Insurance Terms

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Act of God: A direct, violent sudden act of nature that could not have been foreseen, or if foreseen, its effect could not have been prevented, e.g., flood, earthquake.

Actual Cash Value: The current cost of replacing an article with a similar one in the same condition.


Additional Living Expense Insurance: Coverage applicable when an insured's dwelling is damaged by an insured peril to such an extent that one cannot live in it until repaired. This insurance pays the extra amount it costs to live elsewhere until repairs are made, such as the cost of living in a hotel.



1) A person who is employed to act on behalf of another.
2) An insurance agent is one who contracts with one or more insurance companies to sell their insurance policies to the public and is paid a commission on or receives compensation for such business. See also Broker.

All Risk: A name given to an insurance policy which covers against the loss caused by all perils except those which are specifically excluded by the terms of the policy.


Amount of Insurance: The limit of payment for which an insurer is liable under a policy.


Appraisal: A valuation of property made for determining its insurable value or the amount of loss sustained.


Arson: At common law, the deliberate and intentional burning of property by its owner or by another person.


Automatic Reinstatement: After a claim has been paid or the property restored, most policies automatically return the stated limit of insurance to its original amount.


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Basic Premium: A starting charge made to which is added the premium developed by the application of rates as directed.


Betterment: Physical improvements beyond mere maintenance or repairs that augment the value of a property.


Binder: A written or oral agreement given by an insurer to insure a risk, pending the issue of a policy. A binder is deemed to be the policy and must be cancelled in the same manner.


Blanket Policy (insurance): Insurance on two or more items, or locations, in one aggregate sum insured without separate amounts for each item.


Boiler & Machinery Insurance: Coverage that indemnifies in the event of loss with respect to and arising from the ownership, use and operation of boilers, pressure vessels and machinery.


Brick Veneer Construction: Frame construction with a single course of brick as an outside covering.


Broker: An independent person or firm who acts on behalf of the insured in placing business with the insurance company. Responsible for the collection of premiums but having no authority to give coverage on the insurance company's behalf without their specific agreement. Compensation is on a commission basis.


Builder's Risk Insurance: Insurance coverage on property under construction including loss to buildings or ships, including machinery and equipment, under course of construction, and materials incidental to construction.


Building Codes: Rules and regulations of governmental bodies defining standards that construction in that jurisdiction must meet.


Burglar Alarms: Devices of various types which give warning of entry into premises by unauthorized persons.


Burglary: Unlawful removal of property from premises involving visible forcible entry. Burglary Insurance covers against loss of property caused by burglars.


Business Insurance: A form of insurance to protect a business against the loss of services of a key employee or employees. Usually accident and sickness, however, life insurance may also form part of the package. Also called Partnership Insurance or Corporation Insurance.


Business Interruption: Insurance against business expenses and loss of income resulting from fire or other insured peril.


By-law: A law or ordinance dealing with matters of local or internal regulation made by a local authority or by a corporation or association.


By-law Endorsement: An endorsement explaining how a particular insurance company deals with a claim which is affected by a local by-law.


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Cancellation: Termination of an insurance coverage during the policy period by the voluntary act of the insurance company or insured, effected in accordance with provisions in the contract or by mutual agreement.


Care, Custody and Control: A term used primarily in liability coverages which refers to property belonging to another but which is legally in the insured's possession or under his control.


Certified Copy: Reproduction of a document, that authority having custody of original signs and attests as a true, genuine and authentic copy.


Claim: Strictly speaking, a claim is the exercising of the right of an insured to be indemnified by his insurance company for damage suffered. It is frequently used, however, to indicate the amount of the claim.

In practice, it is any notification of a possible loss under an insurance policy whether any payment is likely to follow or not.

For every claim that is reported, the insurance company must set aside reserves equal to the figure which it is anticipated the claim will cost.


Claims Made Basis: Provision in some insurance and reinsurance contracts covering only claims made during term of the contract.


Clause: Words in a policy which describe certain specifications, limitations or modifications.


Co-Insurance Clause: A clause in an insurance policy requiring an insured to carry a certain percentage, usually 80, 90 or 100 per cent of insurance in relation to the value of the property insured. If the insured fails to do this, then he agrees to be a self-insurer of all losses large or small in the same ratio as his failure to comply with the percentage required, is related to the insurance required. For example, a building valued at $100,000 with an 80 per cent co-insurance clause would require insurance coverage of $80,000. If coverage is carried for only $40,000 then the insured is a self-insurer or coinsurer for $40,000 of the $80,000, and the insurance company would be responsible for the same amount. This ratio would apply even if a loss were only $5,000. Then the insurance company would pay $2,500 and the balance or coinsurance penalty of $2,500 would be borne by the insured.


