Glossary

The limit of insurance is the most that will be paid by the insurer in the event of a covered loss under an insurance policy.

LIMRA International, Inc., is an international association that conducts market, consumer, economic, financial, manpower, and human resources research for life insurance and financial services companies. LIMRA and its fellow research association, LOMA, provide their members with research, training and development, consulting, assessment, compliance, and other benefits and services.

A line in an insurance context is a class of insurance, such as property, marine, or liability. In reinsurance, a line is an amount of risk retained by a ceding insurer for its own account.

A line of business in an insurance context is a general classification of insurance industry business, e.g., fire, life, health, liability.

A line sheet is a schedule showing the maximum limit of liability that can be written by an insurer for different classes of risks; also called a "line guide."

Liquidated damages refers to a stipulated amount as agreed on in a contract. Liquidated damages are often used in lieu of actual damages, especially in construction contracts. For example, a contractor may be liable for $10,000 per day for each day required to complete a project beyond the agreed-upon completion date. Liquidated damages are not intended to be punitive and must have a reasonable correlation to anticipated actual damages. Most contractors prefer liquidated damages provisions (as opposed to being liable for actual damages) because they offer greater ability to quantify the risk.

Liquidity is a measurement of an organization's ability to meet its debt obligations, particularly short-term debt. Cash, accounts receivable, and short-term securities are considered liquid assets since they can be quickly made available to pay debt. Ratios commonly used to measure liquidity include the current ratio, acid-test ratio, number of days' sales in accounts receivable, accounts receivable turnover, total assets turnover, and inventory turnover.

Liquidity ratio is a measurement of key financial variables that impact an insurer's ability to pay claims. In the Insurance Regulatory Information System (IRIS), liabilities to liquid assets and agent's balances to surplus are monitored.

Liquidity risk refers to the exposure to adverse cost or return variation stemming from the lack of marketability of a financial instrument at prices in line with recent sales.

Liquor law liability refers to the common law liability imposed on those selling alcoholic beverages, as well as the statutory liability established in some states, which is excluded in general liability policies.