Insurance Glossary
A B C D E F G H I J K L M N O P Q R S T U V W X YZ
A
Accident Benefits: A compulsory coverage in all provinces except Newfoundland and Quebec, it pays defined amounts to an injured insured on a no-fault basis. Examples of coverage are rehabilitation expenses, death benefits and loss of income benefits.
Accounts Receivable Insurance: Protects business against inability to collect accounts receivables because of loss of supporting records from an insured peril.
Acid Test: An accounting test that measures the ability of a business to pay its current liabilities. Sum of cash, marketable securities, and receivables divided by current liabilities.
Act of God: A sudden and violent act of nature that could not have been foreseen or prevented.
Actual Cash Value: The actual cash value is usually the cost of replacing the property with something of like kind and quality, minus an allowance for depreciation. A deductible may apply.
Actual Loss: Loss resulting from the real and substantial destruction of the insured property.
Actual Loss Sustained: Refers to the basis for payment that is used to determine the amount of money to be paid to the insured under most Business Interruption policies. The amount of the payment is limited to the actual amount of money the business would have earned had the loss not occurred.
Additional Living Expense Insurance: This type of coverage provides funds to pay for increased living costs which result from damage to your property and that is covered by the policy; e.g., it covers the cost of renting somewhere else while your home while it is being repaired.
Additional Premium: This is an additional premium that is charged to cover the increased hazard or liability to the insurer during the period when you are making alterations to your home.
Adjacent Property: Property lying near or close to the insured property which may affect the hazard or loss or the premium rate.
Adjuster: A representative of an insurance company who works along with the insured to investigate, negotiate and settle an insurance claim.
Adjustment: The ascertainment of the amount of a loss and the ratable distribution of it among those liable to pay it.
Agent: An independent person or firm authorized by contract to write business with a number of insurance companies, to provide coverage in accordance with the agreement and to collect premium on the insurance company’s behalf.
Aggregate: Total amount.
Aggregate Limit: The total amount stated on the Declarations document that the policy will pay during the policy period for all claims for which insurance is provided.
All Perils Policy: This is the most basic type of coverage that may be purchased for your property. This policy provides coverage only for those perils that are listed in the policy and that are the cause of the loss.
All Risks Policy: This type of policy provides a better level of coverage than an All Perils policy. In the All Risks policy, you get coverage for all perils or risks, except for those that are listed as exclusions in the policy.
Annul: Abolish, cancel; declare invalid.
Applicant: The party requesting insurance.
Appraisal: A valuation or an estimation of value of the property, which is usually conducted by experts who have no personal interest in the property.
Appraise: To fix or set a price or value upon a thing, usually in writing.
Appraiser: A person with specialized knowledge enlisted by an insurance company to assess the value of piece of property.
Arbitration: A form of alternative dispute resolution where an unbiased person or panel renders an opinion as to the responsibility for or the extent of a loss.
Assessable Insurance: Insurance policy under which an insured is liable to pay an additional premium if losses prove to be unusually large.
Assets: All property, whether real, personal, tangible, or intangible, that belongs to any person including a corporation and the estate of a deceased person.
Assignment: The legal transfer of one person's interest in an insurance policy to another person.
As Soon As Practicable: This means that, the insured person must notify the insurer of damage or loss to their property within a reasonable time in view of all the facts and circumstances of each case. “As soon as practicable” does not mean the same as “as soon as possible.”
Assumed Liability: Liability which would not rest upon a person except that he/she has accepted responsibility by contract that is either expressed or implied. This is also known as Contractual Liability.
Assurance: Term used in Canada which is synonymous with “insurance.”
Assured: One who has been insured by an insurance company (insurer) or underwriter against losses or perils as indicated in the insurance policy. Synonymous with “insured.”
Auxiliary Heating: A heat source which is used in conjunction with a primary source of heat (e.g., a gas furnace may the primary source of heat in a home; however, the homeowners also use a woodstove as a secondary source of heat).
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Bad Faith: This expression refers to the fraudulent deception of another person. It is the intentional or malicious refusal to perform some duty or contractual obligation. Bad faith is not the same as negligence. A person can make an honest mistake about one's own rights and duties, but when the rights of someone else are intentionally or maliciously infringed upon, such conduct demonstrates bad faith.
Beneficiary: In insurance, one who is entitled to the benefits of a policy of an insured person who is deceased.
Benefit: The amount payable by the insurance company to a claimant, assignee, or beneficiary when the insured suffers a loss covered by the policy.
Betterment: A temporary or permanent improvement beyond mere maintenance to a property that increases its value. “Betterment” is also used to describe the increased value that results to a property if a public improvement such a street widening is undertaken.
Bind: To bring or place under definite duties or legal obligations.
Binder: An agreement by an insurance company to cover a risk, pending the issue of a policy. This may be verbal, in writing, or on a printed form.
Binding Authority: The authority given to an insurance agent whereby they may provide coverage to an insured without first submitting the risk to an insurance company for approval.
Binding Agreement: An enforceable contract.
Blanket Contractual Liability: This coverage protects a business when liability arises from obligations it has assumed under specific or implied contracts with others.
Blanket Coverage: Insurance policies that allow those insured to select a single limit of insurance for all property falling within a specific class.
Blanket Policy: Policy of insurance which covers two or more items, or two or more locations, in one aggregate sum without having to list separate amounts for each item.
Bodily Injury: Injury or death to a person, who is not an insured under an automobile policy, i.e. a third party. This type of claim is paid under Section A: Third Party Liability.
Bona Fide: This Latin expression means real; genuine; without deceit, or in utmost good faith.
Breach of Contract: Failure, without legal excuse, to perform any promise which forms the whole or part of a contract.
Breach of Duty: In general terms it means non-performance of a legal or moral duty, or in some other way a violation of the duty.
Broad Form Property Damage: This coverage expands your general liability policy to include certain property while in your care, custody, or control. When performing normal operations, the property is insured from damages resulting in a loss of use, for which you (or your business) are held liable.
Broker: An independent person or firm authorized by contract to write business with a number of insurance companies, to provide coverage in accordance with the agreement and to collect premiums on the insurance company’s behalf.
Builder’s Risk Insurance: Covers building during construction. Normally includes coverage for all materials entering into the project, including landscaping. Coverage for transit exposure and property at another location is usually available as coverage options.
Building Code: Laws and regulations that set out construction standards in a jurisdiction (i.e., municipality, province, etc.)
Building Permit: The authorization that is required by local governmental bodies prior to building, expanding, or altering existing structures.
Burden of Proof: A legal concept which states that the person (plaintiff) bringing a suit against another (defendant) is required to prove the allegations made against the defendant.
Burglary Insurance: Insurance against loss of property caused by burglars.
Business Interruption Insurance: Insurance protecting against loss of business income or expenses that result from a fire or other insured peril.
Business Life Insurance: Life insurance purchased by a business enterprise on the life of a member of the firm. It is often bought by partnerships to protect the surviving partners against loss caused by the death of a partner, or by a corporation to reimburse it for loss caused by the death of a key employee.
Buy Back Deductible: A deductible which may be removed if an additional premium is paid.
By-Laws: Regulations, ordinances, rules or laws dealing with matters of local or internal regulations made by government authorities, or by corporations, or by associations.
By-Law Endorsement (for buildings): When construction codes and zoning bylaws change, existing buildings are usually exempted. But when a severely damaged building has to be substantially rebuilt, the entire building may have to comply with current building codes. The “by-law” endorsement covers any additional expenses to bring the building up to current standards.
