Auto Insurance Glossary – L Definitions

Lapse

The termination of any policy of insurance by the insurer due to non-payment of the premium by the policy owner. Coverage under an insurance policy ceases on the date on which the policy lapses, but not in relation to insured events which occurred prior to the date of lapse. A lapsed car insurance policy can be reinstated at the discretion of the insurer, but in almost all cases a higher premium will be required.

Larceny

The taking away of personal property belonging to another, with the intent of permanently depriving that person of the property. All larceny is theft, but not all theft is larceny, as larceny is restricted to personal property which can be physically removed. It does not include non-property forms of theft such as identity theft and other intangibles. In law there are degrees of larceny characterized as petty larceny and grand larceny (such as grand larceny auto), which are determined in relation to the value of the item stolen.

Legal Liability

The liability of a person under law (as opposed to contract) which is capable of being the subject of an enforceable action for compensation. Legal liability can arise from a number of causes, including negligence, reckless acts and failure to act. For example, a driver who runs a red light, crashes into another car and as a result causes injury to another person from the crash would likely be held legally liable for the damages caused.

Liability Insurance

A contract of insurance in which an insurance company indemnifies a person for compensation awarded against the individual due to a legal liability incurred by that individual, on certain conditions and up to specified limits. Liability insurance policies also normally provide a person with indemnity for legal costs involved in providing a defense against legal liability lawsuits. Liability insurance coverage is normally included in auto insurance policies, although the limits are usually so low that policyholders need to effect umbrella insurance to provide top-up coverage. Learn more about personal liability coverage and umbrella insurance.

License

Certification provided by a competent authority for an individual or organization to perform an action or actions specified in the license, which in the absence of the license would be unlawful to perform. For example, each state issues licenses to agents to sell insurance in the state, and the licenses specify the types of insurance which may be sold by the agents. Similarly, each state issues licenses to insurance companies to conduct insurance business in the state, and those licenses specify the types of insurance business which may be conducted.

Limit

The maximum claim amount or amounts to be paid under a contract of insurance for events specified in the contract. Limits can be set on different bases, such as per event, per period, per person and as an aggregate of all losses indemnified under the contract. For example, personal liability coverage under an auto insurance policy can be either on a single limit or split-limit basis. A single limit policy specifies the liability limit of the insurer for each accident, whereas a split-limit policy specifies the limit per person and the aggregate liability of the insurer per accident. Learn more about single and split limits.

Livery Use

The use of a vehicle to carry persons for monetary reward. An example of livery use is operating a taxi. Standard auto insurance policies exclude coverage for livery use, so coverage for that requires a special policy or a specific policy endorsement, with a premium rate which corresponds to that usage.

Loading

The percentage added to the premium of an insurance policy to cover the operating expenses of the insurance company. The loading is the difference between the net premium and the gross premium. The net premium is the proportional and actuarially-calculated amount required to exactly cover the claim amounts expected to be paid out by the insurer for all policies of that class issued by the insurer, while the gross premium is equal to the net premium plus the loading.

Loss

In relation to auto insurance, the monetary value of damages suffered by a policyholder as a consequence of an insured event. Loss can take the form of damage to a car (the policyholder’s or someone else’s), medical expenses in treating injuries, compensation for loss of earnings, compensation for pain and suffering, legal defense costs, towing charges, rental car costs and other costs incidental to an insured event. From an insurer’s perspective, loss equates to the amount which the insurer is obligated to pay, after subtracting any deductible.

Lost Policy Release

Also referred to as a lost policy cancellation release, as it generally only applies in the event that a policy is cancelled by an insured and the insured is unable to locate the policy document. A lost policy release is a written statement signed by an insured which releases the insurer from all liability under the policy, but only in respect of insured events which occur subsequent to cancellation.