Glossary of Terms

A random event that occurs not by intention and is not part of expected course of events.
Accident Benefits Coverage
In Alberta, this is first party coverage for all insured persons, that covers basic expenses. It exists to reduce the need for lawsuits and allow injured persons to recover fully and quickly.
Accident Forgiveness Endorsement
This is an extra coverage that some insurers offer to give qualified drivers a 'free pass' on their first at fault accident. That means that this first at fault accident will not increase the persons insurance premiums upon renewal with the same insurer.
Act of God
An unpredictable, sudden event which is not preventable. Examples: flood, earthquake
Actual Cash Value
The current cost to replace a product of equivalent value in the same condition. Item have three basic values: original cost, actual cash value (ACV), and replacement value. Generally, ACV refers to the price that you would need to pay on the date of loss to repalce the lost property with an identical item in the same or similar condition.
Additional Interest Insured
Another person or company who may be liable for an accident involving an insured or an insured vehicle and who has been named as an Additional Interest Insured under the policy.
Additional Premium
This is an extra premium charged on an insurance policy for some specific coverage. There are a lot of sources of these premiums, including extra risk or additional coverages.
A person who works at an insurance company, responsible to review and settle claims on the company's behalf.
All Perils
All perils (sometimes called All Risks) is a coverage that covers most of the eligible coverages under a policy. This is most common in automobile insurance where Third Party Liability, Accident Benefits, Collision, Comprehensive coverages are all offered. Buying all of them is sometimes coloquailly called All Perils. True All Perils coverage typically is a broader form of coverage that coverage everything, except whatever it happens to exclude (every insurance policy has exclusions).
Alternative Dispute Resolution
A method of resolving legal disputes before going to court. Mediation and arbitration are examples of alternative dispute resolution.
A form used to gather relevant details of a potential insured and subject of insurance, so that the insurance company underwriter can appropriately price the insurance policy
A formal way of determing that value of a physical object. This can be done at the time of underwriting when a particularly valuable item is insured to a specific value (jewelery, antique cars, artwork, and collectibles are common examples). An appraisal can also be done at the time of loss to determine the compensation to be paid (typical when an vehicle is damaged).
This is another form of alternate dispute resolution and is a way to escalate a claim when negotiations stall or fail. An insurance company may suggest arbitration before the case goes to litigation, and this can be done with or without a PIA.
Assumed Liability
Liability that normally wouldn't be presumed of somebody, but they have accepted responsibility via expressed or implied contract.
Same as "Insurance". The term Assurance is sometimes used in life insurance or fidelity, whereas insurance is typically used in property and casualty lines of insurance like automobile insurance.
Same as "Insured".
Same as "Insurer".
Being deemed responsible for a collision.
The power to act on behalf of another person.
Automobile Insurance
Coverage for the risks involved with owning and/or operating an automobile. This can include liability, comprehensive, and collision coverage, as well as coverage for medical and uninsured motorists.
Avoidance of Risk
Avoidance is a risk management tactic that involves not doing things that could potentially lead to an incident. For example, you (generally) cannot be at fault for an automobile accident if you do not drive.
Bodily Injury / Property Damage. These are typically only used together when discussing Third Party Liability coverage, as they are the two basic components that could give rise to a loss.
Basic Rate
The standard chaarge for a specific type of risk.
A binder is an insurance policy that has been "bound" but not yet written by the insurance company. This can happen in a number of ways, including delegating binding authority to a broker, or issuing a quote with binding authority if accepted as is. The policy is bound, meaning that it is effectively in force and the applicant is insured for losses from the time of binding, but the insurance company may not yet know that they are exposed to the risk, or may not have issued the policy which forms the legal contract.
Bodily Injury
Bodily Injury (BI) refers to a type of Third party Liability that involves the insured negligently causing phyisical harm to another person.
Broad Form
An insurance Broad Form is a general insurance policy that "broadly" covers all the normal risks associated with that type of insurance, but still includes exclusions, and can be enhanced by an Endoresement. This is common in physical damage policies like homeowners and commercial property coverage. In automobile insurance, it is more common to use the term All Perils.
