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Insurance Definitions



Actual Cash Value The fair market value of property taking into account factors that might augment or reduce the value of the property in question.

Additional Living Expense Insurance Coverage applicable when an insured’s dwelling is damaged by an insured peril to such an extent that one cannot live in it until repaired. This insurance pays the extra amount it costs to live elsewhere until repairs are made, such as the cost of living in a hotel.

Agent 1) A person who is employed to act on behalf of another. 2) An insurance agent is one who contracts with one or more insurance companies to sell their insurance policies to the public and is paid a commission on or receives compensation for such business. See also Broker.

All Risk Policy A name given to an insurance policy which covers against the loss caused by all perils except those which are specifically excluded by the terms of the policy. Frequently, a policy of insurance is written to insure damage to property caused by specific “named perils,” which are listed on the policy. However, policies may be issued in certain cases to insure against “all risks of loss or damage” and are then called “all risks” policies. The term excludes insurance against certain hazards.

Amount of Insurance The limit of payment for which an insurer is liable under a policy.

Applicant The person or firm requesting insurance.

Application A request for insurance. This may be done verbally, in writing or by using a printed form.

Appraisal A valuation or an estimation of the value of property usually done by an expert in that field who has no personal interest in the property.

Appraisal Clause A clause in an insurance policy that gives the insurer the right to demand an appraisal on the damaged property. It gives both the insurer and insured a means of settling disputes over the value of lost or damaged property.

Appraiser Person who because of special knowledge is vested with authority in determining the real value of property or damage.

Arbitration Reference of a dispute to one or more impartial persons chosen by the parties to the dispute to determine their rights and/or obligations. The parties agree in advance to abide by the arbitrament. Each party has a chance to be heard.

Architects and Engineers Insurance Insurance coverage specifically tailored to meet the risks of Architects and Engineers. Coverage usually includes Professional Liability and General Liability, as well as physical damage to owned property and business interruption (loss of income).

Automobile Insurance Insurance coverage that provides indemnity and/or compensation for injury or physical damage which ensues from the ownership, use or operation of an automobile.


Bailee In contract and property law one to whom goods or property are entrusted for a stated purpose. Can be either gratuitous (for no consideration) or for hire (for consideration).

Bailment The act of placing goods in the possession of a bailee.

Bailor A person entrusting goods to another.

Balance Sheet Financial statement showing assets, liabilities and equity of a company.

Basic Premium A starting charge made to which is added the premium developed by the application of rates as directed.

Betterment Physical improvements beyond mere maintenance or repairs that augment the value of a property.

Bid Bonds A bid bond is a bond where the contractor i.e. the principal guarantees the obligee i.e. the owner, that the principal will honor the bid and the sign the contract, if bid is awarded. In default of the bid the owner may sue both the obligator i.e. the principal and the surety. This bond guarantees that the bidder will carry on the contact at the bid price if bid is awarded. If the bidder is allowed to take away the bid before granted, no action may be taken against the bidder or bid security. The bid bond generally indemnifies the faithful performance with regards to the bid. Bid Bonds guarantee the sincerity of the bidders.

Bill of Lading See attached description and example from the queen’s printer

Binder A written or oral agreement given by an insurer to insure a risk, pending the issue of a policy. A binder is deemed to be the policy and must be cancelled in the same manner.

Blanket Crime Policy An individual policy covering several crime perils on a single amount rather than on individual limits.

Blanket Policy (Insurance) Insurance on two or more items, or locations, in one aggregate sum insured without separate amounts for each item.

Boiler and Machinery Insurance Coverage that indemnifies in the event of loss with respect to and arising from the ownership, use and operation of boilers, pressure vessels and machinery.

Brick Veneer Construction Frame construction with a single course of brick as an outside covering.

Broker An independent person or firm who acts on behalf of the insured in placing business with insurance companies.

Builders Risk Insurance Insurance coverage on property under construction including loss to buildings or ships, including machinery and equipment, under course of construction, and materials incidental to construction. Often referred to as COC or Course of Construction insurance.

Building Codes Rules and regulations of governmental bodies defining standards that construction in that jurisdiction must meet.

Burglar Alarms Devices of various types which give warning of entry into premises by unauthorized persons.

Burglary Unlawful removal of property from premises involving visible forcible entry.

Burglary Insurance Insurance against loss of property caused by burglars.

Business Insurance A form of insurance to protect a business against the loss of services of a key employee or employees. Usually accident and sickness, however, life insurance may also form part of the package. Also called Partnership Insurance or Corporation Insurance.

Business Interruption Insurance Various types of insurance against business expenses and loss of income resulting from a fire or other insured peril.

By-law A law or ordinance dealing with matters of local or internal regulation made by a local authority or by a corporation or association.

By-law Endorsement An endorsement explaining how a particular insurance company deals with a claim which is affected by a local by-law.


Care, Custody and Control A term used primarily in liability coverages which refers to property belonging to another but which is legally in the insured’s possession or under his control.

Cargo Goods being transported, such as the load of a truck or the goods being carried by a ship. The cargo of a ship does not include the equipment needed to operate the ship.

Cash Surrender Value When an insured wishes to cancel a life insurance policy before the full term, the policy may have a cash value which is stipulated in the policy. The longer the policy is in force, the higher the cash value is likely to be. It is a sum paid back by the life insurance company to the insured when an insured requests the termination of the policy.

Casualty Insurance Loosely used to describe an area of insurance not particularly or directly concerned with life insurance, fire insurance or automobile insurance. Most frequently refers to liability, burglary and plate glass insurance but may include Fidelity and Surety.

Cede An insurer cedes part of a risk to a reinsurer when it transfers or reinsures part of the risk.

Certified Copy Reproduction of a document, that authority having custody of original signs and attests as a true, genuine and authentic copy.

Canadian Chartered Insurance Broker (C.C.I.B.) A professional designation earned by examination following study courses.

Chartered Insurance Professional (C.I.P.) A professional designation (Canada) earned by the successful completion of several educational requirements as designated by the Insurance Institute of Canada.

