Insurance Glossary

Accidental Death Benefit (ADB) Coverage against accidental death. The amount is usually payable in addition to any base amount of life insurance coverage.Annuity A contract providing payments to an individual over a specified period of time.

Annuity period The time between payments under an annuity.

Applicant The party applying for insurance coverage.

Asset Thing of value owned by, or owed to, an individual or organization.

Avoidance One method of risk management. It is the decision not to pursue certain activities or behaviours since to do so would increase one’s exposure to risk of injury, disease, or even death. Examples might include smoking, skydiving, racing a car, etc.

All perils coverage: An optional, more expanded level of car insurance that combines collision and comprehensive coverages. Subject to a deductible. Check with your agent or insurer to satisfy yourself what may still not be covered.

“At-fault” accident An accident, which will form part of your insurance record, where you are considered to be partially or completely at fault. Being “at fault” can occur regardless owhether or not you have been charged by police. So you can still be considered to be at fault by your insurer, even though you have not been charged under the Highway Traffic Act.

Accidental death and dismemberment (ADD) ADD is coverage that provides a lump-sum payment to you (or your survivors) in the event that an accident causes you to lose a limb (or limbs), leaves you paralysed, or causes your death.

Benefits The stream of payments you would receive from your insurance plan if you were to become disabled.

Beneficiary The person named in the policy who receives the death benefit, upon the death of the insured.

Cash value That portion of a permanent insurance policy that accumulates over time.

Cash surrender value (CSV) A benefit entitling the policy owner to an amount of money upon cancellation of a policy.

Claim A request for payment from an insurer, for a loss covered by a policy. A claim made to your own company is called a “first-party” claim. A claim made by a person against another person’s insurer is known as a “third-party” claim.

Claimant The person or party requesting payment of benefits under the terms of an insurance policy.

Collision or upset insurance Optional automobile insurance coverage that will pay for the repair or replacement of your car if it is involved in a collision. The collision could be with another car, a fixed object such as a hydro pole, or any other object. Note that this does not include “collisions” with animals. As with other coverages, it is subject to a deductible.

Comprehensive insurance Another optional insurance coverage that will pay you for the loss of, or damage to, your car when it is caused by such events as falling objects, flood, fire, vandalism and theft. It is under this coverage that you would be compensated for a “collision” with an animal. Comprehensive insurance provides broader coverage than that available as specified perils coverage (see below). Except in the case of theft and fire, a settlement is subject to a deductible.

See collision or upset insurance above.

See specified perils coverage below.

Convertibility The option to change from one type of life insurance policy to another (e.g. from term to whole life) without having to provide evidence of insurability (i.e., passing a medical exam).

Death benefit This is the money paid out to a named beneficiary (or the deceased’s estate) on a life policy, after the death claim is approved by the insurer.

See Face Value

Disability The inability to continue working, caused by illness or injury. An important distinction exists between being unable to perform one’s own occupation, or any occupation.

Dividend Policy dividends on participating insurance policies are not based on the insurer’s profits. They are determined by grouping policies together by type, and by country of issue, and then examining how each class of policy contributes to the insurer’s overall earnings and surplus.

Deductible This is the portion of an insurance claim that you are required to pay yourself. A deductible applies to optional coverages such as collision, comprehensive, and all perils. It also applies to mandatory uninsured automobile coverage. It does not apply to the theft of the vehicle itself, or to claims for lightning or fire. However, most insurers have a requirement of a minimum deductible, but you can opt for a higher one, and save money on your premiums.

Exclusion A risk (“peril”) that is not covered under your policy because it is specifically excluded. For example, damage to your wiring caused by squirrels (or any other rodent) is usually excluded from a standard homeowner’s policy.

Endorsement An amendment to your policy to increase some portion of your coverage. Commonly purchased to provide additional coverage for valuables such as furs, jewellery, stereos, etc. Also referred to as a “rider,” or “floater”.

Extended health care This is coverage beyond what is provided by your provincial health plan, and it can cover a lot of territory. It could include services such as those provided by physiotherapists, chiropractors, speech therapists, etc. And it could include equipment such as prosthetics, orthotics, and medical devices such as hearing aids. It could even include nursing and home care.

Face value The amount that will be paid to the named beneficiary upon the death of the insured.

See Death benefit.

