Terms are from IBC’s (Insurance Bureau of Canada) Glossary of Insurance Terms. Copyright © 2008 Insurance Bureau of Canada. Used with permission from IBC. Click here for more information.

A B C D E F G H I J K L M N O P Q R S T U V W X Y Z

A

Absolute liability

The liability of a wrongdoer’s automobile insurance company to pay someone harmed by the wrongdoer, even if the wrongdoer has violated the terms of the insurance policy, for example, by driving with an expired license. This is subject to a limit, usually $200,000, and the requirement that the wrongdoer in violation of the contract must reimburse the insurer.

Accident

An event that happens by chance and is not expected in the normal course of events, which results in harm to people, damage to property or equipment, or a loss of process or productivity.

Accident Benefits (AB)

The part of auto insurance that provides medical care and income replacement benefits to insured persons injured in a car collision, regardless of who caused the accident. In some parts of the country, this is referred to as “Section B.”

Accident Benefits (AB) – CLEAR

The relative index based on the frequency of Accident Benefits (personal injury) claims.

Accounts receivable coverage

This coverage can protect a business owner if he or she is unable to collect outstanding balances as a result of lost or damaged account records.

Actual cash value

The actual cash value is usually the cost of replacing the property with something of like kind and quality.

Actuary

An actuary is an employee of the insurance company who analyzes the financial consequences of risk. An actuary uses mathematical models to predict the financial outcomes of uncertain future events. For example, an actuary will use mathematical business models to predict the cost of future natural disasters to ensure that the insurance company has enough money set aside (in “reserves”) to pay the claims that would result.

Additional premium

An extra charge for an alteration, during the policy period, which increases the hazard or the insurance company's liability. For example, if you installed a wood stove in your home, you would be charged an additional premium.

Adjuster

An adjuster reviews and settles claims on behalf of the insurance company. The adjuster could be an employee of the insurance company or an independent contractor hired by the company.

Adjusting

The process of reviewing and settling losses with or by an insurance company.

Agent

An insurance agent represents only one company and may sell many of that company’s products. He or she can provide information about the insurance products and rates for that one company only.

All-risk (All-perils) policy

See Comprehensive Auto Insurance.

Application (“App”)

A form completed by a person seeking to buy insurance. On the basis of the information entered on the form (possibly together with any information from other sources), the insurance company decides whether or not to provide insurance or modify the coverage offered.

Appraisal

A valuation of property made for determining its insurable value or the amount of loss sustained.

Arbitration

An alternative to litigation for resolving a dispute between an insurer and its customer or between insurers. An unbiased person or panel is appointed to review the case and determine responsibility for paying for the loss or the amount to be paid.

Arson

The willful and malicious burning of property.

Assumed liability (contractual liability)

Liability for which a person has accepted responsibility by entering into an expressed or implied contract.

Assurance

Same as Insurance.

Assured

Same as Insured.

Assurer

Same as Insurer.

Authorization

The power or right to act on behalf of another.

Avoidance of risk

Taking steps to remove a hazard, engage in an alternative activity, or otherwise end a specific exposure.

B

Bad faith

A party to an insurance contract is said to have acted in “bad faith” if that party has deceived the other party or otherwise treated that party unfairly. Examples are the withholding of relevant information when the contract of insurance is negotiated or the unjustified denial of a claim.

Basic insurance policy

See Named Perils.

Binder

A temporary or preliminary agreement that provides coverage until a policy can be written or delivered.

Bodily injury

A term, mostly used in automobile insurance, meaning physical injury as a result of a car collision.

Boiler and machinery insurance

This coverage protects an organization against any losses that result from a breakdown of heating, refrigeration, air conditioning equipment, pressure vessels, boilers, production machinery, electrical apparatus and/or electronic equipment.

Branding

A car is branded after an accident to indicate its state of disrepair as one of the following:

Salvage — A vehicle that has sustained damage to the point where the cost of fixing it exceeds its cash value prior to the damage.

Irreparable — A vehicle that is incapable of safe highway operation, has sustained damage beyond repair and is only used for parts.

Rebuilt — A vehicle that was severely damaged but has been repaired and inspected and met rigorous determined standards.