Church Insurance Insurance coverage specifically tailored to meet the needs of faith-based organizations, such as churches, mosques and synagogues. Wordings may include coverage for Professional Liability and General Liability, as well as physical damage to owned property, business interruption (loss of donations) and coverage for Physical and Sexual Abuse claims.

Civil Code 1) The civil law of the Province of Quebec. 2) The reduction of law to a set of rules. In some countries for example, France, most of the laws of the country were at one time reduced to a set of rules after the style of the Roman Code although these too have subsequently been subject to certain new statutes. In some jurisdictions, certain sections of the law are reduced and simplified to a “Civil Code.”

Civil Commotion Disturbance involving a large number of individuals. An uprising of people creating a prolonged disturbance.

Claim Strictly speaking, a claim is the exercising of the right of an insured to be indemnified by his insurance company for damage suffered. It is frequently used, however, to indicate the amount of the claim. In practice, it is any notification of a possible loss under an insurance policy whether any payment is likely to follow or not. For every claim that is reported, the insurance company must set aside reserves equal to the figure which it is anticipated the claim will cost.

Claimant One who makes a claim.

Claims Examiner An employee of an insurer who handles and is responsible for incoming claims.

Claims Made Basis Provision in some insurance and reinsurance contracts covering only claims made during term of the contract.

Clause Words in a policy which describe certain specifications, limitations or modifications.

Co-insurance Clause A clause in an insurance policy requiring an insured to carry a certain percentage, usually 80, 90 or 100 per cent of insurance in relation to the value of the property insured. If the insured fails to do this, then he agrees to be a self-insurer of all losses large or small in the same ratio as his failure to comply with the percentage required, is related to the insurance required. For example, a building valued at $100,000 with an 80 per cent co-insurance clause would require insurance coverage of $80,000. If coverage is carried for only $40,000 then the insured is a self-insurer or coinsurer for $40,000 of the $80,000, and the insurance company would be responsible for the same amount. This ratio would apply even if a loss were only $5,000. Then the insurance company would pay $2,500 and the balance or coinsurance penalty of $2,500 would be borne by the insured.

Co-insurer Two or more persons or companies who may be sharing a loss. A company, whose policy covers the same risk as that of one or more other companies, is a co-insurer whether the policies are written separately or together.

Collapse Falling in of a building.

Collision A vehicle or a ship collides when it strikes another object or another vehicle or ship. Collision insurance insures against loss so caused.

Collusion A secret agreement between persons to defraud another, e.g., an insured driver of an automobile and his passenger may misrepresent the facts of an accident in order to have monies paid to the passenger under the insured’s automobile insurance policy.

Commercial Property Floater Property used in a business which requires it to be moved from place to place, may be insured on one of the forms of commercial property floaters. A television studio, for example, may require insurance on their equipment even though it may be out of the regular studio much of the time. In most instances, these are written on special forms suited to the particular need such as contractor’s equipment floater, inland marine block policy, jeweler’s block policy, salesman’s floater policy, etc.

Common Carrier One who offers to transport merchandise for hire and must accept shipments from anyone who wishes to use the services. Different laws and rules govern common carriers than do private or contract carriers who only transport the goods of those with whom they have made agreements.

Common Law American, Canadian and British law derives its force and authority from the universal consent and practice of the people over the years. Certain aspects of the law are written into statutes. The underlying principles and usages and rules of action which do not rest for their authority on this statutory or legislative law are to be found in principles set forth by decisions of the Courts over the years. Many rules were promulgated in feudal times. During the reign of Henry II (beginning 1154 AD) the King’s Courts became organized and common law began to evolve. The Courts met frequently and when one Court made a decision in connection with a certain issue, that decision was followed by the other courts and became the law unless modified by statue or by gradual evolution.

Comprehensive General Liability Policy A policy particularly suited to a manufacturer, contractor or large wholesaler or retailer providing broad coverage for claims made against him for bodily injury or damage to property of others for which he may become liable and which arise out of his entire business operation.

Comprehensive Personal Liability A form of liability insurance for individuals which insures the policyholder in the event he has become liable to pay money for damage or injury he has caused to others. This form does not include automobile liability, but does cover almost every activity of the policyholder except those which arise from the operations of a business. Hence “Personal” Liability.

Conditions The general terms or requirements upon which the insurance is based. For the mutual understanding of the parties the conditions will commonly state such matters as how the policy can be cancelled or renewed, provisions with respect to change of the insured’s interest, provisions as to what an insured should do in the event of a loss, and conditions as to what he should do subsequent to a loss etc. A condition precedent is one that must be fulfilled prior to the general fact at stake. The insured, for example, is required to give notice of a claim and fulfill certain other obligations as a condition precedent to his receiving a settlement. A condition subsequent is one which is applicable subsequent to the event, as for example, the insured is required to co-operate in the disposition of the claim and to co-operate, other than in a monetary way, to assist to recover from anyone who is responsible for the loss.

Conditions of the Contract Articles in contract defining or describing terms, responsibilities of owner and contractor, performance and payment schedules, and the like.

Condominium Is the individual ownership of a single unit in a multiple unit building or group of buildings, together with a percentage interest in that part of the total property owned jointly by all unit owners. In an apartment building, each apartment would be a unit and the stairways, pathways and parking areas would be in common ownership. Condominium property requires special insurance treatment.

Consent of Surety Consent of Surety are issued at the time of tender and state that if the contractor enters into a contract, the surety company will provide the final bonds.

Consequential Loss The word “consequential” means something following as an effect or result. It is an indirect result of the occurrence that causes the loss. The difference between a direct loss and a consequential loss can be seen in the destruction of a power station by wind. The damage to the power station is a direct loss by wind. There is actual physical damage directly resulting. The destruction of the power station also interrupts the generation of power by the station. For example, a cold storage plant is without electrical power. Foodstuffs spoil as a result or as a consequence. This is a consequential loss, not a direct loss.

