any person
  • Furnishing alcoholic beverages to a person under the legal drinking age or under the influence of alcohol
  • Violating any statute, ordinance, or regulation relating to the sale, gift, distribution, or use of alcoholic beverages

This coverage only applies if the insured is involved in the following activities:

  • Manufacturing, selling, or distributing alcoholic beverages
  • Serving or furnishing alcoholic beverages for a charge, whether or not such activity requires a license or is for the purpose of financial gain or livelihood
  • Serving or furnishing alcoholic beverages without a charge, if a license is required for such activity

Long tail liability

One where an injury or other harm takes time to become known and a claim may be separated from the circumstances that caused it by as many as 25 years or more.

Loss

Amount of damage to property, and/or injury suffered by a person. In the insurance world, this term is used interchangeably with the word “claim.”

Loss adjustment expense

Cost involved in an insurance company’s adjustment of losses under a policy.

Loss control

Inspection and engineering work done to help remove potential causes of loss. Loss control is also referred to as safety engineering, accident prevention, accident control, or loss prevention.

Loss of lease income or value

This covers the loss of income when rental property is damaged or destroyed and the loss of value when the owner of the rental property also used some of its space for business. If the tenant of the destroyed or damaged building is forced to rent space elsewhere at a higher cost, this is called loss of lease value.

Loss of use insurance

Compensation for loss caused because the policyholder has lost the use of his property.

Loss payable clause

A policy condition that enables an insured to direct the company to pay any loss that may be due to a third party.

Loss prevention service

Loss control and inspection work done by insurance companies or independent organizations to help business owners reduce or prevent loss in their workplace.

Loss ratio

Relationship of incurred losses plus loss adjustment expense to earned premiums.