for Canada's mutual insurance industry


Excerpt from the Dictionary of Insurance produced by The Insurance Institute of Canada

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Abstract of Title
A concise chronological history of title to land showing any encumbrances, e.g., mortgages, deeds or conveyances that may affect the land or interest in the land.

1) An unusual, fortuitous, unexpected or unforseen event or occurrence. 2) A mishap that is not expected or designed.

Accident and Health (Sickness) Insurance
A form of insurance compensating an individual for loss as a result of an accident or illness. It may pay certain or all expenses for medical and similar services and a weekly or monthly indemnity for loss of income. The amounts and items covered vary from policy to policy and depend to some extent on what coverage is purchased by the insured.

Accident Prevention
Methods insurers and their insureds use to reduce accidents, e.g., removing a hazardous condition.

Accidental Means
Unintended, unexpected and unforeseeable cause of an injury. Accidental means requires that the cause of the injury be accidental as distinct from the result being accidental. For example, a man while painting his house falls because his ladder breaks. He suffers injury. The breaking of the ladder is the cause of the injury, and is accidental means. If instead he strains a muscle in reaching to paint, such a strain is an accidental result, but not accidental means.

Acquisition Cost
The cost of putting business on the books. The items involved are not standard with all insurers but generally may include such items as agents'/brokers' commissions, field representatives' costs, premium tax and perhaps some of the relevant head office acquisition costs of operation.

Act of God
A direct, violent sudden act of nature that could not have been foreseen, or if foreseen, its effect could not have been prevented, e.g., flood, earthquake.

Actual Cash Value
The fair market value of property taking into account factors that might augment or reduce the value of the property in question.

Additional Insured
A person other than the named insured who is protected by the terms of the policy. Most automobile policies, for example, insure a specific individual as an insured, but also insure anyone driving with that insured's consent. The additional insured may be "named" or "unnamed."

Additional Living Expense Insurance
Coverage applicable when an insured's dwelling is damaged by an insured peril to such an extent that one cannot live in it until repaired. This insurance pays the extra amount it costs to live elsewhere until repairs are made, such as the cost of living in a hotel.

Additional Premium
An extra charge, during the policy period, for an alteration which increases the hazard or the insurer's liability.

1) One who represents an insurer or investigations and dealings with respect to settlement of claims. This may be a salaried employee of an insurer or one who operates as an Independent Adjuster. 2) A Public Adjuster is an adjuster who is employed by a policyholder to represent him in his claim negotiations with an insurance company. As compensation the Public Adjuster usually takes a percentage of an amount collected. He does not act on behalf of an insurance company.

The process of arriving at an amount of settlement for a claim. It may consist of a series of computations to arrive at the amount of a loss, as in a complicated fire loss. It may involve discussions of liability, quantum and other such matters as might be the case in a problem liability claim. It may contain both.

Adjustment Bureau
An organization for the purpose of adjusting claims with a regular staff of adjusters but which is generally owned by a number of insurance companies. The member companies usually refer their claims to their own Bureau in the particular area in which the Bureau is operating.

Admitted Company
Insurer or reinsurer licensed or approved to conduct business in a particular jurisdiction (provincial, territorial or federal).

Adverse Selection
A situation occurring when an insurer does not receive a fair cross-section of an agent's/broker's portfolio of business, e.g., when the agent/broker places the poor risks with one insurer but places the good risks with another insurer.

1) A sworn statement. 2) A written statement in the name of a person known as the "dependent," who has voluntarily signed and sworn or affirmed to such a statement.

A term usually used when confirming a judgement of an inferior Court. To "affirm" the earlier judgement is to agree with it.

Agency Contract
The written agreement between an insurer and an agent or broker outlining their respective rights and duties.

1) A person who is employed to act on behalf of another. 2) An insurance agent is one who contracts with one or more insurance companies to sell their insurance policies to the public and is paid a commission on or receives compensation for such business. See also Broker.

Agent of Record
The agent indicated on and for each insurance policy, binder or acceptance. The agent on a particular policy or bond.

Alien Company, Carrier or Insurer
A company incorporated in a foreign country, but conducting business in Canada.

All Risk Policy
A name given to an insurance policy which covers against the loss caused by all perils except those which are specifically excluded by the terms of the policy. Frequently, a policy of insurance is written to insure damage to property caused by specific "named perils," which are listed on the policy. However, policies may be issued in certain cases to insure against "all risks of loss or damage" and are then called "all risks" policies. The term excludes insurance against certain hazards.

Allied Lines
Those coverages which are associated with property insurance. Examples are: sprinkler leakage, earthquake and water damage.

Amount of Insurance
The limit of payment for which an insurer is liable under a policy.

Anti-discriminatory Laws
Laws which prohibit companies from giving preferential terms or rates not warranted by the rating of the risk.

Any proceeding brought before a higher Court seeking a review to a decision of a lower Court or quasi-judiciary that is deemed erroneous in the interpretation or application of the law and/or facts.

One who appeals the decision of a lower Court to higher Court.

The person or firm requesting insurance.

A request for insurance. This may be done verbally, in writing or by using a printed form.

A valuation or an estimation of the value of property usually done by an expert in that field who has no personal interest in the property.

Person who because of special knowledge is vested with authority in determining the real value of property or damage.

A person or persons (usually three) chosen by the parties to a dispute to hear their matter of contention and to then render judgment. The parties submit themselves in advance either voluntarily or compulsorily to the arbitrator's decision.

At common law, the deliberate and intentional burning of property by its owner or by another person.

Property of all kinds, real or financial, that belongs to a person or corporation or to the estate of a decedent.

Assigned Risk
A plan between insurance companies in certain jurisdictions to accommodate the poorer risks which would not normally be acceptable to an individual company.

Associate of the Insurance Institute of Canada (AIIC)
A professional designation (Canada) earned by examination following study courses.

Authorized Company
An insurance company licensed to do business in a province by the authority of the provincial insurance department.

Automatic Reinstatement
After a claim has been paid or the property restored, most policies automatically return the stated limit of insurance to its original amount.

Automobile Dealer's Bond
A consumer protection bond which usually guarantees that the vehicle sold is not a stolen one and that a deposit given by a buyer to a dealer is secure.

Automobile Insurance
Insurance coverage that provides indemnity and/or compensation for injury or physical damage which ensues from the ownership, use or operation of an automobile.


Physical improvements beyond mere maintenance or repairs that augment the value of a property.

Blue Book Value
The Blue Book lists the values of automobiles. Insurers typically use this book to establish the amount of loss in automobile physical damage claims. These values are synonymous with market value. See also Red Book.

