Glossary- Life Insurance, Health Insurance, Retirement

Lapse

Termination of a life insurance contract because of non-payment of premiums. If there are non forfeiture values, the policy lapses but may remain effective reduced paid-up insurance.

Large -cap

A large sized company, or a mutual fund that invests in the stock of large, established well known companies.

Law of large numbers

A large insurance portfolio enables the actuary to predict better the number of claims. The principle reduces the number of random fluctuations of claims as the number of lives insured slowly grows. There is substantial decline in standard deviation of claims arising from pure chance with increase in number of insured.

Lien

At the time the policy is issued or reinstated, as a part of the underwriting decision, the company may impose a lien on the policy. This would mean that in the event of a claim arising from a specific risk or within a period, a certain agreed amount would be deducted form the claim. The insured is regarded to self insure the amount to be deducted as the company has declined to cover the specific risk or the insured has agreed to this arrangement instead of paying the extra premium.

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.

Life Assured

Person whose life is covered under a life insurance policy.

Law 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.

Life fund

This is a fund set up by an insurance company to which life insurance premiums of certain designated category of life policies issued are paid into. Claims and expenses occurring on these life polices are paid out of these funds.The company actuary does a valuation of the funds periodically before any profits or the company distributes dividends. The insurance company has a responsibility to exercise fairness in the way it manages the fund and the actuary will ensure that the fund is solvent at all times.

Liquidity fund

The degree to which an investment may be quickly sold in exchange for cash. Funds are a liquid investment; at any time-shares may be redeemed. A 30-year savings bond is not liquid. It cannot easily be sold until the 30-tear, maturity date is reached.