Insurance Glossary



The price for $100 or $1,000 of insurance, usually for one year, expressed in dollars and cents. Alternatively, the rate is the premium for a specified amount of insurance, for a specified time.

For some types of insurance in some jurisdictions legislation requires rates to be applied consistently to similar risks, and certain jurisdictions require regulatory approval of rates, e.g. auto.

In addition to policyholder premium rates, the industry commonly uses the term "rate" in reference to reinsurance premium rates, and to commission costs for both insurance and reinsurance.

Person appointed to hold in trust and to administer property of insolvent companies.

A return to the policyholder of part of the paid premium, because of cancellation, suspension, reduction in insurance coverage, or because of rate reduction.

Registered Insurer
The registration of a reinsurer is significant in determining whether an insurer can obtain full credit with regulators for the transfer of insurance liabilities to a reinsurer. Any reinsurer not under the regulatory control of a Canadian insurance regulator (is not licensed) is deemed unregistered and the primary insurer must cover any liabilities transferred to this unregistered reinsurer.

Note: Registration (corporate), should not be confused with Licensing (operations).

The federal, provincial or territorial government agency responsible for the control and regulation of the insurance industry under its jurisdiction.

The reactivation of suspended or cancelled insurance. Restoration of full amount of insurance or reinsurance after a claim has been paid, with or without the payment of additional premium.

A discharge from obligation or responsibility. To let go of, or give up a legal claim. The most common types in insurance are: First Party Release - between the insured and the insurance company. Third Party Release - between the insured and a third party. Indemnifying Release - between the insured and a guardian for a minor or other person not legally competent.

The standard fire insurance policy insures against damage done in removing the insured property from the path of the fire or other insured peril (if loss is mitigated).

Removal also may mean the taking of property to some place other than that at which it was insured.

A certificate which attests to the fact that an insurance policy has been extended for another term.

Renewal Premium
The premium for the new term of the policy.

Generally an insurance policy will set out the conditions for an insured to effect repairs to insured property. Ordinary repairs are usually permitted without notice to the insurer.

Most policies of insurance of property give the company the right to substitute other property of like kind and quality for insured property which has been damaged or destroyed. This is making a replacement.

Replacement Cost Clause
Applies generally to some fire insurance policies where a special cover may be purchased so that in the event of fire, repairs or replacement will be made with material of like kind without cost to the insured for depreciation or betterment.

Replacement Value
The cash value representing what it would cost to replace the particular article which is the subject of the insurance.

The acceptance or rejection of an insurance risk and the amount of premium that would be required, is determined by information submitted by the person applying for such insurance.

Statements which would normally lead the company to decline the acceptance of a risk, or to charge a much higher rate, are material to the risk and are commonly considered "warranties."

All other statements such as the insured's address, etc. are referred to as mere "representations" to distinguish them from the more important statements considered to be "warranties."

The penalty for false information on material facts or "warranties" may be voiding of the policy.

Another name for an endorsement.

The chance of loss. Specifically the possible loss or destruction of property or the possible incurring of a liability. Sometimes refers to the subject of an insurance contract.

The taking of another's property by force or threat of force.


The remaining value of property after severe damage by fire or other peril. The overall loss is reduced by the salvage value. Undamaged property may be quite saleable and some property may be partially damaged, thus repairable and then saleable.

1) A comprehensive list accompanying a policy to detail the property, locations and amounts insured, and the applicable conditions.
2) In rate-making, the formula applied to determine a rate.

Scheduled Property Floater
An inland marine form of policy specifically insuring various individual items. Articles of unusual value, provided they are movable, may normally be written this way and insured against many hazards, often against "all risks."

Seasonal Risk
1) A risk occupied only part of the year, such as a summer dwelling.
2) In manufacturing, it may be a plant operating seasonally, such as a cannery.

A person, corporation or organization which assumes all or part of a risk itself rather than use an insurer, government departments often self-insure.

An agreement between concerned parties. In insurance, the agreement is usually on the money changing hands to discharge an insurance claim.

Settlement Options
The alternatives offered to the insured or the insured's beneficiaries when settling a loss. Life insurance policies provide either a lump sum payment or a set annual amount for a fixed period. Accident and health policies usually provide for weekly benefits along with the payment of expenses as they occur, even though the disability may not last long enough to total the lump sum option.

Short Rate Cancellation
The cancellation by the insured of a policy before its natural expiration; the insurer pays a return premium which is less than the proportionate part that remains unearned.

The oral utterance or spreading of falsehood harmful to another's reputation. Libel is written; slander is spoken.

Smoke Damage
Essentially, the devaluation by smoke, not fire, of merchandise and property. Such damage is covered by the fire policy.

Special Damages
Actual loss from the natural, not the necessary, consequences of the subject of complaint; e.g., specific payments for medical bills or car repairs. In third party claims, it means the damages that may be proved with documents.

Special Multi-Peril Policy
This basic policy contains declarations, general provisions and definitions applicable to the four principal sections of coverage; property, liability, comprehensive crime, boiler and machinery. The particular coverage requirements for each are handled by separate forms attached to the basic contract.

Specified Perils*
Means: Fire, lightning, explosion, smoke due to a sudden, unusual and faulty operation of any heating or cooking unit in or on the premises, falling objects, impact by aircraft watercraft or land vehicle, riot, vandalism, water damage (more information available), windstorm or hail, loss while personal property is in transit. *This is a brief overview and not meant to be an exhaustive list.

Spontaneous Combustion
Self-ignition of combustible material through chemical action of its parts.

Sprinklered Risk
Property protected against fire by a system of overhead pipes with regularly spaced heads designed to melt at the heat of a fire, thus releasing water for extinguishment.

Statement of Claim
A written statement by a plaintiff detailing the facts which support the claim against the defendant and the relief sought.