Consideration The inducement to a contract; the cause, motive or price which induces a contracting party to enter into an agreement, act or forbearance or promise thereof. It is an essential part of a binding contract. Consideration is either expressed or implied. The money, or whatever is being used in substitution of money, paid for the article or contract is “the consideration.”

Constructive Total Loss A partial loss but where the damage is so extensive that repairs would cost as much or more than the repaired property would be worth, or the limit of insurance.

Contract An agreement made between two or more persons, which is intended to be enforceable at law, and is constituted by the acceptance by one party of an offer made to him by the other party, to do or to abstain from doing some act. The offer and acceptance may either be expressed or inferred by indication in the conduct of the parties.

Contract bonds are used primarily in the construction and manufacturing industries to guarantee a contractor’s or manufacturer’s contractual obligation to a project owner. In the construction industry there are different types of contract bonds to support a project from tender to completion. These may be performance bonds, labour and material bonds, or bid bonds.

Commercial bonds Commercial bonds fulfill public, legal and government security requirements against financial risk and to guarantee that a business, organization, or individual complies with specified legal obligations.

Contract Documents Agreement, addenda, supporting documents, general conditions, supplementary conditions, specifications and drawings and modifications to an agreement.

Contract Surety Bonds Contract Surety Bonds, through the Surety company’s financial strength and rigorous prequalification procedures, provide security to Owners, Sub-contractors, and others that the Contractor will transform plans and specifications into a timely and successfully completed project.

Contractor’s Liability Insurance Insurance protecting contractor from defined liability claims arising from contractor’s operations.

Contractual Liability Liability assumed by a contract either written or implied. Legal liability policies are based upon liability in tort or negligence and have very little coverage normally for contractual liability (with a possible exception of such matters as sidetrack agreements, etc.) However, contractual liability may be covered in many instances as an additional risk with an additional premium.

Contributory Negligence Many accidents are the fault of both parties who are involved in the occurrence. The plaintiff who sues another party for damages also may be guilty of some negligence, which is a concurrent cause of the damage. Such a party is guilty of contributory negligence.

Course of Construction Insurance (COC) Insurance coverage on property under construction including loss to buildings or ships, including machinery and equipment, under course of construction, and materials incidental to construction. Often referred to as COC or Course of Construction insurance.

Coverage The nature of protection afforded by a particular policy. Can be used at times interchangeably with “insurance” or “protection” as “fire coverage” or “fire protection” or “fire insurance.”

Credit Report A report provided by a commercial credit reporting company which provides details on the reputation and financial strength of an individual or corporation.

Custody Immediate control that an authority exercises over property or people.


Data Processing (Equipment Insurance) A special insurance usually on an all risks basis. Covers physical loss and loss from business interruption if the damage necessitates shutdown of operations.

Debris Removal A provision in an insurance policy most commonly found in fire insurance providing indemnification for the cost of removal of the debris after a fire.

Declaration Statement, signed by the insured, warranting that information given by him is true.

Deductible An agreed specified sum to be deducted from the amount of loss and assumed by the insured. See also Franchise.

Deductible Clause A clause defining the amount of loss for which insured is liable; defines insurer’s and insured’s contributions to cover losses.

Depreciation Reduction in value of property through use, aging, deterioration and obsolescence.

Directors and Officers Liability Insurance Protection for officers and directors of a corporation against damages resulting from negligent or wrongful acts in the course of their duties. Also covers the corporation for expenses incurred in defending lawsuits arising from alleged wrongful acts of officers or directors. These policies always require the insured to retain part of the risk uninsured.

Disclosure Act of making known something known.


Employer’s Liability Insurance Coverage for legal liability imposed on an employer to pay damages to an employee injured by the employer’s negligence. This is not Worker’s Compensation Insurance where special acts of legislature set out specifically the relationship between the employer and employees in certain circumstances and formula by which awards in each case are computed.

Equipment Material for use on one machine, one vehicle, one unit. For example, a car comes “equipped” with five tires. Tires other than those on the car are not “equipment” of the car. They are instead the dealer’s “stock of tires.” Equipment also includes contractor’s equipment, e.g., backhoe, bulldozer.

Errors and Omissions (E&O) Insurance See Professional Liability Insurance.

Estoppel A bar created when someone by his action or lack of it indicates that he will not exercise a right he has. He stops himself from exercising his right later, e.g., if A owns a pen and stands by and watches B sell the pen to C, as if the pen belonged to B, then A cannot later reclaim the pen, arguing that it was his.

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

Expiry End of the policy period.

Explosion A rupture of a pressure vessel of some kind due to excessive internal pressure (usually accompanied by a loud noise).

Exposure The hazard threatening a risk because of external or internal physical conditions.

Extra Expense Insurance A form of insurance policy covering the extra expense of an insured in carrying on a business following a loss by an insured peril.


Fire Department Service Clause A provision in a fire insurance policy agreeing to pay the cost of bringing a fire department to the location of the property insured in the event of a fire. It is valuable where the insured’s property is not in a built-up area with its own fire department or where the risk is sufficiently large to require additional fire department services.

Fire Insurance Coverage for losses from fire and lightning and also the resultant damage caused by smoke and water. Usually supplemented by Extended Coverage Insurance. See definition.

Fire Resistant A fire resistant building or article is generally designed to resist certain higher heat temperatures for a certain period of time. It has a lesser degree of resistance to fire and ranks slightly more hazardous than “fireproof.”

Fixed Assets Tangible long-term assets such as land, building, furniture, fixtures, machinery, equipment etc. held for use rather than for sale.

Fixtures Anything that is attached to real property is known as a “fixture.” Fixtures when permanently attached to real property become part of the real property. Tenant’s fixtures are fixtures of a removable nature and are the responsibility of the tenant for insurance purposes. Whether a fixture is a tenant’s fixture and movable or a landlord’s fixture and immovable is frequently determined by the purpose of the fixture.

Flat Cancellation The cancellation of a policy as of the effective date with all paid premium refunded.

Fleet Policy In automobile insurance, this is a policy insuring a number of cars for one owner. In marine insurance, a policy insuring a number of ships for one owner.