Co-Insurer: Two or more persons or companies who may be sharing a loss. A company whose policy covers the same risk as that of one or more other companies, is a co-insurer whether the policies are written separately or together.


Collapse: Falling in of a building.


Collision: A vehicle or a ship collides when it strikes another object or another vehicle or ship. Collision insurance insures against loss so caused.


Commercial Property Floater: Property used in a business which requires it to be moved from place to place, may be insured on one of the forms of commercial property floaters. A television studio, for example, may require insurance on their equipment even though it may be out of the regular studio much of the time. In most instances, these are written on special forms suited to the particular need such as contractor's equipment floater, inland marine block policy, jeweler's block policy, salesman's floater policy, etc.


Common Carrier: One who offers to transport merchandise for hire and must accept shipments from anyone who wishes to use the services. Different laws and rules govern common carriers than do private or contract carriers who only transport the goods of those with whom they have made agreements.


Commercial General Liability Policy: A policy particularly suited to a manufacturer, contractor or large wholesaler or retailer providing broad coverage for claims made against him for bodily injury or damage to property of others for which he may become liable and which arise out of his entire business operation.


Comprehensive Personal Liability: A form of liability insurance for individuals which insures the policyholder in the event he has become liable to pay money for damage or injury he has caused to others. This form does not include automobile liability, but does cover almost every activity of the policyholder except those which arise from the operations of a business. Hence "Personal" Liability.


Conditions: The general terms or requirements upon which the insurance is based. For the mutual understanding of the parties the conditions will commonly state such matters as how the policy can be cancelled or renewed, provisions with respect to change of the insured's interest, provisions as to what an insured should do in the event of a loss, and conditions as to what he should do subsequent to a loss etc.

A condition precedent is one that must be fulfilled prior to the general fact at stake. The insured, for example, is required to give notice of a claim and fulfill certain other obligations as a condition precedent to his receiving a settlement.

A condition subsequent is one which is applicable subsequent to the event, as for example, the insured is required to co-operate in the disposition of the claim and to co-operate, other than in a monetary way, to assist to recover from anyone who is responsible for the loss.


Condominium: Is the individual ownership of a single unit in a multiple unit building or group of buildings, together with a percentage interest in that part of the total property owned jointly by all unit owners. In an apartment building, each apartment would be a unit and the stairways, pathways and parking areas would be in common ownership. Condominium property requires special insurance treatment.


Consequential Loss: The word "consequential" means something following as an effect or result. It is an indirect result of the occurrence that causes the loss.

The difference between a direct loss and a consequential loss can be seen in the destruction of a power station by wind. The damage to the power station is a direct loss by wind. There is actual physical damage directly resulting. The destruction of the power station also interrupts the generation of power by the station. For example, a cold storage plant is without electrical power. Foodstuffs spoil as a result or as a consequence. This is a consequential loss, not a direct loss.


Contractor's Liability Insurance: Insurance protecting contractor from defined liability claims arising from contractor's operations.


Contractual Liability: Liability assumed by a contract either written or implied. Legal liability policies are based upon liability in tort or negligence and have very little coverage normally for contractual liability (with a possible exception of such matters as sidetrack agreements, etc.) However, contractual liability may be covered in many instances as an additional risk with an additional premium.


Coverage: The nature of protection afforded by a particular policy. Can be used at times interchangeably with "insurance" or "protection" as "fire coverage" or "fire protection" or "fire insurance."


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Data Processing (Equipment Insurance): A special insurance usually on an all risks basis. Covers physical loss and loss from business interruption if the damage necessitates shutdown of operations.


Debris Removal: A provision in an insurance policy most commonly found in fire insurance providing indemnification for the cost of removal of the debris after a fire.


Declaration: Statement, signed by the insured, warranting that information given by him is true.


Decline: To refuse acceptance of an insurance application.


Deductible: The portion of a loss that you are required to pay before your insurance coverage will respond. Deductibles can be used to reduce your physical damage premiums. For example, if you owned a policy with a $200 deductible and you suffered a covered loss totaling $1,000, you would pay the first $200 and the insurance company would pay the remaining $800. If the loss were only $200, you would pay the entire amount and the insurance company would pay nothing.


Deductible Clause: A clause defining the amount of loss for which insured is liable; defines insurer's and insured's contributions to cover losses.


Depreciation: Decrease in the value of property over a period of time due to use, wear, tear, and obsolescence. For example, if you paid $500 for a television set five years ago, its current value minus depreciation might be only $125, for example.


