Insurance Terms & Definitions
Below is a list of definitions and legal terms to help you navigate the language of insurance. Contact your Direct-Line Risk Manager if you have further questions about your insurance plan and needs.
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Act of God
A natural event without human involvement that could not have been foreseen or prevented. An earthquake is an example of this.
In this context, accident refers to a vehicle collision with any object, whether it’s another vehicle, a fence, or a tree.
Also known as statutory accident benefits, these are the benefits you may receive if you are injured in a car accident, or your family may receive if you are killed in a car accident. Statutory accident benefits are paid regardless of who is at fault (though there are certain exclusions, for example, if someone is driving without insurance). These benefits include replacement for lost income, medical benefits, death benefits, funeral expenses, and others
Actual Cash Value
Fair and reasonable current value of your property, allowing for depreciation.
Additional Living Expense
How much it costs for you to live outside of your home while repairs are made. If an insured event makes your home unlivable, or you have to move out while repairs are made, the insurer will pay any reasonable increase in living and moving expenses so that your family can maintain its normal standard of living.
An agent is someone who sells auto insurance for a particular insurance company. A company that sells its products through agents usually does not use the services of brokers, and the agent can only tell you what the rates are for that company.
This is a type of insurance that combines collision or upset and comprehensive coverages. It also covers loss or damage caused if a person who lives in your home steals the insured car, or if an employee who uses or services the car steals it. For example, if you take your insured car to a garage for repairs and an employee involved in the repair steals the car, all perils will cover you.
This is a type of insurance that covers losses due to a many different causes. Instead of listing each insured “peril” (fire, lightning etc.,), the policy covers all loss or damage that is the result of any peril, unless that peril is specifically excluded.
A device that helps prevent a vehicle from being stolen. Examples include car alarms or special keys for the ignition. You can save up to 5% on your comprehensive premiums if your car has an ignition cut-off system.
If you are involved in a car accident and your car is damaged, your insurance company is legally required to assign a percentage of fault to each driver involved. They use “fault determination rules”, which are set out under the Insurance Act, to come up with a percentage.
Auto Policy Discounts
If you qualify for any of the discounts offered by an insurance company, you could pay a much lower premium on your auto insurance policy. For example, an anti-theft device, driver training, or an excellent driving record will help you qualify for lower rates.
Bodily Injury Liability
If you are held legally responsible for injury or death caused by a vehicle driven by you or a covered family member, this type of coverage will pay damages.
This insurance coverage offers extended protection, covering all perils a building may face (though the contents may only have coverage for specified perils).
Unlike an insurance agent, an insurance broker searches among a variety of insurance companies to find the coverage that's best for you. They usually sell insurance for a number of different insurance companies, and can give you quotes for each one. You can ask that information about companies and quotes be provided in writing if you wish.
This insurance covers damage and loss resulting from theft. The theft must have occurred within either the household premises or your vehicle and caused by someone entering by force. It must be reported to the authorities.
Canadian Loss Experience Automobile Rating (CLEAR)
CLEAR is a rating system that helps insurance companies determine insurance costs that are appropriate for a particular vehicle. Cars are rated based on their claims history, such as the cost of repairs and injury claims, and how often they're stolen or in accidents. Your premium may actually be lower if your insurer uses CLEAR. For example, if your car has a history of only minor claims and repair costs, then an insurer who uses CLEAR might be able to give you a lower rate. Almost all insurance companies used the CLEAR system.
Certificate of Insurance
A document listing your types of coverage, and includes the name of the insurance company, the policy period, and the limitations of coverage.
If you are involved in a car accident and your car is damaged, your insurance company is legally required to assign a percentage of fault to each driver involved. They use “fault determination rules”, which are set out under the Insurance Act, to come up with a percentage. The rules help insurance companies deal with accident claims quickly and economically.
When you notify your insurance provider that you require reimbursement due to a loss from an insured peril.
Collision or Upset Coverage
Coverage that pays for losses caused when an insured car is involved in a collision or rolls over.
A furnace that can burn more than one type of fuel.
This coverage pays for losses due to specified perils, falling or flying objects, missiles or vandalism.
Coverage that protects you from all perils faced by a building and its contents except for those perils that are specifically excluded.
This tells you who and/or what is covered by the insurance. It also states the amount of coverage purchased and conditions of the coverage.
The amount of a loss you are responsible to pay. For example, if you’re involved in a car accident that causes $1,500 worth of damage to your car and you have a $500 deductible on coverage, then your insurance company will only pay for $100 worth of damages. You would be responsible for the first $500. Increasing your deductible can decrease your insurance premiums, because if an accident does happen, you contribute a higher amount toward the cost of repair or replacement.
The decrease in value of your assets over time.
Offences under the Alberta Highway Traffic Act or the Criminal Code of Canada. If you have one or more driving convictions, your insurance premium will likely increase depending on how serious the offence is. Offences include but are not limited to careless driving, criminal negligence, impaired driving, speeding, not wearing a seatbelt, following too closely, and improper passing. Some policies have conviction waivers that protect your rates of rising if you get a driving conviction.
Your driving history, including the number of years you’ve been licensed and any accidents or convictions. Your insurance rates are partially based on the quality of your driving history, and you can get discounts if you have an excellent record.
Premises occupied as a private residence.
A written agreement attached to your insurance policy that adds or subtracts insurance coverages. This attachment takes precedence over the provisions in your original policy.