C
Cancellation Clause: This is a provision in an insurance policy that permits either the insurance company or the insured to cancel an insurance policy at any time before its expiration date. Generally, a cancellation provision clause requires that whenever a party chooses to cancel the policy, that party must send a written notice to the other one. The insurance company is also obligated to refund any prepaid premium on a pro rata basis.
Captive Agent: A licensed insurance agent who sells insurance for only one company.
Cash Value: The value an article or piece of property would bring at sale.
Casualty Insurance: A term describing the following types of insurance coverage: liability, crime, plate glass, accident and sickness, fidelity, surety, boiler and machinery.
Catastrophe Limit: The maximum amount that the insurer will pay in any one disaster.
Causation: Being the cause of something produced or something happening. An important doctrine in fields of negligence and criminal law.
Caveat Emptor: This Latin expression means “Let the buyer beware.” This maxim is generally applied to judicial sales, auctions and the like, as opposed to the sales of consumer goods where consumers are protected by strict liability, warranty and other consumer protection laws.
Certificate: In insurance, the document indicating existence of a master policy and the participation of an individual insured (e.g. employer may retain a medical expense policy while each employee possesses a certificate)
Certificate of Insurance: A modified form of a policy that is issued to a person with an interest in a property. It certifies the existence of insurance. By issuing such a document, an insurance company agrees to notify the person of any cancellation of insurance.
Claim: Any occurrence where an insured makes a formal request to receive compensation because of damage that was caused by an insured peril.
Claim Adjuster: Employee of an insurance company, or an independent person or firm who negotiates and settles claims brought against the insurance company.
Claimant: One who makes a claim.
Class Action: Means by which one or more members of a large group of persons (class) who are interested in a single matter may sue or be sued as representatives of the class.
Class of Automobile: In determining premium, insurance companies divide vehicles according to the class they fall into. For example, private passenger vehicles used for pleasure or business would be placed in one class, while public automobiles such as buses and taxies would be placed in a different class.
Clause: Term used to identify a particular part of a policy or endorsement.
Clear Title: The title to a property where there are no competing claims, liens, or anything else that would hinder its transfer. It is a property without any encumbrance, and the ownership is undisputed. An owner with clear title may sell the property without any legal difficulties.
Closed Insurance Policy: An insurance contract in which the terms and rates cannot be changed.
Coinsurance Clause: This refers to a clause in property insurance policies, which stipulate that a building must be insured for at least a certain percentage (80, 90, or 100 percent) of its insurable value based upon current rebuilding costs.
For example, when only a portion of a building is damaged by an insured loss (i.e. fire in the kitchen), and your building is not insured to the full replacement value (100%), the insurer will apply a financial penalty against the claim. So, if you are only insured for half the property value, the insurance company will only pay half of the cost to make the repairs to your kitchen and you will have to pay the difference yourself.
To protect yourself fully against such an event you can increase the value of your coverage or buy a Guaranteed Replacement Cost policy.
Collusion: Refers to the agreement that two or more persons make to secretly defraud another.
Collusive Loss: Loss caused by dishonest employees acting together.
Commercial Blanket Bond: Bond issued for a fixed amount which protects an employer against loss through dishonest acts of his employees.
Commercial General Liability Policy: Policy which provides broad coverage for claims made against the business for bodily injury or damage to the property of others, and which was determined to have been caused by the business operations.
Commercial Insurance: Insurance policies designed to insure exposures of a business; (same as “Business Insurance”).
Commercial Property Insurance: Policy designed to insure real and personal property of a business.
Commission: This refers to the compensation that an insurance broker receives from the insurance company, when they sell insurance policies on their behalf. These commissions pay for staff, office rent, telephones, computers, their own business insurance, etc. Independent brokers do not set the prices of insurance policies, nor do they set their commission levels.
Common Area: In common law, the portion of the premises over which the landlord retains control (e.g. hallways), and is liable for losses that occur in the common areas. “Common Areas” also refers to areas used in common by residents of a condominium (strata) complex.
Common Hazards: Certain hazards or conditions common to all buildings, which can trigger or cause certain types of losses.
Common Law: The system of law employed in all provinces except for Quebec. “Common Law” is also referred to as “Case Law.” Common Law is based on precedents, which are principles that have been established upon previous decisions reached in similar court cases.
Common Property: (a) Property held by two or more persons in common with each other. (b) Portion of rented premises over which landlord retains control but that are used by tenants.
Compensation: That which is necessary to make good the loss a person has suffered. Also commonly used to refer to remuneration for services rendered.
Composition Roof: A roof that is made of materials such as asphalt shingles, asbestos shingles, or tar paper roofing. The term does not refer to roofs made of non-combustible materials such as: slate, tiles, metal, or wood shingles.
Comprehensive Insurance (property): The comprehensive policy provides “all risks” coverage on both the dwelling AND the contents. This is the most commonly purchased policy.
Comprehensive Personal Liability: This refers to coverage for claims made against an insured person for bodily injury or damage to the property of others for which he/she is alleged to be responsible, and which arises out of non-business related activities.
Compulsory Insurance: Any form of insurance which is required by law (e.g. automobile liability insurance which is required in all provinces; workers compensation insurance, etc.)
Computer / Data Processing (EDP) Floater: This is a type of coverage for computers and other electronic data processing equipment. Covered items include the equipment, the media (diskettes, tapes, software) and the cost of retrieving or reproducing the lost data, as well as loss of income due to the failed equipment.
Condominium: System of separate ownership of individual units in multiple-unit building, together with a percentage interest in common areas.
Conflagration: Unusually a large fire, or extending over a large area.
Consent: A legal term stating when one party has given authority to another party for a particular purpose. (For example, Jack gave consent to Diane to drive his car. Diane now has the authority to do so.)
Consequential Damage (loss): Damage that is an indirect result of an accident or fire; (e.g., food spoiled due to loss of electricity to a freezer, which was caused by a fire in the basement, where the freezer was stored.
Constructive Total Loss: Position which exists when the cost of salvaging the loss or damaged property is too high relative to the value saved. In such instances, the property has lost its total usefulness so as to render it valueless to the insured.
Contents (automobile): In an automobile policy, it is described, as the personal effects of a person not permanently attached to the automobile. In a home, it refers to
Contents (home): Home contents are often referred to as ‘movables. To illustrate, contents would include everything that you would put into the moving van should you move. “Contents” also includes everything that is in the shed, the cellar, or the attic. It does not, however, include an automobile, motorcycle, or sailboat, even if they are parked in your garage.
Contingency Insurance (Seller’s Insurance): A secondary insurance coverage which protects an insured’s financial interest if the primary insurance coverage that is effected by others does not respond for a covered loss.
Contingency Business Interruption Insurance: Provides coverage for loss due to interruption of business by insured peril occurring at another’s premises (e.g. a key supplier cannot fill your orders, or large customer experiences a catastrophic loss and cannot buy your products).
Contractor’s Equipment Floater: This type covers provides protection against a loss or damage to moveable equipment and tools of a contractor.
Contractor’s Liability Insurance: A policy that provides protection for contractors from defined liability claims arising from his operations.
Contractor’s Protective Liability: Liability insurance protecting the contractor in the event of a claim that results from operations conducted on his behalf by independent contractors or subcontractors.
Contractual Liability: Liability that is assumed under a contract and is in addition to liability imposed by law.