Floater Policy A policy covering the same risk at a number of perhaps unspecified locations possibly over a wide area (even world-wide); usually includes goods being frequently moved from one location to another, e.g., Fur Floater, Jewelry Floater, Contractors’ Equipment Floater, etc.

Frame Refers to the construction of a building built of lumber.

Fraud 1) Methods used to deceive to cause unwarranted favourable decision for one’s own benefit. 2) Deliberate misrepresentation or misstatement. 3) Concealment of facts which should at the time be made known.

Fraudulent Dishonest; based on or obtained by fraud.

Fraudulent Misrepresentation A false statement made knowing it to be false and intending another to act on it to his detriment, or made carelessly or recklessly without regard to whether it is true or false. In insurance it is most frequently found in the intentional misrepresentation of a risk to obtain insurance or in proof of loss after the loss occurs.

Free on Board (F.O.B.) When goods are shipped F.O.B., the shipper is responsible only until the goods have been placed on board the vessel or freight car or truck or other means of transport. After that the risk belongs to the consignee.

Friendly Fire A fire confined to the place it is supposed to be, e.g., in the fireplace; in the incinerator. See Hostile Fire.


General Liability The legal exposure under common law, Statute or Civil law, to act as a reasonably prudent person would, or would not, under the circumstances. Liability may be for bodily injury, property damage, or monetary loss. The standard of care is lower than that of a professional.

General Liability Insurance (CGL Insurance) Insurance designed to cover the normal exposure for negligence for bodily injury or property damage. Policy wordings cannot provide less coverage than the wordings promulgated by the Insurance Bureau of Canada, but may or may not include numerous extensions depending on the insurer providing coverage.

Glass Insurance Insurance against the breakage of glass. The coverage is usually extended to certain other incidental expenses associated therewith. See Plate Glass.

Good Faith Most ordinary contracts are good faith contracts. Insurance contracts are agreements made in the utmost good faith. This implies a standard of honesty greater than that usually required in most ordinary commercial contracts.

Gross Negligence The degree of negligence somewhat greater than ordinary negligence. It may be a reckless wanton and willful misconduct causing bodily injury and/or property damage.

Guiding Principles A loss may be covered by more than one policy. One policy may have a co-insurance clause and the other may not. How any loss in such circumstances should be apportioned between the various insurance companies involved creates a problem. To meet this problem, the majority of insurance companies have agreed to certain rules and principles. These principles override the actual wording of the policy so the insured is indemnified with least difficulty.


Hazard 1) A risk or probability that the event insured against might occur. 2) Condition which engenders or increases the chances of a loss.

Hazard, Moral Hazard arising from character, interest, habits and lack of integrity of the insured or person concerned.

Hazard, Physical Hazard arising from physical condition or characteristics of the object that is insured, e.g., using and storing volatile materials and substances on the premises.

Highway Traffic Act The body or system of laws which govern the obligations of the provincial governments and users of roads. A breach or conviction of any of these laws may be an offence but does not of itself impose legal liability, but it may be relied upon in any proceeding to establish or negate any liability.

Hit and Run Accident Collision between motor vehicle and/or a motor vehicle and another object and/or a motor vehicle and a pedestrian where a driver leaves the scene of the accident without identifying him/herself. This is an offence under the Highway Traffic Act.

Hostile Fire A fire which occurs in or escapes to a place not anticipated, e.g., a fire in a fireplace becomes uncontrollable and ignites something externally. See Friendly Fire.


Improvements and Betterments Additions or changes to a rented premise by a tenant at his own expense. Also called Tenant’s Improvements.

Inception The date and time on which coverage under an insurance policy takes effect.

Indemnify To provide compensation for loss or expenses incurred.

Indemnity A contract, expressed or implied, to repay in the event of a loss. Insured neither gains nor loses.

Indemnity Period The policy period.

Independent Adjuster One who adjusts losses on behalf of insurance companies, but is not employed by any one insurance company.

In Force Insurance policy which is in effect, and has not expired or been cancelled.

Inherent Vice The quality that something has to deteriorate or damage itself without outside help, e.g., milk sours; coal combusts spontaneously.

Insurable Interest An interest which the insured must have in the subject matter of the insurance he buys so that if the event insured against occurs, the insured will suffer a pecuniary loss.

Insurance A contract in which one party, the insurer, for monetary consideration agrees to reimburse another, the insured, for loss or liability for a loss on a defined subject caused by specified hazards or perils.

Insurance Policy A written contract of insurance.

Insured The entity (individual or otherwise) whose risk of financial loss from an insured peril is protected by the insurance policy.

Insurer The company providing the insurance coverage.

Insuring Clause Describes the intent of the policy, just what insurance coverage is provided by the policy and in what limits.

Intermediary 1) The agent/broker negotiating insurance or reinsurance contracts for another. 2) Any party representing another party, in negotiation with a third party.


Joint and Several Liability Clause This exists when the situation is such that a creditor in the case can sue any one of the debtors individually, or any, several or all of them, at the creditor’s option. This situation applies to tort-feasors as well as to commercial debtors. Persons who together commit a tort and injure another person generally would be jointly and severally liable for the damage. An injured person has the option of suing the entire group or of suing the one having the greatest financial strength.

Judgment 1) An order given by a Court. 2) A debt resulting from a Court Order.

Jurisprudence Common law, being based partly on decisions made in previous cases and quotations from these earlier cases, supports the decision that should be reached in any particular case presently before the Court. These previously decided cases are known as jurisprudence.

K – No insurance terms identified.


Labour and Material Payment Bonds Labour and Material Payment Bonds are issued in conjunction with the Performance Bond, guaranteeing that the Contractor will pay all his accounts arising from the project. In construction, a bond on the general contractor to ensure payment to subcontractors, labourers and suppliers; i.e., if the general contractor does not pay, the surety will pay.

Lapse An insurance policy which, having reached its expiry date, is not renewed or extended is said to have lapsed.

Latent Defect A defect which is not apparent. A hidden defect.