Direct Billing: A system for the collection of premiums whereby the insurance company "directly bills" the insured for the premium in lieu of the conventional collection of premiums by the agent or broker. The insurer sends a statement to the agent, usually monthly, recording the premiums collected directly, and credits the agent with the commission on those items.


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 alleged wrongful acts of officers or directors. These policies always require the insured to retain part of the risk uninsured.


Disclosure: Act of making known something known.


Dwelling: The living quarters occupied, or intended for occupancy, by a household.


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Earned Premium:

1) That portion of premium earned or charged for the period of time a policy remained effective. For example, an annual policy paid for in advance would be one twelfth "earned" at the end of the first full month of its term.
2) An amount calculated by taking earned premium reserve at beginning of period plus premium written during period, less unearned premium reserve at end of period.
3) Premium actually exposed to loss.


Effective Date: The date on which an insurance policy or bond goes into effect, and from which protection is furnished.


Employer's Liability Insurance: Coverage for legal liability imposed on an employer to pay damages to an employee injured by the employer's negligence. This is not Worker's Compensation Insurance where special acts of legislature set out specifically the relationship between the employer and employees in certain circumstances and formula by which awards in each case are computed.


Endorsement: Amendment to the policy used to add or delete coverage. Also referred to as a "rider."


Equipment: Material for use on one machine, one vehicle, one unit. For example, a car comes "equipped" with five tires. Tires other than those on the car are not "equipment" of the car. They are instead the dealer's "stock of tires." Equipment also includes contractor's equipment, e.g., backhoe, bulldozer.


Estimated Premium: A tentative premium set in the anticipation of being approximately correct but which may be increased or decreased when the final premium calculation is made.

Exclusions: Certain causes and conditions, listed in the policy, which are not covered.


Expiry Date: The date when your current insurance policy expires. This date can be found on your current Declaration (or "DEC") page, insurance identification card, or recent cancellation notice. This date is not to be confused with the date of your next payment or the date when your renewal payment is due.


Explosion: A rupture of a pressure vessel of some kind due to excessive internal pressure (usually accompanied by a loud noise).


Exposure: The hazard threatening a risk because of external or internal physical conditions.

Extended Coverage (EC): A common extension of property insurance beyond coverage for fire and lightning. Extended coverage adds insurance against loss by the perils of windstorm, hail, explosion, riot and riot attending a strike (civil commotion), aircraft damage, vehicle damage, smoke damage and volcanic eruption.


Extra Expense Insurance: A form of insurance policy covering the extra expense of an insured in carrying on a business following a loss by an insured peril.


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Face Brick: Brick, chosen for its visual rather than its structural characteristics, used on wall's exposed surface.


Fair Market Value: Price at which a buyer and seller, under no compulsion to buy or sell, will trade.


Fire Damage: Damage caused by fire. Fire Insurance covers for losses from fire and lightning and also the resultant damage caused by smoke and water. Usually supplemented by Extended Coverage Insurance.


Fire Department Service Clause: A provision in a fire insurance policy agreeing to pay the cost of bringing a fire department to the location of the property insured in the event of a fire. It is valuable where the insured's property is not in a built-up area with its own fire department or where the risk is sufficiently large to require additional fire department services.


Fire Resistive Construction: A building, which has exterior walls, floors, and roof constructed of masonry or other fire-resistive materials.


Fixed Assets: Tangible long-term assets such as land, building, furniture, fixtures, machinery, equipment etc. held for use rather than for sale.


Fixtures: Anything that is attached to real property is known as a "fixture." Fixtures when permanently attached to real property become part of the real property. Tenant's fixtures are fixtures of a removable nature and are the responsibility of the tenant for insurance purposes. Whether a fixture is a tenant's fixture and movable or a landlord's fixture and immovable is frequently determined by the purpose of the fixture.


Flat Cancellation: The cancellation of a policy as of the effective date with all paid premium refunded.


Floater Policy: A policy covering the same risk at a number of perhaps unspecified locations possibly over a wide area (even world-wide); usually includes goods being frequently moved from one location to another, e.g., Fur Floater, Jewelry Floater, Contractors' Equipment Floater, etc.



1) The illegal signing of another's name to a document, such as, a cheque.
2) Falsely making or altering a written instrument.


Frame: Refers to the construction of a building built of lumber.



1) Methods used to deceive to cause unwarranted favourable decision for one's own benefit.
2) Deliberate misrepresentation or misstatement.
3) Concealment of facts which should at the time be made known.


Fraudulent: Dishonest; based on or obtained by fraud.


Fraudulent Misrepresentation: A false statement made knowing it to be false and intending another to act on it to his detriment, or made carelessly or recklessly without regard to whether it is true or false.


