Simplified Definitions for Insurance Coverage Jargon
Here are the definitions of some commonly used insurance terms and phrases explained in plain English for you. They are listed in alphabetical order.
- Absolute liability
- This means that the auto insurance company has to pay the innocent victims of an accident (up to a $200,000 limit) even if the at-fault driver that they insure has violated the terms of the policy (e.g. by driving with an expired license or lying about a ticket to get a lower premium).
- In the context of auto insurance, an accident means a collision between two or more vehicles, or between a vehicle and other objects, that results in injuries or damage to property.
- Accident Benefits
- Statutory accidents benefits is mandatory coverage for auto insurance in Ontario. It covers medical costs and rehab, loss of income due to disability or death, and funeral expenses. Learn more
- Accident Forgiveness
- An “accident forgiveness” program keeps your driving record intact even after your first at fault accident.
- Acts of God
- The expression Act of God is often used to describe a natural event that causes damage such as forest fires, earthquakes, tornadoes, landslides, etc. In Canada, insurance companies do not use the term ‘Act of God’, but instead say peril. (See Named Perils coverage)
- Actual Cash Value (ACV)
- This is the amount that most vehicles and most personal belongings in your home are insured for, and represents what that item would likely be worth on the open market (kijiji, auto trader etc.) immediately prior to a loss. As an equation, ACV = Purchase price – depreciation.
This is different from replacement cost, which is the price you would pay to buy a brand new car (or other personal item) of the same or similar type. For an additional premium, most insurers will allow you to insure your car or home contents for replacement cost. In the case of auto insurance, replacement cost coverage will likely only be available if the car is less than 4 or 5 years old.
- An actuary is a certified professional who works for an insurance company and uses her/his specialized knowledge of math and probability to examine statistical data and use that data set rates for particular types of risk.
- Additional Insured
- An additional insured is a person who is covered under an insurance policy, but is not the main person named on the policy (the named insured). So, for example, if Mary buys an auto insurance policy for her Ford F-150, she would be the named insured. Her son Ryan might be added as an occasional driver. He would be an additional insured. Mary’s partner Alex, who is not named in the policy but might drive the truck from time to time, is also an additional insured.
- Additional Living Expense Insurance
- When you can’t stay in your home because it’s been damaged by something covered under your policy (insured peril), like a fire or a storm, additional living expense insurance can help with costs like hotel, food etc. while your home is being repaired. This coverage is part of most home, condo and tenant policies and will pay for accommodations, food etc. that is similar to what you are accustomed to. In other words, it won’t pay for a 5-star hotel.
- An insurance adjuster can work directly for an insurance company or can be an independent contractor/firm working for an insurance company. This person/firm assesses your claim and the supporting documentation, and determines the final amount payable by the insurer.
- Agent (Insurance)
- An insurance agent (also called a captive agent) represents only one insurance company and therefore can only offer the insurance products of that one company.
- All Perils or All Risk Coverage (auto)
- All Risk auto coverage combines collision and comprehensive coverages. In addition, it covers loss or damage caused if a person who lives in your home steals the vehicle that is covered by your policy. Learn more
- All Perils or All Risk Coverage (home)
- Provides broader coverage for normal risks to your home, except those that are specifically excluded, such as acts of terrorism or flooding.
- You don’t actually buy insurance. You apply for insurance, and the insurance company then decides whether or not they want you as a customer. All the information you give your broker over the phone, in person or online is used to fill in the application, which is then submitted to the insurance company. When you apply for insurance, before the company accepts you, you are the applicant.
- An estimate of the value of a piece of property, whether it be a house, a car or a piece of jewellery. An appraisal can be done prior to getting insurance (for jewellery, classic cars etc.), or sometimes it can be part of the claims settlement process. An appraiser must be an expert in that type of property.
- At Fault Accident
- When you are found to be the cause or at fault, fully or partially, for an accident.
- Arbitration is an alternative way to settle a dispute with your insurer. Both sides have to agree on an arbitrator, who reviews both of your positions and supporting documentation, and decides on a fair outcome. Some insurance policies include an arbitration clause that specifies when and how arbitration is to be used.