Contractual Obligation: The obligation arising from a contract.
Cooperation Clause: This provision requires the insured to cooperate with the insurer in defense of a claim.
Co-Owner: Two or more persons who own property, or a business.
Cover Note: Written statement by insurance agent or broker that coverage is in effect. Different from binder, in that a binder is prepared by the insurance company.
Credit Card Loss Insurance: Covers against loss stemming from the misuse of lost or stolen, or misappropriated credit cards.
Credit Insurance: Policy which indemnifies the insured against failure to collect money due him as a result of death, disability, bankruptcy, or insolvency of persons to whom credit is extended.
Culpable: Blameworthy; involving the commission of a fault or the breach of a duty imposed by law. The connotation of the term suggests that the culpable person acted wrongly but that the action does not involve any evil intent by the wrongdoer.
Current Assets: Assets that can be quickly converted into cash, usually within a one year period.
D
Damages: An amount of money awarded to the person injured by another’s wrongful actions.
Debris Removal: Provision commonly found in property insurance policy providing coverage for cost of debris removal after an insured loss.
Declaration: A statement signed by an insured, warranting that the information supplied is accurate.
Deductible: The amount of the loss which the insured must absorb themselves (pay out of their own pocket, rather than the amount being paid by the insurer).
Deductible Clause: A clause providing that the insured will pay the first part of any insured loss, with the balance being paid by the insurer.
Default: Failure to abide by the terms of an undertaking or contract.
Defendant: In a court of law, the party that a case is brought against.
Deferred Premium Payment Plan: This is a provision where an insured can make payments of the premium over a specified length of time.
Depreciation: The reduction in value of property due to use, aging, deterioration, and obsolescence.
Description of Risk: Describes the particulars of a risk (e.g. construction, location, and occupancy of a building).
Diminution: This refers to the act or process of diminishing or lessening the value of an item.
Direct Loss: This is a loss that results immediately and proximately from the cause of the loss. For example, a fire inside the wall of a house causes the drapes to catch fire, which in turn fans flames onto the furniture—the house structure, drapes, and furniture are all direct losses. An indirect loss would be inconvenience of the inhabitants, who would not be able to sleep in their home, thus causing a drop in their efficiency at work.
Direct Writer: Insurance companies who sell policies directly to the public, rather than using a broker or agent.
Directors and Officers Liability Insurance: Protection for officers and directors of a corporation against damages resulting from negligent or wrongful acts in the course of their duties. Also covers the corporation for expenses incurred in defending lawsuits arising from such acts.
Disclaimer: Act of disclaiming, renunciation, disavowal.
Discount: Reduction in rate or the premium for features which improve the risk or for when several coverages are incorporated into one policy.
Discovery Period: The time permitted by the insurer, commencing with the expiry date of the policy (end of the policy period) in which a claim must be discovered by the insured if it is to be covered by the policy.
Double Insurance: Double insurance describes the case where the same risk (property) is insured by overlapping but independent insurance policies. In the event of a loss, the insured can file a claim with both insurers because both are liable under their respective polices. The insured, however, cannot profit (recover more than the loss suffered) from this arrangement because the insurers are law bound only to share the actual loss in the same proportion they share the total premium.
Downtime: The period of time between damage and repair where an economic loss occurs.
Duress: Duress describes the action when one party induces another into signing and entering into a contract by use of threats, force, violence or other similar means. When such circumstances exist, the contract was realized by duress, and it is voidable at the option of the victim.
Duty to Cooperate: In accepting and signing the insurance policy, the insured usually has agreed to follow its conditions. One of the most important duties of an insured is to cooperate. This duty is identified in Statutory Conditions, and in Conditions of most Commercial General Liability policies. Indeed, this condition is so critical insurers can cite a breach of this condition as a basis to deny a defense to an insured.
E
Earned Premium: This defines the difference between the premium paid by the insured and the portion the insurance company must return to him/her if the policy is cancelled during its term. It also refers to the amount of premium at anytime that pays for the coverage furnished by the insurance company during the expired portion of the policy term.
Easement: An easement gives others the right to use land belonging to others; i.e., a right of way.
Effective Date: The date an insurance policy comes into effect, or the date additional coverages come into force.
Effects: This generally means personal property, but it can also include real property.
Electronic Data Processing Policy (EDP): This is an insurance policy that normally covers physical loss to data processing systems, equipment, data processing media, and the extra expense related to data recovery, and related costs.
Elevator Liability Insurance: Covers against liability for bodily injury and property damage arising out of ownership, operation, or use of an elevator.
Employer’s Liability Insurance: This is coverage for common law liability of an employer for accidents to employees, which is different from liability imposed by a Worker’s Compensation Law.
Encumbrance: An encumbrance is a claim against a property by another party. It can be mortgage, lien on work and materials, or a right of dower, which usually impacts the transferability of the property and can restrict its free use until the encumbrance is removed.
Endorsement: Any change to the wording of a policy that varies its terms.
Enjoin: To require a person, by writ of injunction, to perform or not perform some act.
Environmental Impairment Liability Insurance: Insurance to cover damage caused by pollution.
Errors and Omissions Insurance: Insurance covering liabilities of professionals not usually involved in care of the human body (e.g. insurance brokers, accountants, etc). It protects the insured professional for any loss sustained because of the rendering or failure to render professional services.
Escalation Clause: Contract provision allowing for adjustment in specific items if conditions change.
Event: Happening or occurrence. Different from an “act,” which is a product of the will, whereas an “event” is something that takes place independent of the will (e.g. earthquake or flood).
Exception: A difference in coverage that is listed in a policy, which amends the standard declarations, so as to provide the required coverage.
Exclusions: Specific conditions or circumstances listed in the policy for which the policy will not provide coverage.
Exclusive Agent (Captive Agent): An agent who is employed by one insurance company only and who solicits business exclusively for that company.
Exposure: The state of being open or subject to loss from some hazard or contingency.
Extended Coverage Clause: This clause extends the insured person's protection to hazards beyond those covered in the basic policy.
Extra Expense Insurance: Covers the extra expense an insured incurs in carrying on a business following an insured loss.
F
Face Amount: The policy amount which is the limit the insurer may be liable to pay in one loss.
Face Value: The value indicated on the face of a security or insurance policy representing its value at maturity or death.
Fair Market Value: Price at which property would change hands between a willing buyer and a willing seller, if neither were under any compulsion to buy or sell and both having reasonable knowledge of the relevant facts. Synonymous with actual cash value, actual value, market value, fair cash market value, fair cash value, reasonable market value, trust cash value, value.
Fault: Negligence; neglect of duty.
Fault Charts or Rules: Charts used by insurance companies to settle claims in an efficient fashion. These charts outline different accident circumstances such as parking lot accidents or left hand overtakes. The charts also outline the methods used to settle such claims.
Feasance: Performing or doing of an act.
Fidelity Insurance: Covers losses caused by dishonesty or want of fidelity on the part of insured’s employees.
Fiduciary: One who manages money or property for another and who must exercise a standard of care imposed by law or contract.
Fire Insurance: Contracts of insurance which, by law, are required to insure direct damage caused by fire, lightening, and explosions of natural, coal or manufactured gas.
First Party: The insured is considered the first party in an insurance contract.
Fixed Assets: Those long-term assets held for use rather than for sale (e.g. land, buildings, machinery, equipment, etc).
Fixed Costs: Costs that remain constant whether any business is done or not.
