Glossary

The definitions in this Glossary are provided only for general purposes. In the case of any inconsistency between the definitions in this Glossary and the definitions appearing in the actual policy the definitions containing in the actual policy shall govern.

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ABANDONMENT & SALVAGE
      The act of giving an insurance company all rights to an insured’s property. The insured must notify the insurance company of its intention to abandon property but the insurer is under no obligation to accept the abandoned property. Abandonment Clauses are most commonly found in marine insurance policies.
 
   
ABSOLUTE LIABILITY
      Liability without fault, or when fault or negligence cannot be proven.
 
   
ACCIDENT
      An unexpected, unforeseen event, over which the insured has no control, and which results in a loss.
 
   
ACCIDENT BENEFITS
      Provision under an automobile policy for payment of limited medical expenses and death benefits without regard to fault.
 
   
ACCOMMODATION
      When an insurance company agrees to write substandard business for an agent or broker to maintain a good relationship with the agent or broker and attract profitable business.
 
   
ACCOUNTS RECEIVABLE INSURANCE
      Coverage that applies when business records are destroyed by an insured peril and as a result the business cannot collect the money owed. The policy pays the uncollectible amounts, plus the expense of reconstructing records.
 
   
ACQUISITION COSTS
      The expense to the insurer or soliciting and acquiring new insurance customers, including the broker’s commission, underwriting expenses (such as inspection reports), marketing support services, clerical costs, etc.
 
   
ACTUAL CASH VALUE
      Cost of replacing damaged or destroyed property with comparable new property, less the cost of depreciation.
 
   
ACTUARY
      A professional skilled in analysis, evaluation and management of statistical information. Actuaries calculate premiums, reserves, and in many companies, oversee the general financial functions.
 
   
ADDITIONAL INSURED
      An insured specifically named in the insurance policy, usually as a requirement of a contract. Occurs when one party works for another.
 
   
ADDITIONAL LIVING EXPENSES
      Extra charges covered by homeowners, condominium and tenants policies over and above the policyholder’s customary living expenses. This coverage applies when damage caused by an insured peril makes the insured’s residence uninhabitable.
 
   
ADJUSTER
      A person employed to evaluate losses and settle claims. This person may be an employee of the insurer (“staff adjuster”) or an independent contractor (“independent adjuster”) who adjusts claims for different insurance companies. These differ from “public adjusters” who represent insurance claimants and negotiate with insurers on behalf of the claimant.
 
   
ADJUSTING
      The process of investigating and settling insurance losses.
 
   
ADMITTED ASSETS
      Assets recognized and accepted by regulatory authorities to measure an insurance company’s solvency.
 
   
ADVERSE SELECTION
      The tendency of those exposed to a higher risk to seek more insurance coverage than those with a lower risk. Insurers will either charge higher premiums or not insure the risk, or will find themselves “selected against.”
 
   
AFFINITY SALES
      Selling insurance through groups such as professional and business associations.
 
   
AGENT
      An individual who sells and services insurance policies for only one insurance company.
 
   
AGENT OF RECORD
      See “Broker of Record.”
 
   
AGGREGATE LIMIT
      The maximum dollar amount of coverage in force in a specified time period.
 
   
AGREED AMOUNT CLAUSE
      An agreement between the insurer and the insured that the insured will carry a specified amount of insurance coverage under the policy.
 
   
AIC
      See “Alberta Insurance Council.”
 
   
AIIC
      See “Associate of the Insurance Institute of Canada.”
 
   
ALBERTA INSURANCE COUNCIL
      The Alberta Insurance Council is the Regulatory Body responsible for licensing and discipline of insurance agents, brokers and adjusters in the Province of Alberta. The Council derives its authority under a delegation from the Minister of Finance for the province. The Council also investigates complaints into the actions of insurance companies in Alberta.
 
   
ALL-RISKS COVERAGE
      Insurance that covers each loss except for those specifically excluded.
 
   
ALTERNATIVE DISPUTE RESOLUTIONS
      A variety of voluntary, non-litigation process used by insurance companies to resolve contractual disputes with their insureds.
 
   
ALTERNATIVE MARKETS
      Risk financing mechanisms, including captives and risk-retention groups, used to fund self-insurance.
 
   
AMBIGUITY
      Language in an insurance policy which is unclear or has different interpretations. (Courts generally rule in favour of the insured and against the insurer when policy wordings are ambiguous.)
 
   
AMENDMENT
      Written changes to the original contract.
 
   
APPLICATION
      A signed statement of facts made by a person applying for insurance, which is used by the insurance company to decide whether or not to insure the risk.
 
   
APPRAISAL
      A valuation to determine a property’s insurable value, or the amount of a loss.
 
   
ARBITRATION
      A form of dispute resolution where an unbiased person provides his/her opinion on liability and the extent of damages.
 
   
ARBITRATION CLAUSE
      A provision in an insurance policy which states that if the insured and the insurer cannot reach agreement on the amount of a claim settlement that each will appoint an appraiser and the appraisers appoint an unbiased umpire. Agreement on the settlement amount by any two of the three is binding on both the insured and the insurer.
 
   
ARSON
      The deliberate act of burning assets, starting fires.
 
   
ASSETS
      Property owned, which has commercial value. For example, the stocks, bonds, investments, real estate and other property owned by an insurance company and listed on its balance sheet.
 
   
ASSIGNMENT
      The transfer of rights under an insurance policy to another person or business.
 
   
ASSOCIATE OF THE INSURANCE INSTITUTE OF CANADA
      Professional designation granted after the successful completion of twelve technical property & casualty insurance courses.
 
   
ASSURANCE
      Synonymous with “insurance.” “Assurance” is more common in Great Britain.
 
   
ASSURED
      Synonymous with “insured.”
 
   
ATTRACTIVE NUISANCE
      Property that is inherently dangerous, and particularly attractive to children.
 
   
AUTOMATIC REINSTATEMENT CLAUSE
      A provision in a property or liability policy which states that after a loss has been paid, the total original limits of the policy are once again in effect.
 
   
AUTOMOBILE INSURANCE
      A policy of insurance, which covers the ownership, use and operation of an automobile, including:
1) Liability for damages and injuries caused to others
2) Damage to the automobile
3) Injuries to occupants

 
   
AVIATION INSURANCE
      The combination of property insurance on the hull of an aircraft, liability insurance for negligent acts that result in injury or property damage to passengers or others, and accident insurance for the passengers.
 
   
BAD FAITH
      The allegation that an insurer has failed to act in good faith.
 
   
BAILEE
      An individual who has temporary rightful possession of another person’s property (for example, a dry cleaner has temporary custody of clothes to be cleaned).
 
   
BAILEES CUSTOMERS POLICY
      Coverage for legal liability resulting from damage or destruction of bailor’s property while under the bailee’s temporary care, custody or control.
 
   
BENEFITS
      The amount paid or payable by the insurance company to a claimant, assignee or beneficiary under the policy.
 
   
BINDER
      Temporary authorization of coverage prior to issuance of the actual insurance policy.
 
   
BINDING AUTHORITY
      The terms and conditions of a broker’s ability to commit an insurance company to contract.
 
   
BIP
      Acronym for “Broker Identity Program.”
 
   
BIPPER
      Colloquial name for the Broker Identity Program (“BIP”) logo owned by the Insurance Brokers Association of Canada.

 
   
BLANKET BOND
      Coverage for an employer in the event of dishonesty of any employee.
 
   
BLANKET COVERAGE
      Insurance coverage for more than one item of property at a single location, or two or more items of property wherever they may be located.
 
   
BODILY INJURY
      Physical damage to a person.
 
   
BODILY INJURY LIABILITY COVERAGE
      Portion of an auto insurance policy that covers injuries the policyholder causes to someone else.
 
   
BOILER AND MACHINERY INSURANCE
      Commercial insurance that covers damage caused by the malfunction or breakdown of boilers, and a vast array of other equipment including air conditioners, heating, electrical, telephone, and computer systems. Often called Equipment Breakdown, or Systems Breakdown insurance.
 
   
BOND
      A financial guarantee provided by an insurer on behalf of an insured/obligee to perform a specified function.
 
   
BOOK OF BUSINESS
      Total amount of insurance on an insurer’s books at a particular point in time.
 
   
BORDEREAU
      An itemized statement of transactions used in reinsurance or for managing general agents.
 
   
BRANCH OFFICE
      Local business “headquarters” of an insurance company with its head office elsewhere.
 
   
BREACH OF CONTRACT
      Failure of a party to perform in accordance with terms specified in a contract.
 
   
BROAD FORM
      Coverage for numerous additional perils, such as those found in a Broad Form Homeowners policy.
 
   
BROKER
      An intermediary between a customer and an insurance company. Brokers work for their customers and represent their needs to insurance companies. Typically, brokers search the market for coverage appropriate to their clients.
 
   
BROKER OF RECORD
      The individual who represents the policyholder. The broker of record has a legal right to commissions from the insurance policy.
 
   
BROKER’S AUTHORITY
      Types of policies and limits of coverage that brokers have the authority to place with an insurance company as contractually agreed by the insurance company and broker.
 
   
BROKERAGE
      Business where brokers work.
 
   
BUILDERS RISK INSURANCE
      Insurance contracts that provide coverage for property under construction.
 