Bodily Injury
A term used in auto and liability policies meaning physical injury, including sickness, disease, mental injury, shock or death.

An independent person or firm who acts on behalf of the insured in placing business with insurance companies.

Broker (Reinsurance)
An intermediary negotiating reinsurance treaties between reinsured and reinsurer on behalf of reinsured for a consideration.

Building Codes
Rules and regulations of governmental bodies defining standards that construction in that jurisdiction must meet.

Burglar Alarms
Devices of various types which give warning of entry into premises by unauthorized persons.

Unlawful removal of property from premises involving visible forcible entry.

Burglary Insurance
Insurance against loss of property caused by burglars.


Cancellation Clause
Provision in insurance policies or bonds stipulating how the policy or bond can be cancelled.

The measure of an insurer's ability to issue contracts of insurance. Measured usually by the largest amount it will accept on a given risk or, in certain other situations, by the maximum volume of business which the company is prepared to accept.

Captive Agent
Agents who place all their business with one insurance company are known as "captive agents". In some instances they may be salaried employees of the company, in others, they have a contract to write only business that would be acceptable to the one insurance company, and are paid on a commission basis.

Captive Insurance Company
Insurance company entirely owned by another, generally non-insurance company, insuring risks of parent organization, and in some cases, risks of non-related organizations.

Cash Mutual
A mutual corporation, without share capital, empowered to undertake insurance on both a mutual plan and a cash plan. Often have participating policies and non-participating policies. Provincial authority may require security deposit in lieu of guarantee fund participation. See Mutual Insurance Company.

Casualty Insurance
Loosely used to describe an area of insurance not particularly or directly concerned with life insurance, fire insurance or automobile insurance. Most frequently refers to liability, burglary and plate glass insurance but may include Fidelity and Surety.

Catastrophe Cover
Most companies buy reinsurance which will pay them if they suffer a large amount of loss as the result of an accumulation of net losses in a single event, e.g., a hurricane or a conflagration. Such covers are "excess covers" because the reinsured company must first stand a large agreed amount of loss. The reinsurance pays losses suffered in excess of that agreed amount.

An insurer cedes part of a risk to a reinsurer when it transfers or reinsures part of the risk.

Ceding Commission
Commission paid by reinsurer to reinsured.

Ceding Company
A company placing reinsurance with another company is the ceding company. The company accepting the risk is the reinsuring company.

Chartered Insurance Broker (C.I.B.)
A professional designation denoting membership in the Chartered Insurance Professional Society, having qualified by examination as an Associate of the Insurance Institute of Canada.

Strictly speaking, a claim is the exercising of the right of an insured to be indemnified by his insurance company for damage suffered. It is frequently used, however, to indicate the amount of the claim.

In practice, it is any notification of a possible loss under an insurance policy whether any payment is likely to follow or not.

For every claim that is reported, the insurance company must set aside reserves equal to the figure which is anticipated the claim will cost.

Claim Reserve
The amount of money set aside by an insurance company for reported but unpaid claims and incurred but not reported (IBNR) claims including claim expenses.

One who makes a claim.

Claims Examiner
An employee of an insurer who handles and is responsible for incoming claims.

Class Rate
Some insurance premiums are so low that it is not economically practical to calculate them individually for rating purposes, and where there are sufficient numbers of such risks against a particular peril, a minimum rate is set for the class without the necessity of detailed rating for the particular line of insurance. This is known as a class rate.

Words in a policy which describe certain specifications, limitations or modifications.

Co-insurance Clause
A clause in an insurance policy requiring an insured to carry a certain percentage, usually 80, 90 or 100 per cent of insurance in relation to the value of the property insured. If the insured fails to do this, when he agrees to be a self-insurer of all losses large or small in the same ratio as his failure to comply with the percentage required, is related to insurance required. For example, a building valued at $100,000 with an 80 per cent co-insurance clause would require insurance coverage of $80,000. If coverage is carried for only $40,000 then the insurer is a self-insurer or co-insurer for $40,000 of the $80,000, and the insurance company would be responsible for the same amount. This ratio would apply even is a loss were only $5,000. Then the insurance company would pay $2,500 and the balance or co-insurance penalty of $2,500 would be borne by the insurer.

Falling in of a building.

A vehicle or a ship collides when it strikes another object or another vehicle or ship. Collision insurance insures against loss so caused.

Combined Ratio
The sum of the loss ratio and the expense ratio of an insurer for a specific period.

Compensation based upon amount of production, e.g., independent insurance agents are compensated on the basis of a percentage of the premium. The percentage varies with different lines of insurance.

The action taken or the funds paid to make good the loss a person has suffered.

Comprehensive Automobile Coverage
An item of coverage in an Automobile Physical Damage policy insuring against loss or damage resulting from numerous miscellaneous causes such as fire, theft, windstorm, flood, vandalism, etc., but normally not including loss by collision or upset.

Comprehensive Personal Liability
A form of liability insurance for individuals which insures the policyholder in the event he has become liable to pay money for damage or injury he has caused to others. This form does not include automobile liability, but does cover almost every activity of the policyholder except those which arise form the operations of a business. Hence "Personal" liability.

Compulsory Insurance
Any form of insurance required by law, e.g., Workers' Compensation Insurance must be in effect before certain workers' may be hired; certain Auto coverages.

Conditional Sale
A contract for the sale of property where the seller retains title until all conditions have been fulfilled (usually payment in full under an instalment plan.) In real estate, conditions may apply to seller (vendor) and purchaser. See Also Hire-Purchase Agreement.

Conditions of the Contract
Articles in contract defining or describing terms, responsibilities of owner and contractor, performance and payment schedules, and the like.

Is the individual ownership of a single unit in a multiple unit building or group of buildings, together with a percentage interest in that part of the total property owned jointly by all unit owners. In an apartment building, each apartment would be a unit and the stairways, pathways and parking areas would be in common ownership. Condominium property requires special insurance treatment.

Consequential Loss
The word "consequential" means something following as an effect or result. It is an indirect result of the occurrence that causes the loss.

The difference between a direct loss and a consequential loss can be seen in the destruction of a power station by wind. The damage to the power station is a direct loss by wind. There is actual physical damage directly resulting. The destruction of the power station also interrupts the generation of power by the station. For example, a cold storage plant is without electrical power. Foodstuffs spoil as a result or as a consequence. This is a consequential loss, not a direct loss.

Constructive Total Loss
A partial loss but where the damage is so extensive that repairs would cost as much or more than the repaired property would be worth, or the limit of insurance.

Contents Rate
The rate for insurance of the contents of a building as distinguished from the rate for insurance on the building itself.