In insurance it is most frequently found in the intentional misrepresentation of a risk to obtain insurance or in proof of loss after the loss occurs.


Friendly Fire: A fire confined to the place it is supposed to be, e.g., in the fireplace; in the incinerator. See Hostile Fire.


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Glass Insurance: Insurance against the breakage of glass. The coverage is usually extended to certain other incidental expenses associated therewith. See Plate Glass.


Good Faith: Most ordinary contracts are good faith contracts. Insurance contracts are agreements made in the utmost good faith. This implies a standard of honesty greater than that usually required in most ordinary commercial contracts.


Gross Negligence: The degree of negligence somewhat greater than ordinary negligence. It may be a reckless wanton and willful misconduct causing bodily injury and/or property damage.

Guiding Principles: A loss may be covered by more than one policy. One policy may have a co-insurance clause and the other may not. How any loss in such circumstances should be apportioned between the various insurance companies involved creates a problem. To meet this problem, the majority of insurance companies have agreed to certain rules and principles. These principles override the actual wording of the policy so the insured is indemnified with least difficulty.


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Habitation: Dwelling place; residence.


1) A risk or probability that the event insured against might occur.
2) Condition which engenders or increases the chances of a loss.

Hazard, Moral: Hazard arising from character, interest, habits and lack of integrity of the insured or person concerned.

Hazard, Physical: Hazard arising from physical condition or characteristics of the object that is insured, e.g., using and storing volatile materials and substances on the premises.

Highway Traffic Act: The body or system of laws which govern the obligations of the provincial governments and users of roads. A breach or conviction of any of these laws may be an offence but does not of itself impose legal liability, but it may be relied upon in any proceeding to establish or negate any liability.

Hit and Run Accident: Collision between motor vehicle and/or a motor vehicle and another object and/or a motor vehicle and a pedestrian where a driver leaves the scene of the accident without identifying him/herself. This is an offence under the Highway Traffic Act.


Holdup: The taking of money or property by threat or the use of force or violence.

Homeowners Policy: A multi-peril insurance policy for dwelling risks, combining coverages for fire, and extended coverages including theft, and liability.

Hostile Fire: A fire which occurs in or escapes to a place not anticipated, e.g., a fire in a fireplace becomes uncontrollable and ignites something externally. See Friendly Fire.


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Improvements and Betterments: Additions or changes made by a lessee at his own cost to a building that he is occupying, which enhance its value. These become part of the realty and require special insurance consideration.


Incendiary: Malicious setting on fire or preparing, providing and setting the means for fire to start.


Inception: The date and time on which coverage under an insurance policy takes effect.


Indemnify: To provide compensation for loss or expenses incurred.

Indemnity: A contract, expressed or implied, to repay in the event of a loss. Insured neither gains nor loses.

Indemnity Period: The policy period.

Independent Adjuster: One who adjusts losses on behalf of insurance companies, but is not employed by any one insurance company.


Inflammable: Easily set on fire.


In Force: Insurance policy which is in effect, and has not expired or been cancelled.

Insurable Interest: An interest which the insured must have in the subject matter of the insurance he buys so that if the event insured against occurs, the insured will suffer a pecuniary loss.

Insurance: A contract in which one party, the insurer, for monetary consideration agrees to reimburse another, the insured, for loss or liability for a loss on a defined subject caused by specified hazards or perils.


Insurance Policy: A written contract of insurance.

Insured: The entity (individual or otherwise) whose risk of financial loss from an insured peril is protected by the insurance policy.

Insurer: The company providing the insurance coverage.

Insuring Clause: Describes the intent of the policy, just what insurance coverage is provided by the policy and in what limits.

Inventory: Itemized list of goods and property on hand.


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Lapse: Termination of a policy because of failure to pay the premium.

Legal Liability: Liability imposed by law on individuals or corporations to pay for harm done to others. Such law may be the common law, statute law or customs which over a period of time have taken on the same status as law. Legal liability may also be assumed under the terms of a contract.


Lessee: The person, to whom a lease is granted, commonly called the tenant.


Lessor: The person granting a lease, also known as the landlord.


Liability Insurance: In an accident where you are charged with injuring another person or damaging his or her property, liability insurance pays the cost of your legal defense, as well as the cost of any damages for which you are found legally responsible.


Liability Limits: The maximum amount of insurance provided under a policy of liability insurance. There may be different limits for bodily injury and property damage, or, more commonly, a single amount for all claims for bodily injury or property damage arising from one accident or occurrence.