A broker is an intermediary who works for, and represents, both the insured and the insurer. Brokers typically have contracts with several insurance companies, which allows them to shop around (market) an insurance policy to several markets (insurance companies) to find the best pricing and coverage options.
When an insurance policy is cancelled.
Catastrophe refers to large insured losses that affect many insureds. For example, a fire that completely destroys a single house wouldn't be a catastrophic loss, but a forest fire that damages many homes in a community is a catastrophic loss. Insurance companies typically buy insurance for these types of losses as the total insured losses can easily be higher than a single insurance companies capacity to pay. In extreme cases, the government may offer financial support to insurers to assist their insureds as the effect of the loss is significant at a societal scale.
Certificate of Insurance
This is a document that is issued by a broker, agent, or insurance company representative to attest that coverage is in place. These are typically used to demonstrate to a third party who has an interest in the insured or the subject of insurance that insurance is in place. For example, it is common for a mortgage company to request a certificate of homeowners insurance as evidence. A Certificate of Insurance (COI) may also demonstrate that the recipient has been added as an Additional Insured, or will be provided with written Notice of Cancellation (NOC) if the policy is cancelled by either the insured or the insurer.
Civil Liability
As the driver of a vehicle on a public roadway, you have a responsibility to other drivers, pedestrians, and property owners.
A claim is a formal process of demanding compensation for damages.
Someone who makes a claim with an insurance company for any reason. Sometimes used to refer to the Plaintiff.
Claims Foregiveness
This is similar to Accident Forgiveness
A clause is a term of any contract that specifies relevant details about when the contract is valid or not.
Co-Insurance is when an insured takes out multiple insurance policies for the same subject of insurance. For example, if you bought two automobile insurance policies for the same car and driver. In the event that this happens, each insurance company is only liable in proportion to their respective limits of insurance. For example, if Insurer A writes a policy for your house with a insured valuie of $200,000 and Insurer B writes a policy for your house at a value of $250,000 then the total Insurable limit is $450,000. Neither insurer will provide coverage above their insured limit, and any losses will be split between the two insurers at rate of 200/450 (44.5%) for Insurer A and 250/450 (55.5%) for Insurer B.
Collision Coverage
Automobile insurance for the physical damage to an automobile caused by striking another vehicle. This is a first party coverage i.e. your insurance covers your damage when you are responsible for the accident. In the case that damage is caused to your vehicle by striking another and it is not your fault—then the responsible party would pay for it through their Third Party Liability coverage.
Something, typically money, that is awarded to someone to reimburse them for their loss.
Comprehensive Coverage
Automobile insurance for the physical damage to an automobile caused by factors other than striking another vehicle. This is usually where coverage for theft, vandalism, or striking an animal is provided. Similar to Collision coverage, this is a first party coverage, but due to the nature of the perils covered, it is often treated like a not-at-fault coverage.
Compulsory Insurance
This refers to any insurance that is legally mandated in a particular legal jurisdiction. In Canada, insurance is regulated by Provinces and Territories, and in the US, by States. The particular legally required coverage varies drastically between States/Provinces.
A Coverage is a form of insurance that provides compensation to an insured (or third party for liability coverage) for particular incidents or damages. For example, Collision coverage on your authomobile is a Coverage, as is Third Party Liability.
Damage to Non-Owned Vehicle Endorsement
This endorsement extends the physical damage and / or liability coverage for your vehicle to other vehicles that you operate. Typically, this is restricted to rental vehicles and loaners, under the logic that an insured driver cannot operate more than one vehicle at a time, so there is minimal extra risk to the insurance company to extend this coverage.
The Declarations are the section at the beginning of an insurance policy that "declare" who the insured is, who the insurer is, and what the subject of the insurance is. There is no standard form for Declarations, however, and more or less information may be present in any one place in the document.