Stolen — A vehicle that has been stolen from its owner. Only the police can apply or remove this brand.

Broad coverage

This provides comprehensive insurance coverage for buildings and named perils coverage for contents.

Broker

An insurance broker sells insurance for more than one company.

Business interruption insurance

Business interruption insurance can provide funds to pay for fixed expenses during a period of time when the policyholder’s business is not operational. This coverage will pay fixed costs such as taxes, utilities and other continuing expenses associated with running a business between the time when the loss or damage occurs and the time when the lost or damaged property is replaced or repaired.

C

Canadian Loss Experience Automobile Rating

See CLEAR.

Canadian Standard for Automobile Theft Deterrent Systems (ULC S338)

This is the benchmark for all immobilizer theft deterrent systems. In after-market systems, the Canadian Standard demands that the immobilizer cut three vital circuits in the vehicle – the starter, the ignition and the fuel supply – to disable the vehicle. In Original Equipment Manufacturers (OEM) systems, the immobilizer disables the fuel injection system to render the vehicle inoperable. The Canadian Standard also requires that each theft deterrent system undergo extensive laboratory testing. Immobilizers meeting ULC S338 offer a proactive means of preventing vehicle theft.

Cancellation

During the policy period, either the insurer or the customer may terminate coverage according to provisions in the contract.

Capacity

The amount of capital available to an insurance company, or to the industry as a whole, for underwriting insurance coverage or coverage for specific perils.

Captive insurance company

A company that is owned solely or in large part by one or more non-insurance entities (e.g., a municipality) for the primary purpose of providing insurance coverage to the owner or owners.

CGL

See Commercial General Liability Policy.

Civil liability

An individual’s liability to others for harm caused to them by his or her actions.

Claim

The exercising of a policyholder’s right under a policy to be paid by his or her insurance company for certain financial losses suffered. A claim can be any notification of a possible loss under an insurance policy, whether or not any payment follows. For every claim that is reported, the insurance company must set aside money (“reserves”) sufficient to cover its anticipated cost.

CLEAR

CLEAR is the Canadian Loss Experience Automobile Rating. This is a method for classifying different models of cars for insurance purposes by using historical claims data, including Collision, Comprehensive, Direct Compensation – Property Damage, and Accident Benefits coverages. CLEAR is used by many insurance companies across the country.

Collision coverage

An optional type of automobile insurance coverage that pays for the cost of repairing the insured vehicle if it is damaged in a collision or upset. In some parts of the country, this is referred to as “Section C.”

Commercial auto insurance

This policy is designed to protect a business in the event of accident, theft, injury and/or other damages involving business vehicles and business staff while driving those insured company vehicles, or their own vehicles or rented vehicles for business purposes. There are a variety of coverages for commercial autos, depending on the business being operated and who owns the vehicles being used.

Commercial General Liability policy (CGL)

A standard form of liability insurance developed for use in the business sector. It is usually contained in a broader mercantile policy also covering property loss and business interruption.

Commercial lines

Refers to insurance for businesses, organizations, institutions, volunteer groups, governmental agencies, and other commercial establishments.

Comprehensive auto insurance (also known as “all risk, all perils”)

Optional auto insurance coverage that pays for damage to an insured vehicle caused by any perils other than collision or overturning. Examples of perils covered are hail, flood, theft, fire, glass breakage, falling objects, missiles, explosions, earthquakes, windstorms, vandalism or malicious mischief, riot or civil commotion, and collision with a bird or an animal.

Compulsory insurance

Any form of insurance (usually auto insurance) that is required by law.

Conditions

Conditions are terms of insurance contracts that impose obligations an insured person must satisfy in order to preserve coverage.

Contract

A way to make a promise legally enforceable.

Coverage

What the insurance contract covers.

Crime Stoppers

An international, non-profit civilian program that assists police in solving crimes through tips reported by citizens who have knowledge or a suspicion of a crime that has taken place. Since its establishment, Crime Stoppers has contributed to solving more than half a million criminal cases internationally, with a value of more than $3 billion.

D

Declarations (“Dec” sheet)

The portion of the insurance contract that contains information such as the name and address of the insured, the property insured and its location and description, the policy period, the amount of insurance coverage, applicable premiums, and any other information provided by the insured.