Policies providing cover for claims arising from products manufactured by the insured or arising from his completed operations generally contain a further "aggregate limit" applicable to these, imposing a maximum for all claims occurring during the course of a single year.

Claims handling and adjusting expenses, costs of legal defense and prejudgment interest are normally payable in addition to the liability limits stated in the policy.

Like, Kind and Quality (LKQ): Refers to replacement of damaged, destroyed or lost property with used property of similar type and condition.


Limit of Liability: The maximum amount, which an insurance company agrees to pay in case of loss.


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Manufacturer's & Contractor's Liability Policy: A policy which provides coverage against the liability arising from the ownership of property or the carrying out of operations. This type of policy does not provide any coverage with respect to the hazards of products or completed operations.


Market Value: The value of an asset based on a current market valuation, e.g., the amount for which the item could be sold on the open market.


Masonry Construction: A form of construction identified by self-supporting walls of masonry, e.g., brick, stone or hollow concrete block, but with floors and roofs which may be constructed of combustible materials, usually wood.


Medical Payments Insurance: A provision in an insurance policy to pay certain specified medical expenses of others irrespective of the insured's legal liability.


Misrepresentation: An incorrect statement made about a material fact. Misrepresentation can be innocent, e.g., arising from an oversight; fraudulent (in other words, a deliberate untruth with intent to deceive) or the result of extreme carelessness where a statement is made without regard to whether it is true or false. When a misrepresentation is discovered, the insurer may either continue the contract or treat the contract as void with a full return of any premiums paid. In order for the insurer to successfully treat a policy as void, the misrepresented fact must be material to the risk.


Money & Securities (Broad Form) Rider: A broad form of policy protecting against loss of money or securities. There is no coverage for losses caused by, among other things, employee infidelity.


Moral Hazard: Danger of loss arising from the nature of the insured rather than from the physical nature of the risk. This would encompass those instances where the chance of loss is increased by an insured's carelessness, incompetence, recklessness, indifference to loss or an insured's fraudulent nature.


Mortgage Clause: A clause in an insurance policy which stipulates the rights and obligations of the insurer and the mortgagee. The main characteristics of this clause are that the mortgagee is granted protection in the event a loss is denied due to the actions of the insured (provided that the mortgagee was not aware of the insured's wrongful action) and, in return, the mortgagee accepts responsibility to advise the insurer of any misrepresentation or change in risk of which the mortgagee is aware.


Mortgagee: The creditor to whom a mortgage is given and who lends money on the security of the value of the property mortgaged. MORTGAGOR – The debtor who receives money and in turn grants a mortgage on his property as security for a loan.


Mutual Insurance Company: An insurance company which is owned by its policyholders who formed an association for the purposes of insuring one another against the possibility of fortuitous loss. Each policyholder pays a premium for his or her own policy. If at the end of the fiscal year the mutual insurance company declares a profit, the profit is shared amongst all the policyholders. If the company declares a loss there is also provision for the policyholders to be assessed a levy to make up for this shortfall.


Mysterious Disappearance: The disappearance of insured property in an unexplained manner. For example, if a ring is left in a public place and the owner returns later to find the ring gone, it is reasonable to assume that the ring has been stolen. However, there is no direct evidence that this is in fact what happened. This would be an example of mysterious disappearance.


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Named Insured: The first person in whose name the insurance policy is issued.


Named Perils: A policy in which the perils insured against are listed, as opposed to one which insures against "all risks." Some of these perils are: Fire and Lightning, Smoke, Vandalism or Malicious Acts, Water Escape, Rupture or Freezing, Windstorm or Hail, Glass Breakage, Theft, Weight of Ice, Snow or Sleet, etc.


Natural Disaster: A disaster caused by the elements such as flood, earthquake, tornado, lightning, etc.


Negligence: Failure to use the degree of care expected from a reasonable and prudent person.


No Fault: The term used to describe a system for improving the compensatory process for automobile accident victims by eliminating costly and lengthy litigation. Simply it means paying certain claims without reference to who was at fault.


Non-Combustible: Materials, no part of which will ignite and burn when subjected to fire.


Non-Disclosure: A contract of insurance is based on utmost good faith. An applicant for insurance is required to disclose to the company all material facts which are necessary to underwrite a policy. If the applicant does not disclose all these facts, he/ she is guilty of non-disclosure and may risk having coverage voided from inception.


Non-Insurable Risk: A risk for which no insurance can be written. The chance of loss is very high or cannot be accurately measured.


Non-Owned Automobile Insurance: A policy which protects the insured against third party claims arising out of some other person using their own vehicle in the business of the insured.