Contributory Negligence
Many accidents are the fault of both parties who are involved in the occurrence. The plaintiff who sues another party for damages also may be guilty of some negligence, which is a concurrent cause of the damage. Such a party is guilty of contributory negligence.

Crop-Hail Insurance
Insurance against hail damage to growing crops. Although hail is the basic peril in these policies, cover is often granted for crop damage resulting from additional perils, such as fire, windstorm, lightning, etc.

Crop Insurance
Insurance against loss due to the failure of crops to produce properly. Basically the Crop-Hail policy with added weather hazards such as drought, frost, excessive heat, snow, sleet, etc.


Death Benefit
An amount set out in the policy representing the amount that will be paid in the event of death. Also referred to as "principal sum."

Debris Removal
A provision in an insurance policy most commonly found in fire insurance providing indemnification for the cost of removal of the debris after a fire.

A person who owes something to another person.

Statement, signed by the insured, warranting that information given by him is true.

Statements included in a policy, which are agreed to by the insured and form the basis of the contract of insurance.

To refuse acceptance of an insurance application.

A Judgement or Order of the Court.

An agreed specified sum to be deducted from the amount of loss and assumed by the insured.

Deductible Clause
A clause defining the amount of loss for which insured is liable; defines insurer's and insured's contributions to cover losses

A defendant's response to a plaintiff's Statement of Claim.

The person against whom the suit is commenced.

Deferred Premium Payment Plan
Plan providing for the payment of the premium over time.

A statement made under oath. Most commonly the statement of a witness in a judicial proceeding.

Reduction in value of property through use, ageing, deterioration and obsolescence.

Description of Risk
Particulars of a risk such as the physical hazzard, e.g., construction and occupancy of a building.

Not joined to another structure on either side.

Direct Billing
A system for the collection of premiums whereby the insurance company "directly bills" the insured for the premium in lieu of the conventional collection of premiums by the agent or broker. The insurer sends a statement to the agent, usually monthly, recording the premiums collected directly, and credits the agent with the commission of those items.

Direct Written Premium
The policy premium adjusted by additional or return premiums.

Directors and Officers Liability Insurance
Protection for officers and directors of a corporation against damages resulting from negligent or wrongful acts in the course of their duties. Also covers the corporation for expenses incurred in defending lawsuits arising from alleged wrongful acts of officers or directors. These policies always require the insured to retain part of the risk uninsured.

Inability to carry on in one's normal occupation due to accident or sickness.

A denial of liability for cause, e.g., to deny coverage under a policy on grounds that a statutory condition has been breached.

The right of discovery is the right by which a party to a Civil Court proceeding, actually commenced or contemplated, is enabled before the determination of any matter of consequence in those proceedings, to extort under oath from another party to those proceedings: i) all his knowledge, remembrance, information and belief concerning the matter in question and ii) the production of all documents in his possession or power relating to such matter.

Loss of a limb, e.g., leg, arm, finger or eye.

Domestic Company
A Canadian company.

Place of permanent residence.

Double Insurance
Two policies covering the same risk.

Drainage System
All pipes, public or private, conducting liquid wastes to a designed spot.

Drive Other Cars Clause
A provision in an automobile policy to protect the policyholder when he is driving cars other than the one described in the policy.

Driver Training Credit
To encourage education coursers at schools and colleges, many insurers grant premium rebates to applicants for private passenger automobile insurance who have successfully completed an approved training program.

The living quarters occupied, or intended for occupancy, by a household.


Earned Premium
1) That portion of premium earned or charged for the period of time a policy remained effective. For example, an annual policy paid for in advance would be one twelfth "earned" at the end of the first full month of its Term. 2) An amount calculated by taking earned premium reserve at beginning of period plus premium written during period, less unearned premium reserve at the end of period. 3) Premium actually exposed to loss.

Earned Surplus
See Retained Earnings.

Earthquake Insurance
Insurance against damage by earthquake.

Right of way, or similar right, over another's land, e.g., the owner of land may grant passage over a certain portion of that land to another who may want to access another property or lake.

Effective Date
The date of inception of an insurance policy, or the date additional coverages become effective.

Property, goods, chattels, clothes and documents.

Employer's Liability Insurance
Coverage for legal liability imposed on an employer to pay damages to an employee injured by the employer's negligence. This is not Worker's Compensation Insurance where special acts of legislature set out specifically the relationship between the employer and employees in certain circumstances and formula by which awards in each case are computed.

A claim or mortgage on property pledged as collateral for a loan. The owner has less than the full interest in the property.

An amendment added to a written document, particularly an agreement between parties, altering its provisions.

Errors and Omissions Insurance
1) Insurance covering the legal liability of professionals not usually involved with the care of the human body such as architects, engineers, accountants. 2) A type of insurance which will step in to take the place of insurance that has not been effected due to a mistake or forgetfulness on the part of the policyholder. Issued to risks such as mortgage concerns, professionals, semi-professionals or others engaged in the routine insurance of many properties. 3) A clause in certain policies whereby the insurer agrees to waive its defences when an honest error has been committed, provided it is corrected when discovered. See also Malpractice Insurance and Professional Liability Insurance.

Escalation Clause
A provision in a contract providing adjustment of price of specific items if conditions change.

Estimated Premium
A tentative premium set in the anticipation of being approximately correct but which may be increased or decreased when the final premium calculation is made.

A person who appraises value, worth or cost of items, especially construction costs.

Excess Insurance
Insurance which does not participate until all other similar insurance on the same subject is exhausted, or until the loss exceeds a previously agreed upon amount. Where there are two policies on a risk and both contain a provision that they are "excess to all other insurance," the problem is resolved by the general "guiding principles." This is usually interpreted so that each insurer contributes pro rata to the loss.

Excess Judgement Loss
Amount in excess of policy limit the insurer must pay as a result of the insurer's negligence or bad faith when settling a claim.

Excess of Loss Treaty
A form of reinsurance which indemnifies the ceding company for that portion of the loss which is in excess of a stipulated sum or primary retention of the ceding company.

Excess Per Risk Reinsurance
A form of reinsurance where the reinsurance company reimburses the ceding company for the amount exceeding a defined retention for each loss in each risk.

Risks, perils or properties defined in the policy as not covered.

Ex Gratia Payments
A payment made for which an insurer is not liable under terms of its policy. Usually made in lieu of incurring greater legal expenses in defending a claim.

Expense Ratio
1) Expenses (including accruals), excluding loss adjustment expenses, during a defined period, divided by premiums earned for the same period. 2) Percentage of premium used to pay cost of acquiring, writing and managing a bond of policy.

Comparison of premiums earned with claims incurred for:
a) an individual insured
b) group of insureds
c) class of coverage.

