Below, we outline 20 common insurance terms you should be familiar with so you can actively participate in conversations with your Insurance Broker and fully understand your insurance policies.
When discussing insurance, it often relates to protecting your life, or property that is important to you, like your home, or vehicle. Understanding the terms in your insurance policies or that your insurance broker may use will ensure that you can make informed decisions regarding your insurance policies and choices.
This refers to the amount of a covered claim you are responsible for yourself. If your policy has a $500 deductible and you have $5000 worth of damage to your car, you will pay the $500 while your insurance company will pay the remaining balance of $4500, or up to the limit that is covered by your insurance policy.
A claim is a request for reimbursement subject to the limitations of your insurance policy. If your home’s roof suffers damages, you could file a claim to your Insurance Broker and request payment to be issued to cover the damages to return you to the same financial state you were in prior to the loss occurring.
Depreciation is the amount of value that is lost in an item as it gets older, or its condition deteriorates over time. Depreciation is not calculated the same with every insurance company.
Actual Cash Value
This is one way your insurance policy can be set up that will affect the amount you are paid when filing a claim. The Actual Cash Value is the current value of an item or piece of property with depreciation taken into account.
Perils or Cause of Loss
A “Peril” refers to a specific cause of damage to whatever it is you have insured. Your insurance policy will either outline specific perils that are covered or will outline what is NOT covered; also known as “Exclusions”. There can be additional coverage purchased for certain excluded perils available which you should inquire about with your Insurance Broker.
Liability refers to the legal obligation an involved party has for causing damage, injury, or loss to the other involved party. Liability coverage is the part of your policy that protects you from the expenses that come with being liable in an insurance claim.
PremiumA premium is the amount of money you pay an insurance company for the coverage they provide you with.
This refers to a clause that provides coverage to individuals not named in the insurance policy.
An appraisal is the valuation of a property or item performed by an “expert” third party who holds no financial interest in the property or item in question.
Comprehensive coverage in an auto insurance policy refers to coverage that adds protection for physical damage to your insured auto against elements other than collisions, including hail, fire, vandalism, glass coverage, and others.
This is an agreement from one party to another to cover the losses of that party, it is the main point of insurance contracts and the amount the insurer pays to indemnify the insured is usually limited.
Holding title to property means you have legal ownership of the property.
A binder is a document that is temporary proof of insurance.
Endorsement or Rider
This is an amendment attached to a policy that adjusts the coverage. This is something that can be added to your basic insurance policy.
The face amount is the face value of insurance. This means it is the amount that is equal to what your insurance policy is worth.
A beneficiary is a person who is designated as the recipient of payment of your insurance policy, often used for a life insurance benefit.
This is the maximum amount your insurer will reimburse you for all covered losses during a certain time period, most often one year.
Certificate of Insurance (COI)
This verifies the existence of your insurance policy. A COI is usually injuries used to provide proof of insurance to a third party.
An exclusion is something the insurance policy does not offer coverage for. You can customize your insurance policy to cover some exclusions to meet your needs.
This is someone who evaluates risk and determines whether coverage will be offered for certain aspects of a policy.
Now that you know more about these common insurance terms, you can feel empowered when having conversations with your Ontario insurance broker, fully understand your insurance policies, understand how issuing an insurance claim works, and whether you need to update any of your insurance policies to meet your insurance needs.
Disclaimer: The information provided on this blog is for educational purposes only and is not intended as professional insurance advice. The coverage, terms, and conditions of each insurance policy are unique and subject to individual circumstances. The information provided does not guarantee the availability or suitability of any insurance policy for your specific needs. You should not rely on the information in the blog as an alternative to professional advice from your insurance broker or insurance company. If you have any specific questions about any insurance matter, please consult a licensed insurance broker for personalized advice and guidance.