The world of insurance can be tricky, especially when you’re new to the terms! It is full of wording that may not be common outside of auto, home and business policies. As a result, it can sometimes be confusing to understand when reviewing your policy. Knowing these standard insurance terms is crucial for understanding and maximizing the benefits of your insurance plans. Luckily, isure is here to help with our list of the most common insurance terms below.
This glossary will help you discuss and research your auto insurance with confidence. So, whether you’re looking for a new plan, submitting a claim, or trying to better understand your policy, you’ll know exactly what terms are being used with confidence.
Actual Cash Value
This is the current market value of your car or item. This is a general term for determining the cost of insuring an item or covering it in the event of damage, theft, or loss.
Advisor / Adjustor
This common insurance term is also known as an adjustor. These are the insurance professionals who gather facts about the items you wish to insure. They do everything from coordinating appraisals to determining the value of your items or settlements based on damage or loss.
At-Fault
After a car accident, you can be found anywhere between 0% to 100% at-fault, depending on the accident details. If you are even 1% at fault, you will have an at-fault accident recorded on your insurance history. This will differ in each situation, and certain areas will have specific circumstances in which the amount of fault is determined. As a result, your insurance premium will typically increase.
Insurance Claim
A claim is what you submit after you experience damage or loss to a car or item you pay to insure. You will also submit a claim when something of yours is stolen from your home during a burglary, such as expensive jewellery. Insurance companies will receive a claim and either approve or validate it for the loss. You will also submit a claim when someone causes damage or harm to you or your property.
All Perils Coverage
All Perils is an optional coverage that covers all causes of loss if written directly in your policy. This can include loss or damage in the event your car is stolen or something in your home is broken by someone who does not live there.
Bodily Injury Coverage
This one isn’t necessarily what it may sound like. This is protection against liability for damage to someone else’s property. This includes loss and the destruction of the property.
Family Protection Coverage
This type of coverage will allow you to add family members to your liability coverage limit. This can prove helpful if you are involved in an accident with someone who only has the minimum amount of liability coverage. Please read our blog to learn more information about the OPCF 44R endorsement.
Liability Coverage
Liability auto insurance is a mandatory coverage that protects you from being held responsible for accidents that happen between you, a third party, and their property. Your level of liability coverage depends on the policy that you purchase. Additional liability coverage will differ, depending on different scenarios and other coverage you purchase. It is against the law to drive a car without liability insurance. However, it is not a requirement to have liability insurance to own a house. However, with that being said, most banks and mortgage lenders will refuse to approve a mortgage without proof of insurance.
Perils Coverage
‘Perils’ are specific situations or risks that you purchase protection from within your insurance policy. Some examples of these can include damage, theft, fire, or flooding.
Deductible
This is the amount you are responsible for paying up to when it comes to a claim. This will be something you will always need to pay upfront in case of a claim, no matter who is at fault. This is a previously agreed-upon amount that you pay for before your insurance plan comes into effect. If you are not at fault, you may be eligible for a refund of your deductible.
Depreciation
This is when the value of an insured item decreases over time. For example, a car’s depreciation will begin after you leave the dealership lot. It will depreciate further as the car ages and develops use.
Excluded Driver
These are specific people who are using your car, but are not covered by your insurance plan. For example, this can be a friend who regularly uses your car or a family member who borrows it to run an errand. This additional endorsement can help avoid higher premiums if the excluded driver is deemed at-fault during an accident.
Exclusion
An exclusion is the opposite of a peril. These are typically things that are not covered by a general insurance policy. This can also include normal wear and tear from use, as well as vermin or rodents.
In Force
This term describes an active, ongoing insurance policy. If your policy isn’t cancelled or expired, it is ‘in force’.
Lessee
A person who leases a car from a dealership or company, or rents a home from a landlord.
Lessor
A company or dealership that provides you with a lease agreement for your car or home.
Limitation Period
This is the period of time in which you can decide to take legal action against your insurance company. The duration of a limitation period varies between provinces and territories. In Ontario, the limitation period is two years.
No Fault
This is the procedure in which each party’s own insurance company handles insurance claims. This is the case, regardless of who is at fault in the car accident or other situation. Instead of dealing with the other driver, you will deal directly with your insurance company. From there, each person will handle things such as injuries, damages, and claims. One thing to keep in mind is that, regardless of the name, full or partial fault for the specified accident can still be assigned to you.