A deductible is a reduction of a coverage that is intended to provide an insured a financial incentive to assist in mitigating, avoiding, or eliminating potential incidents. Typically, the insurer will require the insured to pay the deductible before they are willing to pay their portion of the loss. For example, if you have a $1000 deductible on your collision coverage, you will need to pay the body shop that $1000 before the insurance company will pay the body shop the remainder of the cost to repair your vehcile, and most body shops will hold the vehcile until you pay any deductible owing.
A person, company, or organization sued or accused in a court of law.
Depreciation is a financial concept that tracks the way any asset loses value over time. For example, a car has a specific value when purchased new, however as it gets used and accumulates wear & tear, the value of the car fluctuates (typically decreases). The difference between Market Value and the Purchase Price (or ACV and the Purchase Price) of a physical object is the Depreciation.
Direct Loss
Direct Losses are those losses that can easily be attributed the occurence of a specific peril. For example, a water main breaks and floods your basement.
Direct Writer
Direct writers are insurance companies that market and sell their own insurance product, rather than using an intermediary like a broker or agent. Direct writers can only offer insurance that they provide, so an insured may need to have different people help them with different types of insurance needs. For example, in Canada, many banks provide insurance as direct writers. They will offer basic home and automobile insurance coverages, but typically will not take on niche coverages or risky lines of business like motorcycles, recreational vehicles, or commercial / business insurance.
Many insurers offer a variety of discounts for their policies. These can include discounts for renewing with them (a type of loyalty discount), discounts for having more vehicles than drivers on a policy (since they can't all be on the road at the same time), or many other things that reduce their perceived risk.
Driver Training Course Discount
A type of discount on an automobile policy for having taking driver training.
Driving Frequency / Distance
This is proxy for risk that an insurance company uses to underwrite a policy. The more a driver drives (either in frequency/number of trips taken or distance / how far each trip typically is), the greater the likelihood that they get into an accident.
Driving Record
This refers to the history of either driving related accidents or tickets / convictions for a particular driver. A driving record with many accidents or tickets/convictions would translate to a higher perceived risk to the insurance company, and therefore higher insurance quotes / premiums.
Effective Date
The date that the insurance contract "starts".
Employer Liability Insurance
A type of liability insurance that provides coverage for unlawful dismissal lawsuits, failure to manage benefit packages, or a variety of other employment specific liabilities.
An endorsement is an extension of coverage to an insurance policy that adds extra coverages, or may limit coverages. Endorsements may also be called Riders or a Warranty in some situations.
An estimate is an approximation used to price an insurance contract. Some coverages use proxies like expected revenue in the upcoming year as a way of determing the amount of risk an insurer may take on. It is understood that these are just guesses, and at the end of the year, the insurer may ask for actual numbers and invoice/refund the premium difference due to the discrepancy between the estimate and the actual numbers. This is very common in commercial general liability policies, or commercial automobile fleet policies.
Exclusions are parts of the insurance policy that are not covered.
The date that the insurance contract 'ends'.
Exposure refers to the perceived risk of a peril happening. In some contexts, exposure may refer to the insurance policy itself, the likelihood that a claim will occur, or other related risk management concepts.
Extended Coverage
Extended Coverage typically refers to a basic level of property coverage, often in the context of 'Fire and EC (Extended Coverage)". Fire and EC typically refers to the minimal legal insurance coverage on a physical location.
Facility Association
The Facility Association (FA) is a backup insurer for high risk insureds that other automobile insurers do not want to insure. This needs to exist because automobile insurance is legislated for a driver to legally operate a vehcile on a public roadway, and particularly high risk insurers may otherwise not be interested in writing the policy. In Alberta, all automobile insurers 'participate' in the FA by paying any insured losses that exceed the premiums collected by the FA. The participating insurers would pay the excess claims in proprotion to the total amount of automobile insurance they write in the jurisdiction that the FA exists.
Fair Market Value
The price that a buyer would be willing to pay to a seller who is willing to sell, with neither parties being under any pressure or obligation to buy or sell.
