Working Ventures Insurance understanding insurance terminology

Insurance Terms – A Quick Reference

Working Ventures Insurance understanding insurance terminology

Insurance terminology can be confusing. For everybody! Let’s break down the most used words and phrases to help you better understand the policies.

It’s not unusual to get stumped by all the confusing terminology associated with insurance. To help you navigate the variety of language used here’s a quick reference guide to some of the most common insurance terms and what they mean.

Actual cash value (ACV): The Actual Cash Value is what the property is worth and takes into account such things as the cost of replacement less any depreciation an obsolescence.

Adjuster: When you submit a claim, your insurance company needs to figure out the extent of the damage or loss so they can determine a settlement amount. The person assigned to do this is called an adjuster.

Bareland condominium: A bare land condominium is typically a detached home built on commonly-owned land. The owner would own both the structure and the plot of land it’s built on. The condo corporation would receive fees from the owners to maintain the common areas within the community.

Claim: An insurance claim is a request you submit to your insurer after there’s a loss or damage to your property.

Comprehensive coverage: Full comprehensive insurance provides coverage for all risks, except for those specifically excluded.

Deductible: The amount you agreed to pay before your insurance company pays out your claim. Once the deductible is paid, your insurer covers the remainder.

Depreciation: A decrease in value over a period of time due to wear and tear.

Effective date: The date your insurance policy goes into effect.

Endorsement: An addition to your insurance policy.

Exclusion: An exclusion is a term used for those losses or events that aren’t covered by your home insurance policy.

First party: The main policyholder listed on the insurance policy. Also referred to as “named insured”.

Indemnity: An agreement between you and your insurer (in the form of your insurance policy) where your insurer is required to compensate you for loss or damages and getting you back to where you were before the incident happened.

In force: An insurance policy that is still active and hasn’t expired or been cancelled.

Insurable interest: If something’s loss or damage would cause you to suffer financially or otherwise.

Liability/Liability coverage: This addresses risk. With liability coverage, you’re protected financially if someone hurts themselves on your property. Expenses for any damages, losses or injuries are covered.

Lienholder: A lender who legally owns your property (e.g. a vehicle).

Limitation period: The set period of time in which you can take legal action against an insurance company.

Loss assessment: As a condo owner, you’re financially responsible for covering part of the cost of damage to things that happen in the common areas of the condo property. For instance, if someone is hurt in the building’s lobby or if there’s a fire in the laundry room.

Mortgagee: A lender (e.g. a bank) who lends money to an individual for the purchase of a property.

Mortgagor: The person borrowing money from a lender.

Named insured: The person who has been issued an insurance policy.

Overland water coverage: Additional coverage (if available) you add to your home policy to protect you financially from loss due to damage from overland water. Overland water is fresh water (from lakes or rivers, rainstorm or melting snow and ice). Damage from coastal water (salt water) is not covered under overland water coverage.

Personal liability: The typical home insurance policy includes personal liability which protects you and others in your home in case you’re sued – if someone is hurt during a visit to your home, for instance. It can also protect you if you were to damage someone else’s property. Overland Water Coverage varies from market to market.

Policy: A legal document that provides all the information about your insurance coverage, including terms and conditions.

Premium: The rate that you pay for your home insurance coverage.

Pro rata cancellation: If you cancel your policy before it renews, you’d get back any unearned premium – that is, premium you’d paid for but not used.

Replacement Cost: The cost to repair or replace your home or personal belongings, including labour and materials, without any deduction for depreciation. (For homeowners, this isn’t the same as market value which includes the cost of the land.)

Risk: If there’s a probability of loss, damage, injury or liability.

Seasonal dwelling: Usually a vacation home like a cottage, cabin or chalet not occupied on a full-time basis.

Sewer backup coverage: Additional coverage that protects you financially for loss or damages caused by flooding due to a sewer system backup.

Speciality belongings: These are items that may require separate coverage because their value exceeds the limits of standard contents coverage. Artwork, jewellery, watches, furs, silverware and collectables (sports memorabilia, comic books, rare books, stamps and coins are just a few examples.

Specified perils: Losses that are the result of events specifically defined in your policy: fire, lightning, theft, hail, windstorm, earthquake, explosion, and riot/civil disturbance.