Deductible

The portion of the loss covered by insurance that the policyholder must pay himself or herself; the amount appears on the policy. If a policy has a $1,000 deductible, the policyholder would pay the first $1,000 of any repair bill and the insurance company would pay the balance up to the policy limits. Any loss that costs less than $1,000 would be the policyholder’s own responsibility.

Depreciation

The decrease in the value of property over a period of time due to use, wear and tear, and obsolescence. For example, if you paid $500 for a television set five years ago, its current value minus depreciation might be only $125. This will affect the amount of insurance payable if the item is lost or destroyed (see “Actual cash value”) unless there is coverage for replacement cost.

Direct Compensation – Property Damage (Ontario, Quebec, New Brunswick)

Covers damage to – or loss of use of – an automobile or its contents, to the extent that the driver of another vehicle was at fault for the accident. It is called “direct compensation” because, even though someone else caused the damage, the insured person collects directly from his or her insurer instead of from the person who caused the accident.

Direct loss

Damage to or loss of the insured property itself. It does not include consequential loss or expenses incurred as an indirect result of the damage, such as the cost of renting replacement items while the originals are being repaired.

Direct writer

An insurance company that uses its own sales employees to sell its policies. Sometimes refers to companies that contract with exclusive agents.

Directors’ and officers’ liability insurance (D&O)

Insurance that provides coverage for members of boards of directors against “wrongful acts,” which might include actual or alleged errors, omissions, misleading statements, and neglect or breach of duty on the part of the board of directors.

Duty of care

The obligation that a person has to exercise reasonable care with respect to the interests of others, including protecting them from harm.

Dwelling coverage

This applies to your home and “attached structures” such as a garage or carport. Permanently installed outdoor equipment on the premises, such as a swimming pool and the equipment attached to it, is usually included. Building materials for use in construction, alteration or repair of the insured dwelling or related structures on the premises are usually covered, too, if they are on the site or adjacent to it. Theft and vandalism losses during construction are usually not covered.

E

Earthquake insurance

Coverage for damage caused by an earthquake as defined in the contract.

Effective date

The date on which an insurance policy or bond goes into effect, and from which protection is furnished.

Embezzlement

The fraudulent use of money or property that has been entrusted to one’s care.

Employers’ liability insurance

Protects an employer against injuries sustained by employees that fall under common-law liability. This should not be confused with workers’ compensation liability, which is liability as defined by workers’ compensation law.

Endorsement

See Rider.

E&O

See Errors and Omissions insurance.

Errors and Omissions insurance (E&O, professional liability insurance or malpractice)

This type of insurance may be appropriate for anyone who gives advice, makes educated recommendations, designs solutions or represents the needs of others, such as doctors, lawyers, engineers, teachers, financial planners, consultants, software developers, ad copywriters, web page designers, placement services, telecommunications carriers or inspectors. It can be important coverage for anyone who deals with customers who could claim that something done on their behalf was done incorrectly and that this error cost them money or caused them harm in some way.

Exclusions

Events or circumstances described in policies which, if they happen in a way that relates to the loss, result in there being no coverage.

Expiration

The date upon which a policy will end.

Exposure

Vulnerability to loss of an insurer (generally) or an insured (usually with respect to liability insurance).

F

Facility Association

The organization that ensures that anyone who is required to have car insurance has access to it. For more information about the important role of Facility Association in the insurance market, please visit its website at www.facilityassociation.com

Fault determination rules

In Quebec, New Brunswick and Ontario, charts or rules are used to determine fault or responsibility for Direct Compensation – Property Damage claims, but not for injury claims in cases of car collisions. In some other jurisdictions, insurers use inter-company "settlement" charts for handling claims against each other; these are not legally binding on the policyholder, however.



The circumstances of a collision may show that more than one driver was negligent. Each driver's insurance company may then become involved in the settlement based on the degree of responsibility attributed to each person. If there is a dispute about responsibility, court action may be required to resolve it.

Finding fault

See Fault determination rules

Fire-resistive construction

A building that has its exterior walls, floors and roof constructed of masonry or other fire-resistive materials.