   
BURGLARY
      Forced entry into premises. Some insurers require evidence of forced entry prior to paying claims for burglary.
 
   
BURGLARY AND THEFT INSURANCE
      Insurance for the loss of property due to burglary, robbery or larceny. It is provided in standard homeowners policies and business multiple peril policies.
 
   
BUSINESS INTERRUPTION INSURANCE
      Commercial coverage that reimburses a business owner for lost profits and continuing fixed expenses during the time that a business must stay closed because of a covered peril, such as fire. There are various forms of coverage available to meet different customer circumstances.
 
   
BYLAWS COVERAGE
      Coverage for increased costs to rebuild following a loss, created by the requirement to adhere to updated bylaws.
 
   
CAIB
      See “Canadian Accredited Insurance Broker.”
 
   
CAIFA
      See “Canadian Association of Insurance and Financial Advisors.”
 
   
CANADIAN ACCREDITED INSURANCE BROKER (“CAIB”)
      A professional designation granted after the successful completion of 4 courses by examination. CAIB was designed by brokers for brokers, and focuses on the practical application of technical knowledge and business management strategies.
 
   
CANADIAN ASSOCIATION OF INSURANCE AND FINANCIAL AD
      The trade association which represents life insurance agents and brokers, and financial advisors.
 
   
CANADIAN CERTIFIED INSURANCE BROKER (“CCIB”)
      The highest designation awarded to brokers by the Insurance Brokers Association of Canada, after candidates successfully complete two written exams and one oral exam, designed to test applied knowledge of property and liability coverages through risk analysis.
 
   
CANADIAN COALITION AGAINST INSURANCE FRAUD
      The national organization for reducing the cost of insurance fraud through public awareness, better business practices, improved investigative and enforcement techniques and a better understanding of the problem.
 
   
CANADIAN LIFE AND HEALTH INSURANCE ASSOCIATION INC
      Established in 1894, CLHIA is the trade association for life and health insurers in Canada.
 
   
CANADIAN PROFESSIONAL INSURANCE BROKER “(CPIB”)
      A senior designation course of study designed for students who have completed CAIB or CIP, offered through regional brokers associations, including the Independent Insurance Brokers Association of Alberta. Three streams of study are offered: Personal Lines, Commercial Lines and Brokerage Management
 
   
CANCELLATION
      The act of terminating an insurance policy by either the insured or the insurance company.
 
   
CANCELLATION, FLAT
      See “Flat Cancellation.”
 
   
CANCELLATION, PRO-RATA
      See “Pro-Rata Cancellation.”
 
   
CANCELLATION, SHORT-RATE
      See “Short-Rate Cancellation.”
 
   
CAPACITY
      The maximum amount that an insurance company can underwrite, based on the company’s retained earnings and invested capital.The amount of capital available to the industry as a whole for providing insurance protection.


 
   
CAPTIVE AGENT
      A person who represents only one insurance company and is contractually restricted from submitting business to any other company.
 
   
CAPTIVE INSURANCE COMPANY
      An insurance company owned solely or primarily by a non-insurance entity for the primary purpose of providing insurance coverage to the parent company.
 
   
CARE, CUSTODY AND CONTROL
      A phrase in many insurance policies which excludes coverage for property in the care, custody or control of the insured. Coverage for this property can better be covered on other policies (for example, liability policies exclude property in the care, custody or control of the insured property as bailees policies afford better coverage).
 
   
CARGO INSURANCE
      A type of ocean marine insurance that protects the shipper of the goods against financial loss if the goods are lost or damaged. Also refers to goods shipped by various means – land, air, inland waters.
 
   
CARRIER
      The insurance company which provides coverage for the risk.
 
   
CASH FLOW UNDERWRITING
      The practice of pricing insurance at less than the amount required to pay claims and expenses (based on the theory that income from investments will exceed the losses from underpricing the insurance product).
 
   
CASUALTY INSURANCE
      Insurance concerned with the insured’s legal liability for injuries to others or damage to other persons’ property.
 
   
CATASTROPHE
      A single incident or series of closely related incidents causing severe insured property losses (for example, Hurricane Andrew).
 
   
CATASTROPHE BONDS
      A form of reinsurance to pay catastrophes, such as a major hurricane. Insurance risk is spread amongst many investors in the form of bonds.
 
   
CAVEAT EMPTOR
      Latin expression meaning “Buyer beware.”
 
   
CCAIF
      See “Canadian Coalition Against Insurance Fraud.”
 
   
CCIB
      See “Canadian Certified Insurance Broker.”
 
   
CEDE
      To transfer all or part of a risk from an insurer (the ceding company) to a reinsurer.
 
   
CERTIFICATE OF INSURANCE
      A statement of coverage issued to an individual insured under a group insurance contract, outlining the limits of coverage, premiums and perils insured for the member.
 
   
CERTIFIED FINANCIAL PLANNER (“CFP”)
      Designation granted to an individual who has demonstrated through successful examination a high degree of technical expertise in the field of financial planning.
 
   
CESSION
      Amount of insurance ceded to a reinsurer by the original (ceding) company.
 
   
CFP
      See “Certified Financial Planner.”
 
   
CGL
      See “Commercial General Liability” insurance.
 
   
CHARGEABLE
      A term used to describe automobile accidents that are considered to be caused by negligent acts of the insured driver, and which usually result in increased premiums.
 
   
CHARTERED INSURANCE PROFESSIONAL (“CIP”)
      The designation used to identify those who have successfully completed the requirements for the “Associate of the Insurance Institute of Canada” and who are paid members of the CIP society.
 
   
CHARTERED LIFE UNDERWRITER (“CLU”)
      A professional designation granted to individuals with a prescribed number of years experience in life and health insurance sales, following the successful completion of national examinations.
 
   
CHARTERED PROPERTY/CASUALTY UNDERWRITER (“CPCU”)
      A professional designation granted by the American Institute for Property and Liability Underwriters, following the successful completion of national examinations.
 
   
CHOICE NO-FAULT
      Allows automobile insureds the choice between the tort system and the no-fault system.
 
   
CIP
      See “Chartered Insurance Professional.”
 
   
CLAIM
      A request for payment of a loss under an insurance policy.
 
   
CLAIM REPORT
      The report given to the insurance company by the adjuster that documents the amount of payment the insurer is legally obligated to pay.
 
   
CLAIMANT
      A person who submits a claim.
 
   
CLAIMS ADJUSTER
      See “Adjuster.”
 
   
CLAIMS DEPARTMENT
      The section of insurance companies that evaluates claims.
 
   
CLAIMS EXPENSE
      Costs incurred in adjusting a claim (including legal fees, investigation expenses, adjuster costs).
 
   
CLAIMS RESERVE
      A fund established by the insurance company for payment of claims that have been reported, but that are not yet settled, as well as claims that have occurred, but have not yet been reported (See “Incurred But Not Reported” or “IBNR”).
 
   
CLAIMS-MADE POLICY
      A form of insurance that pays insured claims presented to the insurer during the term of the policy or within a specific time after its expiration.
 
   
CLASS
      A group of insureds with the same characteristics which have similar probabilities of incurring a loss (for example, those who drive more than 15 km one way to work, or those with wood stoves).
 
   
CLAUSE
      Sentences and paragraphs in an insurance policy which describe various coverages, exclusions, duties of the insured, locations covered, and policy conditions.
 
   
CLHIA
      See “Canadian Life and Health Insurers Association.”
 
   
CLIENT
      A person who engages a broker or agent for advice.
 
   
CLU
      See “Chartered Life Underwriter.”
 
   
CMP
      See “Composite Mercantile Policy.”
 
   
COINSURANCE
      Requires the policyholder to carry insurance equal to a specified percentage of the value of the property in order to receive full payment for partial losses.
 
   
COINSURANCE PENALTY
      A reduction in the amount an insured receives from the insurer after a loss, because of carrying lower limits of coverage than required by the Coinsurance Clause.
 
   
COINSURER
      A party that shares in the loss under an insurance policy.
 
   
COLLISION COVERAGE
      The portion of an automobile insurance policy that covers damage to insured vehicles from the perils of collision and upset.
 
   
COLLISION DAMAGE WAIVERS
      Special property damage coverage purchased by an individual renting an automobile.
 
   
COMBINED RATIO
      The total amount of an insurer’s loss and expense costs, stated as a percentage of premiums. A combined ratio exceeding 100% indicates that the insurer has experienced an underwriting loss.
 
   
COMBINED SINGLE LIMIT
      Bodily injury liability and property damage liability expressed as a single amount of coverage
 
   
COMMERCIAL BLANKET BOND
      Coverage of the employer for all employees on a “blanket basis,” with the maximum limit of coverage applied to any one loss without regard for the number of employees involved.
 
   
COMMERCIAL GENERAL LIABILITY (“CGL”) INSURANCE
      Broad coverage that provides cover for all liability exposures of a business not specifically excluded.
 
   
COMMERCIAL LINES
      Insurance products designed for businesses, corporations, industrial entities and other commercial establishments.
 
   
COMMISSION
      A percentage of the policy premium paid to the broker.
 
   
COMPANY ADJUSTER
      A claims adjuster who is a salaried employee of one insurance company.
 
   
COMPLETED OPERATIONS COVERAGE
      Coverage for bodily injury or property damage caused by a completed project or job, after the work is complete.
 