Facility association This is the “insurer of last resort” for drivers that pose an exceptionally high risk for insurers. This would include drivers who have had several at-fault accidents and/or numerous convictions. Drivers such as this often cannot obtain coverage from a regular insurer. Rates are significantly higher – about two to three times higher – depending on the driver’s record. It is an industry-sponsored association to which all automobile insurers belong. Provincial automobile insurers are not members of this association, but will still charge high-risk drivers accordingly.

Guaranteed renewal A guarantee by the insurer that a policy will be renewed at the end of the term, without penalty or the necessity for a medical exam. The rate that the insured may pay upon renewal may also be guaranteed.

Home insurance Insurance coverage that protects your house and its contents, and provides you (the owner) with liability protection. Similar (but not identical) insurance packages exist for renters and condo owners, though there are important differences.

Floater See endorsement (above)

Illustration A computer-generated proposal for a client, taking into account certain assumptions, in an attempt to show (illustrate) how a specific policy might perform for that client.

Insured The person upon whose death the death benefit will be paid.

Liability A legally enforceable financial obligation.

Liability insurance A variety of insurance that pays the losses incurred by others when they have been injured, or their property has been damaged, and you are legally responsible for the loss.

Maturity That point in time when a policy or annuity reaches the end of its term.

Mortality rate The death rate for each of a number of age groups within the population.

No-fault insurance A system of insurance where accident victims collect benefits from their own insurance companies, up to specified maximums, for certain medical expenses and loss of income, regardless of who was at fault in the accident.

Non-participating policy A type of insurance policy (or annuity) where the owner does not receive dividends.

Participating policy A type of insurance policy that offers the potential of sharing in the success of the insurer through the receipt of dividends.

Peril The cause of damage or loss. For example, your homeowner’s policy insures you against perils such as theft, fire, and windstorm, etc. See also Risk

Personal lines insurance Insurance such as homeowner’s or automobile policies for individuals. (Compare to commercial lines insurance for businesses.)

Policy The legal document issued by the insurer outlining the terms and conditions of the insured’s coverage.

Policyholder The person buying the insurance, usually (but not necessarily) the insured.

Premium The amount paid by the insured to keep the insurance policy in force.

Prevention A very common method of risk management. Healthful eating, exercise, and not smoking are all good examples of prevention. Prevention is also accomplished by installing smoke detectors in your home, keeping your car in good repair, etc.

Pre-existing condition A condition that you were diagnosed with, or for which you have seen a physician, or were receiving treatment, before you acquired an insurance policy.

Rider An attachment to an insurance policy. It becomes part of the contract and increases the benefits payable.

Risk In the context of insurance coverage, this is the calculated chance of a financial loss.

Risk class A group of insureds that present a similar level of risk to the insurer. Risk classes can include such designations as standard, preferred, substandard, or uninsurable.

Segregated fund A pool of assets held by the insurer, to back a specific liability to a policyholder. The insurer must maintain these assets separately from its own assets (hence “segregated”). Segregated funds fluctuate in value. They can offer creditor protection and guarantees of capital.

Separation A method of risk management. Parents might choose to fly separately in order to avoid leaving their children parentless in the event of an accident. Companies may forbid senior managers or executives from flying together.

Specified perils Optional coverage for loss or damage caused by specific perils. These usually include events such as theft, fire, explosion, windstorm, lightning, and earthquake, or the destruction of any kind of vehicle in which the insured automobile is being transported. It doesn’t normally include damage from vandalism, or incidental damage such as a stone cracking your windshield. They are subject to a deductible.

Surrender To give up the policy itself, or to give up certain rights under a policy.

Rider Optional, extra-cost protection on a life policy, such as the accidental death benefit. See Endorsement above.

Term The time period during which a policy is in force. Also the period of time for a policy to reach its maturity.

Term life insurance A variety of life insurance that covers the insured for a specified period of time. It provides pure insurance with no investment component. A life insurance policy issued for a specific period, say 5, 10, 20, or even 100 years.

Upset or collision insurance See collision or upset above.

Underwriter The company, or individual within an insurance company, who evaluates the risk to the insurer in accepting someone as a policyholder.

Underwriting The process of “risk selection” for insurers. It includes determining how much to charge to insure against the risk, and what coverage to provide.

Universal life insurance A type of policy that combines term insurance with a separate investment component.

Variable annuity A variety of annuity where the amount of each benefit is neither guaranteed nor specified. The amounts fluctuate based on the performance of a separate investment account.

Whole life insurance A policy with a cash value component that provides coverage for one’s entire life.