Fixed Expenses: Are those expenses that continue during the period of the interruption. Fixed expenses include: mortgage interest, interest on accounts payable, salaries, property taxes, professional fees, insurance premiums, regular donations, and trade association dues.
Fixtures & Fittings: Parts or furnishings of a building considered as permanent attachments, as opposed to moveable items such as stock, office furniture, etc.
Floater Policy: This type of policy covers property that may be transported to different locations. For example, a contractor may purchase a floater policy to protect his/her tools from a loss.
Flood Insurance: Covers against damage cause by rising or overflowing of bodies of water.
Force Majeure: Of superior or irresistible natural force. You will often see this clause in construction contracts to protect the parties in the event that the contract cannot be performed in its entirety due to causes which are outside both parties’ control (e.g. Act of God).
Foreseeability: The reasonable anticipation that loss or damage is a likely result of acts or omissions.
Forfeit: To lose some right, privilege, or property because of breach of contract, neglect of duty, or offense.
Fortuitous: Accidental or happening by chance.
Fortuitous Event: An event that happens by accident.
Fortuitous Loss: Unforeseen and unexpected loss that occurs as a result of chance.
Foundation Exclusion Clause: This clause states that the policy does not insure building foundations. This means that such values will not factored into the determination of insurance under the provisions of a coinsurance clause.
Franchise Clause: In an insurance policy, clause stating the insured will pay for damage under an agreed amount and the insurer will pay claims only over a stated amount. Different from a deductible clause, wherein the insured bears the loss in every claim up to the deductible amount. In the franchise clause, once the claim exceeds the agreed amount, the insurer pays the entire claim.
Fraudulent: To act fraudulently means to act willfully and with the specific intent to deceive or cheat; ordinarily for the purpose of either causing some financial loss to another, or bringing about some financial gain to oneself.
Fraudulent Misrepresentation: A false statement or an intentional half-truth deliberately carried out with the intention of deceit.
Full Coverage: Insurance which covers all losses with no deductible amount.
G
General Damages: These are damages which cannot be quantified with precision in monetary terms, but reflect an amount that the court believes necessary to compensate the aggrieved party fairly.
Glass Insurance: Covers against accidental glass breakage.
Going Concern Value: The value of the assets of a firm that is actively in business, rather than the value if those assets were disposed of in a liquidation sale. Good will is included in such value.
Going Price: Current market value.
Good Faith: the state of mind denoting honesty of purpose, freedom from intent to defraud, and being faithful to one’s duty and obligation. A basic principle of insurance (e.g. normally applicant for insurance must provide all details of risk to be insured, including information regarding previous claims, cancellations, or refusals of insurance).
Goods: Generic term which can include all personal property.
Goods and Chattels: Usually refers to all personal property, and not real property (land, buildings, etc.).
Grace Period: A period beyond the due date of premium (usually 30 or 31 days) during which insurance is continued in force and during which payment may be made to keep policy in good standing.
Gross Earnings Form: Business Interruption form of insurance under which the insured’s gross earnings are insured. Indemnity period commences at time of loss and is restricted to such time as is required to replace the lost or damaged property.
Gross Negligence: The reckless, wanton, and wilful misconduct causing bodily injury or damage to property. In this case, the standard of due care has been ignored by such a wide margin that it almost amounts to an intentional act.
Gross Premium: Net premium plus loading for expenses and contingencies.
Group Insurance: An agreement between an insurance company and a group of people sharing common characteristics to provide them with insurance at a special rate.
Guaranteed Endorsement: Endorsement providing that if insurance company becomes insolvent, reinsurer shall pay insured for loss to mortgaged property covered by reinsurance.
Guaranteed Replacement Cost: A type of policy that repairs or replaces property without any deduction for depreciation.
Guaranty or Fidelity Insurance: Insures against loss arising from infidelity of employees and against others holding positions of trust, or against the insolvency of debtors, losses in trade, loss by non-payment notes, or against breaches of contract.
Guiding Principles: Certain rules and principles agreed to by the majority of insurance companies that override actual wording of a policy in order to ensure efficient settlement of a claim.
H
Habitation: Residence; place of abode, dwelling place.
Hazard: The risk, danger, or probability that the event insured against may happen.
Heirlooms: Valuable personal property items handed down through generations of a family.
Hold Harmless Agreement: A contractual arrangement whereby one party assumes legal responsibility for the acts of another.
Holdback: Under terms of a contract, the amount which is not payable until the contract has been completed and the period within which any liens must be filed has expired.
Household n.: For insurance purposes, term is synonymous with “family” and includes those who dwell together as a family under the same roof.
I
Immediate Cause: The last cause which directly produces the result or event. Distinguished from “proximate” in that the proximate cause (that which directly and efficiently brings about the result) may not be immediate (e.g. if a drunk man falls into the water and drowns, his intoxication is the proximate cause of his death, but the immediate cause of death is suffocation by drowning).
Implied Agreement: An agreement where both parties have acted in such a way that it is understood that a contract or agreement is in place even if there is no written or expressed agreement in place.
Improvement: An addition made to property that enhances its value, beauty, or utility or adapts it for new or expanded purposes.
Improvements and Betterments: Additions or changes to rented or strata-owned premises by a tenant or strata owner at his/her own expense.
Inception Date: The commencement date of an insurance policy.
Incurred Losses: Losses occurring within a fixed period whether they have been adjusted and paid for, or they have yet to be adjusted and paid for.
Indemnify: This is the cornerstone principle of the insurance agreement; it is to place an insured in the same financial position as they were just prior to the loss—no better or worse off.
Indemnification: Compensation to the victim of a loss, in whole or in part, by payment, repair, or replacement.
Indemnity: Expressed or implied in a contract in which liability for a loss is shifted from one person held legally responsible to another person.
Independent Adjuster: An independent business person hired by an insurance company to represent it in investigating, negotiating and settling claims on its behalf.
Independent Broker: A provincial government licensed independent business person who usually represents a number of different insurance companies by selling and servicing their policies.
Indirect Damage: Loss resulting from a risk, but not caused directly and immediately thereby. May be covered by insurance (e.g. Business Interruption, Leasehold Interest, etc).
Indirect Loss: Losses which arise as a consequence of direct losses. These losses are insurable under policies of indirect damage insurance.
Ingress: Refers to the right of a lessee to enter and return from property or lands in question.
Injury: Damage or wrong done to a person, his rights, reputation, or property.
Inland Marine/Transportation Insurance: A term describing coverage for anything not insured under a property or casualty policy. It covers such things as account receivables, contractor's tools.
Inspection Report: Report prepared after a physical inspection of the risk which provides a detailed description of premises or property to be insured, including the hazards involved.
Installation Floater: Coverage for equipment in transit to the job site, while awaiting installation on site and during installation until accepted or interest of the insured ceases, whichever first occurs.
Insurable: Able to be insured against loss, damage, etc.
Insurable Interest: An insurance principle stating that a person is legally entitled to insure something when it may be shown that they would suffer financially in the event of a loss.
Insurable Value: The property’s value for insurance purposes.
Insurance: A contract (policy) whereby, for monetary consideration (premium), one party (the insurer) undertakes to compensate the other (the insured) for loss on a specified subject by specified perils.
Insurance to Value: Insuring the full value of property, or at least to that value that meets the co-insurance requirement.
Insured: The person or corporation whose insurable interest is protected by the policy. Not limited to the insured named in the policy, but applies to anyone who is insured under the policy.