Notice of Loss: The conditions of the insurance policy require that any person sustaining a loss insured by the policy shall immediately give notice to the company of such loss. Failure to give notice as required has been held to be a bar against recovery. The notice is required to be in writing, and verbal notice to the agent or broker will not be sufficient to comply with the condition.


Notice of Termination: The conditions of insurance policies stipulate how a policy may be terminated during its term. For example, a policy may be terminated by the insured at any time or by the insurer who must give the insured a certain number of days' notice of termination by registered mail or a certain lesser number of days' written notice of termination personally delivered.


Null and Void: Of no legal or binding force; invalid.


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Occupancy: Occupancy is the act of holding possession of property or premises. The term implies the use of the building for the purposes described in the policy, and no other. An occupied building has furnishings and/or people in it.


Occurrence: A happening or event. Liability policies are usually written on either an accident or occurrence basis. For coverage on an accident basis, the loss or damage must be due to accident, whereas on an occurrence basis all that is required is the happening or the continual or repeated exposure to an unfavourable situation, neither intended nor expected to cause injury or damage. In reinsurance and insurance, it is also the grouping of related losses into a single loss situation.


Off Premises Clause: A provision in residential policies affording coverage on some of the household goods when away from the premises. within certain limits.


Operations: The business of an Insured or the type of business of an Insured.


Owner's Landlord's & Tenant's Liability: Liability insurance coverage which gives protection because of liability arising out of ownership, use or occupancy; operation or maintenance of buildings or premises.


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Package Policy: Any insurance policy which covers two or more lines or types of insurance in the same policy.


Pair & Set Clause: Establishes that loss or damage to one of a pair or set of individual items does not represent the loss of the pair or set.


Partial Loss: A loss covered by an insurance policy where the property or the premises are not completely destroyed or rendered completely worthless.

Peril: Cause of a possible loss. For example, fire, theft, or hail.


Perjury: Giving false evidence or information while under oath.


Personal Articles Floater: Provides all risk coverage, subject to reasonable exclusions for valuable items such as furs, jewellery, cameras, silverware, etc. formerly insured under separate contracts. The items are generally listed by description and value. This can be contrasted to the personal effects floater.


Personal Injury Liability: Injury other than bodily injury arising out of defined causes which usually include false arrest or detention, malicious prosecution, wrongful entry or eviction, libel or slander or violation of a person's right to privacy other than in the course of advertising, broadcasting, television, publishing.


Personal Lines: Insurance for individuals and families, such as private passenger auto insurance and homeowners policies.

Personal Property: Any property of an insured other than real property. Homeowner policies protect the personal property of family members, and commercial forms are used to protect many types of business personal property of an insured.


Policy Conditions: Provisions which state the rights and duties of the insured or insurer.


Policy Limit: The maximum that the insurance company is obligated to pay in actual claims under an insurance policy. Certain additional costs may also need to be paid.


Policy Provisions: Statements contained in an insurance policy which explain the benefits, conditions and other features of the insurance contract.


Policy Year: Period between anniversary dates.


Policyholder: Individual or other entity who owns an insurance policy. The Insured.


Pollution Exclusion: Standard general liability policies include an exclusion for loss arising out of pollution. For certain exposures this exclusion may be modified. e.g., "sudden and accidental" pollution arising from a fire.


Power of Attorney: Authority given one person or organization to act for and obligate another to the extent of the instrument creating the power.


Preferred Risk: Any risk considered to be better than the average risk on which the premium rate was based.


Premises: Building including the land immediately surrounding it and belonging to it.


Premium: The price of insurance protection for a specified risk for a specified period of time.


Principle of Indemnity: The concept that an insured will be reimbursed for his loss (subject only to the policy limit and terms). If there is no loss there can be no indemnity.


Private Passenger Car: Four-wheeled motor vehicles of the private passenger, station wagon or van type, designed for use on public highways and subject to motor vehicle registration.


Product Liability: Liability insurance, generally for contractors, for products liability and for claims arising out of completed work.


Products & Completed Operations Insurance: Liability insurance, generally for contractors, for product liability and for claims arising out of completed work.


Professional Liability Insurance: Protects professionals against liability for damages and cost of defense based upon his/her alleged or real professional errors and omissions or mistakes, e.g., architects, engineers, medical malpractice, attorneys.


Proof of Loss: A formal statement made by a policy owner to an insurer regarding a loss. It is intended to give information to the insurer to enable it to determine the extent of its liability.


Property Damage Liability Insurance: Protection against liability for damage to the property of another including loss of the use of the property.


Property Insurance: Covers an insured's property against damage, destruction or loss by a covered peril.