First party

The person who is insured on the insurance policy. He or she is also the “policyholder” or “insured.” There may be other people, named or unnamed, who are covered as well.

Forgery

In general, any false writing with intent to defraud.

Form

An insurance policy itself or riders and endorsements attached to it.

Fortuitous event

An unforeseen accident – i.e., an event neither deliberately caused by the insured nor bound to happen in the ordinary course of events.

Fraud (insurance)

Any act or omission with a view to illegally obtaining an insurance benefit. In other words, any action allowing a claimant to walk away with money to which he or she is not entitled.



Insurance fraud includes a full range of fraudulent acts, including completely fabricating claims, inflating or padding genuine claims, making false statements on insurance applications, and internal fraud.



Fraudulent claims represent approximately 10-15% of claims paid out. General insurance fraud amounts to a cost of approximately $1.3 billion per year in Canada. This cost is paid by honest policyholders in increased premiums.

G

Garaging location

The postal code where your vehicle is parked or garaged when not in use. This is usually your primary residence.

GDL

See Graduated driver’s licensing.

General insurance

See Property & Casualty Insurance

General Insurance Ombudservice (GIO)

Assists in the resolution of conflicts between insurance companies and their customers. When disputes arise, GIO's mediators and experienced customer service officers help insurance companies and customers work toward a solution that is in the best interest of both parties in a fair, independent and impartial environment. For more information about GIO and its services, please visit their website at www.giocanada.org

GIO

See General Insurance Ombudservice.

Government-run auto insurance

In Manitoba, Saskatchewan and BC, consumers have no choice but to buy their insurance from the provincial government. (Some optional coverages can be purchased from private insurance companies). In Quebec, insurance for injuries as a result of a car collision must be purchased from the government.

Grace period

A period after the premium due date during which an overdue premium may be paid without penalty. The policy remains in force throughout this period.

Graduated driver’s licensing

A staged introduction of new drivers into the driving environment. Under graduated driver’s licensing systems, new drivers earn more driving privileges as they gain more experience and demonstrate that they are able to handle increased risk.

Guaranteed replacement cost endorsement (building)

Coverage that pays for replacement without reduction for depreciation (see also Actual cash value and Depreciation). A guaranteed replacement cost endorsement covers any shortfall in the event that the replacement cost of a building has been underestimated.

H

Hard market

The part of the insurance cycle in which premiums rise significantly. It is usually associated with a sharp decline in capacity. (See also Soft market).

Hazard

A condition that creates or increases the chance of a loss. For example, fire, flood, liability, burglary, and explosion are hazards. Slippery floors, unsanitary conditions, shingled roofs, congested traffic, unguarded premises and uninspected boilers are also hazards.

HCMU – AB (Accident Benefits)

A relative index based on the frequency of Accident Benefits (personal injury) claims.

HCMU – Collision

A relative index based on the cost per vehicle for Collision insurance claims.

HCMU – Comprehensive

A relative index based on the cost per vehicle for Comprehensive insurance claims (including theft).

HCMU – Relative claim index

A relative index based on the cost per vehicle for a specified coverage’s insurance claims.

HCMU – Theft claim cost

A relative index based on the cost per vehicle for theft claims.

HCMU – Theft claim frequency

A relative index based on the frequency of theft claims (that is, the number of claims reported as a percentage of the number of vehicles with Comprehensive coverage).

High-risk automobile insurance market

Consumers with a poor driving record (e.g., multiple driving infractions, demerit points or criminal convictions involving driving), or no driving record at all (i.e., new drivers), may, in many cases, be insured by insurance companies that specialize in drivers who are high risk.

Hold-harmless clause/agreement

A clause or agreement written into a contract by which one party agrees to release another party from all legal liability. For example, a retailer may agree to release a manufacturer from legal liability in the event the manufacturer’s product injures someone.

Homeowners insurance

An elective combination of coverages for the risks of owning a home. It may include coverage for fire, burglary, vandalism, earthquake and other perils.

I

IBAC

See Insurance Brokers Association of Canada.

IBC

See Insurance Bureau of Canada.

ICBC

See Insurance Corporation of British Columbia.