Insurer: The company providing the insurance coverage.
Intangible Property: Property that has no physical substance and consists of legal rights rather than things (patents, stocks, bonds, goodwill, trademarks, franchises, copywrites).
Interim Coverage: Temporary coverage granted to an insured before the policy is issued.
Intrinsic Value: The inherent value of a thing itself, rather than any special features which make its market value different.
Irrevocable Beneficiary: Beneficiary designation allowing no change to be made in the beneficiary of an insurance policy without the beneficiary’s consent.
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Jewelry Floater: This refers to special coverage under an All Risk policy that is designed to increase and broaden your protection for a particular piece of jewelry. This coverage also provides protection against perils such as theft and mysterious disappearance. In the event of a claim, the amount paid will equal the cost to replace the item.
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Key Man Insurance: Protects companies against financial loss on the death or disability of a valued employee, or by partnership to provide funds with which to buy out the interest of such partner on his death or disability.
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Landlord: One who owns property and leases it to another.
Lapse: The cancellation of an insurance policy due to non-payment of renewal premiums during the grace period.
Lapsed: A term used to describe an expired policy, which has not been renewed; a cancelled policy.
Larceny: The taking away of property with the intention to defraud the owner.
Leasehold Improvements: Improvements made by the tenant (lessee).
Legal Description: The description of real property by government survey or lot numbers which includes a description of any easements on the property.
Legal Duty: An obligation arising from law or a contract which the parties have entered into.
Legal Liability: Responsibility imposed by law for negligence resulting in bodily injury to persons and/or damage to their property.
Legal Residence: The dwelling place where one permanently lives and to which he intends to return despite temporary residences elsewhere or despite temporary absences.
Legislation: Laws enacted by a government.
Lessee: One who rents property from another under a lease (e.g., a tenant).
Lessor: One who rents property to another under a lease (e.g., a landlord).
Liability Insurance: Type of insurance covering an insured’s legal liability for bodily injuries to others or damage to the property of others.
Liability Limits Maximum: Amount of insurance provided under a policy of liability insurance.
Libel: Any written or printed matter tending to injure a person’s reputation unjustly.
Lien: A claim or charge on real or personal property for payment of some debt, duty, or obligation.
Lien Holder: A person or corporation who places a lien against a piece of property or business because of non-payment of a debt.
Like Kind and Quality: This clause, found in property insurance policies, limits the liability of the insurer for property lost or damaged to property of “like kind and quality.”
Limit of Liability: The maximum amount, excluding legal defence costs, for which an insurance company is responsible for under a policy.
Loading: An additional rate or premium added to a basic rate or premium because of the additional risk involved for the insurance company.
Loss: An occurrence leading to a claim under a policy, e.g., a fire is a “loss”.
Loss (Risk) Control: As relates to risk management techniques that serve to reduce the frequency and severity of losses.
Loss Exposure: The chance (exposure to) of financial loss to a company as the result of a particular peril striking a thing of value.
Loss of Profit: Insurance against business expenses and loss of income resulting from a fire or other insured peril. Another term for “loss of profit” insurance is “business interruption” insurance.
Loss Payable Clause: A policy clause that names a party with an interest in a property who would receive payment in the event of a loss; e.g., a mortgagee, bank, finance company.
Loss Payee: Person named in insurance policy who will be paid in event of loss.
Loss Prevention: Any action taken to reduce the potential or frequency of a particular loss.
Lost Property: Property involuntarily parted with and which the owner does not know where to find.
Loss Ratio: An important ratio used to measure an insurance company’s results; it is the percentage of claims paid to the amount of premiums collected.
Loss Reserves: The funds an insurance company sets aside to pay for reported, but outstanding claims. The amount an insurance company must keep in reserve is legislated by the government of Canada.
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Maim: To cripple; mutilate; disable.
Maintenance Bond: Contract bond guaranteeing that obligations imposed by law and in contract upon the principal for repair or replacement of defective work and materials will be fulfilled for a stipulated period of time after completion of a job.
Majority Shareholder: A party holding or controlling more than fifty percent of the issued shares of a corporation.
Malfeasance: Performing an unlawful act. Also, any wrongful conduct that effects, interrupts, or interferes with the performance of official duties.
Malicious Act: An unlawful act intentionally done to injure another.
Malicious Mischief: Willful destruction of personal property of another from actual ill will or perverse intent.
Malicious Prosecution: A suit begun in malice without probable cause to believe the charges can be sustained.
Malicious Trespass: The act of one who maliciously injures or causes to be injured any property of another.
Manuscript Wording: In insurance, a policy form or wording which does not conform to standard wordings in general use and which is often unique to the risk being undertaken.
Marine Insurance: Insurance coverage for the hull and cargo of a boat in addition to the liability imposed onto others from the operation of the boat.
Market Price: The price at which a seller is ready and willing to sell and a buyer ready and willing to buy.
Market Value: The highest price a willing buyer would pay and a willing seller accept.
Masonry Construction: A form of construction which incorporates self-supporting walls of masonry, except that its floors and roofs may be of combustible materials (e.g. wood).
Material Change: Material change refers to a change in the level of risk that is associated with the property being insured. For example, assume you’ve bought a homeowner’s policy and the premium is $800. You then add a basement suite. This upgrade to your home that represents a significant change to the level of risk that your home is exposed to; the insurer considers this a “material change of risk.” You need to inform your insurance company of significant changes to what is being insured; otherwise your policy may be void.
Material Fact: A fact so important to a contract that withholding it would alter the terms of the contract or void it altogether.
Material Loss: For negligence action to succeed there must be a material loss.
Material Representation: A statement which is so important as to be the basis of an action if such representation is false.
Maximum Possible Loss: This refers to the largest loss that could occur under the circumstances.
Maximum Probable Loss: Largest loss which underwriter considers likely to occur based on his/her experience and judgment.
Mechanic’s Lien: Under the law, a mechanic is anyone who provides labour, services, or supplies to improve real property, like the carpenters, electricians, roofers, and plumbers you hire to work on your house. A mechanic’s lien is a legal claim that such service providers can place against your real property, in the event of non-payment for their services.
Mediation: This refers to the intervention of a third party between two parties with a view to persuading them to adjust or settle their dispute.
Mediator: One who intervenes between parties in dispute with a view to reconcile their differences.
Mercantile Risk: One having to do with the business of buying and selling merchandise.
Merit Rating: This is a rating system that insurers use in which the applicant’s history of losses and claims influences the cost of their insurance.
Messenger: The insured or a partner of the insured or any employee who is duly authorized by the insured to have the care and custody of the insured property outside the premises.
Mill Construction: Mill construction describes the construction of buildings that is characterized by thick masonry walls and heavy wooden floors. This type of construction is frequently found in older factories and warehouses.
Minimum Retained Premium: The minimum amount of premium an insurer will retain in the event the policy is cancelled prior to its expiry.
Misappropriation: Misappropriation is the intentional, illegal use of the property or funds of another person for one's own use or other unauthorized purposes, particularly by a public official, a trustee of a trust, an executor, or administrator of a dead person's estate or by any person with a responsibility to care for and protect another's assets (a fiduciary duty).
Misconduct: Misconduct is a legal term meaning a wrongful, improper, or unlawful conduct motivated by premeditated or intentional purpose or by obstinate indifference to the consequences of one's acts. It refers to an action taken, rather than neglecting to take action, or inaction.
