Insurance Resource Centre

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.
A-I

Accident benefits
A compulsory coverage that provides compensation if you, your passengers or pedestrians are injured in an automobile accident. Coverage is provided regardless of fault.

Actual Cash Value
The replacement value of an item less depreciation.

Additional Living Expenses
This coverage applies when your dwelling is deemed uninhabitable due to an insured loss. It pays the extra expenses you incur to live elsewhere while repairs are made. For example hotel costs and restaurants.

Agent
An individual who acts on behalf of, or is employed by an insurance company to sell, modify or terminate insurance.

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

Claim
When an insured person or 'claimant' notifies an insurer of a possible loss under their insurance policy, whether or not it results in a payment.

Clear
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. Developed by: the Vehicle Information Centre of Canada (VICC) a division of the Insurance Bureau of Canada (IBC).

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 provides coverage to replace or repair your vehicle in the event of a loss that’s not covered by Collision. This includes events such as fire, vandalism and theft.

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

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

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

Endorsement
An amendment to a policy that changes the terms of the contract.

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

Extended Coverage Insurance
The base property policy covers Fire and the extends coverage to windstorm, hail, smoke, explosion, riot, riot attending a strike, civil commotion, vehicle and aircraft.

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.

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

J-R

Lapse
A period where no insurance coverage is in force.

Lessee
The person to whom a lease is granted. A lessee of real property is commonly called the “tenant”.

Lessor
The person granting a lease.

Liability Insurance
Covers you for insured claims where you are required by law to pay third parties for bodily injury and property damages.

Lien
A charge upon real or 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 property of similar type and condition.

Loss
The amount your insurer will pay because an insured loss (claim) under your policy.

Loss of Use
An endorsement that provides you with a replacement vehicle or reimburses you for transportation cost while your vehicle is being repaired or replaced in the event of an insured loss.

Material Fact
Something important enough about subject to be insured that could change the terms of your insurance, premium charged, or result in a refusal to cover. You must disclose a material fact if asked about it.

Misrepresentation
If you give false information to the insurance company or leave out certain facts, to obtain a benefit to which you are not entitled, 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 a "comprehensive" policy.

Negligence
Failure to give the care or attention of a reasonable and prudent person to someone or something for which you are responsible.

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.

Peril
The cause of a loss (for example, fire). The policy wording describes covered and/or excluded perils.

Policy Limit
The maximum amount an insurer will pay under a policy under a specific coverage, or on the policy as a whole.

Premium
The amount of money you pay an insurer for financial protection against 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.

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

Replacement Cost
The cost to replace property without applying depreciation.

Replacement Value
The cost to replace property without applying depreciation.

Rider
The document(s) attached to the original insurance policy or added later by endorsement that outline the terms of a given coverage (such as items covered, perils insured, deductible and exclusions applicable.

S-Z
Short Rate Cancellation
Cancellations made where the refunded premium is less than on a pro-rata basis to cover administrative expenses, for seasonal vehicles, etcetera.

Statement of Claim
A written statement by an injured person detailing the facts which support a claim, and compensation they are seeking, from the person(s) alleged to have caused the damages.

Statutory Conditions
Special conditions required under provincial insurance acts to be included in fire, automobile and accident and sickness policies.

Telematics
Technology which monitors your real-time driving behaviours to provide an objective picture of your driving. If you are a low mileage driver, exhibit better driving habits or improve your driving behaviour, you may save on insurance premiums. Also known as usage-based insurance (UBI) or pay-as-you-drive (PAYD) insurance.

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

Utmost Good Faith
A legal phrase which calls for the highest standards of integrity on the part of the insured and the insurer.