   
COMPOSITE MERCANTILE POLICY (“CMP”)
      A commercial policy which provides coverage for various combinations of perils.
 
   
COMPREHENSIVE “3-D” POLICY
      See “Dishonesty, Disappearance, and Destruction Policy.”
 
   
COMPREHENSIVE COVERAGE
      The portion of an automobile insurance policy which covers insured vehicles for damage caused by perils other than collision or upset.
 
   
COMPREHENSIVE PERSONAL LIABILITY (“CPL”) COVERAGE
      Protection against loss arising out of legal liability for damage or injury to others for which the insured is responsible. Coverage does not include liability arising from automobile or business operations.
 
   
COMPULSORY AUTOMOBILE INSURANCE
      The minimum amount of Third Party Liability coverage required by law (in Alberta, currently $200,000).
 
   
CONCEALMENT
      A deliberate attempt by an applicant to withhold material information from an insurer.


 
   
CONDITIONS
      Provisions in an insurance contract that qualify or place limitations on the insurer’s promise to perform.
 
   
CONDOMINIUM INSURANCE
      A policy specifically designed for owners of condominiums, combining coverage for the insured’s personal property, betterments and improvements to the unit, and personal liability.
 
   
CONSEQUENTIAL LOSS
      Financial loss which occurs as the consequence of some other loss.
 
   
CONSIDERATION
      One of the essential elements in the formation of a contract. Consideration under a contract of insurance often takes the form of a monetary payment or promise to pay.
 
   
CONSTRUCTIVE TOTAL LOSS
      An insurance claim where the value to repair the property exceeds the market value of the property.
 
   
CONTENTS
      Coverage for personal or business property items that are movable (not attached to the building’s structure).
 
   
CONTINGENT LIABILITY
      Liability of individuals, corporations, or partnerships for accidents caused by people other than employees for whose acts or omissions the corporations or partnerships are responsible. Also known as “Vicarious Liability.”
 
   
CONTRACT
      An agreement between two or more parties that is binding in law.
 
   
CONTRACT LAW
      The portion of civil law that interprets contracts and resolves disputes between parties.
 
   
CONTRACTORS EQUIPMENT FLOATER
      A form of inland marine insurance that covers the mobile equipment of a contractor.
 
   
CONTRACTUAL LIABILITY
      Legal liability of another party that is assumed under contract.
 
   
CONTRIBUTORY NEGLIGENCE
      Negligence on the part of the person suffering damages which contributed to the accident.
 
   
COUNTERSIGNATURE
      A licensed broker’s or agent’s signature on an insurance policy.
 
   
COVER NOTE
      Written verification provided to an insured that coverage is in place. Often used to “bridge the gap” between coverage being bound and policy issuance.
 
   
COVERAGE
      Synonymous with “insurance.” The protection provided under an insurance policy. Any of several risks covered by a policy.
 
   
CPCU
      See “Chartered Property/Casualty Underwriter.”
 
   
CPIB
      See “ Canadian Professional Insurance Broker.”
 
   
CPL
      See “Comprehensive Personal Liability Coverage. ”
 
   
CREDIT CARD INSURANCE
      Coverage under a personal property policy (homeowners, tenants or condominium owners) in the event that a credit card is fraudulently used or altered.
 
   
CRIME INSURANCE
      A type of insurance that provides coverage for employee dishonesty, forgery, theft of money, robbery, burglary, computer fraud involving money, and other similar risks.
 
   
CROP AND HAIL INSURANCE
      Coverage for damage to growing crops from hail and other named perils.
 
   
CROSS LIABILITY CLAUSE
      Liability incurred by one insured as the result of his or her damaging another insured when both insured are covered under the same liability insurance policy. Obligates the insurer to protect each insured separately.
 
   
CSIP
      See “Customer Service for the Insurance Professional.”
 
   
CSR
      See “Customer Service Representative.”
 
   
CUSTOMER SERVICE FOR THE INSURANCE PROFESSIONAL (“
      A broad, all encompassing introductory four-module program which examines the broker’s role in customer service. It is offered through regional brokers associations, including the Independent Insurance Brokers Association of Alberta.
 
   
CUSTOMER SERVICE REPRESENTATIVE (“CSR”)
      A person who provides service to clients once the insurance sale has been concluded.
 
   
D&O
      See “Directors and Officers Liability.”
 
   
DAMAGE TO PROPERTY OF OTHERS
      Coverage provided under a habitational policy (homeowners, tenants or condominium owners) for damage to the property of others, regardless of legal liability. Claims are often presented based on a feeling of moral responsibility.
 
   
DECLARATION
      The part of a property or liability insurance policy that states the name and address of the insured, the property insured, its location and description, the policy period, premiums and other information. Informally referred to as a “dec page.”
 
   
DECLINATION
      Rejection of an application for insurance by an insurance company.
 
   
DEDUCTIBLE
      The amount of loss which is paid by the insured. This is commonly a dollar amount which is specified in the insurance contract, but may be stated as a percentage. This is the first amount which is paid of any claim.
 
   
DEFENDANT
      One of two parties in a negligence lawsuit (the other party is the plaintiff). The action is brought against the defendant.
 
   
DEFINITIONS
      An essential part of insurance policies that explains the meanings of words and phrases found in the insurance contract.
 
   
DEPOSIT PREMIUM
      The initial premium required by insurance companies for policies subject to premium adjustments.
 
   
DEPOSITORS FORGERY INSURANCE
      Coverage for individuals or businesses for loss due to forgery or alteration of financial instruments, such as cheques and notes.
 
   
DEPRECIATION
      The decrease in the value of an asset over time.
 
   
DIRECT LOSS
      A loss in which the insured peril is also the proximate cause of the loss.
 
   
DIRECT PREMIUMS
      Property and casualty insurance premiums collected by insurance companies from their policyholders, before making adjustments for reinsurance premiums.
 
   
DIRECT WRITERS
      Insurance companies which sell directly to the public, through their own employees or exclusive agents.
 
   
DIRECTORS AND OFFICERS (“D&O”) LIABILITY
      Insures directors and officers of companies for negligent acts or omissions, misleading statements which result in lawsuits against the company including allegations of mismanagement.
 
   
DISAPPEARING DEDUCTIBLE
      In property insurance, the amount that the insured does not have to pay when the loss exceeds a certain specified amount. The deductible would apply to smaller losses, but be reduced or disappear for larger losses.
 
   
DISCLOSURE
      The act of making something known.
 
   
DISHONESTY, DISAPPEARANCE, AND DESTRUCTION POLICY
      Insurance which combines all forms of crime coverages in one policy.
 
   
DOMESTIC INSURER
      A phrase used to describe an insurance company incorporated in Canada.
 
   
E&O COVERAGE
      See “Errors and Omissions Coverage.”
 
   
EARNED PREMIUM
      The portion of the total premium that applies to the part of the policy period already expired (for example, 4 months into an annual policy 33% of the premium is earned).
 
   
EARTHQUAKE INSURANCE
      Coverage that can be purchased in conjunction with property policies, covering direct damage resulting from an earthquake.
 
   
EFFECTIVE DATE
      Date at which an insurance policy goes into force.
 
   
EMBEZZLEMENT
      Theft of another person’s property, particularly money, by a person entrusted with that property.
 
   
EMPLOYEE DISHONESTY
      See “Fidelity Bond.”
 
   
EMPLOYERS CONTINGENT LIABILITY
      Protects employers for injuries sustained during the course of employment by employees who are deemed not eligible for Workers Compensation coverage.
 
   
ENDORSEMENT
      An amendment to the original policy which adds, subtract or alters coverage.
 
   
ENVIRONMENTAL IMPAIRMENT LIABILITY
      A form of insurance designed to cover losses and liabilities arising from damage to property caused by pollution.
 
   
EQUIPMENT FLOATER
      Coverage for portable property, such as equipment used by contractors or physicians and surgeons. Covers anywhere within a specified geographic range.
 
   
ERRORS AND OMISSIONS COVERAGE (“E&O”)
      Liability coverage for various professions against negligent acts and/or omissions which result in bodily injury, personal injury and/or property damage to a client.
 
   
ESTOPPEL
      An estoppel is created when one person makes an invalid statement upon which another person relies. The first person cannot then go back on his or her word and revert to what should have been correctly stated.
 
   
EXCESS POLICY
      A policy that pays only after coverage under other applicable policies has been exhausted (for example, umbrella liability policies).
 
   
EXCLUSION
      A provision in insurance policies that eliminates coverage for certain risks, people, property, locations or occurrences.
 
   
EXCLUSIVE AGENT
      An agent who represents only one insurance company and is restricted by agreement from submitting business to any other insurance companies.
 
   
EXPENSE RATIO
      The ratio of an insurance company’s operating expenses to premiums.
 
   
EXPERIENCE
      Record of losses, used to predict future losses.
 
   
EXPIRY DATE
      The point in time when an insurance policy terminates.
 
   
EXPOSURE
      The possibility of loss. The higher the exposure, the more likely it is that type of loss will occur.
 
   
EXTENDED COVERAGE
      An extension of coverage applicable to Standard Fire Policies, including coverage against property damage caused by windstorm, hail, smoke, explosion, riot, civil commotion, and impact by vehicles and aircrafts.
 
   
EXTENDED REPORTING PERIOD
      An additional period of time after policy expiration during which valid claims will be paid under a claims-made policy. Often available only after payment of an additional premium and within a limited time period (i.e., 30 days).
 