Misdescription: An error in the description of the subject matter of a contract which is misleading in a material or substantial point.
Misfeasance: The improper performance of some lawful act; i.e., take inappropriate action or give intentionally incorrect advice. The expressions misfeasance and nonfeasance, and occasionally malfeasance, are used in reference to the discharge of public obligations existing by common law, custom or statute.
Misleading: Meant to lead into error.
Misnomer: Wrong name.
Misrepresentation: The submission of false, or the fraudulent omission of material information in connection with the insurance application.
Mistake: In unintentional act, omission, or error.
Mobile Home: A home which is factory built on its own chassis and which can be easily moved.
Mortgage Clause: A policy condition providing protection to the mortgagee in the event that the insured failed to comply with policy conditions.
Mortgage Insurance: Insurance policy designed to cover the balance due on a mortgage on the death or disability of the insured.
Mortgagee: The person, usually a bank, to whom property is pledged as security.
Mortgagor: The person, usually the insured, who gives his property as security for a loan.
Motor Truck Cargo Policy (Carrier’s Form): Covers goods of others while being transported on insured’s vehicles.
Motor Truck Cargo Policy (Owner’s Form): Covers the insured’s own goods or goods of others for which he is responsible while being transported on insured’s vehicles, or by such other means as specified by the policy.
Multi-Peril Policy: Insurance contract which combines a variety of insurances (e.g. property, crime, liability).
Municipal Ordinance: A law or rule enacted by a municipal corporation for the proper conduct of its affairs (e.g. zoning, building codes).
Mysterious Disappearance: The loss of property in unexplainable circumstances.
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Named Perils: A type of insurance coverage where the perils insured are listed on the policy.
Natural and Probable Consequences: Those consequences that normally result out of certain acts and which a prudent person can anticipate as likely to happen again, all circumstances being the same.
Neglect: The omitting or failing to do something that can or is required to be done. It may also refer to an absence of care and attention in the doing or omission of a given act.
Negligence: Omitting to do something which a reasonable person in similar circumstances would have done, or doing something which a reasonable person in such circumstances would not have done.
Negligent Misrepresentation: Occurs when the person making the misrepresentation should have known, but was careless, about the truth of the representation.
Next of Kin: The person or persons most closely related by blood to a person who has died. This expression can also refer to the surviving spouse.
No-Fault: An insurance concept where an insured recovers the damage to their automobile from their own insurance company as if they were a third party. The insured does not recover any vehicle damages from the third party insurance company.
Non-Disclosure: This refers to the failure to reveal facts. If applicant for insurance does not disclose all relevant facts, he/she could be found guilty of non-disclosure and may risk having their coverage voided.
Nonfeasance: When someone fails or neglects to perform duties as agreed upon, this is described as nonfeasance.
Noninsurable Risk: (Also known as an uninsurable risk.) A risk for which an insurance company will not provide coverage because one or a number of the following conditions do not exist: 1) there must be an insurable interest in the thing or person being insured, 2) there must be a large number of similar risks being insured, 3) any losses incurred must be accidental, 3) the risk must not be too catastrophic for the insurance company—i.e., the possible loss should not be so great as to ruin the insurance company, 4) it must be possible to calculate the risk of a loss occurring.
Non-Payment: Failure to pay a debt when due.
Non-Performance: Failure to perform an act agreed upon.
Non-Waiver Agreement: This is an agreement that is signed by the insured person after they suffer a loss, and which allows the insurer to investigate and determine the amount of damage without such action being perceived as an admission of liability. This type of agreement is generally used when the insured person is in violation of a policy condition and there is some question about whether or not the insurer will pay the loss.
Notary Public: A person who is appointed by provincial legislation and who is authorized to administer oaths and to attest to the authenticity of signatures.
Notice of Loss: When a loss occurs, insurance policies stipulate that the insured person must immediately notify the insurance company to advise them of such a loss.
Notice of Termination: Notice respecting termination of insurance contracts may be given by the insured or insurer and may be different for different types of policies. Terms of termination are contained in policy.
Null: This refers to something as having no validity, or being without value, effect, consequence, or significance. When used in connection with “void” (null and void) in a contract or statute, it means that the contract has no legal force or effect.
Null Contract: A contract that is deemed to have never existed in the eyes of the law; i.e., the contract is void.
Numismatic Property: This expression refers to coin albums, containers, frames, card and display cabinets used in connection with such collections that are owned by or in the custody or control of the insured person.
O
Obligate: To bind by obligation or promise; to assume a duty.
Obligation: An obligation is when a person promises to, agrees to, or is obliged to do certain things, and which arises out of a sense of duty or results from custom, law, etc.
Obsolescence: The decline in a property’s value which is unrelated to physical changes in the asset itself but which is instead due to changes in technology and public taste which render the property less useful or desirable on the market.
Occupancy: Taking possession of property and using it. In insurance, occupancy implies the use of the building only for those purposes described in the policy.
Occurrence: In insurance, this term generally refers to an unexpected or accidental event.
Omission: Neglect to do what the law requires.
Omnibus Clause: In insurance, this clause extends coverage to other persons (e.g., the automobile policy which extends to cover any other person driving the vehicle with the insured’s consent).
Onus: This refers to the “burden of proof,” which states that a person (plaintiff) bringing a suit against another (defendant) is required to prove the allegations made against the defendant.
Optional Settlement Clause: This type of clause allows the insured person to select the method to be used in the way a settlement will be made (e.g., a homeowner policy may allow for settlement of a claim by either “actual cash value” (ACV), or replacement cost value.
Ordinance: Equivalent of a municipal statute dealing with matters not covered by federal or provincial law (e.g., zoning laws, building codes, etc).
Ordinary Construction: Buildings having exterior bearing walls of non-combustible construction; and roofs, floors and interior framing wholly or partly of wood or other combustible material.
Other Insurance: This refers to a clause found in property insurance policies that outlines what is to be done in the event that other insurance policies cover the same property.
Outboard Motor Boat and Outboard Motor Policy: Insurance policy covering boats, motors, and equipment.
Outbuilding: These are buildings used in connection with a main building and generally separated from it (e.g., storage shed, garage).
Out-Of-Court Settlement: Settlement which takes place between parties in a pending suite without actually going to court to settle the matter.
Out-of-Pocket Expenses: Reasonable expenses incurred by an insured person during the claims process. With the proper receipts, the insured may receive refunds from the insurance company.
Over-Insurance: When a risk is insured for more than its fair or reasonable value.
Overlapping Insurance: When two different kinds of policies cover the same loss. (See Double Insurance.)
Overt Act: An open act from which criminality may be implied.
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Package Policy: This is an insurance policy that combines coverage from two or more types of insurance (such as property and liability) into one policy.
Pain and Suffering: Physical discomfort and distress, as well as mental and emotional trauma recoverable as damages in a legal action.
Pair & Set Clause: This is a provision in many business and personal policies that loss or damage to one of a pair or set of individual items does not represent the loss of the pair or set. For example, the loss of one diamond earring would not entitle the insured to be reimbursed for a pair of earrings, but for only the resulting decrease in the overall pre-loss value of the pair.
Partial Loss: A loss under an insurance policy that does not either completely destroy or render worthless the insured property, or which does not exhaust the insurance limits that apply to the damage or loss.
Partnership Insurance: This is an insurance policy that covers the life or health of business partners, which is designed to enable a business to continue in event of disability or death of a partner.
