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Glossary of Insurance Terms

The definitions appearing in this glossary are provided solely for general informational purposes. In the case of any inconsistency between the definitions in this glossary and the definitions appearing on your actual policy, the definitions contained in your actual policy shall take precedence.

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  1. An unusual, fortuitous, unexpected or unforeseen event or occurrence.
  2. A mishap that is not expected or designed.

Accident and Health (Sickness) Insurance

A form of insurance compensating an individual for loss as a result of an accident or illness. It may pay certain or all expenses for medical and similar services and a weekly or monthly indemnity for loss of income. The amounts and items covered vary from policy to policy and depend to some extent on what coverage is purchased by the insured.

Act of God

A direct, violent, sudden act of nature that could not have been foreseen, or if foreseen, its effect could not have been prevented, e.g. flood, earthquake.

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.


  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 risk" policies. The term excludes insurance against certain hazards.

Amount of Insurance

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


The person or firm requesting insurance.


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


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 the insured a means of settling disputes over the value of lost or damaged property.


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


That which belongs to something else, e.g. appurtenances of automobile. The term "appurtenances" means that one thing belongs to another thing; that the two will remain in relationship, and will pass with the ownership.


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 arbitration. Each party has a chance to be heard.


At common law, the deliberate and intentional burning of property by its owner or by another person.


  1. The witnessing of signatures. Where a document is signed a witness who has seen the document signed before him may "attest" that the signatures on the document are genuine.
  2. Audited financial statements are said to be "Attested," i.e. the auditor attests the corporation's representations.


  1. An examination of evidential matters to determine the reliability of a record or assertion.
  2. In connection with financial statements a review of the accounting records and other supporting evidence of an individual or an organization to assess the reasonableness of the statements as presented (not a guarantee of accuracy).

Automatic Reinstatement

After a claim has been paid or the property restored, most policies automatically return the stated limit of insurance to its original amount.

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.




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).


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


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 to the premium developed by the application of rates as directed.


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


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.


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.

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.


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.


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.


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.


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

Certified Copy

A reproduction of a document, which the authority having custody of the 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.

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.


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.


One who makes a claim.

Claims Examiner

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

Claims Made Basis

Provision under some insurance and reinsurance contracts covering only claims made during term of the contract.


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 co-insurer 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 co-insurance penalty of $2,500 would be borne by the insured.


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.


Falling in of a building.


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


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, jeweller'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 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 statute 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 operation of a business. Hence "personal" liability.


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 cooperate, other than in a monetary way, to assist to recover from anyone who is responsible for the loss.

Conditions of the Contract

Articles in a contract which define or describe terms, the responsibilities of owner and contractor, performance and payment schedules and the like.


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.

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.


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.


An agreement made between two or more persons that 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 Documents

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

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.


To protect with insurance, or the insurance protection provided.


The nature of protection afforded by a particular policy. Can be used at times interchangeably with "insurance" or "protection" as "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.


Immediate control that an authority exercises over property or people.



Daily Report

Copy of the policy or bond for company or agency records. This term may also include all correspondence, notes, inspection reports, credit reports, etc. pertaining to the policy.

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.


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


To refuse acceptance of an insurance application.


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

Deductible Clause

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


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

Direct Billing

A system for the collection of premiums whereby the insurance company "directly bills" the insured for the premium in lieu of the conventional collection of premiums by the agent or broker. The insurer sends a statement to the agent, usually monthly, recording the premiums collected directly, and credits the agent with the commission on those items.

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.


Inability to carry on in one's normal occupation due to accident or sickness.


Act of making known something known.

Driver Training Credit

To encourage driver education courses at schools and colleges, many insurers grant premium rebates for private passenger automobile insurance to applicants who have successfully completed an approved training program.


The living quarters occupied, or intended for occupancy, by a household.



Earned Premium

  1. That portion of premium earned or charged for the period of time a policy remained effective. For example, an annual policy paid for in advance would be one twelfth "earned" at the end of the first full month of its term.
  2. An amount calculated by taking earned premium reserve at beginning of period plus premium written during period, less unearned premium reserve at end of period.
  3. Premium actually exposed to loss.

Earthquake Insurance

Insurance against damage by earthquake.

Effective Date

The date of inception of an insurance policy, or the date additional coverages become effective.

Employer's Liability Insurance

Coverage for legal liability imposed on an employer to pay damages to an employee who has been 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.


Mortgage, lien or other charge against a property.


An amendment added to a written document altering its provisions, particularly an agreement between parties.


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.


  1. In law, one of the various interests in land.
  2. The net worth of an individual's worldly goods.

Estimate (Bid Function)

Costs a contractor anticipates for a project.

Estimated Premium

A tentative premium set in the anticipation of being approximately correct but which may be increased or decreased when the final premium calculation is made.


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.


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


Comparison of premiums earned with claims incurred for: a) an individual insured b) group of insureds c) class of coverage.


End of the policy period.


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


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

Extended Coverage Insurance

An endorsement that enlarges the coverage afforded by the primary policy. Coverages such as windstorm, hail, smoke and riot are extended coverages on a fire policy.

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.



Face Brick

Brick, chosen for its visual rather than its structural characteristics, used on wall's exposed surface.

Face of Policy

The front of the policy on which normally the name of the insurance company, the name of the insured, the amount of insurance and the type of insurance appear, among many other items.

Fair Market Value

Price at which a buyer and seller, under no compulsion to buy or sell, will trade.

Fellow, Chartered Insurance Professional (F.C.I.P.)

A professional designation awarded to a Chartered Insurance Professional (C.I.P.) after the successful completion of several additional university level educational requirements, as designated by the Insurance Institute of Canada.