See Liability
Floater Policy
A floater policy is a type of insurance comverage for property that does not remain in a single location. For example, it's common to have a floater on a homeowner policy to cover floating property during a move, or to purchase an floater for company property like laptops that employees take home.
Flood Insurance
Insurance coverage from physical damage to property casued by the flooding of a waterway, lake, river, or other body of water. Sewer backup, or other types of water damage are typically covered under separate coverages.
Falsified writing with the intent to defraud another party.
A Form refers to an insurance policy, endoresement, or other standard policy document that an insurance company uses to track the terms and conditions of their coverage.
Fortuitous Event
An unforseen event or accident.
Garaging Location
When your vehicle has been given to an autobody shop, dealership, or mechanic (for example) and they have legal custody over the vehcile, it is said to be 'garaged'. The location where these individuals house the automobile is the Garaging Location. Typically, your insurance would not cover your vehcile while garaged but would be covered the the Garage Automobile Insurance Policy of the dealership, mechanic, etc.
Good Driver Discount
A discount offered on auto insurance to drivers who demonstrate a clean driving record over a period of time.
Good Student Discount
A discount offered on auto insurance to students for maintaining a high grade point average.
Grace Period
The time after the due date of an insurance preium in which insurance policy remains in place, and the premium may be paid without penalty.
Group Discount
Group Discounts are a type of discount that an insurance company would offer to a group of similar risks that they are very interested in writing. Typically, this means that they have a contract with a specific broker or intermediary. This broker would then be responsible to manage the group of similar insureds (this is common with Churches, medical providers, and other well understood occupations). Sometimes, the insurer may even delegate underwriting authority to the broker (often called giving the broker 'the pen').
A hazard may be a different name for a risk, a peril, or an exposure. Hazards are often refered to as factors that can lead to or increase the risk of an insured event happening.
High Risk Driver
A high risk driver may be classified as a driver who has had a major traffic violation, multiple minor traffic violations, multiple at fault accidents, is a new driver, etc.
Hybrid/EV Discount
A discounted insurance rate offered to owners of electric or hybrid cars.
An immobilizer is a device that gets installed under court order on a vehcile. The vehicle cannot be driven without without the driver disabiling the immobilizer by demonstrating that they are not over the legal limit of intoxication.
Replacing, in whole or part, the losses of a victim by way of repair, replacement, or payment.
Indirect Loss
An indirect loss is similar to a direct loss except that it does not result directly from an insured peril. This could be losses that are harder to quantify, or side effects/after effects of a direct loss. A common example of an indirect loss would be rental car coverage. If your vehcile is damaged in a car crash, the physical damage is a direct loss, and as a result of that direct loss, you lose access to the vehicle for a period of time.
An independent inspection agency may check the facts provided by an applicant or cliamant, to the details of their application or claim.
This is a measure of how likely a risk or subject may be to be covered by insurance. Not all risks can be transfered to insurance companies, and some types of risks/perils/hazards are excluded by some or all insurance companies.
Insurance is a form of shared responsibility. The basic idea is that all insureds pay into a big pot of money, and that this pot of money is used to pay for the insured losses of the insured parties. In this model, everyone pays a small amount for the potential of a loss, rather than the much larger amount that would be required to cover an otherwise insurable loss entirely out of pocket.
Insurance Agent
An insurance agent is similar to a broker. This may refer to an employee of an insurance company who can sell insurance (in the case of a direct writer), or it may refer an independant intermediary who has a contract with the insurance company to act as it's agent. The best example of the latter is Cooperators. The agents are independantly owned companies who have an exclusive (or nearly exclusive) contract with the Cooperators insurance company. In the case of Cooperators, the agents also operate under the name Cooperators, though technically they are a separate legal entity.