Expiration Notice
Notice sent by the company to the broker/agent or one sent by the broker/agent to the client that a policy is due to expire.

End of a policy period.

Extended Coverage Insurance
An endorsement that enlarges the coverage afforded by the primary policy. Coverages such as windstorm, hail, smoke, riot are extended coverages on a fire policy.


See Fellow Chartered Insurance Professional.

Face Amount
The amount for which a policy is written and, therefore, the limit the insurer may be liable to pay in one loss.

Face Value
The amount for which a policy is issued.

A pooling agreement between all automobile insurers (now replaced in most provinces by the Facility Association) in which a market is guaranteed for all licensed drivers and registered owners. The results of the total industry pool are shared by all members of the agreement.

Facility Association
Similar to Facility in intent. However individual risks are written with selected carriers on behalf of the association, with the collective results then shared by all members of the association.

Facility of Payment Clause
A provision in a policy authorizing the insurance company in certain circumstances to pay certain designated persons other than the insured.

Facultative Reinsurance
Reinsurance of risks on an individual case by case basis subject to acceptance or rejection by the reinsurer.

Fair Cash Value
See Fair Market Value.

Fair Market Value
Price at which a buyer and seller, under no compulsion to buy or sell, will trade.

Farm Mutual
A mutual insurance company whose owning policyholders are predominately farmers. See Mutual Insurance Company.

Farmer's Comprehensive Policy
A comprehensive liability policy covering the operation of a farm

Fellow Chartered Insurance Professional
A professional designation denoting membership in the Chartered Insurance Professional Society, having qualified by examination as a Fellow of the Insurance Institute of Canada.

Fellow of the Insurance Institute of Canada (F.I.I.C.)
A professional designation awarded to a graduate of the Institute's Fellowship Program.

Field Representative
An individual employee working away from the head or home office in the territory served by his company. See also Special Agent and Inspector.

Fine Arts Insurance
Insurance of works of art. Usually written by inland marine underwriters on an "all risk" or a "valued" basis.


Combustion manifested in light, flame and heat for useful purposes (friendly fire) or destructive purposes (hostile fire). Fire has long been used for the benefit of man. Fires heat his premises, cook his meals, and are used in many manufacturing processes. Such situations are known as Friendly Fires.

Fire when uncontrolled, can be an enemy of man and destroy his houses, crops lumber, stands, etc. Such fires are known as Hostile Fire and are the subject of insurance.

Fire insurance policies therefore, do not indemnify the insured for his loss in oil or coal burned in heating a building, nor the gas for cooking his dinner. Such consumption takes place at the deliberate and intentional instigation of the insured. That is a friendly fire.

Where the fire is a hostile fire, however, an individual stands to suffer substantial loss because of something beyond his normal control and can purchase protection in the form of indemnity for his loss from fire insurance companies.

Most commonly, the fire must be a combustion with actual and visible flames to be a fire as contemplated by the fire policy.

There are many borderline cases. For example, Scorch Claims from a friendly fire will produce different interpretation in different areas. Certainly a scorch claim caused by hostile fire is a loss within the scope of the coverage of the policy. A scorch claim, however, from a friendly fire is presumably something within the control of the insured and in some areas is not paid, although more frequently is considered as a breaking of the bounds of the friendly fire and, therefore, covered by the policy.

Similarly, cigarette burns frequently do not cause any flame but do scorch and damage furniture finish. It might well be argued that technically these are not covered and frequently they are not paid but, on the other hand, some companies in some areas do recognize such losses.

Also subject to difference in interpretation are the cases where some good object is accidentally thrown into a friendly fire such as a ring which falls into wrapping paper and later is thrown in the fireplace. At one time it was commonly held that the friendly fire did not break its bounds and that there was, therefore, no coverage. However, in recent times it is frequently interpreted that while the fire did not break its bounds, the insurable article did and would, therefore, be subject to insurance protection.


Fire Insurance
Coverage for losses from fire and lightning and also the resultant damage caused by smoke and water. Usually supplemented by Extended Coverage Insurance. See definition.

Fire Loss Retention
Insurers' loss before excess of loss reinsurance cuts in. See also Net Line.

Fire Mark
A medallion or sign on a building showing which insurance company insured it. Used in the early days of insurance when municipalities did not have fire departments and individual insurance companies had their own fire fighting equipment. The Fire Mark helped identify a property for the insurer and its fire fighters.

Fire Partition
See Fire Wall.

Fire Resistant
certain higher heat temperatures for a certain period of time. It has a lesser degree of resistance to fire and ranks slightly more hazardous than "fireproof".

Fire Wall
Wall, starting at foundation and continuing without interruption to above roof; restricts spread of fire.

Fireproof, in insurance, means something with a very high degree of resistance to the spread of fire. It is a misnomer since no building is actually totally fireproof. This type of construction is as close to being fireproof as possible, given human and technical frailties. Fireproof construction is considered safer from the spread of fire than fire resistant construction.

First Loss Insurance
An insurance policy for much less than the value of the property insured. Requested where the insured does not anticipate a total loss. A higher rate is charged than the basic rate for full insurance.

Fixed Assets
Tangible long-term assets such as land, building, furniture, fixtures, machinery, equipment etc. held for use rather than for sale.

Flat Cancellation
The cancellation of a policy as of the effective date with all paid premium refunded.

Flat Commission
A commission to agents which pays the same percentage on all classes of risks, as opposed to a graded scale commission which pays different percentages for different classes of risks.

Fleet Policy
In automobile insurance, this is a policy insuring a number of cars for one owner. In marine insurance, a policy insuring a number of ships for one owner.

Floater Policy
A policy covering the same risk at a number of perhaps unspecified locations possibly over a wide area (even world-wide); usually included goods being frequently moved from one location to another, e.g., Fur Floater, Jewellery Floater, Contractors' Equipment Floater, etc.

Overflow of water from its natural boundaries. A general and temporary condition of partial or complete inundation of normally dry land areas from the overflow of inland or tidal waters or from the unusual and rapid accumulation or runoff of surface waters from any source.

Flood Insurance
Insurance against damage done by rising or overflowing of bodies of water.

Foundation Wall
A masonry wall below the surface which supports a building.

A provision in an insurance policy whereby the insured pays all claims up to the amount set in the franchise. If, however, any loss exceeds that amount the insurance company assumes full responsibility for the full amount of the loss including the franchise amount.

1) Methods used to deceive to cause unwarranted favourable decision for one's own benefit. 2) Deliberate misrepresentation or misstatement. 3) Concealment of facts which should at the time be made known.