Pro Rata Cancellation: Cancellation of an insurance policy or bond with the return premium credit being the full proportion of premium for the unexpired term of the policy.


Protected: In fire insurance, a risk located in an area protected by a fire department.


Protection: Used interchangeably with "coverage" to denote insurance provided under the terms of a policy.


Punitive Damages: Damages in excess of those required to compensate the plaintiff for the wrong done, which are imposed in order to punish the defendant because of the particularly wanton or willful character of his wrongdoing.


Quotation: The amount of premium that an insurer sets as the price to cover a particular risk.


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Rate: The price for $100 or $1,000 of insurance, usually for one year, expressed in dollars and cents. Alternatively, the rate is the premium for a specified amount of insurance, for a specified time.

For some types of insurance in some jurisdictions legislation requires rates to be applied consistently to similar risks, and certain jurisdictions require regulatory approval of rates, e.g. auto.

In addition to policyholder premium rates, the industry commonly uses the term "rate" in reference to reinsurance premium rates, and to commission costs for both insurance and reinsurance.


Refund: A return to the policyholder of part of the paid premium, because of cancellation, suspension, reduction in insurance coverage, or because of rate reduction.


Reinstatement: The reactivation of suspended or cancelled insurance. Restoration of full amount of insurance or reinsurance after a claim has been paid, with or without the payment of additional premium.

Release: A discharge from obligation or responsibility. To let go of, or give up a legal claim. The most common types in insurance are: First Party Release - between the insured and the insurance company. Third Party Release - between the insured and a third party. Indemnifying Release - between the insured and a guardian for a minor or other person not legally competent.


Removal: The standard fire insurance policy insures against damage done in removing the insured property from the path of the fire or other insured peril (if loss is mitigated).

Removal also may mean the taking of property to some place other than that at which it was insured.


Renewal: A certificate which attests to the fact that an insurance policy has been extended for another term.


Renewal Premium: The premium for the new term of the policy.


Repairs: Generally an insurance policy will set out the conditions for an insured to effect repairs to insured property. Ordinary repairs are usually permitted without notice to the insurer.


Replacement: Most policies of insurance of property give the company the right to substitute other property of like kind and quality for insured property which has been damaged or destroyed. This is making a replacement.


Replacement Cost Clause: Applies generally to some fire insurance policies where a special cover may be purchased so that in the event of fire, repairs or replacement will be made with material of like kind without cost to the insured for depreciation or betterment.


Replacement Value: The cash value representing what it would cost to replace the particular article which is the subject of the insurance.


Representation: The acceptance or rejection of an insurance risk and the amount of premium that would be required, is determined by information submitted by the person applying for such insurance.

Statements which would normally lead the company to decline the acceptance of a risk, or to charge a much higher rate, are material to the risk and are commonly considered "warranties."

All other statements such as the insured's address, etc. are referred to as mere "representations" to distinguish them from the more important statements considered to be "warranties."

The penalty for false information on material facts or "warranties" may be voiding of the policy.


Rider: Another name for an endorsement.


Risk: The chance of loss. Specifically the possible loss or destruction of property or the possible incurring of a liability. Sometimes refers to the subject of an insurance contract.


Robbery: The taking of another's property by force or threat of force.


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Salvage: The remaining value of property after severe damage by fire or other peril. The overall loss is reduced by the salvage value. Undamaged property may be quite saleable and some property may be partially damaged, thus repairable and then saleable.



1) A comprehensive list accompanying a policy to detail the property, locations and amounts insured, and the applicable conditions.
2) In rate-making, the formula applied to determine a rate.


Seasonal Risk:

1) A risk occupied only part of the year, such as a summer dwelling.
2) In manufacturing, it may be a plant operating seasonally, such as a cannery.


Settlement: An agreement between concerned parties. In insurance, the agreement is usually on the money changing hands to discharge an insurance claim.


Settlement Options: The alternatives offered to the insured or the insured's beneficiaries when settling a loss. Life insurance policies provide either a lump sum payment or a set annual amount for a fixed period. Accident and health policies usually provide for weekly benefits along with the payment of expenses as they occur, even though the disability may not last long enough to total the lump sum option.


Short Rate Cancellation: The cancellation by the insured of a policy before its natural expiration; the insurer pays a return premium which is less than the proportionate part that remains unearned.


Smoke Damage: Essentially, the devaluation by smoke, not fire, of merchandise and property. Such damage is covered by the fire policy.


Spontaneous Combustion: Self-ignition of combustible material through chemical action of its parts.


Sprinklered Risk: Property protected against fire by a system of overhead pipes with regularly spaced heads designed to melt at the heat of a fire, thus releasing water for extinguishment.