Insurance Broker
See Broker
Insurance Policy
See Policy
Insurance to Value
This refers to insuring a (typically) physical object to it's "true value". Depending on the insurance policy, this may refer to ACV, Market Value, Replacement Cost, Guaranteed Replacement Cost, or an Appraised Value. Underinsuring an asset is a way that people may try to reduce their insurance premiums, and overinsuring an asset (like an art piece) may lead to an insured being compensated for more than an asset is 'actually worth'. Some policies may have a clause that requires the asset be insured to its value, under whichever particular valuing metric that policy is using, and there may be penalties to the insured for under- or over-insuring the value of the asset.
The person (or persons) who is named under the policy and protected by the policy. Same as "policyholder".
The insurance company.
The termination of an insurance policy due to failure of payment.
Liability Coverage / Liability Insurance
Liability coverage covers the damage you have inflicted on another person and their property. It also covers your legal defence and any other damages in which you are responsible for.
A written statement about and individual that is damaging to their reputation.
Limit of Liability (Limit)
The maximum dollar amount an insurance company agrees to pay in the case of a loss.
The act of going to government run courts to resolve a dispute. Most personal injury cases are settled out of court, without litigation, using negotiation, mediation or arbitration. Someone who begins Litigation is called the Plaintiff. This can be done with or without lawyer. When the litigant or plaintiff doesn't use a PIA, they are a self-represented or Pro Se plaintiff.
Can mean: the loss of value of the insured vehicle in the event resulting in the claim, the amount desired by the claimant, or the amount paid by the insurance company on behalf of the insured.
Loss of Use Insurance
Insurance that can credit you for transportation while your vehicle is being repaired. This can cover a temporary rental, or taxis and public transportation for this period of time.
Low Mileage Discount
A lower rate on your insurance if you drive your vehicle infrequently.
Make/Model/Age of Vehicle
The make, model, and age of your car can play a factor in your insurance premium, but don't entirely dictate it. The Insurance Bureau of Canada collects data on claims by type of vehicle in order to understand average claim costs for each vehicle.
Market Value
The average price for which your vehicle would sell under current market conditions, taking into account it's age, mileage, condition, etc.
Material Misrepresentation
False information provided by the policyholder on their application, such as the location of where the vehicle is garaged.
A form of alternate dispute resolution after your negotiations related to your insurance claim stall or fail. Generally, insurance companies will attempt to mediate before the case goes to litigation, and this can be done with or without a PIA.
Multi-policy Discount
A discount provided by the insurance company to those who hold a home and auto policy under the same company.
Multi-vehicle Discount
A discount provided by the insurance company to those who insure more than one vehicle with the same company.
Named Insured
The person whose name is on the insurance policy.
Named Perils
The threats that a policy covers the insured against, such as hail damange, fire, etc.
Failure to act with a reasonable degree of care which a typical person would use given the same circumstances.
When the claimant, or their lawyer, works with the insurance adjuster to attempt a settlement. This can be done with or without engaging a personal injury attorney (PIA).
No-Fault Insurance
No-fault systems mean that you are paid directly by your insurance company for all innuries that you sustained, even if the accident was your fault.
Not At-Fault
Being declared not responsible for a collision, as decided upon by the fault determination rules of the insurance industry.
Occasional Driver
Somebody who drives a vehicle on occasion, but not as often as the primary driver.
The specific event, such as a collision, that resulted in a loss covered by the insurance company.
Partial Loss
A loss covered by the insurance company which does not (1) completely destroy or render worthless the insured property, or (2) exhaust the insurance applying thereto.
The cause of the insured loss, such as hail, fire, theft, etc.
Personal Injury
A type of civil lawsuit in which the person bringing the suit (See Claimant or Plaintiff) has suffered harm to their body or mind. Personal injury cases can result from harm due to both accidents and intentional actions by another person (See Defendant).
Physical Damage
Real, actual damage to property.
Physical Damage Coverage
Includes both comprehensive coverage and collision coverage.
The person who sues someone else.
The legal document issued to the insured, by the insurer, which defines the terms of the insurance contract.
Policy Expiration Date
The date in which your insurance policy expires.
Policy Limit
The maximum total dollar value which a policy will pay.