ICLR

See Institute for Catastrophic Loss Reduction

Immobilizer

An electronic anti-theft device that arms a vehicle automatically when it is switched off, and prevents unauthorized starting of the vehicle. (See also Canadian Standard for Automobile Theft Deterrent Systems)

Incident

An event which, under different circumstances, could have resulted in harm to people, damage to property or equipment, or loss of process or productivity – for example, almost hitting a pedestrian with a car, or a slip and fall that does not result in an injury. Sometimes an incident is referred to as a “near miss.”

Indemnify

To compensate the insured person for a loss, in whole or in part, by payment, repair, or replacement.

Indirect or consequential loss (or damage)

Loss resulting from a peril, but not caused directly or immediately by the peril. For example, loss of property due to fire is a direct loss, while the loss of rental income as the result of the fire would be an indirect loss.

Informed consent

An agreement intended to ensure that both parties understand the activities being undertaken and the risks associated with them. Often used in conjunction with a waiver or hold-harmless and indemnifying agreement.

Inspection

Independent checking of facts about an applicant or claimant, usually by a commercial inspection agency.

Institute for Catastrophic Loss Reduction (ICLR)

The insurance industry established the Institute for Catastrophic Loss Reduction (ICLR) in 1998. It is a coordinated effort of the Canadian home, car and business insurance community, the University of Western Ontario and other partners to reduce – through research and education – the loss of life and property caused by severe weather and earthquakes. ICLR is working to improve Canadians’ capacity to adapt to, anticipate, withstand and recover from natural disasters.

Insurance

A contract between an insurance company and its customer for a specific period of time. It protects the customer financially against a loss. Insurance is also a mechanism for dispersing risk, because it shares the losses of the few among the many.

Insurance Brokers Association of Canada (IBAC)

As the national voice of 25,000 home, car and business insurance brokers in Canada, IBAC represents their interests to the government of Canada. IBAC develops national licensing courses and professional development programs for brokers, for delivery through its 11 provincial/regional associations.

Insurance Bureau of Canada (IBC)

The national trade association for the companies that insure the homes, cars and businesses of Canadians. IBC’s membership includes the companies that provide nearly 95% of the home, car and business insurance sold in Canada. IBC works on behalf of member companies to advocate for public policies that create and maintain a healthy insurance marketplace that serves insurers and consumers. IBC facilitates communications and seeks consensus among its members and, when possible, seeks out and implements solutions to common insurance concerns.

Insurance Corporation of British Columbia (ICBC)

The government-run insurance company from whom all drivers in British Columbia must purchase mandatory or compulsory car insurance.

Insurance Institute of Canada

The professional education arm of the general insurance industry in Canada.

Insurance policy

A document setting out the terms of the contract of insurance. It is usual for a policy to be issued but, for most forms of insurance, this is not a requirement.

Insurance representative

A customer’s main point of contact for insurance needs. This could be an insurance broker or agent. It could also be an employee of the insurance company itself.

Insurance to value

Insurance written in an amount approximating the value of the property insured.

Insured

The person (or persons) whose risk of financial loss from an insured peril is protected by the policy. Sometimes called the “policyholder,” “customer” or “assured.”

Insurer

The insurance company. Sometimes called the “assurer.”

L

Lapse

Termination of a policy at the end of its term.

Lessee

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

Lessor

The person granting a lease.

Liability

This is a legally enforceable obligation. Liability insurance pays for the damages or losses suffered by others for which the insured person is legally responsible.

Liability limits

The amount or amounts beyond which an insurance company does not protect a person insured for liability coverage. For example, a common liability limit for an auto insurance policy is $1 million. If a policyholder is successfully sued for more than $1 million, the balance of the judgment would be paid out of the policyholder’s pocket.

Libel

A written statement about someone that is personally injurious to that individual.

Loss of use insurance

Optional coverage purchased to compensate for the loss of use of property, if it cannot be used because of a loss covered by the policy. This is most common in auto insurance. For example, loss of use insurance will have the insurance company pay for the use of a rental car while the insured car is being repaired.

M

Malpractice insurance

See Errors and Omissions.