Peak Season Endorsement: Provides increased coverage for larger than normal stock inventories during peak seasons.
Peculation: Fraudulent misappropriation of another’s property entrusted to one’s care.
Performance Bond: A performance bond is issued by an insurance company or a bank to guarantee satisfactory completion of a project by a contractor. If the contractor fails to construct the building according to the specifications laid out in the contract (most often due to the bankruptcy of the contractor), the client is guaranteed compensation for any monetary loss up to the amount of the performance bond.
Peril: The cause of a loss; e.g., fire, accident, burglary.
Permission Clause: This clause gives the policyholder permission to use the insured premises for normal purposes relating to occupancy.
Personal Effects: Moveable property of any kind associated with a person.
Personal Injury: Technically this refers to an injury to one’s person. However, in liability insurance, this term refers to injuries that arise due to libel or slander, malicious prosecution, false imprisonment, wrongful eviction, etc.
Personal Lines: Insurance coverage for individuals and families (e.g. private passenger automobile, homeowners, etc).
Personal Property: Property belonging to insured; similar to “personal effects”; does not refer to real property, such as a home.
Physical Depreciation: This means the reduction in value of an insured asset that is due to the actual wear and tear or physical deterioration of it.
Physical Hazard: The exposure to a loss arising out of the physical features of the risk such as its location, type of construction, or type of heating.
Plaintiff: In a court of law, the party who initiates the court proceedings against the defendant.
Policy: The printed legal document issued to the insured person by an insurance company, which sets out the terms of the insurance contract.
Policy Conditions: Conditions developed by the insurer which describe the rights and duties of insurer and insured.
Policy Fee: Amount added to premium that reflects the various expenses associated with issuing the policy.
Policy Limit: Maximum amount the insurer is obligated to pay in any one loss occurrence or accident.
Policy Period: Duration of policy.
Policyholder: One to whom the insurance policy is issued.
Power of Attorney: This is the written authorization to act as one’s agent or attorney.
Preamble: This is the introductory section of a policy, which includes identification details of the policyholder.
Precedent: Legal principle established in similar prior cases.
Preferred Risk: A preferred risk refers to a better than the average risk on which the premium rate was based.
Premium: The price charged to purchase the coverage supplied by an insurance policy.
Premium Finance Plan: Plan that allows for payment premium in installments.
Prescription: It is the time frame after which a claim may not be brought to an insurance company.
Pressure Vessel: Vessel designed to hold liquid or gases under pressure (e.g. boiler, hot water heater).
Presumption: Rule of law under which a fact is presumed true until proven otherwise.
Presumption of Liability: Assumption of who is liable in a given circumstance until proven otherwise.
Prima Facie: A fact which, at first sight, is presumed to be true unless evidence is provided to the contrary.
Primary Policy: The primary policy is that policy which pays first before any recovery is made from another policy.
Principle of Indemnity: Doctrine that an insured is entitled to the actual amount of his loss, no more and no less.
Prior Damage: Damage that existed prior to the loss. This damage may not be claimed under an insurance claim.
Probable Cause: This refers to the cause of an event wherein there is more evidence indicating it to be the cause, than there is evidence to suggest it isn’t the cause.
Product Liability: Refers to the legal liability of sellers and manufacturers for injury or damage caused by defective products sold or made by them.
Product Liability Insurance: Insurance coverage designed to insure the legal liability of sellers and manufacturers for injury or damage caused by defective products sold or made by them.
Products Recall Expense Insurance: This coverage provides protection against the costs of recalling products known or suspected to be defective.
Professional Liability Insurance: See “Errors and Omissions.”
Profits Insurance: This covers the loss of income as a result of physical damage to insured’s premises by an insured peril.
Proof of Loss: A sworn declaration filled out and signed by the insured person that details their claim.
Property Damage: This is the damage that occurs to the property of others; does not refer to the insured’s property.
Provisions: Refers to the terms of the policy that outline the circumstances under which the benefits are payable.
Proximate Cause: See “Direct Cause.”
Proxy: Legal authority to act on behalf of another person.
Public Adjusters: Independent professional that is hired by insured to represent their interest in the claims process.
Punitive Damage: A fine levied against individuals by a court of law as a form of punishment for their actions.
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R
Rain Insurance: This coverage provides protection against financial loss caused by the cancellation of an outdoor event due to rain (e.g. fairs, outdoor concerts, etc).
Rate: A charge for insurance based on factors relating to insurable qualities, market conditions, etc.
Reasonable Care: That degree of care which a person of ordinary prudence would exercise in similar circumstances. (Also referred to as: ordinary or due care.)
Receiver: A court-appointed person who manages property in litigation or the affairs of a bankrupt company.
Receivership: Condition of a business or individual over whom a receiver has been appointed for protection of its assets and for the ultimate sale and distribution to the creditors.
Recovery: The amount of a loss which an insurance company gets back from reinsurance, salvage or by subrogation.
Refund: That portion of insurance premium which is returned to the insured, normally as result of termination of policy or reduction in coverages.
Reinstatement: To reactivate a cancelled or lapsed policy.
Reinsurance: A system of passing part of a risk from the original insurance company to a second insurance company known as a reinsurer. The system of reinsurance is designed to limit insurance companies’ liability on any one risk. In essence it is insurance that insurance companies buy to protect themselves.
Reinsurer: An insurance company who provides insurance for an insurance company.
Remedy: The means by which a right is enforced or the violation of a right is prevented, redressed, or compensated.
Remote Cause: Any cause of loss that is not the direct or proximate cause. A remote cause is not the event that started a chain of events that led to a loss. Rather, a remote cause is one event of many in a chain of events that eventually led to a loss.
Renewal: The continuation of an insurance contract at the same terms and conditions.
Renewal Agreement: This refers to the provision in a policy that an insurer will renew policy for an agreed number of times.
Renewal Certificate: The form used to change the expiry date of the insurance policy or contract.
Rental Value Insurance: Insurance coverage designed to insure loss of income to owners of tenanted properties when the rental property is uninhabitable as a result of an insured loss.
Replacement Cost: The cost to repair or replace an item with a new one without any deduction for depreciation.
Replacement Value: The cash value or the actual cost to replace an insured asset.
Rescind: To void a contract as if it were never in place.
Rescission of Contract: Undoing a contract from the beginning, either by mutual agreement, or by one party if legal grounds exist.
Restitution: The act of restoring to the rightful owner something that has been taken away, lost, or surrendered. It also refers to the act of making good or compensating for some loss, damage, or injury.
Revoke: To cancel, rescind or take back.
Rider: A document issued by the insurer that modifies the policy by expanding or restricting its benefits. Also, known as an “endorsement.”
Right of Way: An easement giving a person the right to pass over another’s land.
Risk Classification: Refers to the grouping or classifying of risks according to established criteria which, in the large part, is based on their probability of occurring and causing a loss—as a class.
Risk Management: To identify risks and undertake preventive actions to reduce the probability of their occurrence.
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Salvage: Salvage is property that has been damaged by an insured peril but still has some realizable value; this value is taken into account when determining the amount of the loss.
Seasonal Dwelling: A summer cottage is an example of a seasonal dwelling.
Seasonal Risk: A risk which is only occupied for a part of the year (e.g. summer dwelling, restaurant at summer resort, etc).
Self-Insure: When a person does not purchase any insurance protection and absorbs losses with their own money.