The person whose risk is covered from financial loss by the insurance policy.
Preferred Risk
Risk which has been deemed lesser than the typical average risk, thus qualifying for a reduced insurance rate.
The amount of money you are charged for your insurance policy. This can vary significantly depending on your location, type of vehicle, coverage type, driving record, etc.
Primary Driver
The person who drives the car most often. Can also be referred to as the "principe driver".
Proof of Loss
A declaration made by the insured to the insurance company on the loss they have suffered. This will allow the insurance company to determine what they cover under the policy.
Same as "Coverage".
The estimated cost of the insurance policy, based upon the information given to the insurance company by the applicant.
The per unit (bi-weekly, monthly, yearly) cost of the insurance policy. For example, commercial liability coverage is often priced at a rate per $100,000 of company revenue; property coverage is often priced at a rate per square foot of the building area.
Red Book
A publication used in the Canadian insurance industry, listing the values of vehicles.
Restoring a policy which has been lapsed due to cancellation, expiry, etc.
A way in which insurance companies share risk, by purchasing insurance policies through one another.
The decision to continue an insurance policy that is set to expire. This can be completed by issuing a new policy, or a renewal of the old policy, effective on the expiration date of that policy.
Renewal Discount
A discount on the insurance policy, offered by the insurance company, for staying loyal to that insurance company for a certain period of time.
Replacement Cost
The cost of replacing an asset, such as a vehicle, with an identical one.
A defendant in Litigation, Mediation, or Arbitration.
Retiree Discount
A discount provided by the insurance company to those who are retired, who meet criteria such as having no current employment income.
Amending a policy to add, delete, or otherwise change coverage.
(1) The chance of experiencing a loss, or (2) the person who is insured.
The agreed payment obtained by the policyholder from the insurance company, from a claim.
Statement of Claim
The first thing that a plaintiff will file with a civil court against a defendant. This is generally the very beginning of a formal lawsuit.
The right for the insurance company to act on behalf of the policyholder, in order to sue any other party who the policyholder could have sued.
A type of legal case that is civil, as opposed to criminal. Tort laws rely on the public to enforce them, rather than police. Personal injury lawsuits are civil, or tort cases.
Total Loss
A property loss is considered a total loss when the cost to repair the property is greater than the policy limits or the purchase price of the property.
An Underwriter is an insurance professional who works with the broker or agent to evaluate the risk of an insurance policy. This evaluation is used to determine the pricing of the insurance policy, if provided by that particular insurer.
Underwriting refers to the process that an underwriter goes through to determine if they will quote an insurance policy, and if so, at what price.
Uninsured Automobile Coverage
Coverage which protects you from death or injury caused by an uninsured motorist, or a hit-and-run collision from somebody else. This coverage also covers damages to your vehicle commited by an identified uninsured driver. This coverage is mandatory in Canada.
Vehicle Identification Number. Typically found on the driver side dashboard of a vehicle, and is listed on your vehicle's registration slip. This number contains 17 characters (letters & numbers) and identifies the make, model, and year of your vehicle.
The estimate of the value of an item, usually from an appraisal.
Waiver of Depreciation Endorsement
Removes the ability of the insurer to deduct depreciation on a vehicle, during the process of a claim. This is commonly applied to vehicles less than 36 months old, which have been damaged in an accident. In this case, you will receive a settlement as much as the original purchase price of the vehicle.
Waiver of Subrogation
A term in an insurance contract that indicates the insurer will not seek subrogation against the specified third party in the event of a loss where the third party is named in a claim due to their relationship to the insured.
Where you Live
Where you most commonly drive your vehicle will have an impact on your insurance premium. For example, those living in urban areas are at greater odds of being in an accident, than those living in rural ones.
Winter Tire Discount
Some insurance companies offer a discount for poliyholders who install winter tires on their vehicle(s).
Years You Have Been Licensed
New drivers are more likely to be involved in a collision and, as such, may be entitled to savings on their insurance policy if they pass an approved driver training program.