Statement of Claim: A written statement by a plaintiff detailing the facts which support the claim against the defendant and the relief sought.


Statement of Values: The information required when a single rate is to cover more than one item or building. To determine a correct average, the rating bureau requires the policyholder to give the value of each separate risk and its contents.


Stock: Merchandise for sale or manufacture, as distinguished from furnishings, fixtures or equipment.


Storage: A term applied to articles or substances held for safekeeping. If storing of such articles is prohibited by a policy, the policy will be voided if loss consequently occurs, unless the company's permission and consent has been specially granted.


Subscription Policy: A single policy covering a risk that is divided among a number of insurers; the policy is issued by the "lead" company (usually the one with the largest percentage) and signed by all participating companies.


Suit: A legal proceeding brought by one person against another.


Sum Insured: The amount for which insurance is effected and the one on which the premium is based. Often in life insurance, the term is "sum assured."


Superintendent of Insurance: The chief officer of the Government Department which regulates insurance.


Surrender: Cancellation of a policy before its normal expiry by mutual consent of insured and insurer.


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Tenant's Policy: A package policy specially designed to meet the normal insurance requirements of a private tenant covering personal belongings and liabilities.


Term: The period of time from the inception to the termination of an insurance policy or bond.


Theft: The wrongful taking of the property of another. It is a broad term and includes larceny, pilfering, hold-up, robbery and pick-pocketing.


Third Party: A claimant under a liability policy, so called because he is not one of the two parties (insured and insurer) who has entered into the insurance contract which pays his claim.


Third Party Insurance: A fire policy insures the policyholder against loss or damage to his own property. When a policy insures a person against the liability he may incur to another for damages, it is "Third Party Insurance." The insured is indemnified with respect to any loss which he might suffer as a result of his legal liability to others arising out of the peril against which insurance is written.


Title: The right to ownership of property. The owner of real property having just possession of his property.


Tort: A legal wrong arising from a duty fixed by law. Breach of this duty causing injury to persons or property is repressible by legal action for damages. Liability for tort involves private or civil wrong or injury and is distinct from that under contract in that the duty is owed to people, generally, rather than to a specified individual.


Total Loss: Loss of all the insured property. Also a loss involving the maximum amount for which a policy is liable.


Tresspass: An illegal act against another person's rights or property.


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Umbrella Policy: A special form of liability policy designed to protect the insured for certain unknown contingencies over and above coverages and to provide excess insurance.


Underwrite: To insure. More commonly, to scrutinize a risk and decide on its eligibility for insurance.



1) The insurance company or group that underwrites or insures a particular risk.
2) The individual within an insurance company whose responsibility it is to accept or reject business in the particular line in which he/she specializes and in this way chooses risks his/her principals are prepared to underwrite.


Underwriter's Laboratories of Canada (ULC): An organization financed by stock insurance companies whose purpose is fire prevention and safety. It provides testing laboratories for various manufactured items and approves those that are acceptable. Labels issued by the Underwriters' Laboratories are evidence to the public that the particular item meets the safety standards.


Unoccupied: Where the premises contain contents but no human beings, such persons being temporarily away from the premises, on vacation for example, the premises are said to be unoccupied. This is distinguishable from Vacant in that in vacancy, the contents have been moved out leaving nothing but the building.


Unprotected: A property located in an area not regularly serviced by a fire department.


Utmost Good Faith: A phrase in a legal document calling for the highest standards of integrity on the part of the insured and the insurer.




Vacant Building: A building with no occupants or furnishings.


Valuation: An estimate or the act of assessing of value. This will frequently be done through the process of an appraisal.


Vandalism and Malicious Acts: Damage or destruction to property, which is willful. This coverage can be purchased under many Property forms and is automatically covered under most Homeowners policies.



1) Invalid, not legally binding.
2) An insurance contract that is prohibited by law and thus cannot be held to be a valid contract.


Waiting Period: The time which must elapse before an indemnity is paid.


Waiver: The intentional relinquishment of a known right. A waiver under a policy is required to be clearly expressed and in writing.


Warranty: Statement or stipulation in a contract, the breach of which nullifies the contract.


Warranty (Implied): A warranty assumed to be a part of the insurance contract even though not expressly included.


Water Damage Clause: A Portion of the policy affording coverage for certain specific causes of water damage.


Windstorm Insurance: Protection against damage done to property by unusually high winds, cyclones, tornadoes or hurricanes. This coverage is available under the extended coverage endorsement of property policy.


Without Prejudice: An action taken during claims negotiations designated as "without prejudice" is intended to be without detriment to the existing rights of the parties.

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