Lease A contract by which one party, called the lessor, conveys to another, called the lessee, real estate, equipment or facilities for a specified term and for a specified rent.

Legal Liability Liability imposed by law on individuals or corporations to pay for harm done to others. Such law may be the common law, statute law or customs which over a period of time have taken on the same status as law. Legal liability may also be assumed under the terms of a contract.

Lessee One that holds real or personal property under a lease, e.g., a tenant of rented premises.

Lessor One that conveys property by lease, e.g., a landlord of rented premises.

Liability Insurance Insurance which agrees to indemnify the insured for sums he may be required by law to pay to third parties as damages for bodily injury or damage to property.

Liability Limits The maximum amount of insurance provided under a policy of liability insurance. There may be different limits for bodily injury and property damage, or, more commonly, a single amount for all claims for bodily injury or property damage arising from one accident or occurrence. Policies providing cover for claims arising from products manufactured by the insured or arising from his completed operations generally contain a further “aggregate limit” applicable to these, imposing a maximum for all claims occurring during the course of a single year. Claims handling and adjusting expenses, costs of legal defense and prejudgment interest are normally payable in addition to the liability limits stated in the policy.

Libel Insurance Insurance against claims arising from alleged libel, slander, defamation of character, etc. Principally written for the protection of those engaged in the publishing or advertising fields, as well as TV or radio broadcasters. Also provided as an extension to a liability policy as part of “personal injury” cover, which also includes false arrest, malicious prosecution and wrongful eviction.

Lien A charge upon real or personal property as security for some debt or duty. Also, the security interest created by a mortgage. The conditions of an insurance policy require the disclosure to the insurer of any existing lien on the insured property.

Like Kind and Quality (LKQ) Refers to replacement of damaged, destroyed or lost property with used property of similar type and condition.

Limit of Liability The maximum amount, as stated in the policy, which an insurer is bound to pay in case of a loss. See also Liability Limits.

Loss A word often used in place of the word “claim.” It refers to the amount an insurer must pay because one of the possibilities of loss insured against under a policy, has happened.

Loss of Use Insurance Cover against expenses incurred as a result of damage to the property insured resulting in the need to replace the property on a temporary basis. In automobile insurance this might refer to the cost of a rental car while the insured vehicle is under repair as the result of an accident. In a homeowner’s policy it might refer to additional living expense when the insured premises are rendered uninhabitable by an insured peril.

Loss Payable Clause A policy clause providing, at the direction of the insured, that in the event of a loss, payment shall be made to an interested party other than the insured, e.g., a mortgagee.


Malicious Mischief Injury to the rights or property of another with a wicked or perverse intent.

Malpractice A performance by a professional whom is deficient in skill from what might ordinarily be expected of a professional person. The standard of performance to which a professional person will be held is necessarily higher than the standard which an unskilled person would be expected to display.

Manufacturer’s and Contractor’s Liability Policy A policy which provides coverage against the liability arising from the ownership of property or the carrying out of operations. This type of policy does not provide any coverage with respect to the hazards of products or completed operations.

Market Value The value of an asset based on a current market valuation, e.g., the amount for which the item could be sold on the open market.

Masonry Construction A form of construction identified by self-supporting walls of masonry, e.g., brick, stone or hollow concrete block, but with floors and roofs which may be constructed of combustible materials, usually wood.

Material Fact Something affecting a contract of insurance important enough to change the agreement between the company and the policyholder. Material facts must be disclosed if asked about. Failure to do so may result in a voiding of the policy involved. An exception to this general rule is that, with respect to ocean marine insurance, all material facts must be disclosed whether the insurer asks the appropriate question or not.

Medical Payments Insurance A provision in an insurance policy to pay certain specified medical expenses of others irrespective of the insured’s legal liability.

Mercantile Risk Hazard or peril of a merchant in selling his stock of goods.

Merchandise Those goods which a commercial enterprise ordinarily sells to its customers.

Merit Rating A system of rating in which the loss experience of a particular risk is a factor in determining the rate for that risk.

Minor A person under the age of being legally capable of transacting business on his own behalf.

Misrepresentation An incorrect statement made about a material fact. Misrepresentation can be innocent, e.g., arising from an oversight; fraudulent (in other words, a deliberate untruth with intent to deceive) or the result of extreme carelessness where a statement is made without regard to whether it is true or false. When a misrepresentation is discovered, the insurer may either continue the contract or treat the contract as void with a full return of any premiums paid. In order for the insurer to successfully treat a policy as void, the misrepresented fact must be material to the risk.

Money and Securities (Broad Form) Rider A broad form of policy protecting against loss of money or securities. There is no coverage for losses caused by, among other things, employee infidelity.

Multiperil Policy A policy which is a combination of fire and casualty (or fire, casualty and inland marine coverages) in a single contract such as the Homeowner’s Policy.

Mysterious Disappearance The disappearance of insured property in an unexplained manner. For example, if a ring is left in a public place and the owner returns later to find the ring gone, it is reasonable to assume that the ring has been stolen. However, there is no direct evidence that this is in fact what happened. This would be an example of mysterious disappearance.


Named Insured The person or party designated in the policy as the insured, as opposed to someone who may be covered by the policy, but is not specifically named.

Named Peril Policy A policy in which the perils insured against are listed, as opposed to one which insures against “all risks.”

Negligence Failure to use the degree of care expected from a reasonable and prudent person.

Non-disclosure A contract of insurance is based on utmost good faith. An applicant for insurance is required to disclose to the company all material facts which are necessary to underwrite a policy. If the applicant does not disclose all these facts, he/ she is guilty of non-disclosure and may risk having coverage voided from inception.

Non-insurable Risk A risk for which no insurance can be written. The chance of loss is very high or cannot be accurately measured.

Non-owned Automobile Insurance A policy which protects the insured against third party claims arising out of some other person using their own vehicle in the business of the insured.

Notary Public A person (usually a lawyer) appointed by the provincial Lieutenant-Governor with the power of drawing and keeping Deeds and of attesting protests of dishonoured negotiable instruments. This person is also a Commissioner of Oaths before whom affidavits are sworn.