Manitoba Public Insurance (MPI)

The government-run insurance company from whom all drivers in Manitoba must purchase mandatory or compulsory car insurance.

Material misrepresentation

When a policyholder or applicant makes a false statement of material (important) fact on the application, he or she has committed a material misrepresentation, which may result in loss of coverage.

Moral hazard

A position taken by an insured that increases the chance of a loss or the seriousness of a loss.

MPI

See Manitoba Public Insurance.

Mutual insurance company

Mutual insurance companies are home, car and business insurance companies without stockholders. The owners are the policyholders. It is the policyholders (the owners) who elect the directors of the company.

N

Named insured

The person in whose name the policy is issued (see Insured or Policyholder). Technically, he or she would be the first party to the contract, the second party being the insurance company that issues the policy.

Named perils (or basic) insurance policy

Covers only those perils, such as fire and theft, that are specifically named in the insurance policy.

Negligence

To fail to do what a reasonable and prudent person would do (or to do what such a person would not do); this can result in property damage, injury or death.

No-fault

This type of automobile insurance provides some compensation for personal injury and death arising out of a motor vehicle accident, with payments made regardless of who caused the loss. However, it does matter who caused the accident; if found to be at fault, a driver may experience an increase in future premiums.

O

Occupier

A person, company or other group that owns, has possession of, or has responsibility and control over premises.

Occupiers' liability

An individual or organization in possession of property (i.e., the occupier) owes a duty of care to those who come onto the premises. The occupier must take reasonable care to protect others from harm that might result from programs on the premises or at the hands of a third party on the premises. For example, an occupier should ensure that the building is safe by shovelling sidewalks in the winter.

Occurrence

An event that results in an insured loss. In some lines of insurance, such as liability, an occurrence is not necessarily an accident (something sudden or unexpected); it can result from continuous or repeated exposure to a risk. Nonetheless, an occurrence results in bodily injury or property damage that was neither expected nor intended by the insured.

Optional coverage

In automobile insurance, optional coverage is a commonly used term for insurance that is not required by law, such as coverage for collision or comprehensive claims (e.g., theft).



For home insurance, optional coverage is that which is not normally included in standard home insurance policies, but which can be purchased separately, such as coverage for damage from earthquakes, furnace oil spills and sewer back-up.

P

PACICC

See Property and Casualty Insurance Compensation Corporation.

P&C insurance

See Property and casualty insurance.

Pain and suffering

A non-economic loss for which recovery may be available against the wrongdoer in a lawsuit.

Peril

This is the cause of loss or damage. A homeowner’s policy, for example, insures against perils like windstorms, fire and theft.

Personal articles floater

A personal articles floater provides all-risk coverage, subject to reasonable exclusions, for valuable items such as furs, jewellery, cameras, silverware, etc. The items are generally listed by description and value. This should not be confused with a personal effects/property floater.

Personal effects/property floater

Coverage for personal property, anywhere it may be in the world. Typically, this type of floater is issued in one of two forms, all-risk (or broad) or specified perils.

Personal injury

An injury, other than physical, arising out of false arrest or detention, malicious prosecution, wrongful entry or eviction, libel or slander, or violation of a person's right to privacy.

Personal lines insurance

Home or auto insurance for individuals, as distinguished from commercial lines insurance for businesses.

Personal property insurance

Home insurance covers the contents of a home and other personal property that the named insured and members of the household own, wear or use (including clothing, cameras, furniture, etc.) while on the premises. It may even cover personal property of others (excluding roomers or boarders who are not related to the insured) that is not otherwise insured. There will normally be coverage for personal property while it is temporarily away from the home anywhere in the world (see also “Personal effects/property floater”). Personal property not normally kept at home is not covered. Personal property in a warehouse is usually covered against theft without time limit, but other perils may not be covered, or may be covered only up to 30 days.

Personal property insurance coverage limitations

The maximum amount a policy will pay, either overall or under a particular coverage.

Physical damage coverage (automobile)

The section of an automobile policy that provides cover for damage to the insured vehicle. It may cover all perils, collision or upset, all perils other than collision or upset (comprehensive) or specified perils.

Policy expiration date

The date when an insurance policy expires. This date can be found on the current Declaration (or "Dec") page, insurance identification card, or recent cancellation notice.