Free Alongside Ship (F.A.S.)
A term delivery meaning that the seller accepts full responsibility for the merchandise until it reaches the loading facility of the ship. From that point onward, the merchandise is the responsibility of the purchaser.

Free on Board (F.O.B.)
When goods are shipped F.O.B., the shipper is responsible only until the goods have been placed on board the vessel or freight car or truck or other means of transport. After that the risk belongs to the consignee.

Friendly Fire
A fire confined to the place it is supposed to be, e.g., in the fireplace; in the incinerator. See Hostile Fire.

Full Coverage
An insurance policy without a deductible provision.

Fur Floater
A policy insuring furs against all risks wherever they may be.


General Cover
A policy with covers property at several locations.

General Damages
It is applied in a third party injury claim. Damages awarded by a Court of law for pain and suffering of an individual.

Glass Insurance
Insurance against the breakage of glass. The coverage is usually extended to certain other incidental expenses associated therewith. See Plate Glass.

Good Faith
Most ordinary contracts are good faith contracts. Insurance contracts are agreements made in the utmost good faith. This implies a standard of honesty greater than that usually required in most ordinary commercial contracts.

Merchandise, inanimate objects only and usually not including fixtures. It is always best to specify the nature or character of the goods desired to be covered.

Green Book
IBC publication giving the annual statistical results in Automobile based on the experience of its member companies

Gross Net premium
Gross premium less return premium and dividends, but not less reinsurance premium.

Gross Premium
The premium before deducting any premium paid for reinsurance. Direct plus assumed premiums.

Ground Up Loss
Amount of insurer's loss before allowing for reinsurance and for deductible.

Group Insurance
Usually found in life, accident and health insurance. In a single contract a number of persons are insured.

Guiding Principles
A loss may be covered by more than one policy. One policy may have a co-insurance clause and the other may not. How any loss in such circumstances should be apportioned between the various insurance companies involved creates a problem. To meet this problem, the majority of insurance companies have agreed to certain rules and principles. These principles override the actual wording of the policy so the insured is indemnified with least difficulty.


Dwelling place; residence.

Habitational Fire
Fire occurring in a dwelling.

Hail Insurance
Insurance of property against damage which occurs by hailstorm. Usually refers to growing crops but coverage is also provided under other policies such as for automobiles, buildings and their contents.

1) A risk or probability that the event insured against might occur. 2) Condition which engenders or increases the chances of a loss

Hazard, Moral
Hazard arising from character, interest, habits and lack of integrity of the insured or person concerned.

Hazardous Insurance
Insurance coverage granted on property which has a high risk that a fire loss will occur, or on the life of a person whose occupation exposes him/her to unusually high risks of death.

Hidden Defect
Defect in property which cannot be detected by reasonable inspection and for which a seller is generally liable if such defect causes harm to the user.

Highway Traffic Act
The body or system of laws which govern the obligations of the provincial governments and users of roads. A breach or conviction of any of these laws may be an offence but does not of itself impose legal liability, but it may be relied upon in any proceeding to establish or negate any liability.

Hire-Purchase Agreement
A contract for the bailment of goods or chattels whereby the bailee may buy said goods or chattels, or whereby the ownership of the goods will or may pass to the bailee. Different from a Conditional Sale in that the hirer does not contract to buy but merely has an option upon meeting certain conditions.

Hit and Run Accident
Collision between motor vehicle and/or a motor vehicle and another object and/or a motor vehicle and a pedestrian where a driver leaves the scene of the accident without identifying him/herself. This is an offence under the Highway Traffic Act.

Hold Harmless Agreement
A contract or agreement in which one party assumes legal responsibility for the acts of another.

A portion of the progress payments called for under the terms of a construction contract which is not payable until the contract has been completed and the period within which liens must be filed has expired.

Holding Company
A corporation whose principal business is owning a controlling interest in the shares of one or more other corporations.

Hospital Expense Insurance
Insurance coverage which pays for expenses incurred as a result of illness or injury.

Hostile Fire
A fire which occurs in or escapes to a place not anticipated, e.g., a fire in a fireplace becomes uncontrollable and ignites something externally. See Friendly Fire.


Incurred But Not Reported.

Improvements and Betterments
Additions or changes to a rented premises by a tenant at his own expense. Also called Tenant's Improvements.

The date and time on which coverage under an insurance policy takes effect.

Mortgage, lien or other charge against a property.

Incurred But Not Reported (I.B.N.R.)
A liability for future payments on losses incurred but not yet reported to the company, or development on losses reported.

Incurred Loss Ratio
Incurred losses divided by earned premium.

Incurred Losses
Total of outstanding claims estimates and claims expenses at the end of a term plus all claims paid during the period minus total of outstanding claims estimates at the beginning of the term.

To provide compensation for loss or expenses incurred.

A contract, express or implied, to repay in the event of a loss. Insured neither gains nor loses.

Indemnity Period
The policy period.

Independent Adjuster
One who adjusts losses on behalf of insurance companies, but is not employed by any one insurance company.

Insolvency Clause
An article in reinsurance contracts stipulating that, if the reinsured becomes insolvent, the reinsurance is payable in full to the reinsured or to its liquidator.

Inspection Report
A detailed description of premises or property to be insured, including the hazards involved, prepared after a physical inspection of the risk.

An insurance company employee who examines physical risks and reports on them for underwriting purposes. In some companies this is done by the Special Agent or Field Representative. See also Special Agent and Field Representative.

Installment Premium
Payment of certain premiums may be made by the policyholder in several payments, each called an installment

A contract in which one party, the insurer, for monetary consideration agrees to reimburse another, the insured, for loss or liability for a loss on a defined subject caused by specified hazards or perils.

The entity (individual or otherwise) whose risk of financial loss from an insured peril is protected by the insurance policy.

The company providing the insurance coverage.

1) The agent/broker negotiating insurance or reinsurance contracts for another. 2) Any party representing another party, in negotiation with a third party.

Investment Income
That part of a company's income that comes from the interest, dividends and capital gains earned on the stocks and other investments it owns.


Joint and Several Liability Clause
This exists when the situation is such that a creditor in the case can sue any one of the debtors individually, or any, several or all of them, at the creditor's option. This situation applies to tort-feasors as well as to commercial debtors. Persons who together commit a tort and injure another person generally would be jointly and severally liable for the damage. An injured person has the option of suing the entire group or of suing the one having the greatest financial strength.

1) An order given by a Court. 2) A debt resulting from a Court Order.

Judgment Rates
Rates set by an underwriter that are in conformity with the accepted rating material but are especially set because of the particular risk. Usually used when rating the less desirable type of risk.