Notice of Loss The conditions of the insurance policy require that any person sustaining a loss insured by the policy shall immediately give notice to the company of such loss. Failure to give notice as required has been held to be a bar against recovery. The notice is required to be in writing, and verbal notice to the agent or broker will not be sufficient to comply with the condition.

Notice of Termination The conditions of insurance policies stipulate how a policy may be terminated during its term. For example, a policy may be terminated by the insured at any time or by the insurer who must give the insured a certain number of days’ notice of termination by registered mail or a certain lesser number of days’ written notice of termination personally delivered.

Null and Void Of no legal or binding force; invalid.


Occurrence A happening or event. Liability policies are usually written on either an accident or occurrence basis. For coverage on an accident basis, the loss or damage must be due to accident, whereas on an occurrence basis all that is required is the happening or the continual or repeated exposure to an unfavourable situation, neither intended nor expected to cause injury or damage. In reinsurance and insurance, it is also the grouping of related losses into a single loss situation.

Off Premises Clause A provision in residential policies affording coverage on some of the household goods when away from the premises. within certain limits.

Operations The business of an Insured or the type of business of an Insured.

Optional Settlement Clause A clause in an insurance policy permitting the insured under certain circumstances to have a choice of benefits. In accident and health policies the insured may have a choice of payment of various amounts as periodical indemnity for a certain period of time or a lump sum settlement of a pre-determined amount set out in the policy.

Other Insurance Normally an insured must disclose to an insurance company from whom he is purchasing insurance, information about what insurance he already carries on the property. As a matter of principle, the insured should also advise existing insurance carriers of new policies which he is taking out. This is an essential point in the matter of disclosure. It is however frequently waived, as the more routine policies carry some such wording as “other concurrent insurance permitted without notice until required.”

Overlapping Insurance When two different kinds of policies cover the same loss, the insurance is said to be “overlapping.” This does not mean, for example, when two fire insurance policies cover the same loss, which is called “contributing insurance.” However, if an inland marine policy and a fire policy covered the same loss, they would be overlapping.

Owner’s, Landlord’s And Tenant’s Liability Liability insurance coverage which gives protection because of liability arising out of ownership, use or occupancy; operation or maintenance of buildings or premises.


Package Policy Any insurance policy which covers two or more lines or types of insurance in the same policy.

Partial Loss A loss covered by an insurance policy where the property or the premises are not completely destroyed or rendered completely worthless.

Performance Bonds A bond issued by a surety company, which guarantees the client that if the contractor fails to complete the project in accordance with the terms of the construction agreement, the surety company will either complete the contract itself, or arrange for a client-approved contractor to complete the contract. The surety company will pay the new contractor the amount required to finish the work, minus the unpaid amount under the original contract. However, the surety company is not obligated to pay more than the penal sum or limit of liability stated in the bond. Performance Bonds, issued after the contract is signed, provide that the Contractor will complete the contract in accordance with the plans and specifications.

Peril The event that caused a loss covered by the policy, e.g., fire windstorm.

Personal Effects Floater A policy covering personal effects usually carried by tourists. Can be all risk or specified peril form. Covers worldwide but excludes coverage at the insured’s residence.

Personal Injury Liability Injury other than bodily injury arising out of defined causes which usually include false arrest or detention, malicious prosecution, wrongful entry or eviction, libel or slander or violation of a person’s right to privacy other than in the course of advertising, broadcasting, television, publishing.

Personal Lines Insurance for individuals and families, such as private passenger auto insurance and homeowners policies.

Personal Property Legally, any property of an insured other than real property. More often used to refer to the personal property of family members insured under a Homeowner’s policy.

Personal Property Floater (P.P.F.) A Broad Form policy covering all personal property worldwide including at the insured’s home, usually on an all risks basis.

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

Policy Limit The maximum that the insurance company is obligated to pay in actual claims under an insurance policy. Certain additional costs may also need to be paid.

Policy Provisions Statements contained in an insurance policy which explain the benefits, conditions and other features of the insurance contract.

Policy Year Period between anniversary dates.

Policyholder Individual or other entity who owns an insurance policy. The Insured.

Pollution Exclusion Standard general liability policies include an exclusion for loss arising out of pollution. For certain exposures this exclusion may be modified. e.g., “sudden and accidental” pollution arising from a fire.

Power of Attorney Authority given one person or organization to act for and obligate another to the extent of the instrument creating the power.

Premises Building including the land immediately surrounding it and belonging to it.

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

Prescription In law, a limitation of time within which legal action can be taken by a claimant. In insurance, the period of time in which a claim may be brought by the policyholder. Also Proscription.

Principle of Indemnity The concept that an insured will be reimbursed for his loss (subject only to the policy limit and terms). If there is no loss there can be no indemnity.

Product Liability Liability insurance, generally for contractors, for products liability and for claims arising out of completed work.

Products & Completed Operations Insurance Liability insurance, generally for contractors, for product liability and for claims arising out of completed work.

Professional Liability The legal exposure any Professional has acting in their capacity as an expert in their given field. The Professional is held to a much higher standard of care than a non-professional, and faces significant liabilities in the execution of their chosen profession.

Professional Liability Insurance (E&O Insurance) Insurance designed to cover the Errors or Omissions of the Professional. Coverage is normally for financial loss, and has numerous extensions depending on the insurer providing coverage. Protects professionals against liability for damages and cost of defense based upon his/her alleged or real professional errors and omissions or mistakes, e.g., architects, engineers, medical malpractice, attorneys.

Proof of Loss A formal statement made by a policy owner to an insurer regarding a loss. It is intended to give information to the insurer to enable it to determine the extent of its liability.

Property Damage Liability Insurance Protection against liability for damage to the property of another including loss of the use of the property. See church insurance See construction insurance

Property Insurance Covers an insured’s property against damage, destruction or loss by a covered peril. See church insurance See construction insurance

Pro Rata Cancellation Cancellation of an insurance policy or bond with the return premium credit being the full proportion of premium for the unexpired term of the policy.

