Glossary of Terms and Definitions

The definitions of insurance terms in this glossary are general. If you require a legal definition for a term, consult your lawyer or the Insurance Bureau of Canada or your provincial insurance regulator.

Accident benefits

The automobile insurance coverage that pays for personal injuries to individuals covered by the policy.

Actual Cash Value

The current or fair market value of the property at the time of loss.

Additional Living Expenses

Coverage that pays a claimant's living expenses for living away from home while their home is repaired due to fire or other insured damage - such as hotel rooms, restaurants.


A person employed to act on behalf of another. An insurance agent is employed by an insurance company to sell their products on behalf of the company.

All Risk Policy

An insurance policy that provides coverage for all perils except those specifically excluded by the terms of the policy.


When an insured person or 'claimant' notifies an insurer of a possible loss under their insurance policy.


CLEAR stands for Canadian Loss Experience Automobile Rating which is a method of classifying/rating different models of cars for insurance purposes by using historical data such as theft, collision repair costs and frequency of personal injuries for different models. The program was developed by the Vehicle Information Centre of Canada (VICC).

Collision coverage

The portion of the automobile insurance policy that pays for the cost of repairing the vehicle in the event of an at fault collision loss by the insured.

Comprehensive coverage

The portion of the automobile insurance policy that pays for the cost of damages as a result of such events as fire, vandalism and theft.


An amount deducted from the loss and paid by you as the insured person.


Use, age, deterioration or obsolescence will cause a reduction or decline in value of property covered by insurance.


An addition to a policy that changes the terms of the contract.


Risks, perils or properties defined as not being covered by the policy.

Extended Coverage Insurance

An endorsement that adds to the coverage of the primary policy, such as an extension of coverage for sewer backup.

Flat Cancellation

The cancellation of a policy as of the effective date with all premiums paid being refunded.

Improvements and Betterments or Tenant's Improvements

Additions or changes made to a condominium or to a rented premises at the expense of a tenant.


To put back in the same financial position as just before the loss.


A period where no insurance coverage is in force.


The party who grants the lease, for instance, the landlord of rented premises or the leasing company.

Liability Insurance

If you are negligent, you can be legally liable for injuries to other people or damage to their property.


A charge upon personal property as security for some debt or duty, or the security interest created by a mortgage. The insured must disclose any existing lien to the insurer.

Like Kind and Quality (LKQ)

Damaged, destroyed or lost property will be replaced with used, similar property.


The amount your insurer will pay because an insured loss has happened.

Loss of Use

An endorsement that helps to pay for a rental vehicle when your vehicle is being repaired, because of damage caused by a covered peril. If you don't rent a replacement car, it will pay for taxis and public transportation costs.

Material Fact

Something that is important enough to change the terms of your insurance or the premium being charged. You must disclose a material fact if asked about it.


If you knowingly give false information to the insurance company or leave out certain facts, the insurance company may be entitled to deny your claim or void your coverage.

Named Insured

The insured person named on the insurance certificate.

Named Peril Policy

A policy that specifically lists the perils being insured against rather than an “all risks” policy.


When the insured does not use the degree of care expected from a prudent and reasonable person.

Notice of Loss

A requirement that any person suffering an insured loss must advise the company immediately in writing of that loss or risk losing recovery. Verbal notice to an agent is not sufficient.


The event being insured against that causes a loss covered by the policy (for example, a fire)

Policy Limit

In general, the maximum the insurance company is obligated to pay in claims under an insurance policy.


The price of insurance for a specified risk for a specified period of time.

Proof of Loss

A formal statement you make under oath to an insurer regarding the details of a loss.

Pro Rata Cancellation

Cancellation of an insurance policy with a return of the premium paid for the unexpired term of the policy.


A certificate extending insurance for an additional term with payment of a renewal premium.

Replacement Value

The cash value to replace the insured article.


An additional and separate insurance policy attached to the original insurance policy.

Short Rate Cancellation

Cancellations made where the refunded premium is less than on a pro-rate basis to cover administrative expenses, for seasonal vehicles, etc.

Statement of Claim

A written statement supporting a claim.

Statutory Conditions

Conditions required by Provincial Insurance Acts to be included in fire, automobile and accident and sickness policies.

Terms and Conditions

The provisions (requirements) of a particular insurance policy.

Utmost Good Faith

Legally calling for the highest standards of integrity on the part of the insured and the insurer.