Common law, being based on decisions made in previous cases and quotations from these earlier cases, supports the decision that should be reached in any particular case presently before the Court. These previously decided cases are known as jurisprudence.


An insurance policy which, having reached its expiry date, is not renewed or extended is said to have lapsed.

Law of Large Numbers
The mathematical premise which states that the degree of uncertainty is reduced as the number of events increases. Insurance is built on this premise, permitting forecasts of loss certainty in a large group of similar risks.

One that holds real or personal property under a lease, e.g., a tenant of rented premises.

One that conveys property by lease, e.g., a landlord of rented premises.

Liability Insurance
Insurance which agrees to indemnify the insured for sums he may be required by law to pay to third parties as damages for bodily injury or damage to property.

Liability Limits
The maximum amount of insurance provided under a policy of liability insurance. There may be different limits for bodily injury and property damage, or, more commonly, a single amount for all claims for bodily injury or property damage arising from one accident or occurrence.

Policies providing cover for claims arising from products manufactured by the insured or arising from his completed operations generally contain a further "aggregate limit" applicable to these, imposing a maximum for all claims occurring during the course of a single year.

Claims handling and adjusting expenses, costs of legal defence and prejudgement interest are normally payable in addition to the liability limits stated in the policy.


Liability Loss Exposures
The features of an individual risk to be taken into consideration by an insurer when underwriting a liability cover. These would include location and condition of premises, products made or distributed, work done away from the premises and so on.

Life Expectancy
The average number of years of life remaining for persons at any given age, according to the particular mortality table in use

Like Kind and Quality (LKQ)
Refers to replacement of damaged, destroyed or lost property with used property of similar type and condition.

Liquidation Value
The price which an asset might be expected to realize on a forced sale or on the winding-up of the business.

The act of carrying on a legal contest by judicial process.

Livestock Insurance
Insurance against loss (death) of horses, cattle, hogs, sheep, dogs, etc. owned by the insured. The cover can be on an all risk or a specified perils basis and includes loss by theft. The insurance is usually written by specialist livestock insurers.

A London market for insurance and reinsurance. Lloyd's is not a company but an association of members, or names, grouped in syndicates, each syndicate being headed by an underwriter.

Members are individually liable for their share of business written in their syndicate or syndicates, and their personal liability is unlimited. Over 30,000 individual names are grouped in some 400 syndicates. The Corporation of Lloyd's provides the facilities for handling the business, including the physical location and also policy issuance and accounting.


Long-tail Business
A class of business, e.g., medical malpractice, where it may take several years before final cost of a claim is known.

Long Term Insurance
An insurance policy which is written for a term longer than one year.

A word often used in place of the word "claim." It refers to the amount an insurer must pay because one of the possibilities of loss insured against under a policy, has happened.

Loss Adjustment Expense
Expense incurred by an insurer in the adjusting or handling of a loss, e.g., adjusters' fees, legal expense, etc. but not salaries and other costs of the Insurer's claims department.

Loss Control
Also known as Loss Prevention or Safety Engineering. A service provided by specialist departments of insurers, whereby inspection and engineering work on insured risks helps to remove potential sources of loss.

Loss of Use Insurance
Cover against expenses incurred as a result of damage to the property on a temporary basis. In automobile insurance this might refer to the cost of a rental car while the insured vehicle is under repair as the result of an accident. In a homeowner's policy it might refer to additional living expense when the insured premises are rendered uninhabitable by an insured peril.

Loss Prevention
See Loss Control.

Loss Probability
The likelihood of a loss being produced by a specific risk, taking into account all its various hazards and protections.

Loss Ratio
The relationship between losses incurred and premiums earned over a specific period, usually a year, expressed as a percentage. Example:
Period: 1 January - 31 December 1991.
Earned premiums: $1,000,000
Incurred losses: $ 650,000

Loss ratio = 650,000 x 100 = 65 percent 1,000,000

Loss Reserve
An amount carried as a liability in an insurer's balance sheet representing, in respect of each claim, an amount equal to the estimated final settlement cost less any amounts already paid. Includes IBNR and claim expense reserves.


Malicious Mischief
Injury to the rights or property of another with a wicked or perverse intent.

A performance by a professional which is deficient in skill from what might ordinarily be expected of a professional person. The standard of performance to which a professional person will be held is necessarily higher than the standard which an unskilled person would be expected to display.

Malpractice Insurance
Coverage from liability for acts of professionals, e.g., physicians, dentists, druggists. See also Professional Liability Insurance.

Market Value
The value of an asset based on a current market valuation, e.g., the amount for which the item could be sold on the open market.

Mass Merchandising
A marketing technique in which a group of persons insure with one insurer under the terms of a master agreement. Typically the premiums are lower than those which the insurer would normally charge. The lower premiums are justified on the grounds that the insurer expects to incur a lower unit cost due to the large number of insureds. As a general rule, the insurer's normal underwriting guidelines apply.

Maximum Possible Loss
The largest loss which could occur

Maximum Probable Loss
The largest loss which the underwriter considers likely to occur. Such an assessment would be made by the underwriter based upon his or her own experience and judgement

Mill Construction
A form of building construction characterized by thick masonry walls and heavy wooden floors. It is frequently found in older factories and warehouses and is generally considered a desirable type of construction for fire construction purposes because of its slow-burning nature.

Minimum Retained Premium
A premium specified on an individual policy which will be the minimum amount retained by the insurer in the event that the policy is cancelled midterm by the insured.

An incorrect statement made about a material act. Misrepresentation can be innocent, e.g., arising from an oversight; fraudulent ( in other words, a deliberate untruth with intent to deceive) or the result of extreme carelessness where a statement is made without regard to whether it is true or false. When a misrepresentation is discovered, the insurer may either continue to contract or treat the contract as void with a full return of any premiums paid. In order for the insurer to successfully treat a policy as void, the misrepresented fact must be material to the risk.

Mortgage Clause
A clause in an insurance policy which stipulates the rights and obligations of the insurer and the mortgagee. The main characteristics of this clause are that the mortgagee is granted protection in the event a loss is denied due to the actions of the insured (provided that the mortgagee was not aware of the insured’s wrongful action) and, in return, the mortgagee accepts responsibility to advise the insurer of any misrepresentation or change in risk of which the mortgagee is aware.

Mortgage Insurance
A type of term life insurance available to mortgagors. The amount of coverage decreases as the mortgage balance declines. In the event that the borrower dies while the policy is in force, the debt is automatically satisfied by insurance proceeds.

Multi-Peril Policy
A policy which is a combination of fire and casualty (or fire, casualty and inland marine coverages) in a single contract such as the Homeowner’s Policy.