Premium
This is what you pay when you are purchasing insurance. Depending on the premium and insurance company you use, you may have to pay your premium on a monthly or annual basis.
Registered Owner
This is the person who is identified in your registration information as the owner of a house or vehicle. To be more specific, this is who has the right to the specified item. Keep in mind that if you have leased your car or house to a lessee, then you do not have possession rights until your lease is fully paid off.
Insurance Policy Limit
This is the maximum amount of money your insurance company will pay out to you in the event of damage or a loss. An insurance policy limit, also referred to as an extended policy limit, can be defined in several ways. Generally, it is determined by what is insured and the type of insurance policy you hold. In many cases, when setting up an insurance policy, you have the option to adjust your limits to meet your specific coverage needs.
Write-Off
Also known as a total loss, this occurs when the repair cost of a car or item exceeds the car’s or item’s value before any damage or loss. In situations where this happens, your insurance company will generally offer you a settlement based on your insurance policy coverage.
Underwriting / Underwriter
Underwriting is the process of identifying and evaluating risks in a potential policy. Furthermore, an Underwriter is the person or institution that performs this process of risk analysis.
Exclusions
Exclusions are specific risks and other factors that an insurance policy will not automatically cover. They exist to help specify coverage and help keep premiums at a more reasonable rate.
Umbrella Policy
An umbrella policy is a type of liability insurance that provides an additional layer of protection beyond what the baseline policy offers.
Policy
A policy is a contract between an insurance company and an individual (the policyholder) that outlines the terms of protection against specific risks.
Business Interruption Insurance
Business interruption insurance is a type of coverage that helps financially protect your business if it needs to cease operations due to unforeseen circumstances temporarily. Additionally, it protects against lost income/ongoing expenses in the event your business cannot continue to run as usual and must remain closed for a period of time.
Reinstatement
This is the process of restoring a cancelled or lapsed policy. If your coverage reaches either of these states, reinstatement is reinstating the insurance policy to an active status.
Guaranteed Renewable
A guaranteed renewable policy is a feature that allows insurance providers to renew the customer’s policy automatically. This is usually done when the policyholder pays premiums consistently on time. Furthermore, this means that the insurance company cannot cancel/refuse the policy’s renewal based on any changes in the policyholder’s health.
Coinsurance
Coinsurance is a cost-sharing arrangement in which you and your insurer each pay a portion of the claim. This is a percentage of the cost that products/services you pay have after your insurance deductible has been met.
Risk Management
This is when risks and potential losses are identified, assessed, and managed by a business or individual. It is a financial safety net, created by transferring the risk to an insurance company in exchange for an insurance premium.
Rider/Endorsement
Next, an insurance rider is an entirely optional add-on to a standard insurance policy. These provide additional coverage for an extra fee.
Grace Period
This is a specific span of time after a premium is due during which a policy remains active even if the payment is late. It is a buffer that prevents a policy from lapsing or being cancelled.
Subrogation
This is when an insurance company steps in and takes legal responsibility for its customer (the policyholder). Repayment may be sought from a third party by the insurer after the insured party has been compensated for a loss that is not covered under the policy.
Rescission
A rescission of an insurance policy occurs when an insurer cancels a policy from its inception. It acts as if the policy never existed, differing from a standard cancellation, as that has a specific cancellation date.
Risk
This refers to the possibility of a loss in a policy. An insurance risk is any circumstance that could cause financial harm, for which the insurer is responsible once the coverage is in effect.
Indemnity
This type of insurance helps protect the policyholder from financial loss. Moreover, it does so by promising to reimburse them for any actual economic loss up to a set amount.
Insurable Interest
Next, insurable interest pertains to the legal/financial stake that a person has in the insurance policy. Therefore, this means that the policyholder will suffer monetary loss if the insured article is damaged or lost.
Settlement
An insurance settlement is the final amount paid to a policyholder upon the closure of an insurance claim. It may be issued either in installments or as a single payment.
Insurance Terms: Conclusion
With the help of this standard auto insurance terms glossary, you won’t need to Google words whenever you are reading or talking about insurance! Overall, if you are shopping for new insurance, give us a call! Whether it’s a car, home, or boat, we have you covered with high-quality customer service and the best rates.
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