Insurance 101: General Insurance Terms to Know

When you are discussing your insurance policy and contract of insurance with your insurance provider, there may be a lot of terms that are new or confusing to you. To help you better understand some of the most common insurance terms, we’ve put together a list of definitions.

 

All-risk All-risk coverage, also referred to as open perils, insures against all types of losses, except for those that are specifically excluded from the policy. This applies to several property and casualty (P&C) categories, including homeowners, auto, and commercial insurance.

 

Binding the Policy After selecting your coverage, reviewing the quote, and accepting the terms, ‘binding the policy’ is the final stage, when the application for insurance is officially accepted.

 

Cancellation This refers to the cancellation of an insurance policy before the specified end-date. Typically, policyholders get a refund for any unused premiums, although insurers may charge a cancellation fee.

 

Claim/Claimant An insurance claim is a formal request filed by the policyholder to their insurer for compensation for covered losses or damages. These can include vehicular accidents for auto insurance, storm damage for homeowners’ policies, and emergency surgeries for health insurance plans. A claimant, meanwhile, is the person who files the claim. In most cases, this is the policyholder.

 

Conditions (Policy conditions) This is the section of a policy document that explains the duties and responsibilities of the insured (policy holder) and the insurance company. It also states the requirements that need to be met for the coverage to be valid.

 

Commencement date This is the date when the insurance policy goes into force. It is also known as the effective date.

 

Declarations page This section of the policy document, also called the dec page, summarizes the details of the policy. It contains the coverages, limits, deductibles, and effective date. This page is often located on the front page of the policy.

 

Deductible When you’re filing an insurance claim, you pay something called a ‘deductible’. A deductible is the portion of a claim that you’re responsible for paying, and is chosen by you, based on the value of whatever you’re insuring.

 

Expiry Date: This is the date when the insurance policy ends. It is typically one year after the commencement or effective date.

 

Exclusions Some things aren’t covered by an insurance policy, like vermin, rodents, or wear and tear. These are called exclusions.

 

Floater When it comes to insurance policies, there are certain caps and limits on the coverage of expensive and easily moveable items (like jewellery). When you reach the cap, and require additional coverage, you may need to take out something called a ‘floater’. A floater is an addition to your policy, which covers the value of your items that exceed your base coverage and would take care of the replacement cost of these items if something were to happen to them.

 

Hazard A hazard is a situation or condition that raises the likelihood that a loss will occur. Ice on sidewalks, for example, increases the chance of a person slipping and getting injured, while smoking raises the probability of a policy holder getting lung cancer. This is different from a peril, which is something that causes a loss. Some examples of perils include fire, theft, collisions, natural disasters, illnesses, and death.

 

Lapse This refers to a period when one goes without insurance coverage. If a person, for example, fails to renew their auto insurance policy, then they have a lapse in coverage.

 

Loss A loss is the basis for filing an insurance claim. This includes direct and accidental damage the insured or their property sustains.

 

Named insured The named insured is the person or business named in the policy, also referred to as the policy holder. An insurance policy can have more than one named insured. The named insureds are listed on the declarations page of the policy document.

 

Named perils These are the specific type of losses or damages listed in the policy document. A named perils coverage provides protection against these.

 

Perils These are the forces or events that can cause damage to the thing you’ve insured. They range from common natural disasters (like lightning, wind, or hail) to the rarest (like earthquakes).

 

Policy An insurance policy is a written contract between the policy holder and the insurer that lays out the details of the coverage. This includes coverage, exclusions, deductibles, and premiums.

 

Policy Wording These are the written terms and conditions of an insurance policy. Usually, these terms will be agreed upon verbally first, then put on paper.

 

Premium This is the amount charged by an insurance company in return for coverage. There are several factors that impact premiums. These include age, gender, and driving history for auto insurance, weather-related and crime risks in an area for homeowners’ policies, and medical history and smoking status for life insurance.

 

Rider A rider, sometimes referred to as an endorsement, is an optional coverage that policyholders can add to their policies. This includes identity theft and water backup coverage for home insurance, and accident forgiveness and roadside assistance for auto policies.

 

Endorsement When an insurance policy changes in scope—whether something is added, removed, or modified—those changes are called endorsements.

GIO is an independent body set up to help Canadians find a fair resolution to disputes with insurance providers. GIO can provide advice on dealing with your insurance company as a first step. If you are not satisfied with the decision from your provider, GIO may be able to help resolve your concerns. 

 

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