   
EXTRA EXPENSE INSURANCE
      A type of business income insurance that covers additional costs associated with operating an insured business after a loss (for example, increased costs for expediting equipment replacement).
 
   
FACILITY
      A pooling mechanism to provide insurance to individuals who cannot obtain insurance coverage through conventional markets (usually due to poor driving records or loss experience). Insurers write and issue policies, and all share in the underwriting profits or losses.
 
   
FACULTATIVE REINSURANCE
      Reinsurance that provides an insurer with coverage for specific individual risks. Reinsurers assess each risk individually and have no obligation to take on the risks presented to them by the primary insurers, as opposed to treaty reinsurance.
 
   
FAIR RENTAL VALUE
      The amount payable to a property owner for loss of rental income due to damage to the premises by an insured peril, where the rental property is uninhabitable.
 
   
FARM MUTUAL
      A local mutual insurance company, generally operating in a limited geographical area, which insures farm properties.
 
   
FARMOWNERS PACKAGE
      A package policy which provides coverage for the insured’s dwelling and contents, barns, stables and farming liability.
 
   
FAULT CHART
      An agreement between insurance companies to standardize claim forms and practices, and to provide guidelines for the expedient settlement of claims.
 
   
FCIP
      See “Fellow, Chartered Insurance Professional.”
 
   
FELLOW OF THE INSURANCE INSTITUTE OF CANADA
      A senior designation following the AIIC designation, which is granted upon successful completion of a 10-credit course of university-level study.
 
   
FELLOW, CHARTERED INSURANCE PROFESSIONAL
      A person who has earned the FIIC designation from the Insurance Institute of Canada, and who is a member in good standing of the Chartered Insurance Professional society.
 
   
FIDELITY BOND
      Coverage which protects an employer against dishonest or fraudulent acts of employees, such as fraud, embezzlement or theft of money.
 
   
FIDUCIARY
      A person who holds property, or acts on behalf of another person in trust.
 
   
FIIC
      See “Fellow of the Insurance Institute of Canada.”
 
   
FINAL RELEASE
      A legal contract which acknowledges the termination of a claimant’s right to sue the released party. A Final Release is usually executed in exchange for the final payment of a claim.
 
   
FIRE
      Intense combustion which results in a flame or glow.
 
   
FIRE INSURANCE
      Coverage for losses caused by fire and lightening, plus resulting damage caused by smoke and water.
 
   
FIRE LEGAL LIABILITY
      Coverage for property loss liability as a result of the negligent acts and/or omissions of the insured, which allows a fire to damage another’s property.
 
   
FIRE MARKS
      Historic insignia mounted on the exterior of homes to indicate that the property was insured by a particular insurance company.
 
   
FIRST-PARTY COVERAGE
      Coverage for the insured’s own property or person.
 
   
FLAT CANCELLATION
      Cancellation of an insurance policy on the same date it becomes effective. When a policy is “cancelled flat,” no monies are due the insurance company.
 
   
FLEET POLICY
      An automobile policy which cover numerous automobiles.
 
   
FLOATER
      Coverage for property that moves from location to location. Coverage is provided on a “scheduled” basis, where individual items are listed in the policy, or on an “unscheduled” or “blanket” basis. Coverage is provided for transportation perils as well as perils at a fixed location. Usually geographic restrictions apply.
 
   
FOREIGN INSURER
      An insurer domiciled in a country other than Canada.
 
   
FRANCHISE CLAUSE
      A clause found in policies that states the policy will not pay any claims less than a given amount, but will pay claims in excess of that amount.
 
   
FRATERNAL INSURANCE
      A cooperative type of insurance provided by social organizations for their members, often on a non-profit basis.
 
   
FRATERNAL SOCIETY
      A social organization that provide insurance for its members.
 
   
FRAUD
      A dishonest act. The intentional lying or concealment by a claimant to receive payment of an insurance loss that would not otherwise be paid.
 
   
FRAUDULENT MISREPRESENTATION
      A dishonest statement made to an insurance company to induce it to write coverage.
 
   
FREE ON BOARD (“FOB”)
      A term which means that an exporter of goods relinquishes responsibility for their damage or destruction once they reach the point of destination.
 
   
FREQUENCY
      The number of times a loss occurs.
 
   
FRIENDLY FIRE
      A fire deliberately set in a fireplace, stove, furnace, or other container for that purpose, and which does not spread beyond the container.
 
   
FRONTING
      A procedure by which a primary insurer acts as the insurer of record by issuing a policy, but then cedes the entire risk to a reinsurer.
 
   
FULLY INSURED
      All the insured’s losses are paid in full.
 
   
FUNDAMENTALS OF INSURANCE
      A basic course in property and casualty insurance, offered through the Insurance Brokers Association of Canada, for new entrants to the industry, and accepted in eight of the provinces for licensing purposes.
 
   
FURRIERS BLOCK
      Coverage for furs owned by a furrier and customers’ furs in the care, custody and control of the furrier.
 
   
GARAGE INSURANCE
      Coverage for property damage and bodily injury for which the garage and/or its representatives become legally liable resulting from the operation of the garage.
 
   
GENERAL AVERAGE
      Expenses and damages incurred as the result of damage to a ship and its cargo through taking action to prevent initial or further damage to the ship or its cargo.
 
   
GENERAL DAMAGES
      Damages awarded to an injured person for intangible loss which cannot be measure directly by dollars – known colloquially as “pain and suffering.”
 
   
GENERAL INSURANCE ESSENTIALS
      An introductory course in property and casualty insurance for newcomers to the industry, offered by the Insurance Institute of Canada.
 
   
GENERAL LIABILITY INSURANCE
      Coverage for an insured when negligent acts and/or omissions result in property damage and/or injury on the premises of a business, or when someone is injured as the result of using the product manufactured or distributed by a business, or when someone is injured in the general operation of a business.
 
   
GIE
      See “General Insurance Essentials.”
 
   
GLASS INSURANCE
      Coverage for glass breakage caused by all risks (fire and war risks are often excluded). Insurance can be bought for windows, structural glass, leaded glass and mirrors, subject to a deductible.
 
   
GOOD FAITH
      See also “Uberrimae Fidei,” Latin for “utmost good faith,” the premise upon which insurance contracts are based. It is assumed that all parties enter into an insurance contract in good faith, meaning that they have disclosed all pertinent information and intend to carry out their obligations.
 
   
GRADUATED DRIVERS’ LICENSES
      Restricted licenses for new drivers, allowing them time to improve their skills before being granted an unrestricted license.
 
   
GROSS EARNINGS FORM
      Coverage for the loss in earnings of a business (less those expenses which do not continue while the business is inoperable) as the result of the interruption of normal business activities caused by damage to the premises by an insured peril. Coverage is subject to coinsurance.
 
   
GROSS NEGLIGENCE
      The intentional failure to perform a manifest duty in reckless disregard of the consequences affecting the life or property of another. A reckless action without regard to the life, limb and/or property of another.
 
   
GROSS PREMIUM
      The premium paid by the policyholder.
 
   
GROUP INSURANCE
      A program, normally for reduced premiums or enhanced coverages, offered to a group of individuals, usually employees of the same company or members of the same association.
 
   
GUARANTEED REPLACEMENT COST COVERAGE
      Coverage under a homeowners policy that pays the full cost or replacing or repairing a damaged or destroyed home, even if the cost exceeds the policy limit.
 
   
HAIL INSURANCE
      Coverage against hail damage to crops.
 
   
HARD MARKET
      The part of the insurance sales cycle in which insurance is expensive and in short supply, as insurers charge higher premiums to cover their underwriting losses. A hard market is usually associated with a decline in capacity.
 
   
HAZARD
      A circumstance that increases the likelihood or severity of a loss.
 
   
HEDONIC DAMAGES
      In personal injury cases, damages awarded for the loss of “enjoyment of living.”
 
   
HIGH-RISK AUTOMOBILE INSURER
      Insurance companies that specialize in covering drivers with many moving traffic violations or losses, or those whose policies have been cancelled or who have been refused insurance.
 
   
HOLD HARMLESS CLAUSE
      A clause in a contract by which one party agrees to assume the liabilities of the other party.
 
   
HOMEOWNERS POLICY
      A package policy which combines coverage for the insured’s dwelling, contents and habitational liability exposures.
 
   
HOST LIQUOR LIABILITY
      Provides coverage for a person, when acting as a host, serves liquor to guests and the guest causes property damage or bodily injury to others as a result of being inebriated.
 
   
HOUSEHOLD INVENTORY
      A list and description of household contents and valuables, used to establish values for habitational policies and to assist in the claims process after a loss occurs.
 
   
HULL INSURANCE
      Physical damage coverage on a ship, vessel or aircraft (similar to collision coverage on an automobile).
 
   
HURRICANE
      A tropical storm, with winds of 75 miles an hour or more.
 
   
IAO
      See “Insurers Advisory Organization.”
 
   
IBAC
      See “Insurance Brokers Association of Canada.”
 
   
IBC
      See “Insurance Bureau of Canada.”
 
   
IBNR
      See “Incurred But Not Reported.”
 
   
ICPB
      See “Insurance Crime Prevention Bureau.”
 
   
IIBAA
      See “Independent Insurance Brokers Association of Alberta.”
 