Proscription Outside the time period in which a legal action can be commenced. See also Prescription.

Protected In fire insurance, a risk located in an area protected by a fire department.

Protection Used interchangeably with “coverage” to denote insurance provided under the terms of a policy.

Proximate Cause Cause of loss or damage. Unbroken chain of cause and effect between the occurrence of an insured peril and damage to property.

Punitive Damages Damages in excess of those required to compensate the plaintiff for the wrong done, which are imposed in order to punish the defendant because of the particularly wanton or willful character of his wrongdoing.


Quantum Amount or quantity.

Quasi-Contract An undertaking that is not a written contract but is an implied contract. In insurance it is most frequently found in reference to preservation of salvage.

Quotation (Quote) The amount of premium that an insurer sets as the price to cover a particular risk. See Get An Insurance Quote


Rate The price for $100 or $1,000 of insurance, usually for one year, expressed in dollars and cents. Alternatively, the rate is the premium for a specified amount of insurance, for a specified time. For some types of insurance in some jurisdictions legislation requires rates to be applied consistently to similar risks, and certain jurisdictions require regulatory approval of rates, e.g. auto. In addition to policyholder premium rates, the industry commonly uses the term “rate” in reference to reinsurance premium rates, and to commission costs for both insurance and reinsurance.

Receiver Person appointed to hold in trust and to administer property of insolvent companies.

Refund A return to the policyholder of part of the paid premium, because of cancellation, suspension, reduction in insurance coverage, or because of rate reduction.

Registered Insurer The registration of a reinsurer is significant in determining whether an insurer can obtain full credit with regulators for the transfer of insurance liabilities to a reinsurer. Any reinsurer not under the regulatory control of a Canadian insurance regulator (is not licensed) is deemed unregistered and the primary insurer must cover any liabilities transferred to this unregistered reinsurer. Note: Registration (corporate), should not be confused with Licensing (operations).

Regulator The federal, provincial or territorial government agency responsible for the control and regulation of the insurance industry under its jurisdiction.

Reinstatement The reactivation of suspended or cancelled insurance. Restoration of full amount of insurance or reinsurance after a claim has been paid, with or without the payment of additional premium.

Release A discharge from obligation or responsibility. To let go of, or give up a legal claim. The most common types in insurance are: First Party Release – between the insured and the insurance company. Third Party Release – between the insured and a third party. Indemnifying Release – between the insured and a guardian for a minor or other person not legally competent.

Removal The standard fire insurance policy insures against damage done in removing the insured property from the path of the fire or other insured peril (if loss is mitigated). Removal also may mean the taking of property to some place other than that at which it was insured.

Renewal A certificate which attests to the fact that an insurance policy has been extended for another term.

Renewal Premium The premium for the new term of the policy.

Repairs Generally an insurance policy will set out the conditions for an insured to effect repairs to insured property. Ordinary repairs are usually permitted without notice to the insurer.

Replacement Most policies of insurance of property give the company the right to substitute other property of like kind and quality for insured property which has been damaged or destroyed. This is making a replacement.

Replacement Cost Clause Applies generally to some fire insurance policies where a special cover may be purchased so that in the event of fire, repairs or replacement will be made with material of like kind without cost to the insured for depreciation or betterment.

Replacement Value The cash value representing what it would cost to replace the particular article that is the subject of the insurance.

Representation The acceptance or rejection of an insurance risk and the amount of premium that would be required, is determined by information submitted by the person applying for such insurance. Statements which would normally lead the company to decline the acceptance of a risk, or to charge a much higher rate, are material to the risk and are commonly considered “warranties.” All other statements such as the insured’s address, etc. are referred to as mere “representations” to distinguish them from the more important statements considered to be “warranties.” The penalty for false information on material facts or “warranties” may be voiding of the policy.

Rider Another name for an endorsement.

Risk The chance of loss. Specifically the possible loss or destruction of property or the possible incurring of a liability. Sometimes refers to the subject of an insurance contract.

Robbery The taking of another’s property by force or threat of force.


Salvage The remaining value of property after severe damage by fire or other peril. The overall loss is reduced by the salvage value. Undamaged property may be quite saleable and some property may be partially damaged, thus repairable and then saleable.

Schedule 1) A comprehensive list accompanying a policy to detail the property, locations and amounts insured, and the applicable conditions. 2) In rate-making, the formula applied to determine a rate.

Scheduled Property Floater An inland marine form of policy specifically insuring various individual items. Articles of unusual value, provided they are movable, may normally be written this way and insured against many hazards, often against “all risks.”

Seasonal Risk 1) A risk occupied only part of the year, such as a summer dwelling. 2) In manufacturing, it may be a plant operating seasonally, such as a cannery.

Self-insurer A person, corporation or organization which assumes all or part of a risk itself rather than use an insurer, government departments often self-insure.

Settlement An agreement between concerned parties. In insurance, the agreement is usually on the money changing hands to discharge an insurance claim.

Short Rate Cancellation The cancellation by the insured of a policy before its natural expiration; the insurer pays a return premium which is less than the proportionate part that remains unearned.

Slander The oral utterance or spreading of falsehood harmful to another’s reputation. Libel is written; slander is spoken.

Smoke Damage Essentially, the devaluation by smoke, not fire, of merchandise and property. Such damage is covered by the fire policy.

Special Damages Actual loss from the natural, not the necessary, consequences of the subject of complaint; e.g., specific payments for medical bills or car repairs. In third party claims, it means the damages that may be proved with documents.

Special Multi-Peril Policy This basic policy contains declarations, general provisions and definitions applicable to the four principal sections of coverage; property, liability, comprehensive crime, boiler and machinery. The particular coverage requirements for each are handled by separate forms attached to the basic contract.

Spontaneous Combustion Self-ignition of combustible material through chemical action of its parts.

Sprinklered Risk Property protected against fire by a system of overhead pipes with regularly spaced heads designed to melt at the heat of a fire, thus releasing water for extinguishment.