Damages that your insurance policy doesn’t cover.
Fault Determination Rules
The rules under the Insurance Act that are used to determine fault in an accident. They help insurance companies to deal with accident claims more efficiently.
Fire and Extended Coverages
This insurance protects you from specific perils to a building and everything in it. Fire and extended coverage is typical for seasonal dwellings. Individual wordings will apply but generally the perils covered in this policy are:
- Fire and lightning
- Falling objects
- Impact by aircraft or land vehicles
- Water escape, rupture or freezing
- Windstorm or hail
Pays for loss caused by a fire, including gas explosions and lightning.
A floater is extra coverage for specific items you own, such as jewellery, furs, stamp and coin collections, bicycles and cameras.
Fungi refers to any type of mould, yeast, mushroom or mildew whether or not allergenic, pathogenic or toxigenic. It also means any substance, vapour or gas produced by any fungi or spore(s) or resultant mycotoxins, allergens or pathogens.
Guaranteed Replacement Cost
Should something happen to your insured home, the insurance company will pay to repair or rebuild your home to the same quality and finish. This is the case even if the cost to rebuild or replace your home exceeds the insured amount (though your insurance may be subject to certain terms and conditions) without additional cost to you.
Heat Source — Non-Standard
This term refers to less conventional devices that burn fuel to create heat. This includes space heaters (any fuel), wood or coal burning stoves and furnaces, fireplace inserts, combination units and kerosene heaters. All units must be CSA or ULC approved.
Heat Source — Standard
An electric heating system approved by the public utilities commission. This means hot water, steam, or forced air fuelled by a natural gas, propane, or oil with furnace installed on concrete floor.
An encompassing policy designed to cover the various perils faced by a homeowner.
Compensation that restores you to the same financial position as you were immediately prior to the loss.
The party that agrees to reimburse the policyholder if a specified loss occurs. Usually an insurance company.
Jewellery Coverage (Scheduled)
Coverage for jewellery or precious stones on an all risk basis anywhere in the world. Each separate item must be identified in the policy.
Individually wordings will apply but generally insurance coverage for loss or damage caused by:
- Fire or lightning
- Falling object
- Impact by aircraft or land vehicle
- Vandalism or malicious acts
- Water escape, rupture, freezing
- Windstorm or hail
Private buildings, such as a pool house, located on the same property as your residence.
Your belongings; anything you own, wear or use while on your premises which is typical of the ownership or maintenance of a home.
A written document that contains relevant information about the policyholder, the insurance coverage, the insured, and the insurer. It serves as proof of an insurance contract.
The amount you pay for your insurance coverage.
A home that is occupied year-round and is not vacant for more than 30 days.
Private Passenger Automobile
A vehicle that is operated by you or a family member for personal use. This excludes vehicles used for commercial purposes, such as a taxi or delivery truck.
Insurance will cover damage caused to your property or the property of others as a result of covered peril.
How much it costs to replace or rebuild your damaged property to the same quality and finish, without deduction for depreciation to the limits of the policy.
A rented home is insured for fire and extended coverages. Liability is extended from your primary residence. Fire and extended coverages does not cover the property of tenants; tenants should purchase their own tenants insurance policy.
The person or object to be covered by insurance.
Extra coverage for specific items you own, such as jewellery, furs, stamp and coin collections, bicycles and cameras.
Usually a home occupied for part of the year only. If you own a second dwelling that you use year-round, see secondary dwelling.
Coverage for your seasonal dwelling, outbuildings, and their contents. This form may be available when your Primary Homeowner’s policy is insured with the same company. Liability is extended from your primary residence. Coverage is broad form, which includes burglary and vandalism as well as guaranteed replacement costs.
Usually a dwelling that is unoccupied for less than 60 consecutive days at any time over the year.
Coverage for your secondary dwelling, outbuildings and their contents. Liability is extended from your primary residence. Coverage is broad form, which includes burglary and vandalism as well as guaranteed replacement costs.
Sewer Back-up / Water Escape Coverage
Additional coverage you can add to your home insurance policy to protect against direct loss or damage caused by water. The damage usually must result from accidental escape of water from a sewer, storm drain, drain, sump, septic tank, eaves trough or downspout.
This coverage pays for losses caused by one of the following: fire, theft or attempted theft, lightning, windstorm, hail or rising water, earthquake, explosion, riot or civil disturbance, falling or forced landing of aircraft or parts of aircraft, or the stranding, sinking, burning, derailment or collision of any kind of transport in or upon which an insured car is being carried on land or water.
Spore(s) refers to any reproductive particle or microscopic fragment produced by, or emitted from any fungi.
Terrorism means an unlawful act motivated by ideology, specifically the use of violence for the purpose of influencing a government and/or instilling fear in the public.
The process of reviewing, accepting or rejecting insurance risks. Accepted risks are categorized so the appropriate premium can be charged.
All occupants have moved out with no intention of returning, regardless of the presence of furnishings. In the case of a newly constructed house, it is vacant if no occupant has yet taken up residence.
VIN (Vehicle Identification Number)
A 17-digit number usually located on the driver's side of the dashboard. It is unique to each vehicle and identifies characteristics such as year, make, model and engine specifics.
Voluntary Medical Payments
An insured person can request limited payment for the medical needs of someone else, without having to prove legal responsibility.
Voluntary Property Damage
An insured person can request limited payment for the repair/ replacement of property for someone else, without having to prove legal responsibility.