   
IIC
      See “Insurance Institute of Canada.”
 
   
IMPROVEMENTS AND BETTERMENTS INSURANCE
      Coverage for a tenant’s modifications to leased space for his particular needs (for example, partitions).
 
   
INCEPTION DATE
      The date a policy takes effect.
 
   
INCIDENTAL MALPRACTICE
      Medical malpractice that is the legal responsibility of a person or organization not in the medical profession.
 
   
INCREASED COST OF CONSTRUCTION
      Coverage if local laws or bylaws require that a damaged or destroyed building be rebuilt at an increased cost to comply with building codes that were not in effect when the building was originally constructed.
 
   
INCURRED BUT NOT REPORTED
      Insured losses which have occurred, but which have not yet been reported to the insurance company, and shortfalls in the estimates made about claims already reported, but where the full extent of the injury or property damage is not known.
 
   
INCURRED LOSSES
      Losses that have occurred within a stipulated time period, whether or not they have been paid.
 
   
INDEMNIFY
      The act of providing financial compensation for losses by restoring an insured to the same financial position after the loss that he or she was in before the loss.
 
   
INDEMNITY AGREEMENT
      A policy provision which restores an insured to his or her original financial position after a loss, without financial gain or disadvantage.
 
   
INDEMNITY BOND
      Coverage for loss in the event that the principal fails to perform according to standards agreed upon.
 
   
INDEPENDENT ADJUSTER
      An independent contractor who handles claims for different insurance companies, and who is not an employee of the insurance company.
 
   
INDEPENDENT INSURANCE BROKERS ASSOCIATION OF ALBER
      A trade association, dedicated to furthering the interests of brokers in Alberta through education, lobbying and group benefits.
 
   
INDIRECT LOSS
      A loss that is not the direct result of an insured peril.
 
   
INFLATION GUARD ENDORSEMENT
      An endorsement added to a homeowners policy which automatically increases the coverage limit on the dwelling to reflect increased building costs due to inflation.
 
   
INHERENT VICE
      A defect or cause of loss which arises due to the nature of the good in question (for example, the natural flaws in opals which cause them to crack or break).
 
   
INITIAL RESERVE
      The first estimate by an adjuster of the total amount of damage or loss.
 
   
INLAND MARINE INSURANCE
      A broad form of insurance which covers property in transit, plus bridges, tunnels and other means of transportation.
 
   
INNKEEPERS LIABILITY
      The liability arising out of the operation of a motel or hotel with respect to the physical safety of guests and their property.
 
   
INSOLVENCY
      A company’s financial inability to pay its debts.
 
   
INSPECTION REPORT
      A report completed by insurance company inspectors or independent firms, detailing hazards at an insured location – used as a risk management tool.
 
   
INSURABLE INTEREST
      The financial interest that an owner or creditor has in property and which would create a monetary loss if the property were damaged or destroyed.
 
   
INSURABLE RISK
      Conditions which make a risk insurable, including being definable, accidental in nature, and part of a group of similar risks large enough to make losses predicable, and for which an insurance company can assess a reasonable cost for the insurance.
 
   
INSURANCE
      A system which makes financial losses more affordable by transferring risks from individuals to groups in return for a premium.
 
   
INSURANCE BROKER
      Brokers assess risks and search the marketplace on behalf of their clients for the broadest coverage at a reasonable cost. Brokers represent their insureds, not the insurance companies.
 
   
INSURANCE BROKERS ASSOCIATION OF CANADA
      A national trade association, with eleven regional members, representing property and casualty insurance brokers from every area of Canada. Through property and casualty brokers, IBAC advocates for insurance consumers, representing their interests to the federal government. IBAC’s primary mandate is federal government relations. It also develops national licensing courses and professional development programs for brokers, for delivery through its member associations.
 
   
INSURANCE BUREAU OF CANADA
      The national trade association that represents the companies which insure the homes, cars and businesses of Canadians.
 
   
INSURANCE COMPANY
      A corporation primarily engaged in the business of providing insurance protection to the public.
 
   
INSURANCE CRIME PREVENTION BUREAU
      Funded by Insurance Bureau of Canada, ICPB’s primary objectives are to prevent and detect insurance crime by helping insurance claims departments discover attempted fraud before claims are paid and providing underwriters with loss information that will help them to evaluate risks.
 
   
INSURANCE INSTITUTE OF CANADA
      The Insurance Institute offers educational programs to the general insurance industry in Canada, including employees of insurance and reinsurance companies, brokerages, agencies, adjusting firms, and risk managers.
 
   
INSURANCE POOL
      See “Pool.”
 
   
INSURANCE TO VALUE
      The ratio of the amount of coverage in relation to the total value of the property.
 
   
INSURED
      A person or organization covered by an insurance policy.
 
   
INSURED PERIL
      The source of the loss covered under a policy of insurance – i.e., fire or lightning.
 
   
INSURER
      The company offering insurance protection through the sale of a policy – the insurance company.
 
   
INSURER’S ADVISORY ORGANIZATION
      An organization which provides risk information, loss prevention and control services, commercial inspections, actuarial and other specialized risk management and insurance consulting services.
 
   
INSURING AGREEMENT
      The section which specifies (1) the parties to the contract, (2) the terms of the policy, such as the effective and expiry dates, (3) the premium, (4) the limits of insurance, (5) the types and locations of property insured, (6) consideration, (7) what perils the policy protects against, (8) the conditions under which the policy can be assigned.
 
   
INSURING CLAUSE
      An essential part of a policy, which states the individual(s) covered, property and locations covered, perils covered, and the effective and expiry dates.
 
   
INTERNET LIABILITY
      Coverage designed to protect businesses from liabilities that arise from conducting business over the Internet, including copyright infringement, defamation and violation of privacy.
 
   
INTRODUCTION TO RISK MANAGEMENT
      A self-study course, available through regional brokers associations, including the IIBAA. The course is designed to help brokers understand the systematic approach to the analysis and treatment of loss exposures, through risk management in a wide variety of businesses and industries.
 
   
INVESTMENT INCOME
      Income generated by the investment of assets – for insurance companies, this includes dividends on equities, rent from real estate holdings and interest earned on bonds.
 
   
JEWELLERS’ BLOCK
      A type of commercial insurance that provides coverage for jewels, watches, gold, silver, platinum, pearls, precious and semiprecious stones, owned by either the insured jeweller or property of his/her customers in his/her care, custody or control.
 
   
JEWELLERY FLOATER
      A rider added to personal habitational policies which provides coverage on jewellery and precious stones on an all risk basis at any location, subject to exclusions. Most commonly, items of jewellery are specified described and listed, although blanket coverage is available.
 
   
JOINT AND SEVERAL LIABILITY
      A legal obligation under which a party may be liable for the payment of the total judgment and costs, even if that party is only partially responsible for the loss.
 
   
JOINT UNDERWRITING ASSOCIATION
      A “shared market” mechanism, found in the United States, in which several insurance companies combine to provide the capacity to underwrite a particular type of exposure.
 
   
JUDGMENT
      A decision by a court of law.
 
   
JUDICIAL BOND
      A type of surety bond used for court proceedings, which guarantees that that the party bonded will fulfill certain obligations specified by law. For example, individuals in the position of trust to safeguard assets belonging to others require a fiduciary bond.
 
   
KIDNAP AND RANSOM INSURANCE
      Coverage up to specific limits for the cost of ransom or extortion payments and related expenses. A policy condition is that the existence of the coverage not be revealed.
 
   
LAPSE
      The termination or discontinuance of an insurance policy.
 
   
LAPSED POLICY
      A policy terminated because of failure to pay a renewal premium.
 
   
LAW OF LARGE NUMBERS
      The theory of probability on which insurance is based. The greater the number of exposures, the more accurately that losses can be predicted, and adequate rates can be determined.
 
   
LEASE
      Use of another’s property in exchange for a payment.
 
   
LEGAL EXPENSE INSURANCE
      Coverage for legal expenses for specified activities, such as adoptions, probates, divorces and other legal services.
 
   
LEGAL LIABILITY
      See “Liability.”
 
   
LESSEE
      One who leases something from someone else.
 
   
LESSOR
      One who leases something to someone else.
 
   
LIABILITY
      A legal obligation that arises from personal or corporate acts or the non-performance of those acts.
 
   
LIABILITY INSURANCE
      Coverage for all sums that the insured becomes legally obligated to pay because of bodily injury and/or property damage.
 
   
LIABILITY LIMITS
      The maximum amount of coverage available under a liability policy.
 
   
LIBEL INSURANCE
      Coverage for suits brought against an insured for writing and publishing statements alleged to be libellous.
 
   
LICENSE
      In insurance, the legal authority granted to an insurance company, broker, agent or adjuster, permitting them to do business in a particular province.
 
   
LICENSEE
      An individual who has the permission of the owner or personal who controls the property, to enter the property.
 
   
LIFE INSURANCE
      Protection against the death of an individual, in the form of payment to a beneficiary.
 
   
LIMITS
      The maximum amount of coverage that can be paid for a covered loss.
 
   
LINE
      The term used for a general class of insurance, e.g. Personal Lines.
 
   
LIVESTOCK INSURANCE
      Coverage for horses and farm animals for injury or damage from stated perils.
 
   
LLOYD’S BROKER
      An individual who works exclusively to place insurance with the syndicates at Lloyd’s.
 
