In Ontario, most insurance policies covering personal goods and
automobiles (such as basic home insurance and car insurance
policies) are written in plain English. Insurance policies covering
commercial operations can be written in plain English or in a more
formal language that is sometimes difficult to understand if you do
not work in the insurance business or the legal profession.
In each case some words are unfamiliar to many of us. For this
reason, Rhodes & Williams has added a section to explain these
insurance terms. This is not a complete list of all terms in all
policies, so if you come across another insurance term you don't
understand in your policy, please contact us and we will send you an
explanation and then add it to this page.
General Insurance Terms
Actual Cash Value (ACV): It is usually
considered to be the cost of replacing or restoring property at
prices prevailing at the time and place of the loss, less
depreciation. However, courts in a variety of ways have defined it
depending on the circumstances.
Adjuster: A person who investigates and settles
losses, usually for an insurance carrier.
Agent: An insurance agent is an individual who
sells insurance products for ONLY ONE COMPANY and generally sells
only its products. (See the definition of insurance
All Risks Policy: Coverage by an insurance
contract that promises to cover all risks of direct physical loss
or damage except those specifically excluded in the policy.
Amendment: A formal document changing the
provisions of an insurance policy signed jointly by the insurance
company officer and the insurance policy holder or his authorized
An Act of God: An act of God is a flood,
earthquake or any other accident or event arising purely from
natural causes and without human intervention, of such a nature of
magnitude that it could not have been foreseen or prevented by
reasonable care or foresight. Contrary to popular belief, acts of
God are sometimes insured against.
Automobile Liability Insurance: Protection for
the insured against financial loss because of legal liability for
car-related injuries to others or damage to their property.
Automobile Physical Damage Insurance: Coverage
to pay for damage to or loss of an insured automobile resulting
from collision, fire, theft, or other covered perils.
Bailee: A bailee is a person or business that
for a consideration, takes care, custody and control of the
public's goods for some reason. The bailee must under law assume a
high degree of responsibility to the public for the safekeeping of
Broker: A broker is someone who sells insurance
products for many different insurance companies. This allows them
to compare price and coverages to best suit individual clients.
(See The Benefits of Using An
Canadian Loss Experience Automobile Rating (CLEAR
Rating): A car insurance rating system that groups
cars based on their claims experiences, such as repairs, injury
claims, frequency of theft. Your premium may vary depending on
whether or not your insurer uses CLEAR rating. For example, if your
car's repair costs are fairly economical, an insurer that uses
CLEAR rating might be able to give you a lower rate. About 50% of
insurers use CLEAR rating to establish their rates.
Constructive Total Loss: Constructive Total
Loss is suffered when the cost of repair is more than the property
Deductible: The deductible is the portion of an
insurance claim that you pay. For example, if vandals cause $1000
damage to your car, you pay the amount of your comprehensive
coverage deductible (ex. $300) and your insurance company pays the
rest (up to the limit of your policy).
Driving Record: Your driving record is used to
describe your driving history, including any accidents or traffic
Effective Date: The date on which the insurance
under a policy begins.
Endorsements: Endorsements are used to make
changes (i.e. by adding or deleting coverage in an auto policy).
Endorsements are known as Ontario Policy Change Forms and are
referred to as OPCF.
Errors and Omissions Insurance: Liability
insurance policy that provides protection against loss incurred by
a client because of some negligent act, error, or omission by the
insured. The insured is normally a professional or consultant.
Exclusion: An exclusion is an insurance policy
provision referring to Perils or property the Policy does not
Exposure Loss: An exposure loss is one where
the damage to the insured's premises results from a fire or other
insured Peril which originates elsewhere and has spread to the
Facility: A pooling mechanism for insureds not
able to obtain car insurance in the
voluntary market. Insurers write and issue policies but spread
premium and losses on those policies to a central pool in which all
Floater Policy: A Floater Policy is one whose
protection follows moveable property within the territory specified
in the policy.
Group Discount or Rate: A discount or rate
provided to a member of an eligible group. An eligible group may
include employees of the same employer, a member of a union,
professional or occupational association. It often includes car
insurance, home insurance and possibly
other insurance coverages.
Hazard: Condition that creates or increases the
chance of loss.
Indemnity: A Policy must be a contract of
indemnity, that is, it must indemnify the Insured for the loss, and
no more than the loss. The principle of indemnity is to try to put
the Insured back as closely as possible into the same financial
position that existed immediately before the loss occurred - no
more and no less.
Lapse: The termination or discontinuance of an
Marine Franchise Clause: A Marine Franchise
Clause is a type of deductible clause that says that if a loss
exceeds a stated amount, the loss is paid in full. Below that
amount the entire loss is assumed by the Insured.
Misrepresentation: Usually refers to an attempt
by the Insured to secure a lower rate from the underwriter by
deliberately misrepresenting his Risk as lesser than it actually
is. The consequences of misrepresentation can be extreme - it could
result in your insurance contract being deemed void.
Named Insured: A person named in an insurance
policy and for whom the insurance policy is primarily written. It
is distinguishable from the simple word "insured" in that an
insured includes both named and unnamed insureds. It is
distinguishable from unnamed insured in that it identifies the
specific party in the policy.
Named Perils Policies: Insurance policies that
specifically state the perils against which protection is given,
and no others. This is distinct from the All Risk Policy, which
covers all risks of direct physical loss or damage except those
specifically excluded in the policy.
Obligee: A person or corporation under a
fidelity or surety bond who is protected from loss.
Partial Loss: A partial loss is one that
neither totally destroys and renders worthless the insured
property, nor exhausts the amount of insurance, as opposed to Total
Peril: A peril insured against is a specific
event causing loss or damage - such as the damage to building
caused by fire or windstorm, or damage in a collision between two
Renewal: An extension of an insurance policy
for an additional policy period as the current policy is about to
expire, is known as a renewal.
Subrogation: is the legal process by which the
insurer seeks to recover from the third party who caused the loss,
the amount the insurer has paid its Policyholder.
Specified Perils: Covers your automobile
against losses caused by fire, theft, attempted theft, lightning,
windstorm, hail or rising water, earthquake, explosion, riot or
civil disturbance, the forced landing of aircraft, the stranding,
sinking, burning, derailment or collision of any kind of transport
on which your automobile is being transported.
Tenant: One who holds property, houses or land,
owned by another, by payment of rent.
Underwriter: The insurance company or group
that underwrites or insures a particular risk.
Valued Policy: An insurance policy wherein the
parties agree at the time of issuance on the value of the property