- If you do not pay your monthly premium by the due date, you are in arrears. The outstanding amount that is overdue can also be called arrears.
- When someone sets a house or building on fire on purpose, it’s called arson. This is a serious crime that can land you in jail. Insurance policies generally exclude arson, meaning that if you set your house on fire on purpose to collect the insurance money, you’ll be waiting a while, but at least you’ll have a nice warm jail cell to wait in.
- Assumption of Risk, or Assumption of Liability
- This is what an insurance company does when they sell you a policy. They assume your risk, or they assume your liability, meaning that they take on responsibility for that risk/liability, and agree to pay some or all of your costs if that risk leads to a loss on your part.
- Same as Insurance/Insurer
- Bad Faith
- Bad faith can describe an insurer that knowingly tries to avoid paying a legitimate claim or a claimant or policyholder that knowingly lies to his/her insurance company to secure a lower rate or collect on a fraudulent or inflated claim.
- Basic insurance policy
- See Named Perils
- When an insurance policy refers to betterments, this means improvements to a property beyond maintenance or repairs. Usually betterments would increase the value of the property.
- A binder is a temporary form of insurance that provides coverage until a proper policy can be finalized. This is why you’re able to call your broker from a dealership and drive a new car off the lot the same day. The policy won’t yet be in place, but you will be covered under a binder. When you are insured under a binder, it can be said that coverage is bound.
- Blue Book Value
- Essentially the same thing as ACV. The Kelley Blue Book is a trusted publication that publishes the current approximate values of every vehicle you can imagine. If you have a total loss, your insurance payout is likely to be right around the blue book value of the car before the accident.
- Bodily Injury
- An insurance term that describes physical injuries (including death) suffered as the result of a car accident or other mishap, perhaps on a worksite or at your home. This term is used in reference to liability insurance, which is part of home, auto and business insurance, and is available to pay victims on your behalf if your actions lead to their injuries.
In Ontario, if you’re injured in a car accident, your own Accident Benefits coverage would pay up to a certain amount for rehab, lost wages etc. If those benefits run out, you would have to go after the at-fault driver for Bodily Injury benefits.
- Boiler and Machinery Insurance
- This coverage can be added to a business (commercial) insurance policy, and protects the business if it suffers a breakdown in its heating, air conditioning, refrigeration or related equipment.
- A car can be “branded” after an accident or when it’s been stolen to let police and potential buyers know its status, as follows:
- Salvage – This means the vehicle has sustained damage that makes it unsafe to drive, and that would cost more to fix than the value of the vehicle itself. A vehicle branded salvage is not legal to drive, but if the necessary repairs are made, you can apply to have the vehicle rebranded as “rebuilt”.
- Rebuilt – This means the vehicle was severely damaged, but has been repaired to make it safe for the road.
Irreparable – This means the vehicle has sustained damage that makes it unsafe to drive, and the damage cannot be repaired. A vehicle branded irreparable will never be legal for the road, and can only be used for parts.
- Stolen – This means the vehicle has been stolen, and only the police can remove this brand once the stolen vehicle is returned.
- A breach is a failure on the part of either the insurer or the policyholder to live up to the terms and conditions in the insurance policy. For example, failing to notify your auto insurer when you’ve been in an accident.
- Broad coverage (Business Insurance)
- This is a way to describe a business insurance policy that includes comprehensive coverage for buildings, along with named perils coverage for stuff like chairs, desks, computers and other business supplies that are kept in the building.
- Broker (Insurance)
- An insurance broker is usually employed by an insurance brokerage that can offer the various insurance products of many different insurance companies.
- Builders Risk Insurance
- This coverage protects a property while it is under construction/renovation, including damage to temporary buildings, theft of building materials etc. It is usually purchased by a builder, but can also be purchased by a homeowner managing their own construction or major renovation project.
- Business Income Insurance/Business Interruption Insurance (Business Insurance)
- Business income insurance (also known as business interruption insurance) provides coverage for business income lost as a result of property damage, vandalism, theft, or any other covered reason that prevents a business from carrying on its usual activities for a period of time, usually while repairs are being completed.