Fire Damage

Damage caused by fire.

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 Marshall

A public official involved in fire prevention and in investigation of fires, particularly where arson is suspected.

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.


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, Jewellery Floater, Contractor's Equipment Floater, etc.


  1. The illegal signing of another's name to a document, such as a cheque.
  2. Falsely making or altering a written instrument.


Refers to the construction of a building built of lumber.


  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 be made known at the time.


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.



Glass Insurance

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

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 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.




Dwelling place; residence.


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

Hazard, Physical

A 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 vehicles 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.


The taking of money or property by threat or the use of force or violence.

Homeowners Policy

A multi-peril insurance policy for dwelling risks, combining coverages for fire, and extended coverages, including theft and liability.

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 rented premises by a tenant at his/her own expense. Also called Tenant's Improvements.


Malicious setting on fire or preparing, providing and setting the means for fire to start.


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


To provide compensation for loss or expenses incurred.

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.


Easily set on fire.

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.


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 Bureau of Canada (IBC)

The trade association of the Property/Casualty insurance industry in Canada. It concerns itself with such matters as public relations, collection of statistics, promulgation of forms etc. It has a substantial permanent staff but also many committees made up of volunteers from the senior ranks of insurance companies.

Insurance Crime Prevention Bureau (I.C.P.B.)

An organization supported by property and casualty insurers which investigates fraudulent insurance claims and provides deterrent to such losses. Loss prevention information is maintained by the bureau for use by member insurers, independent claims adjusters and government authorities across the country.

Insurance Institute of Canada (I.I.C.)

The educational body of the general insurance industry. It consists of an association of provincial institutes. Among other things, it conducts correspondence courses, holds annual examinations and grants diplomas.

Insurance Policy

A written contract of insurance.


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


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.


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


Itemized list of goods and property on hand.



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 tortfeasors, 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.


  • An order given by a Court.
  • A debt resulting from a Court Order.


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.


A body of persons selected from the general populace sworn to hear evidence in a law case and to make a decision according to their findings.




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.


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.


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


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.


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.

Livestock Insurance

Insurance against loss (death) of horses, cattle, hogs, sheep, dogs, etc. owned by the insured. The coverage can be on an all risk or a specified perils basis and includes loss by theft. The insurance is usually written by specialist livestock insurers.


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.


A performance by a professional which 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 that is 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.


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.


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


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.

Moral Hazard

Danger of loss arising from the nature of the insured rather than from the physical nature of the risk. This would encompass those instances where the chance of loss is increased by an insured's carelessness, incompetence, recklessness, indifference to loss, or an insured's fraudulent nature.

Mortgage Clause

A clause in an insurance policy which stipulates the rights and obligations of the insurer and the mortgagee. The main characteristics of this clause are that the mortgagee is granted protection in the event of loss that is denied due to the actions of the insured (provided that the mortgagee was not aware of the insured's wrongful action) and, in return, the mortgagee accepts responsibility to advise the insurer of any misrepresentation or change in risk of which the mortgagee is aware.

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.

Mutual Insurance Company

An insurance company which is owned by its policyholders, who formed an association for the purposes of insuring one another against the possibility of fortuitous loss. Each policyholder pays a premium for his or her own policy. If at the end of the fiscal year the mutual insurance company declares a profit, the profit is shared amongst all the policyholders. If the company declares a loss there is also provision for the policyholders to be assessed a levy to make up for this shortfall.

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 risk".

Natural Disaster

A disaster caused by the elements, such as flood, earthquake, tornado, lightning, etc.


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

No Fault

The term used to describe a system for improving the compensatory process for automobile accident victims by eliminating costly and lengthy litigation. Simply it means paying certain claims without reference to who was at fault.


Materials, no part of which will ignite and burn when subjected to fire.


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.

Non-valued Policy

A policy is valued when it promises to pay its face value in case of total destruction, irrespective of the value of the insured property. In other words, the value is agreed upon in advance. Used only for certain classes of property such as fine arts or ocean marine. Ordinary policies do not contain agreement and are therefore "non-valued".

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.




Impairment of desirability and usefulness brought about by changes in public preference or by forces in addition to those which cause deterioration. Functional obsolescence refers to impairment of functional capacity or efficiency. Economic obsolescence refers to impairment of desirability or utility arising from economic forces such as changes in highest and best land use, legislative enactments which restrict or impair property rights, and changes in supply/demand relationships.


Occupancy is the act of holding possession of property or premises. The term implies the use of the building for the purposes described in the policy, and no other. An occupied building has furnishings and/or people in it.


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.


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".

Outboard Motor Boat and Outboard Motor Policy

A class of inland marine insurance covering boats, motors and equipment for named perils (fire, collision and theft) or, at a higher premium, for all risks. Some policies include liability to cover for property damage to other vessels.

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.

Pair and Set Clause

Establishes that loss or damage to one of a pair or set of individual items does not represent the loss of the pair or set.

Partial Loss

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


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


Giving false evidence or information while under oath.

Personal Auto Policy

Insurance policy issued to individuals covering risks arising out of the ownership or operation of a licensed automobile.

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 Liabilty

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 homeowners 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.


An 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 to one person or organization to act for and obligate another to the extent of the instrument creating the power.

Preferred Risk

Any risk considered to be better than the average risk on which the premium rate was based.


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


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.

Private Passenger Car

Four-wheeled motor vehicles of the private passenger, station wagon or van type, designed for use on public highways and subject to motor vehicle registration.

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 Insurance

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.

Property Insurance

Covers an insured's property against damage, destruction or loss by a covered peril.

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.


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


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


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 Damage

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.




Amount or quantity.


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.




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.