Mutual Insurance Company
An insurance company which is owned by its policyholders who formed an association for the purposes of insuring one another against the possibility of fortuitous loss. Each policyholder pays a premium for his or her own policy.


Named Insured
The person or party designated in the policy as the insured, as opposed to someone who may be covered by the policy, but is not specifically named.

Named Peril Policy
A policy in which the perils insured against are listed, as opposed to one which insures against “all risks.”

Natural Disaster
A disaster caused by the elements such as flood, earthquake, tornado, lightning, etc.

Failure to use the degree of care expected from a reasonable and prudent person.

Negligence in Law
Negligence that results in bodily injury or damage to property thus giving right of action against the negligent person.

Net Line
The amount of insurance the company carries on a risk and retains for its own account. Amount of insurance minus reinsurance equals the net line.

Net Loss
The amount of loss that the insurer actually sustains after deducting recoveries, salvage, subrogation and reinsurance.

Net Premium
The amount of the original premium left after deducting premium refunds to the insured and reinsurance premiums.

Net Premium Earned
The net written premium which relates to the expired part of the policy term.

Net Premium Written
The total premium on insurance written by an insurer during a specified period, after deduction of premiums applicable to reinsurance acquired in respect thereof, and any refunded premium.

No Fault
The term used to describe a system for improving the compensatory process for automobile accident victims by eliminating costly and lengthy litigation. Simply it means paying certain claims without reference to who was at fault.

Materials, no part of which will ignite and burn when subjected to fire.

Non-standard Fire Resistive
An industry term to describe a risk which is fire resistive in all aspects other than the roof. This definition usually describes a steel deck roof as opposed to reinforced concrete which is found in a true fire resistive risk.

Notice of Loss
The conditions of the insurance policy require that any person sustaining a loss insured by the policy shall immediately give notice to the company of such loss. Failure to give notice as required has been held to be a bar against recovery. The notice is required to be in writing, and verbal notice to the agent or broker will not be sufficient to comply with the condition.

Notice of Termination
The conditions of insurance policies stipulate how a policy may be terminated during its term. For example, a policy may be terminated by the insured at any time or by the insurer who must give the insured a certain number of days’ notice of termination by registered mail or a certain lesser number of days’ written notice of termination personally delivered.

Null and Void
Of no legal or binding force, invalid.


Occupancy is the act of holding possession of property or premises. The term implies the use of the building for the purposes described in the policy, and no other. An occupied building has furnishings and/or people in it.

Occupational Accident
An accident during the course of one’s employment and related to the hazards of such employment.

Occupational Disease
A disease that is caused by conditions that are characteristic of the insured’s occupation.

A happening or event. Liability policies are usually written on either an accident or occurrence basis. For coverage on an accident basis, the loss or damage must be due to an accident, whereas on an occurrence basis all that is required is the happening or the continual or repeated exposure to an unfavourable situation, neither intended nor expected to cause injury or damage. In reinsurance and insurance, it is also the grouping of related losses into a single loss situation.

Off Premises Clause
A provision in residential policies affording coverage on some of the household goods when away from the premises, within certain limits.

Officers’ and Directors’ Liability Insurance
See Directors’ and Officers’ Liability Insurance

Omnibus Clause
A clause in a policy giving limitless coverage in a certain field, for example, the automobile policy which extends to cover any other person driving the vehicle with the insured’s consent.

Operating Income
Net investment income plus net underwriting income in a defined period.

Fixed expenses which generally do not vary with the amount of business done, e.g., rent or property taxes, salaries.

This is insurance in excess of the value of the subject insured.

Ownership Equity
Residual interest in assets. Assets minus liabilities equals ownership equity.


Party Wall
Common wall between two buildings.

Payroll Audit
Examination of an insured’s payroll record by a representative of the insurer to determine the final premium due on a policy for the latest policy year.

The event that caused a loss covered by the policy, e.g., fire, windstorm.

Permanent Partial Disability
A condition where the injured party’s earning capacity is impaired for life, but he is able to work at reduced efficiency or in another job function.

Permanent Total Disability
A condition where the injured party is not ale to work at any gainful employment for the remaining lifetime.

Personal Auto Policy
Insurance policy issued to individuals covering risks arising out of the ownership or operation of a licensed automobile.

Personal Lines
Insurance for individuals and families, such as private passenger auto insurance and homeowners policies.

Personal Property
Legally, any property of an insured other than real property. More often used to refer to the personal property of family members insured under a Homeowner’s policy.

Personal Theft Insurance
Theft coverage on personal property. Most often part of a Homeowners contract.

The party who brings a legal action against another, called the defendant.

Plate Glass Insurance
Insures against loss caused by breakage of glass or by chemicals accidentally or maliciously applied. Covers frames, temporary glass.

Legally binding contract effecting insurance or certificates thereof, including all clauses, riders, endorsements and renewals.

Policy Conditions
Provisions which state the rights and duties of the insured or insurer.

Policy Limit
The maximum that the insurance company is obligated to pay in actual claims under an insurance policy. Certain additional costs may also need to be paid.

Policy Period
Duration of policy, most often one year in property/casualty insurance.

Policy Provisions
Statements contained in an insurance policy which explain the benefits, conditions and other features of the insurance contract.

Individual or other entity who owns an insurance policy. The insured.

Policyholder Surplus
(Mutual Insurance) Amount over and above assets needed by an insurer to meet future obligations to its policyholders.

An organization of insurers or reinsurers through which particular types of risks are written with the premiums, losses and expenses shared in agreed amounts among the insurers belonging to the pool.

All of the insurer’s in-force policies and outstanding losses. Also the total securities owned by an insurer (investment portfolio).

Power Interruption Insurance
This coverage indemnifies the insured in the event of loss due to the interruption of power supplies by a public utility and caused by any of the perils insured against.

Power of Attorney
Authority given one person or organization to act for and obligate another to the extend of the instrument creating the power.

Precedent (Legal)
A previous common law decision used in considering a subsequent legal case.

Pre-exiting Condition
A physical condition that existed prior to the effective date of a policy.

Preliminary Proofs of Loss
A preliminary statement of the particulars of a loss which the insured submits to the insurer.

Building including the land immediately surrounding it and belonging to it.

The price of insurance protection for a specified risk for a specified period of time.

Premium Earned
The amount of the premium that has been “used up” during that part of the term of a policy that has expired.

Premium Rate
The price per unit of insurance.

Premium Reserve
A premium reserve reflecting the unearned portion of a risk.

Premium Tax
A provincial tax levied on insurance premiums.

Premiums Written-Gross
The dollar value of premiums received during a specific period (usually one year) before taking account of premiums paid out for reinsurance. Includes assumed reinsurance premiums.

