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Glossary

This glossary is arranged in alphabetical order. Click on a letter in left column or scroll down to search.

< L >

Lapse:

This refers to the termination of an insurance policy due to the owner of the policy failing to pay the required premium within the grace period (Usually within 30 days after the last regular premium was required). It is possible to re-instate the coverage with the same premium and benefits intact but the life insured will have to qualify for this coverage all over again and bring up to date all unpaid premiums usually at defined compound interest rate which is stated in the policy document.

Lapse subsidized:

This refers to the practice of some life insurance companies to offer policies, which are lower in price because they have assumed a high probability that the policies will be cashed in or lapsed for lack of payment by their owners for one reason or another before the death benefit becomes available. It is a bold and risky offer by the insurance company because sometimes the purchasers of these policies simply don't lapse them.

Level Premium Life Insurance:

This is a type of insurance for which the cost is distributed evenly over the premium payment period. The premium remains the same from year to year and is more than actual cost of protection in the earlier years of the policy and less than the actual cost of protection in the later years. The excess paid in the early years builds up a reserve to cover the higher cost in the later years.

Liability:

Is any debt, or any claim against the assets of a person or corporation: accounts payable, wages, and salaries payable, dividends declared payable, accrued taxes payable, and fixed or long-term obligations such as mortgages, debentures, and bank loans.

Life Expectancy:

This is Defined as the average number of years of life remaining for a group of people of at given age and gender according to a particular mortality table.

Life Income Fund:

Commonly known as a LIF, this is one of the options available to locked in Registered Pension Plan (RPP) holders for income payout as opposed to Registered Retirement Savings Plan (RRSP) holder’s choice of payout through Registered Retirement Income Funds (RRIF). A LIF must be converted to a unisex annuity by the time the holder reaches age 80.

Limited Partnership:

Limited partnerships are investments, which pool the money of investors to develop or purchase income-producing properties. When the partnership subsequently receives income from these properties, it distributes the income to its investors as dividend payments.

Liquidity:

The ease with which an asset or security can be converted into cash.

Living Benefit:

Some insurance companies include this benefit at no cost to their policyholders. The insurer considers on a case-to-case basis, the need for insurance funds before death. If the insured can demonstrate a shortened life of less than two years and with some insurers one year, the insurer will consider releasing up to 50% or a maximum of $100,000 of the life insurance coverage held by the insured. Not all insurers offer this benefit for free. The need has resulted in specific stand-alone living benefit/critical illness policies coming into existence. You might have heard of "Viatical Settlements", the practice of seriously ill people selling the rights to their life insurance policies to third parties. This practice is common in the United States but thankfully has not caught on in Canada.

Living Trust

Trusts created by a person during his or her lifetime see, Intervivos Trust.

Living Will:

This is a will, which specifically expresses the testator's desire not to be kept alive on life support machines, should the occasion arise.

Long Term Care Insurance:

Long Term Care Insurance is designed to provide you with a daily income benefit towards the cost of long term care (health and personal care services) should you become unable to care for yourself. With a long- term care insurance product, the basic coverage will fund health and personal care services for you whether you are residing in a long- term care facility or in your own home. Home care can also include help with every day tasks such as cooking, cleaning and shopping. These policies are usually rather expensive and grow even more costly as the policyholder ages. They are sold in units of hundred dollars per day.

Lump-Sum Distribution:

This is the disbursement of the entire value of a profit-sharing plan, pension plan, RRSP, annuity, or similar account to the account owner or beneficiary. Lump-sum distributions may be rolled over into another tax-deferred account.

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