   
LLOYD’S OF LONDON
      A marketplace where specialized underwriting syndicates have gathered to sell insurance and reinsurance.
 
   
LONG-TAIL LIABILITY
      Where injury takes a long time to become known, e.g., asbestosis claims did not appear for decades after the injuries originally occurred.
 
   
LOSS
      Damage caused by an insured’s negligent acts and/or omissions which result in bodily injury and/or property damages to another, or damage to an insured’s property, or the amount which an insurance company has a legal obligation to pay.
 
   
LOSS ADJUSTMENT EXPENSES
      The cost to an insurance company to evaluate, defend and pay claims.
 
   
LOSS AVOIDANCE
      A risk management technique which endeavours that an individual or corporation does not incur liability relating to a given activity by avoiding that activity entirely.
 
   
LOSS CONTROL
      Any process which reduces the frequency, severity or unpredictability of losses.
 
   
LOSS OF USE
      The value assigned to not having damaged property available, e.g., the cost of renting a replacement automobile while one’s car is being repaired.
 
   
LOSS PAYABLE CLAUSE
      Coverage for a mortgagee for its interest in real or personal property.
 
   
LOSS PREVENTION
      A risk management control procedure which emphasizes preventing the occurrence of loss through engineering, safety inspections, etc.
 
   
LOSS RATIO
      The relationship of incurred losses, including loss adjustment expenses to earned premiums.
 
   
LOSS RESERVES
      The amount set up, and periodically readjusted, as the estimated cost of a claim.
 
   
MALICIOUS MISCHIEF
      Intentional damage or destruction of another person or business’ property.
 
   
MALPRACTICE INSURANCE
      Professional liability coverage for physicians, lawyers and other specialists alleging negligence or errors and omissions that have harmed clients.
 
   
MANUAL
      A publication stipulating underwriting rules, classifications and rates for an insurance company.
 
   
MANUSCRIPT POLICY
      A custom-designed policy, tailored for a firm’s specific needs and requirements.
 
   
MARINE INSURANCE
      A form of insurance, primarily concerned with goods in transit and the means of transportation on waterways, land, and air.
 
   
MASTER POLICY
      A single policy issued to an employer or association for coverage for a group. The group members receive certificates as evidence of coverage in force.
 
   
MATERIAL MISREPRESENTATION
      Falsification of a material fact in such a manner that if the insurance company had known the truth, it would not have insured the risk.
 
   
MAXIMUM PROBABLE LOSS
      The estimate of the maximum dollar value that could be damaged or destroyed under realistic situations.
 
   
MEDICAL MALPRACTICE
      Improper care or treatment by a physician, hospital or other provider of health care.
 
   
MISREPRESENTATION
      Intent to defraud. An insured is required to answer all questions truthfully when applying for insurance. An insurance company can void a contract of insurance if it would not have issued the policy initially had it known the truth.
 
   
MOBILE HOME INSURANCE
      Similar to homeowner policies, but specifically designed for the property and liability exposures of those who reside in mobile homes.
 
   
MORAL HAZARD
      Any circumstance which increases the probability of loss because of a person’s personal habits or morals.
 
   
MORTGAGE CLAUSE
      A clause in property policies which protects the interest of a mortgagee of a property. If the insured property is damaged or destroyed by an insured peril, the mortgagee is indemnified up to its stated interest in the property.
 
   
MORTGAGEE
      The party which loans mortgage funds.
 
   
MORTGAGOR
      The party who borrows mortgage funds.
 
   
MULTI-PERIL POLICY
      A package policy, such as a homeowners or commercial package policy, that provides coverage against several different perils.
 
   
MUTUAL INSURANCE COMPANY
      A company which is owned by its policyholders and returns part of its profits to the policyholders in the form of dividends.
 
   
MYSTERIOUS DISAPPEARANCE
      Loss of property, when the exact cause cannot be identified or it not known.
 
   
NAMED INSURED
      The person, business or organization specified as the insured(s) in a property or liability insurance policy.
 
   
NAMED PERILS
      Coverage for those perils that are specifically stated such as fire, windstorm, hail, theft, smoke, etc.
 
   
NAMED POSITION BOND
      A fidelity bond that covers a business if employees in listed positions commit dishonest acts.
 
   
NEGLIGENCE
      Lack of care or attention, either willful or innocently, which as a consequence of the action causes injury to a person and/or damage to the property or others.
 
   
NET LINE LIMIT
      The maximum amount of insurance that an insurance company will issue on a particular risk exposure.
 
   
NET WRITTEN PREMIUM
      The premium income retained by insurance companies, after deduction for reinsurance, brokers’ commissions and operational overheads.
 
   
NO-FAULT
      A type of automobile insurance where the right to sue for injury and damages resulting from negligence is restricted, limited or removed. Provincial government insurance programs contain variations of no-fault depending on the jurisdiction.
 
   
NON-OWNED AUTOMOBILE COVERAGE
      Coverage as a separate policy or added to a Commercial General Liability (“CGL”) policy to protect a company for liability exposures for an employee who drives his or her own automobile for business purposes.
 
   
NON-WAIVER AGREEMENT
      An agreement by the insured that the insurer does not admit liability for a claim, simply because it investigates the loss.
 
   
NOTICE OF LOSS
      Written document required by insurer to officially notify the occurrence of a loss or claim.
 
   
OBLIGEE
      The person, firm or corporation to whom the right of performance is owed under a bond.
 
   
OCCURRENCE
      The event of an accident, damage or injury happening, whether continuous or due to repeated exposure to harmful conditions.
 
   
OCCURRENCE POLICY
      Insures liability claims, which occur during the policy period irrespective of when the claim is filed. The opposite of this is a claims made policy, which insures claims only when the claim is reported during the policy period or during the specified discovery period.
 
   
OCEAN MARINE INSURANCE
      Insures all related property involved in the transport of materials by ocean going vessels. This
includes the vessels, related liabilities, on-board cargo and while loading and unloading occurs. This is the oldest form of insurance having its own terminology and language.

 
   
OFFICERS AND DIRECTORS LIABILITY COVERAGE
      See “Directors and Officers Liability Coverage.”
 
   
OLT
      See “Owners, Landlords and Tenants Liability.”
 
   
OMISSION
      Wrongful inaction; failure to act; inactivity.
 
   
OPERATING RATIOS
      A ratio based on the costs of doing business, expenses losses paid versus the gross premium volume. Expressed as a percentage.
 
   
OVERRIDE COMMISSION
      A commission paid to agents and brokers by insurers usually based on the volumes of business placed with the insurer.
 
   
OWNERS, LANDLORDS AND TENANTS (“OLT”) LIABILITY
      Coverage for bodily injury and property damage liability resulting from the ownership, use and/or maintenance of an insured business’ premises.
 
   
PACKAGE POLICY
      An insurance policy that incorporates all forms of applicable coverages for a particular risk or type of business venture in one complete package.
 
   
PAIR CLAUSE
      See “Set and Pair Clause.”
 
   
PEAK SEASON ENDORSEMENT
      An endorsement attached to commercial property policies, which provides higher limits of coverage on a merchant’s inventories during certain specified times.
 
   
PENALTY
      The liability limit on a surety or fidelity bond.
 
   
PERFORMANCE BOND
      A type of bond which guarantees that a contractor will perform under the contract in accordance with the terms of the bid submitted.
 
   
PERIL
      The type of event that causes damage or injury to occur such as fire, windstorm, hail, etc.
 
   
PERSONAL ARTICLES FLOATER
      Specifically designed to insure personal assets of a mobile nature, i.e. cameras, jewellery, furs, fine arts, etc. Insures such items wherever they may be located within a geographical region.
 
   
PERSONAL INJURY
      Wrongful conduct causing false arrest, invasion of privacy, libel, slander, defamation of character, and bodily injury.
 
   
PERSONAL LINES
      Those types of insurance specifically designed to insure individuals’ personal property and liabilities for their private activities.
 
   
PHYSICAL DAMAGE COVERAGE
      Property damage coverage for an automobile under the All Perils, Collision, Comprehensive and/or Specified Perils sections of the policy.
 
   
PHYSICIANS AND SURGEONS EQUIPMENT INSURANCE
      Coverage for equipment normally carried from location to location by a physician or surgeon.
 
   
POLICY
      The physical document that represents the contractual agreement between an insured and an insurer which sets out all the terms, conditions and provisions of the coverage, term of the contract and the specified cost of the coverages.
 
   
POLICY PERIOD
      The time interval during which a policy is in force.
 
   
POLICYHOLDER
      That person or persons whose name is stated within the policy document as being the named insured.
 
   
POLITICAL RISK INSURANCE
      Coverage for corporations that operate in foreign jurisdictions to protect their investment in property assets while located within a foreign country. It protects against events such as nationalization, confiscation, refusal of export of property or currency, revolution, terrorism, or war.
 
   
POLLUTION LIABILITY
      The liability that results from hazardous or harmful materials in what ever form being released from or onto or allowed to seep and contaminate property in the form of land, buildings or other property or persons.
 
   
POOL
      An agreement among insurers who commit to insure specific risks by sharing the exposures, profits and losses, usually on a per share basis.
 
   
POSITION BOND
      A fidelity bond that covers a business if employees in listed positions commit dishonest acts.
 