Policy limit

The maximum amount an insurer will pay under a policy, either overall or under a particular coverage.

Policyholder

Same as Insured.

Pool

A group of insurers or reinsurers who insure particular types of risks. Premiums, losses and expenses are shared in agreed-upon amounts.

Premium

An insurance premium is the money the policyholder pays to the insurer for financial protection against specific risks for a specific time-span. Unlike the premiums for many forms of life insurance, general insurance premiums are not intended to produce a reward other than financial peace of mind.

Private passenger vehicle

A vehicle not used as a commercial vehicle. For example, if a small van is used as a family vehicle, it is considered a private passenger vehicle. However, if this same van is used as a full-time delivery vehicle, it is considered a commercial vehicle.

Product recall insurance

Designed for manufacturers, this coverage insures against the unexpected cost of recalling a product from the market due to faulty design, errors in manufacturing, or intentional tampering not caused or known by the insured and that may cause harm to customers.

Professional liability insurance

See Errors and Omissions.

Proof of loss

A formal statement by the insured when making a claim to the insurance company regarding the loss. The purpose of the proof of loss is to give the insurance company information about the loss to enable it to determine its liability under the policy and the amount it will be required to pay.

Property and casualty (or general) insurance

This is the branch of the insurance industry that covers home, car and business insurance. (The other branch of the industry is life and health insurance.)

Property and Casualty Insurance Compensation Corporation (PACICC)

In the unlikely event of the collapse of a home, car or business insurance company in Canada, the industry-funded, non-profit Property and Casualty Insurance Compensation Corporation (PACICC) will respond to claims of policyholders under most policies issued by home, car and business insurance companies. This protection is extended automatically to eligible policies.

Q

Quote

An estimate of the cost of insurance, based on information supplied to the insurance company.

R

Rate

The amount, established or reviewed by government, used to calculate premiums to be paid on an auto insurance policy.

Regular insurance market

When the insurance business environment is operating effectively, low-risk consumers find that auto insurance is available to them from any insurance company and at a reasonable price.

Reinsurance

Insurance purchased by an insurance company from another insurance company (reinsurer) to provide it protection against large losses on cases it has already insured. Essentially, insurance for insurance companies.

Relative claim index – CLEAR

The relative index based on the cost per vehicle for a specified coverage’s insurance claims.

Replacement cost

The cost of replacing property without deduction for depreciation. (See also Actual cash value and Depreciation)

Residual market

A system through which insurance is made available to customers that represent unusually high risks. This insurance is provided through Facility Association

Rider (or endorsement)

An amendment to an insurance policy. It is used to add or remove coverage.

Risk

A chance of loss or injury for which an insurance claim may be submitted. For a risk to be insurable, related events that could result in a claim must be unexpected (see Accident and Occurrence). For example, the possibility that a visitor to a policyholder’s home will injure himself or herself by falling on the steps is an insurable risk, because such a fall would be unexpected. Expected losses, such as the gradual wearing-out of clothes or the rotting of fruit, are not insurable risks.

Risk management

Risk management is the steps that an organization takes to identify and understand the risks to which it is exposed and to create and implement an effective plan for preventing losses or reducing their impact. A risk management plan includes strategies and techniques for recognizing and confronting the threat of loss. Risk management may be as uncomplicated as asking and answering three basic questions:

• What can go wrong?
• What will we do (both to prevent the harm from occurring and in response to the harm or loss)?
• If something happens, how will we pay for it?

S

Salvage

On paying for a total loss of property, an insurance company takes title to what remains of or what is recovered of the property. This is a right of salvage.

Saskatchewan Government Insurance

The government-run insurance company from whom all drivers in Saskatchewan must purchase mandatory or compulsory car insurance.

Second party

The insurance company that issues the policy is considered the second party of the two parties needed to form a legal contract. The first party is the policyholder.

Section A

See Third-party liability.

Section B

See Accident Benefits.

Section C

See Collision coverage.

Section D

See Uninsured motorist coverage.

Soft market

The part of the insurance cycle in which there is insurance capacity and policies are sold at lower prices (see also Hard market).