- Business Insurance/Commercial Insurance
- Insurance purchased by a business. Can include several types of liability insurance, property and contents insurance, business interruption insurance, commercial auto insurance, cyber insurance, and more.
- Buy Back Deductible
- A deductible that can be removed by paying extra premium.
- By-law Endorsement
- For an additional premium, most insurers will sell you a by-law endorsement that provides additional coverage if local by-laws make it more expensive than normal to repair or rebuild your property after a loss.
- Someone or something that is hurt, damaged, or killed in an accident.
- Certificate of Auto Insurance
- Shows the vehicles covered and for what, and how long the policy is in effect. The small (often pink) copy must be kept in the insured vehicle at all times as proof of insurance.
- A claim is made when you report a loss to your insurance company due to a car accident, for example, or due to a theft in your home.
- Collision Reporting Centre
- In many urban areas, you can go to a Collision Reporting Centre to report an accident within 24 hours when police are not needed at the scene. However you are obliged by law to call the police when the combined damage to vehicles is over $1000 (which is most accidents these days) or if there are injuries.
- Collision Coverage
- Collision & Upset is optional in an auto policy to help you pay to get your vehicle repaired. Learn more
- Commercial Auto Insurance
- Commercial auto insurance protects vehicles being used for business purposes, including company cars, trucks, and shipping vehicles. It is particularly important to have when using personal vehicles for commercial tasks. Leased vehicles, rented vehicles, and hired autos may require additional coverage.
- Comprehensive (or Upset) Coverage
- Comprehensive auto insurance is optional in an auto policy to cover you when your vehicle is damaged in some other way, such as theft, vandalism, flying debris, etc. Learn more
- The dollar amount up to which you are covered for expenses caused by collision if an accident happens, or for other situations (theft or vandalism, for example) if you have comprehensive auto insurance, or a home policy.
- The portion of a loss that you are required to pay. You can lower your monthly premiums if you are willing to have a higher deductible; that is, pay a higher amount of the loss should a loss or claim occur.
- Direct Writer
- An insurance company that sells its own insurance products directly to the public.
- Employment Practices Liability
- Employment practices liability protects against issues that may arise in employee management, including hiring and termination, and daily management, and encompasses issues like wrongful termination, discrimination, and sexual harassment.
- Errors and Omissions
- Errors and Omissions, or E&O, covers you against professional errors or negligence should you be found accountable in the event of your client’s financial loss. Learn more
- These are situations or property not covered by a standard policy. Even with an All Risk policy, not all perils are insured against.
- Fire Insurance
- A peril that is usually covered by property insurance.
- Fleet Insurance
- If your business has 5 or more cars, trucks or other vehicles, you may be eligible for fleet insurance.
- Group Plan
- Large companies can have insurance plans designed for the specific needs of their employees, usually 100 or more to qualify for a group plan.
- High-Risk Driver
- Drivers who have had a number of convictions or at fault accidents, had policies cancelled because they haven’t paid their premiums, or have other risk-related characteristics.
- High-Value Insurance
- High value homeowner’s insurance offers more coverage and higher limits to protect those with more material wealth than average, whether it is the home itself and/or high-value collectibles or jewelry.
- Income Replacement Benefits
- If you cannot work as the result of an automobile accident, you may want to consider this optional coverage to increase your maximum weekly protection.
- Insurance is a contract in which the insurer agrees to compensate the insured for specific losses and specific perils.
- The insurance company who is responsible for paying in the event of an insured loss.
- A liability is something you are legally responsible for or liable for; in business, debts or monies owing are commonly known as liabilities. General liability insurance covers you in situations where you are found responsible for bodily injury or property damage.
- In Ontario, only a RIBO-licensed broker, agent or insurance company is authorized to sell insurance. (See RIBO below for more information)
- Life Insurance
- Simply put, a life insurance policy pays your beneficiary a cash payment when you die. The amount of money depends on what you are insured for and the type of policy that you buy. (See Term Life Insurance and Universal Life Insurance for more information)
- Usually refers to the highest dollar amount available to you when an eligible claim is made.