Setback: In the context of zoning bylaws, this refers to regulations that specify the distance from the lot line to the point where a residential or commercial building may be built or improvements may be made to existing structures.
Short Rate: When an insured cancels a policy before its expiry, the returned premium is based on this type of calculation. The premium returned to an insured receives deductions to account for the administration expenses generated by the early cancellation.
Solvency: This refers to the ability of a business to pay its debts when they are due.
Specified Perils: A type of insurance policy that provides protection against the perils (e.g. fire) named in the policy.
Spontaneous Combustion: Self-ignition by the internal development of heat (e.g. damp grains in a storage unit, oily rags in a trash can, etc.).
Sprinklered Risk: Property which is protected from fire by a system of overhead sprinkler pipes.
Standard Limits: The basic amounts of protection provided by an insurance contract.
Standing Charges: In business interruption insurance, standing charges refer to those expenses which would not ordinarily be reduced during the period of indemnity provided by the policy.
Statute Law: It is written law enacted by the Canadian federal government which overrides any common law dealing with the same point.
Statute of Limitations: The time limit after which a claim or legal action may not be initiated.
Subrogation: Subrogation in its most common usage refers to circumstances in which an insurance company tries to recoup expenses for a claim it paid out when another party should have been responsible for paying at least a portion of that claim.
Subsidence: Damage suffered by property due to movement of land beneath it; (e.g., landslide). Earthquake is excluded.
Substantive Law: The category of law addressing the rights and duties that each person has in society.
Suit: A proceeding in a court of law brought by one person against another for redress of an injury or enforcement of a right.
Summons: A writ delivered to a person advising that an action has been commenced against him in a court of law and requesting his appearance on the date specified to answer to the charge.
Superintendent of Insurance: In each province, the office that legislates the insurance industry.
Supersede: To replace, set aside, take the place or position of.
Surety Bonds: A type of insurance that guarantees the debt or performance of an obligation of one party to another.
T
Tangible Property: Property which may be felt or touched; either real or personal.
Tenant: One who temporarily uses and occupies real property owned by another.
Tenant’s Improvements: See “Improvements and Betterments.”
Tenants Policy: A policy specially designed to meet the normal insurance requirements of a person renting a home or apartment, which provides coverage for both personal belongings and liability.
Tender: An offer to enter into a contract.
Term: A period of time for which an insurance policy is issued.
Title Insurance: The word “title” is a legal term that means you have legal ownership of property. Title insurance protects residential or commercial property owners and their lenders against losses related to the property’s title or ownership. For example, it covers: 1) against title issues that prevent you from having clear ownership of the property; 2) existing liens against the property’s title (e.g. the previous owner had unpaid debts from utilities, mortgages, property taxes or condominium charges; 3) encroachment issues such as a structure on your property needs to be removed because it is on your neighbour’s property; 4) title fraud; 5) errors in surveys and public records; 6) other title-related issues that can affect your ability to sell, mortgage, or lease your property in the future.
Tort: A legal wrong, other than breach of contract, for which the court will provide a remedy in the form of a suit for damages.
Total Loss: A vehicle or piece of property that is not economical to repair. The cost of repairs exceeds the market value or replacement cost depending on how the policy is written.
Transportation Insurance: Insurance coverage designed for owners and carriers of goods in transit.
Trespass: An unlawful interference with one’s person, property, or rights.
U
Umbrella Policy: A special type of liability policy designed to provide protection over and above the protection afforded by the normal liability coverage.
Unavoidable Accident: An accident that results due to no person’s fault and which could not be foreseen and prevented by using ordinary diligence.
Unavoidable Cause: A cause not reasonably anticipated under the circumstances, and whose effects under similar circumstances, a person does not and would not ordinarily avoid.
Under-Insurance: When the amount of insurance is less than the full value of the property insured.
Undertake: To assume an obligation.
Undertaking: A promise.
Underwriter: An employee of an insurance company, who decides whether to agree to provide insurance based upon numerous factors relating to the person requesting insurance and the asset being insured.
Underwriting Profit (Or Loss): The difference between premiums generated and losses and expenses incurred is the company’s underwriting profit or loss.
Unearned Premium: This is the part of the premium collected by an insurance company that it has yet to earn because the term of the policy has not been finished. For example, if the policy is cancelled, the insured should receive a refund of the unearned premium, i.e., the money that they have paid but were not insured for.
Unilateral: One sided.
Uninsurable Risk: See “non-insurable risk.”
Unlawful Entry: A peaceable entry upon lands but which is accomplished by means of fraud or some other willful wrong.
Unoccupied: A building that still has its contents but the occupants are temporarily away.
Unprofessional Conduct: Conduct considered to be immoral, unethical, or dishonourable.
Unprotected: Property is “unprotected” when it is located in an area not regularly serviced by a fire department.
V
Vacancy: A building that is empty or unoccupied.
Vacant: Empty of contents. Implies abandonment and non-occupancy for any purpose. In insurance, when the terms “vacant” and “unoccupied” are used together, “vacant” means empty while “unoccupied” means lack of usual presence of human beings.
Valuation: Same as “appraisal”; a determination of the value of a specific piece of property.
Vandalism: Willful destruction of property.
Vicarious Liability: Indirect legal responsibility (e.g. an employer is liable for the acts of an employee, while he/she is doing their job).
Vitiate: To destroy or annul; to make void or voidable.
Void: Having no legal force or binding effect.
Void Contract: A contract that is deemed to have never existed in the eyes of the law.
Voidable Contract: A contract that may be voided at the request of one party.
Voluntary Medical Payments: A type of coverage found in homeowner’s policies that allows an insured to make payments to an injured party even if the insured is not legally liable.
W
Waiting Period: The period of time during which an insurance policy is not in effect or for which no payment will be made on the policy.
Waiver: A voluntary relinquishment of a known right by an insured or insurance company.
Waiver of Co-Insurance: A clause contained in commercial property insurance policies which provides that the coinsurance penalty will not be applied in situations involving small losses even though insured may not be in compliance with coinsurance requirements (e.g. penalty waived for losses which are less than 2% of amount of insurance and less than $5000).
Waiver of Subrogation: Provision stating coverage will not be prejudiced if the insured has waived any rights of recovery from a responsible party in writing prior to a loss.
Wanton: Reckless disregard of the safety or rights of others.
Wanton Act: An act that clearly demonstrates a reckless disregard to the life, health, reputation, or property rights of another.
Warehousemen’s Lien: Legal right of warehouseman to retain possession of goods until storage charges have been paid.
Wear and Tear: Deterioration caused by ordinary and reasonable use of the asset.
Willfully and Knowingly: An act is done “willfully and knowingly” when the person deliberately intends to do it and knows the nature of the act.
Willful Neglect: Suggests an intentional negligence.
Willful or Wanton Negligence: Failure to exercise ordinary care to prevent injury to a person who is in danger.
Without Prejudice: A phrase, used in claims negotiation, meaning that any statement made during negotiation or any offer of settlement is not to be interpreted as an admission of liability.
Wording: The part of the policy that details all the conditions and stipulations that both the insurance company and the insured agree to.
Writ: A court order requiring a specified act to be done.
Write-Off: To remove bad debts from books of account.
Wrongful Act: An act which will infringe upon the rights of another to his damage.
Wrongful Conduct: Conduct which contravenes some legal duty.
X
Y
Yield: To relinquish.
Z
Zoning Permit: Document issued by government authorizing a parcel of land to be used for a purpose which is consistent with zoning regulations.