Statement of Claim A written statement by a plaintiff detailing the facts which support the claim against the defendant and the relief sought.

Statement of Values The information required when a single rate is to cover more than one item or building. To determine a correct average, the rating bureau requires the policyholder to give the value of each separate risk and its contents.

Statute An act of the legislature. Common law is made up of the various court decisions over the years. Case law may be altered by statute.

Statute of Limitations Law determining the period within which a specific legal action must be taken.

Statutory Conditions Special prescribed and standardized conditions that the Provincial Insurance Acts require to be included in fire, automobile and accident and sickness policies.

Stock Merchandise for sale or manufacture, as distinguished from furnishings, fixtures or equipment.

Stock Company A company owned by a series of investors or stockholders (shareholders) who assume the risks of profit or loss.

Storage A term applied to articles or substances held for safekeeping. If storing of such articles is prohibited by a policy, the policy will be voided if loss consequently occurs, unless the company’s permission and consent has been specially granted.

Structured Settlement A financial package permitting a settlement to be paid in regular installments either for a fixed period or for the lifetime of the claimant. Because it is tailor-made for individual cases, the structure may also include some immediate payment to cover special damages. The payment is usually made through purchase of an annuity from a Life Insurance Company.

Subcontractor A trade contractor such as a roofer who usually subcontracts with a general contractor.

Subrogation Once a company has paid a loss for which someone other than the policyholder is responsible, it may have the right to recover this loss from the guilty party. This right is called subrogation.

Subscription Policy A single policy covering a risk that is divided among a number of insurers; the policy is issued by the “lead” company (usually the one with the largest percentage) and signed by all participating companies.

Suit A legal proceeding brought by one person against another.

Sum Insured The amount for which insurance is effected and the one on which the premium is based. Often in life insurance, the term is “sum assured.”

Superintendent Of Insurance The chief officer of the Government Department that regulates insurance.

Surety Bond Surety Bond is a three party contract between the Owner (Obligee), Contractor (Principal) and the Bonding Company (Surety). The Surety by lending its reputation and credit, guarantees, that the Contractor’s obligation to the Owner will be fulfilled.

Surrender Cancellation of a policy before its normal expiry by mutual consent of insured and insurer.


Tenant’s Policy A package policy specially designed to meet the normal insurance requirements of a private tenant covering personal belongings and liabilities.

Term The period of time from the inception to the termination of an insurance policy or bond.

Theft The wrongful taking of the property of another. It is a broad term and includes larceny, pilfering, hold-up, robbery and pick-pocketing.

Third Party A claimant under a liability policy, so called because he is not one of the two parties (insured and insurer) who has entered into the insurance contract which pays his claim.

Third Party Insurance A fire policy insures the policyholder against loss or damage to his own property. When a policy insures a person against the liability he may incur to another for damages, it is “Third Party Insurance.” The insured is indemnified with respect to any loss which he might suffer as a result of his legal liability to others arising out of the peril against which insurance is written.

Title The right to ownership of property. The owner of real property having just possession of his property.

Tort A legal wrong arising from a duty fixed by law. Breach of this duty causing injury to persons or property is repressible by legal action for damages. Liability for tort involves private or civil wrong or injury and is distinct from that under contract in that the duty is owed to people, generally, rather than to a specified individual.

Total Loss Loss of all the insured property. Also a loss involving the maximum amount for which a policy is liable.

Trespass An illegal act against another person’s rights or property.


Umbrella Policy A special form of liability policy designed to protect the insured for certain unknown contingencies over and above coverages and to provide excess insurance.

Umpire A third person appointed to decide an arbitration.

Underwrite To insure. More commonly, to scrutinize a risk and decide on its eligibility for insurance.

Underwriter 1) The insurance company or group that underwrites or insures a particular risk. 2) The individual within an insurance company whose responsibility it is to accept or reject business in the particular line in which he/she specializes and in this way chooses risks his/her principals are prepared to underwrite.

Underwriters’ Laboratories of Canada (U.L.C.) An organization financed by stock insurance companies whose purpose is fire prevention and safety. It provides testing laboratories for various manufactured items and approves those that are acceptable. Labels issued by the Underwriters’ Laboratories are evidence to the public that the particular item meets the safety standards.

Unoccupied Where the premises contain contents but no human beings, such persons being temporarily away from the premises, on vacation for example, the premises are said to be unoccupied. This is distinguishable from Vacant in that in vacancy, the contents have been moved out leaving nothing but the building.

Unprotected A property located in an area not regularly serviced by a fire department.

Utmost Good Faith A phrase in a legal document calling for the highest standards of integrity on the part of the insured and the insurer. See also Uberrimae Fidei.


Vacant Building A building with no occupants or furnishings. See also Unoccupied.

Valuation An estimate or the act of assessing of value. This will frequently be done through the process of an appraisal.

Valued Policy A policy which provides that a special amount shall paid in the event of a total loss of the property.

Vicarious Liability Liability imposed upon a person even though not a party to a particular occurrence, e.g., the owner of a motor vehicle is vicariously responsible for injuries even though he is not driving the car at the time of the occurrence.

Void 1) Invalid, not legally binding. 2) An insurance contract that is prohibited by law and thus cannot be held to be a valid contract.


Waiting Period The time which must elapse before an indemnity is paid.

Waiver The intentional relinquishment of a known right. A waiver under a policy is required to be clearly expressed and in writing.

Warranty Statement or stipulation in a contract, the breach of which nullifies the contract.

Warranty (Implied) A warranty assumed to be a part of the insurance contract even though not expressly included.

Water Damage Clause A Portion of the policy affording coverage for certain specific causes of water damage.

Windstorm Insurance Protection against damage done to property by unusually high winds, cyclones, tornadoes or hurricanes. This coverage is available under the extended coverage endorsement of property policy.

Without Prejudice An action taken during claims negotiations designated as “without prejudice” is intended to be without detriment to the existing rights of the parties.

Writ A Court document commanding the defendant to enter an Appearance within a specified number of days if he wishes to dispute the claimant’s claim.