   
PREFERRED RISK
      An insured with a lower expectation of incurring a loss than a standard applicant.
 
   
PREMIUM
      The monetary consideration that fulfills the contractual requirements of an insurance policy.
 
   
PREMIUM FINANCE
      An agreement where the insured commits to pay the premium over time, usually subject to interest charges. The party financing the premium may be the insurer or a finance company.
 
   
PRIMARY INSURANCE
      When a claim occurs, the primary insurance will be the first policy to pay (before excess or umbrella policies).
 
   
PRINCIPAL (BOND)
      One of the parties to a bond. The principal has the primary responsibility to perform the obligation.
 
   
PRINCIPLE OF INDEMNITY
      The concept that an insured will be reimbursed for a loss, without profit or being put into a worse financial position than prior to the loss.
 
   
PRODUCT LIABILITY
      The liability that a manufactured product presents as it is purchased, consumed or utilized by a third party.
 
   
PRODUCT LIABILITY INSURANCE
      Insurance that responds to claims or injuries arising from the consumption or utilization of a product by a third party.
 
   
PROFESSIONAL LIABILITY
      Insures professionals such as doctors, lawyers, accountants, insurance brokers against errors or omissions arising from their advice and activities resulting in financial injury to their clients.
Liability is created when an individual who offers services to the general public claims greater expertise in a particular area than a layman.

 
   
PROOF OF LOSS
      The document where an insured specifically states the nature of a claim, attending circumstances, verification of values and makes a statutory declaration that the information given is true.
 
   
PROPERTY DAMAGE
      Physical injury to tangible property.
 
   
PROPERTY INSURANCE
      Insurance against loss or damage to all forms of physical property assets, being buildings, contents, equipment, inventory, cargo, property of others.
 
   
PRORATA
      Proportional.
 
   
PRORATA CANCELLATION
      A cancellation where the refund to the insured is calculated without reduction or penalty (if 100 days are remaining in an annual policy, 100/365 will be returned to the policyholder).
 
   
PROSCRIPTION
      The date beyond which a claim will not be paid as it is after the date specified for filing a claim within the insurance policy.
 
   
PROXIMATE CAUSE
      The primary reason that a claim occurs. The proximate cause starts a chain of events from which the damage results.
 
   
PUBLIC ADJUSTER
      A licensed adjuster who represents the insured, and is paid by the insured, not the insurance company.
 
   
PUNITIVE DAMAGES
      Damages awarded by the courts in a lawsuit where the court seeks to punish the defendant for a wrong committed against others or their property.
 
   
QUOTA SHARE REINSURANCE
      Automatic reinsurance that requires the insurer to transfer, and the reinsurer to accept, a given percentage of every risk written by the insurer within a defined category.
 
   
QUOTE
      The monetary and coverage terms that an insurer determines and requires after assessing a risk in order that they will proceed to issue an insurance policy for an insured.
 
   
RATE
      Actuaries and underwriters determine the rate, or cost for insurance, for risks - usually expressed as a decimal, i.e., .25 per hundred or thousand dollars of insurance. Premiums are calculated by multiplying the rate with the insured values.
 
   
RATE MANUAL
      A publication which lists premiums charged for the various products and coverages sold by an insurance company.
 
   
RATING BUREAU
      A cooperative organization among insurers that rates and prepares new policy forms.
 
   
RATING TERRITORY
      A geographic region that has relatively equal hazards and therefore allows the determination and usage of a rating scheme for that area.
 
   
REBATING
      The giving of some valuable consideration as an inducement to purchase or renew.
 
   
RECIPROCAL EXCHANGE
      An association of insureds that group together to insure their risks of a similar nature, i.e. universities and municipalities. Each share in the profits and losses in proportion to the amount of insurance they purchase individually from the exchange.
 
   
RECOVERY
      The amount of the loss that the insurance company gets back from reinsurance, salvage or subrogation.
 
   
REINSTATEMENT
      The resumption of coverage after a policy has lapsed or been cancelled for non-payment of premium.
 
   
REINSURANCE
      A form of insurance that insurance companies purchase for their own protection. Reinsurance is insurance for insurers. A reinsurer will agree to assume part of the risk for which the insurer will pay part of the premium. This arrangement effectively increases the insurer’s ability to spread its risk and reserve capital. In effect it enables an insurer to assume greater volumes of insurance and larger risks. Reinsurance can be arranged on a Treaty basis or in a form known as Facultative. Reinsurers also reinsure through retrocessionaires.
 
   
REJECTION
      Refusal by an insurance company to underwrite a risk.
 
   
RENEWAL
      The continuation of coverage through an insurance policy for a further term (usually one year).
 
   
RENEWAL CERTIFICATE
      Document evidencing the continuation of insurance with the same provisions, clauses and benefits of the former policy.
 
   
RENTAL INSURANCE
      A form of insurance that provides coverage for the loss of revenues from a premises, either leased or rented, which becomes uninhabitable due to damage from an insured peril.
 
   
REPLACEMENT COST
      A loss settlement method which determines the cost to repair or replace property at current prices without a reduction for depreciation.
 
   
REPRESENTATIONS
      Statements made by an applicant when applying for insurance. Applicants must make these statements to the best of their knowledge.
 
   
RESCISSION
      The act of terminating a contract of insurance by the insurer on the grounds that the statements made by the applicant are misrepresented. Based on the circumstances the insurance policy may be declared void or coverage withdrawn.
 
   
RESERVES
      An adjuster’s best estimate of what it will cost to pay an entire claim. Also, the amounts an insurer maintains as representing future liabilities, including its commitments to pay insured claims.
 
   
RESIDUAL MARKET
      Insurance facilities that provide coverage for those who cannot obtain in the regular insurance market. These are usually pooling facilities that various insurers contribute to on a percentage of risk basis.
 
   
RETENTION
      The portion of risk retained for oneself, usually the first dollar amount of a claim, as opposed to the amount of the risk which may transferred to others through insurance. It is also the net amount of a particular risk that an insurer will retain for its own account before the remaining risk is transferred to reinsurers.
 
   
RETROSPECTIVE DATE
      The first date at which coverage will respond to a claim under a claims-made policy.
 
   
RETROSPECTIVE RATING
      A form of premium rating that provides for the adjustment of the insured’s premium based on the insured’s loss experience for a given period of time. An initial deposit premium is charged at inception and is subject to adjustment at the expiry to reflect the loss experience.
 
   
RETURN PREMIUM
      The amount received by the policyholder is the policy is cancelled or endorsed and the premium is reduced.
 
   
RIDER
      An attachment or endorsement to an insurance policy that modifies clauses and provisions of the policy, to include or exclude coverages.
 
   
RISK
      The chance of loss. Also, the term used to designate an insured or a peril insured against.
 
   
RISK CONTROL
      Any action or decision not to act that has the purpose of reducing the frequency, severity or unpredictability of accidental losses.
 
   
RISK MANAGEMENT
      The process of controlling risk through analyzing all potential loss exposures, determining the chances that the losses will occur and then choosing various options to either minimize or fund the losses should they occur. Risk identification, loss prevention, risk transfer, risk financing which includes insurance are contributing factors that comprise the process.
 
   
ROBBERY
      The taking of property from a person by use of force or threat of violence.
 
   
SALVAGE
      The property damaged in a claim that the insurer takes after paying the claim. Insurers will in turn sell the rights to the salvage to recover part of the claim paid.
 
   
SCHEDULE
      A list of insured items that are covered by a particular policy.
 
   
SCHEDULED PERSONAL PROPERTY FLOATER
      An addition to habitational policies which provides extra coverage for listed articles, such as jewelry and furs.
 
   
SELF INSURANCE
      The process of assuming the financial risk of loss instead of transferring the risk to an insurer through an insurance policy.
 
   
SELF INSURED RETENTION
      The financial amount that an insured determines it will pay at the occurrence of a particular loss or claim.
 
   
SET & PAIR CLAUSE
      A provision in many business and personal property policies that states that loss or damage to one of a pair or set of items does not represent the loss of the pair or set.
 
   
SETTLEMENT
      Disposition of a claim.
 
   
SEVERITY
      The financial size or value that a loss or group of losses represents.
 
   
SEWER BACKUP
      An optional coverage available within a homeowners policy that insures the resulting damage that occurs when a sewer backups effluent into the basement of a house.
 
   
SHOCK LOSS
      A loss so catastrophic in nature that the insurance company experiences a significant underwriting loss as a result.
 
   
SHORT RATE CANCELLATION
      A method to determine the return premium when an insurance policy is cancelled at the request of the insured. The return premium is calculated by taking into account the duration of time the policy was in effect less an administration fee to cover the costs of issuing the policy.
 
   
SOFT MARKET
      The part of the insurance sales cycle in which insurance is inexpensive and in ready supply, as insurers charge lower premiums to attract new business. A soft market is usually associated with an excess of capacity.
 
   
SOLVENCY
      The financial stability of a particular insurer and its ability to pay the claims of its policyholders. Insurers are strictly regulated by government as to minimum capital requirements based on the risks and policies it insures, the methods and manner of where surplus capital is invested, and the financial reporting requirements that must be adhered to in order for them to maintain their licenses to sell insurance policies.
 
   
SPREAD OF RISK
      A theory of managing risk by spreading the potential among multiple locations and/or insureds, to reduce or minimize the overall risk. Flood insurance is an example of a poor spread of risk as only those insureds located along rivers or in flood plains will buy this type of insurance.
 
