Glossary

A limited health benefit plan is one that restricts covered services to a medical specialization or a group of related specializations, such as psychology and family counseling.

A limited liability company (LLC) is a legal entity seeking to realize the benefits of both a corporate and a partnership legal structure. More than 40 states have enacted statutes authorizing this form of legal entity. LLCs provide the liability protection afforded by corporations (i.e., unlike a partnership, principals are not personally liable for the debts and obligations of the organization) and offer the tax benefits afforded to partnerships (i.e., they avoid double taxation and permit allocation of taxable income and deductions). There are two key limitations associated with LLCs: they are available only for privately held companies, and the equity interest in an LLC is not freely transferable.

A limited life and health insurance company is one that issues nonassessable policies with limited benefits.

A limited life insurance policy is a life insurance policy that pays benefits only if the insured dies from a specified cause (e.g., cancer or auto accident).

Limited losses are amounts of losses whereby the size of individual claims is limited to a particular value, for example, $500,000. Losses are sometimes limited in this manner when analyzing loss experience or forecasting future losses to minimize the effect of low-frequency catastrophe events on the analysis.

Limited Mexico Coverage (CA 01 21) endorsement is a standard endorsement used with the business auto policy (BAP) to provide limited excess coverage for autos taken across the Mexico border. Significant limitations apply. For example, the accident must occur within 25 miles of the US border, and the duration of the trip must be 10 days or less. This coverage may not meet Mexican insurance requirements. (Failure to procure Mexican insurance may result in criminal charges.) Additional restrictions also apply.

Limited payment life insurance refers to a life insurance policy that covers the insured's entire life with premium payments required only for a specified period of years.

A limited severability provision in an application for directors and officers (D&O) liability insurance states that knowledge possessed by any insured persons, other than the signer of the application or certain executive officers (usually the CEO, COO, and CFO), will not be imputed to other insureds in a claim situation. For example, if an insured were aware that a coverage application contained false financial data, this knowledge—which would ordinarily bar coverage in a claim situation—will not be attributed to any other insureds who did not know that the financial statements were false. As a result, these so-called innocent insureds will have coverage under the policy. However, if either the signer of the application or one of the three executive officers had knowledge of the false data, their knowledge would be attributed to the innocent insureds, and coverage would be barred for the "innocent insureds" as well. A limited severability provision is much less favorable for insureds, compared to a full severability provision. However, only a minority of insurers' application forms contain limited severability provisions.

A limits reduction provision is used in connection with uninsured/underinsured motorists (UM/UIM) coverage referring to limit of insurance provisions that set out how UM/UIM coverage is affected by the existence of other types of coverage (e.g., auto medical payments, workers compensation) that may apply as well. Under limits reduction, the limit of insurance under UM/UIM is reduced by payments from other types of insurance, as specified in the applicable UM/UIM endorsement.

Limits under multiple policy years is an approach to structuring limits for insurance programs covering low-frequency but high-potential-severity exposures, such as excess liability (over commercial general liability (CGL) policies), pollution liability, and directors and officers (D&O) liability. Under this approach, a single aggregate limit remains in effect for multiple years as opposed to a series of separate policy limits, applicable to single years, as under a traditional approach. Since a single limit applies over several years, a higher limit than would typically be purchased in a single policy year can usually be obtained at a lower cost.