- Medical, Rehabilitation and Attendant Care Benefits
- You can buy optional additional coverage over and above the current standard maximum amounts included in the accident benefits of auto policies. Learn more
- Mortgage Insurance
- An insurance policy that pays the balance of your mortgage back to the lending institution, but only if the person listed on the mortgage dies.
- Named Perils Coverage
- Provides coverage for specific basic perils outlined in the policy. This coverage is usually less expensive, but places more risk of financial loss on you.
- No Fault Insurance
- No fault insurance means that you deal only with your own insurance company when you need to make a claim. Learn more
- A peril is a particular risk that may cause a loss or damage. Fire and theft are examples of perils. See Named Perils coverage.
- Permanent Life Insurance
- A category of life insurance that provides lifelong coverage. Unlike term life insurance, Permanent Life Insurance does not expire after a predetermined period of time. In addition to a death benefit, Permanent Life Insurance also has a savings component, allowing you to cash in or borrow against its accumulated value. There are two main types of permanent life insurance: whole and universal life insurance.Learn more
- Personal Injury
- Personal injury coverage protects not against physical injury but against libel, defamation, or slander for which you, your employees, or your company may be held accountable.
- Product Liability Insurance
- Product liability policies cover any damages that come from the use of your products by consumers, whether through manufacturing errors, faulty design, or safety flaws that can otherwise cause harm.
- Premises Liability
- Premises liability insurance protects against accidents that happen on your property, like slips, falls, and broken bones, and can cover both employees and visitors.
- Premiums are the rates you pay, either monthly or annually for your level of insurance coverage.
- Professional Liability
- Professional liability protects you and your employees against errors and negligence that may occur in the process of performing daily obligations, like malpractice or errors and omissions.
- Property Insurance
- Protects home and property, or business assets and property from perils such as fire, theft and accidental damage.
- RIBO stands for the Registered Insurance Brokers of Ontario, which is the self-regulatory body for insurance brokers in Ontario. Learn more
- Statutory Accident Benefits Coverage
- Mandatory for auto insurance in Ontario. It covers medical costs and rehab, loss of income due to disability or death, and funeral expenses.
- Term Life Insurance
- A term life insurance policy (also called temporary life insurance) protects you over a specific period of time. Generally, term life insurance policies are 5, 10, 15, 20 and even sometimes 30 years in length. (See also Permanent Life Insurance) Learn more
- Theft Insurance
- Theft is a peril that is usually covered by automobile or property insurance.
- Third-Party Liability Coverage
- Mandatory for auto insurance in Ontario. This covers you when the driver of your vehicle is legally liable for injuries to another person or for damage to another person’s property. While you are legally required in Ontario to carry a minimum of $200,000, you may want to increase this coverage to $1 million or $2 million since the additional cost is small in most cases.
- Employed by insurance companies, an underwriter is responsible for investigating the factors affecting the probability of loss and the costs that the insurance company may have to pay. Underwriters use a lot of statistical data to calculate the likely risk and cost of insuring an individual.
- Uninsured Driver Coverage
- Mandatory for auto insurance in Ontario and covers you if you are injured or killed by an uninsured driver (including an unknown hit-and-run driver) who is found liable for the accident. Learn more
- Universal Life Insurance
- Universal life insurance is a form of Permanent Life Insurance that gives the policyholder the ability to shift funds between the savings and the insurance components of the policy. Universal life insurance typically has the most flexibility regarding premium payments, death benefits and savings. Learn more
- Whole Life Insurance
- Whole life insurance is a type of life insurance that is considered a permanent plan. This policy will last from the time it is purchased until the owner cancels the plan or passes away. The cost of these plans does add up since they do last throughout your lifetime and never expire. These policies will often allow you to cash out against them as well and offer a payout.Learn more
- Wrongful Act
- Any error, misstatement, misleading statement, act omission, breach of duty or neglect allegedly committed or attempted.
Questions About Uninsured Automobile Coverage?
Feel free to speak with our insurance experts about any aspect of your auto policy. For free advice and no-obligation insurance quotes, contact Mitchell & Whale Insurance Brokers at 800-731-2228 or email us at firstname.lastname@example.org. We’ll be happy to help you.