   
STANDARD MORTGAGE CLAUSE
      See “Mortgage Clause.”
 
   
STATED AMOUNT CLAUSE
      Endorsement to a property policy which amends the loss settlement clause by substituting a new definition of loss payment based on the value of property, determined in advance by appraisal. In agreeing to this loss amendment, the insurer waives the requirements of the co-insurance clause.
 
   
STATUTE OF LIMITATIONS
      The period, set by law, after which a damage claim cannot be made.
 
   
STATUTORY CONDITIONS
      Stated conditions and precedents as required by provincial statutory laws. These are included in all fire, auto, accident & sickness policies.
 
   
STOP LOSS REINSURANCE
      A type of reinsurance where the reinsurer agrees to pay the insurer the excess when a total amount (either percentage or dollar) is exceeded for numerous smaller claims of one type (i.e., hail losses).
 
   
STRUCTURED SETTLEMENT
      Periodic payments to an injured person over a number of years or for life, found in settlement of liability claims.
 
   
SUBROGATION
      The process whereby an insured after having paid for a loss or claim, retains the legal right to seek a financial recovery from those it determines to have been responsible for causing the claim to occur.
 
   
SUBROGATION CLAUSE
      The section of an insurance policy that gives the insurer the right to take legal action against a third party responsible for a loss to an insured, in order to recover amounts paid for damages to the insured.
 
   
SUPPLEMENTARY BENEFITS
      Stated benefits within a liability policy to pay the additional expenses incurred as a result of a claim for legal fees, personal expenses of the insured to aid the defense, premium payment for bonds as required for court, immediate medical expenses, costs of investigation and settlement of a claim.
 
   
SURETY BOND
      A contract by which one party agrees to make good the default or debt of another. A financial guarantee issued by a surety company to a party to pay for the non-performance of another for specified act(s) within a stated period of time.
 
   
SUSPENSION OF COVERAGE
      Interruption of insurance in circumstances where a substantial increase in risk has arisen with the knowledge of the insured (i.e., vacancy beyond a stated period of time).
 
   
SYNDICATE
      A group of insurers or reinsurers involved in joint underwriting. Members share in premiums and losses based on their agreed percentage share of the risk.
 
   
TAIL COVERAGE
      Insurance that extends beyond the end of the policy period of a claims-made liability policy, providing coverage for claims reported after the accident or event which caused the injury.
 
   
TENANTS IMPROVEMENTS & BETTERMENTS
      Physical improvements made to leased or rented premises that are installed by the tenant or lessee. Some lease terms indicate that ownership of the improvements automatically transfers to the lessor after specified time periods.
 
   
TENANTS INSURANCE
      A form of habitational insurance, specifically designed and packaged for those who rent their living quarters.
 
   
TERM
      The period of time that insurance coverage is in force.
 
   
TERMINATION
      Cancellation of an insurance policy.
 
   
TERRITORIAL RATING
      A rating method where risks are classified based on their geographic location. All similar risks within that area are then assessed based on the rates determined for that territory.
 
   
THEFT
      The act of stealing.
 
   
THIRD PARTY
      An individual, other than the insured or insurer, who has incurred a loss and is entitled to receive payment as a result of the actions or omissions of the insured.
 
   
THIRD PARTY LIABILITY
      Insurance coverage purchased as financial protection against possible lawsuits arising from damages and/or injuries suffered by a third party caused by an action or inaction of an insured.
 
   
THRESHOLD LEVEL
      Found in provinces with no-fault automobile insurance – it is the minimum degree of injury or loss for which an injured party can sue.
 
   
TORT
      A legal definition for an act which causes injury or damage arising from negligence.
 
   
TORT FEASOR
      A person who commits a tort.
 
   
TORT LAW
      A description of various legal actions that arise from some form of negligence that causes injury to persons or damage to property.
 
   
TOTAL LOSS
      The determination in a claim settlement that the property damage is so extensive as the entire structure or item is beyond recovery of any economic value.
 
   
TRAILER INSURANCE
      Liability and physical damage coverage for trailers.
 
   
TRANSFER AND CONSENT FORM
      A form which is used when an owner wishes to transfer an insurance policy to another.
 
   
TRANSIT COVERAGE
      A policy that protects an insured against loss or damage to property being shipped, or “in transit.”
 
   
TRAVEL INSURANCE
      Coverage for those who travel – primarily health coverage, but policies can also include coverage for baggage, trip cancellation, etc.
 
   
TREATY REINSURANCE
      An agreement between insurers and reinsurers that transfers a predetermined portion of the financial risks of a particular type of risk or group of risks or the entire risk portfolio of an insurer. The transfer of risk can occurs by various agreed methods, usually after a net retention by the insurer, then based on a percentage of the total risk or when claims exceed specified dollar amounts.
 
   
UBERRIMAE FIDEI
      Latin for “utmost good faith,” the premise upon which insurance contracts are based. It is assumed that all parties enter into an insurance contract in good faith, meaning that they have disclosed all pertinent information and intend to carry out their obligations.
 
   
UMBRELLA LIABILITY
      Liability insurance arranged to provide additional limits of insurance in excess of underlying primary liability insurance policies. Umbrella liability is written for both personal and commercial risks. Umbrellas usually have broader coverage than the underlying policy and in some cases could act as primary liability coverage. They also have a drop down feature when the underlying liability coverage is exhausted; the umbrella becomes the primary liability coverage.
 
   
UMPIRE
      An arbitrator who settles disputes over the amount of a loss when the insured and insurer disagree.
 
   
UNDERWRITER LABORATORIES
      An independent agency supported by the insurance industry that tests a variety of materials and products to ensure that they meet safety standards.
 
   
UNDERWRITING
      The process that insurers utilize that examines, assesses and then either accepts or rejects a particular type of risk. Acceptance of the risk will then entail the determination of the rating and the premium to be charged to the insured.
 
   
UNDERWRITING PROFIT
      That amount of premium revenues that are retained after an insurer has paid all losses and overhead expenses. Where those total expenses exceed the total premium income, the result is described as an underwriting loss.
 
   
UNEARNED PREMIUM
      The unused portion of a premium that while having been received by the insurer has not yet been provided in the form of insurance protection, being the remaining period left before the policy expires.
 
   
UNINSURABLE RISK
      A particular risk that insurers find has a greater potential of occurring or the potential value of the loss is greater than they are willing or able to assume.
 
   
UNINSURED
      That individual or entity that has no valid insurance in effect at the time of a claim. The term occurs in the Automobile Insurance policy.
 
   
UNINSURED/UNDERINSURED MOTORIST
      A coverage section within the Automobile Insurance policy that protects the insured from claims or losses that are caused by others that are either uninsured or underinsured, or those that are unidentified, such as a hit & run driver.
 
   
UNOCCUPIED
      Absence of people from a specified property for a set period of time (i.e., 60 days).
 
   
UNPAID PREMIUM
      That amount of the premium which has not yet been paid to the insurance company.
 
   
UTMOST GOOD FAITH
      See “Uberrimae Fidei.”
 
   
VACANT
      A building which is not occupied by people, and where all the contents have been removed.
 
   
VALUABLE PAPERS
      Coverage for papers of intrinsic value in the event of their damage or destruction.
 
   
VALUE REPORTING FORM
      A form that provides coverage for a business with an inventory which fluctuates throughout the year. The insured reports values on a regular basis, and the policy premium is adjusted retroactively.
 
   
VALUED or VALUATION CLAUSE
      An agreement by an insurance company to pay a predetermined amount, should a loss occur.
 
   
VANDALISM
      Malicious acts which result in damage, destruction or spoilage of property requiring cleaning, repairs or replacement.
 
   
VICARIOUS LIABILITY
      Indirect legal responsibility. For example, a business may incur liability for the acts of its employees.
 
   
VOID
      A legal term in contract law that removes any responsibility for action from an insurer, as if the policy never existed. Usually occurs where an applicant misrepresented information required on an application of insurance.
 
   
VOIDED POLICY
      A contract which is invalid and not legally binding; enforceable at law. It is as if the policy never existed.
 
   
WAIVER
      The removal or surrender of a right or privilege that exists within an insurance policy; the relinquishment of the legal right to act.
 
   
WAIVER OF COINSURANCE
      A provision in a property insurance policy which stipulates that the coinsurance requirement will not be enforced – for example, when the loss is less than a certain stated amount.
 
   
WAIVER OF SUBROGATION
      An agreement by the insurer to give up its right to take action against a third party for a loss suffered by an insured.
 
   
WAR RISK
      Typically, an exclusion in all forms of insurance policies, with the exception of some forms of Marine insurance, and in special cases through forms of Political Risk coverage.
 
   
WEAR AND TEAR
      Deterioration of property through its normal use – normally excluded from property policies as an uninsurable loss.
 
   
WEATHER INSURANCE
      Insurance available to compensate for losses which occur due to adverse weather conditions.
 
   
WRAP-UP INSURANCE
      Often associated with construction projects, it is designed to bring all the risks and participants in a particular project within the scope of one or two insurance policies. This coverage offers specific advantages by reducing premium costs, reducing administration costs and streamlining claims procedures.
 
   
WRITTEN PREMIUMS
      The total amount of premiums for all risks insured within a particular period of time.