Statement of Values
The information required when a single rate is to cover more than one item or building. To determine a correct average, the rating bureau requires the policyholder to give the value of each separate risk and its contents.

An act of the legislature. Common law is made up of the various court decisions over the years. Case law may be altered by statute.

Statute of Limitations
Law determining the period within which a specific legal action must be taken.

Statutory Conditions
Special prescribed and standardized conditions that the Provincial Insurance Acts require to be included in fire, automobile and accident and sickness policies.

Merchandise for sale or manufacture, as distinguished from furnishings, fixtures or equipment.

Stock Company
A company owned by a series of investors or stockholders (shareholders) who assume the risks of profit or loss.

A term applied to articles or substances held for safekeeping. If storing of such articles is prohibited by a policy, the policy will be voided if loss consequently occurs, unless the company's permission and consent has been specially granted.

Structured Settlement
A financial package permitting a settlement to be paid in regular installments either for a fixed period or for the lifetime of the claimant. Because it is tailor-made for individual cases, the structure may also include some immediate payment to cover special damages. The payment is usually made through purchase of an annuity from a Life Insurance Company.

A trade contractor such as a roofer who usually subcontracts with a general contractor.

Once a company has paid a loss for which someone other than the policyholder is responsible, it may have the right to recover this loss from the guilty party. This right is called subrogation.

Subscription Policy
A single policy covering a risk that is divided among a number of insurers; the policy is issued by the "lead" company (usually the one with the largest percentage) and signed by all participating companies.

A legal proceeding brought by one person against another.

Sum Insured
The amount for which insurance is effected and the one on which the premium is based. Often in life insurance, the term is "sum assured."

Superintendent Of Insurance
The chief officer of the Government Department which regulates insurance.

Surety Bond
Surety Bond is a three party contract between the Owner (Obligee), Contractor (Principal) and the Bonding Company (Surety). The Surety by lending its reputation and credit, guarantees, that the Contractor's obligation to the Owner will be fulfilled.

Cancellation of a policy before its normal expiry by mutual consent of insured and insurer.


Tenant's Policy
A package policy specially designed to meet the normal insurance requirements of a private tenant covering personal belongings and liabilities.

The period of time from the inception to the termination of an insurance policy or bond.

The wrongful taking of the property of another. It is a broad term and includes larceny, pilfering, hold-up, robbery and pick-pocketing.

Third Party
A claimant under a liability policy, so called because he is not one of the two parties (insured and insurer) who has entered into the insurance contract which pays his claim.

Third Party Insurance
A fire policy insures the policyholder against loss or damage to his own property. When a policy insures a person against the liability he may incur to another for damages, it is "Third Party Insurance." The insured is indemnified with respect to any loss which he might suffer as a result of his legal liability to others arising out of the peril against which insurance is written.

The right to ownership of property. The owner of real property having just possession of his property.

A legal wrong arising from a duty fixed by law. Breach of this duty causing injury to persons or property is repressible by legal action for damages. Liability for tort involves private or civil wrong or injury and is distinct from that under contract in that the duty is owed to people, generally, rather than to a specified individual.

Total Loss
Loss of all the insured property. Also a loss involving the maximum amount for which a policy is liable.

An illegal act against another person's rights or property.


Umbrella Policy
A special form of liability policy designed to protect the insured for certain unknown contingencies over and above coverages and to provide excess insurance.

A third person appointed to decide an arbitration.

To insure. More commonly, to scrutinize a risk and decide on its eligibility for insurance.

1) The insurance company or group that underwrites or insures a particular risk.
2) The individual within an insurance company whose responsibility it is to accept or reject business in the particular line in which he/she specializes and in this way chooses risks his/her principals are prepared to underwrite.

Underwriters' Laboratories of Canada (U.L.C.)
An organization financed by stock insurance companies whose purpose is fire prevention and safety. It provides testing laboratories for various manufactured items and approves those that are acceptable. Labels issued by the Underwriters' Laboratories are evidence to the public that the particular item meets the safety standards.

Where the premises contain contents but no human beings, such persons being temporarily away from the premises, on vacation for example, the premises are said to be unoccupied. This is distinguishable from Vacant in that in vacancy, the contents have been moved out leaving nothing but the building.

A property located in an area not regularly serviced by a fire department.

Utmost Good Faith
A phrase in a legal document calling for the highest standards of integrity on the part of the insured and the insurer.


Vacant Building
A building with no occupants or furnishings. See also Unoccupied.

An estimate or the act of assessing of value. This will frequently be done through the process of an appraisal.

Valued Policy
A policy which provides that a special amount shall paid in the event of a total loss of the property.

Vicarious Liability
Liability imposed upon a person even though not a party to a particular occurrence, e.g., the owner of a motor vehicle is vicariously responsible for injuries even though he is not driving the car at the time of the occurrence.

1) Invalid, not legally binding.
2) An insurance contract that is prohibited by law and thus cannot be held to be a valid contract.


Waiting Period
The time which must elapse before an indemnity is paid.

The intentional relinquishment of a known right. A waiver under a policy is required to be clearly expressed and in writing.

Statement or stipulation in a contract, the breach of which nullifies the contract.

Warranty (Implied)
A warranty assumed to be a part of the insurance contract even though not expressly included.

Water Damage Clause
A Portion of the policy affording coverage for certain specific causes of water damage.

Windstorm Insurance
Protection against damage done to property by unusually high winds, cyclones, tornadoes or hurricanes. This coverage is available under the extended coverage endorsement of property policy.

Without Prejudice
An action taken during claims negotiations designated as "without prejudice" is intended to be without detriment to the existing rights of the parties.

A Court document commanding the defendant to enter an Appearance within a specified number of days if he wishes to dispute the claimant's claim.