Special event

Specific presentations, performances or celebrations that mark a special occasion or are used to achieve goals and objectives. Special events usually fall outside an organization’s scope of normal operation.

Standard of care

The degree or level of service, attention, care and protection that a person owes another person according to the law (see also Duty of care).

Standard risk

A person who, according to a company's underwriting standards, is entitled to purchase insurance protection without special restrictions.

Subrogation

An insurer may try to recover some or all of its costs for settling a claim by suing others responsible for the loss. The effect is roughly the same as if the policyholder were to sue the responsible party himself or herself, except that the policyholder is compensated more quickly by his or her own insurer.

Substandard insurance

Insurance for those persons who do not qualify for insurance at standard rates or terms.

T

Terrorism

An ideologically motivated unlawful act or acts, including but not limited to the use of violence or force or threat of violence or force, committed by or on behalf of any group(s), organization(s) or government(s) for the purpose of influencing any government and/or instilling fear in the public or a section of the public.

Theft claim cost – CLEAR

The relative index based on the cost per vehicle for theft claims.

Theft claim frequency – CLEAR

The relative index based on the frequency of theft claims (that is, the number of claims reported as a percentage of the number of vehicles with Comprehensive coverage).

Third party

Anyone who is not a party to an insurance contract is a third party. For example, in an incident giving rise to an automobile insurance claim, a "third party" could be someone other than the insurance policyholder (see first party) who was injured and/or whose property was damaged by an insured car.

Third-party liability (auto) insurance

Covers an insured if his or her car injures someone else or damages property and he or she is held legally responsible. In some parts of the country, this is referred to as “Section A.”

Tort

A tort is a wrongful and harmful action addressable by some appropriate legal remedy.

Total loss

A loss of sufficient size that it can be said there is nothing left of value. The complete destruction of the property.

U

Underinsured motorist coverage

A form of insurance that pays for the bodily injury or property damage caused by the owner or operator of an inadequately insured automobile.

Underwriter

An underwriter is an employee of an insurance company who looks at an insurance application and decides whether or not the insurance company can or should provide the applicant with insurance, based on the risk that person presents.

Underwriting profit or loss

The amount of money that an insurance company gains or loses as a result of its insurance operations. It excludes investment transactions and income taxes.

Underwriting rules

The rules used by insurance companies to assess the risk they are taking on by insuring a particular customer. These rules are set individually by insurance companies.

Uninsurable perils

These are events or situations for which insurance coverage cannot be purchased. The damage as a result of these incidents is usually predictable or preventable. For example, if you build your house on a flood plain, your house will, at some point, be flooded. Flooding, in this case, is an uninsurable peril.

Uninsured motorist coverage

A form of insurance that pays for the bodily injury or property damage caused by the owner or operator of an uninsured automobile. In some parts of the country, this is referred to as “Section D.”

V

Valuable papers insurance

Insurance that protects a business's valuable documents, such as architectural drawings, law libraries, medical reference books, etc.

Valuation

Appraisal estimation of the value of an item.

Vandalism

Physical damage to property by malicious mischief.

Vehicle identification number (VIN)

This is the number usually found on the dashboard of a vehicle on the driver's side, and is usually listed on the vehicle registration and title. The VIN is a combination of letters and numbers 17 characters in length that can be used to identify the make, model, and year of a car.

Vicarious liability

The liability an organization takes on for the actions of those who function on its behalf – for example, the liability of a volunteer organization for the actions of a volunteer while that person is doing volunteer work for the organization.

VIN

See Vehicle identification number.

VIN switch

VIN switching is a technique used by car thieves to disguise the identity of a stolen car. The VIN of a stolen vehicle is replaced with the VIN from a legitimate vehicle, one that is not registered as stolen. The criminal then tries to sell the stolen vehicle. Often, criminals will also develop false registration papers for the vehicle.

W

Waiver

The act or instance of intentionally giving up a right. A waiver can also be a document or a clause in a document that states that rights are being given up or waived.

Warranty

A warranty is a term in an insurance contract wherein a party, usually the insured, undertakes to do or refrain from doing something in order to maintain coverage. A warranty is similar to a condition but must be strictly, as opposed to substantially, complied with.