Premiums Written-Net
Gross premiums written less reinsurance ceded to other companies.

Primary Coverage
Covers from the first dollar, perhaps after a deductible, as distinguished from excess which pays only after primary coverage has been exhausted.

Principle of Indemnity
The concept that an insured will be reimbursed for his loss (subject only to the policy limit and terms). If there is no loss there can be no indemnity.

Private Passenger Car
Four-wheeled motor vehicles of the private passenger, station wagon or van type, designed for use on public highways and subject to motor vehicle registration.

Probable Maximum Loss (P.M.L.)
Maximum amount of loss that can be expected under normal circumstances.

Professional Liability Insurance
Protects professionals against liability for damages and cost of defense based upon his/her alleged or real professional errors and omissions or mistakes, e.g., architects, engineers, medical malpractice, attorneys.

Profit (Loss) Underwriting
The operating result (profit or loss) of an insurance company before taking into account investment income.

Property Damage Liability Insurance
Protection against liability for damage to the property of another including loss of the use of the property.

Property Insurance
Covers an insured’s property against damage, destruction or loss by a covered peril.

Proportional Reinsurance
The reinsurer shares losses in the same proportion that it shares premium and policy amounts.

Used interchangeably with “coverage” to denote insurance provided under the terms of a policy.

Statements contained in an insurance policy which explain the benefits, conditions and other features of the insurance contract

Proviso (Legal)
A condition upon which the general validity of a contract is based.

Public Adjuster
Similar to an independent adjuster except that a public adjuster represents an insured on a fee basis in claims settlement. He is compensated by the Insured on a fee basis.

Public Liability Insurance
Third party liability insurance with respect to bodily injury and property damage.

Punitive Damages
Damages in excess of those required to compensate the plaintiff for the wrong done, which are imposed in order to punish the defendant because of the particularly wanton or wilful character of his wrongdoing.


Quotation (Quote)
The amount of premium that an insurer sets as the price to cover a particular risk.


Rate Making
Compiling and analysing data, e.g., statistics on occurrence of losses or risk, to establish rates accurately reflecting the level of risk, usually performed by actuaries.

Rate Manual (Rating)
Insurance companies will compile their rates and underwriting rules in a manual for the use by their staff, agents and/or brokers.

The insurance industry has a number of commonly used measures to compare or monitor performance, the two most common being:
(a) Loss Ration - claims incurred, including adjustment expense, divided by earned premium for any given category.
(b) Expense Ratio- general expenses, commissions and taxes (excluding income tax), divided by earned premium.

Real Property
Land and buildings.

Loss dollars recovered by the insurance company from salvage or through subrogation. Amounts recoverable under a reinsurance contract.

Red Book
Automobile listing reflecting cost new, wholesale and average retail price, used as a guide by automobile dealers, claims adjusters etc., to establish market value of used automobiles. See also Blue Book Value.

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 Insurance Brokers of Ontario (RIBO)
Legislation in Ontario requires the licensing and self-regulation of all brokers in the province selling insurance to the public. (Not to be confused with agents that represent a specific company.)

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

Reinsurance (Reinsurer, Reinsure)
Agreement by which a reinsurer, for money, indemnifies (reinsures) an insurer (or another reinsurer) for all or part of the insurer’s risk.

The most common types of reinsurance are:

Quota Share - Reinsurance of a fixed share of all risks.

Surplus - Reinsurance of a portion of a risk or risks.

Excess - Reinsurance arrangement to cover losses over a specified amount.

Treaty - Reinsurance contract.

Facultative - Reinsurance arranged on a case or risk by risk basis.

Reinsurance Assumed
The risk that a reinsurer accepts from an insurer (or another reinsurer).

Reinsurance Ceded
The risk that an insurer (o r reinsurer) passes on to a reinsurer.

Reinsurance Premium
Amount ceding company pays to reinsurer in consideration for the liability that reinsurer assumes.

An Insurance Company which reinsures primary insurance companies.

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

Retain (Retention)
An insurer will usually keep a portion of a risk that is ceded to a reinsurer. This amount or percentage is the retention.

Retained Earnings
The earnings a company has accumulated over the years. The Retained Earnings are part of the Net Worth of a company.

The amount of liability the ceding company (primary insurer) retains for its own account. It may be a percentage or a dollar amount of each risk.

Retrocede (Retrocession)
Normally reinsurance is effected between a primary insurer and a reinsurer. If a reinsurer cedes part of a risk to another reinsurer he “retrocedes” part of the risk (cedes again).

The reinsurance company which accepts a retrocession from another company.

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.

Risk Retention
For a non-insurance company, risk retention is the risk not insured, in other words it is self-insured. For an insurance company, risk retention is the risk not reinsured.

Risk Transfer
For a non-insurance company, risk transfer is the risk insured. For an insurance company, risk transfer is the risk reinsured.


Safety Engineering
See Loss Control.

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.

Salvage Value
The value of a damaged asset or an asset whose useful life has expired.

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.

Schedule of Insurance
A list of items individually covered by a policy, e.g., a list of jewels under a jewellery floater, a list of cars insured under one automobile policy or a list of buildings insured against fire.

Schedule of Property
A statement accompanying a policy specifying the various items to be insured and the corresponding amounts applying to each item. The schedule date, when required, must be before or coincident with the issue of the policy, never afterwards.

Scheduled Property
Property specifically identified and assigned value individually in a policy covering several items.

Scorch Claims
See Fire.

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.

In underwriting, the process of accepting or rejecting risks while attempting to produce a profit.

The term describes the assuming of one’s own risk instead of buying conventional insurance.

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.

Share Reinsurance
A reinsurance arrangement in which two or more companies agree to share, at given proportions, all expenses, losses and premiums on a particular risk.

Slow Burning Construction
A building resistant to fire. See Mill Construction.

Special Agent
A company employee who is the company contact in a given territory, responsible for visiting agents/brokers, encouraging business for the company, dealing with problems and, sometimes, personally inspecting and advising on risks. See also Inspector and Field Agent.

Specific Insurance
Insurance on a specifically described item, like a ring or a fur coat, or insurance for a particular address, as distinct from blanket coverage of all items within a certain area or at two or more locations.

Standard Construction
A term applied to a building which conforms to certain agreed upon standards of construction, such as solid brick, stone or concrete.

Standard Forms
Any insurance form worded identically by all insurance companies, generally, to meet the requirements of local legislation.

Standard Limits
The basic amounts of indemnity provided under a liability policy or the liability section of a policy. These limits can be increased by agreement, with an additional percentage charge.

Standard Provisions
1) The prescribed wording of certain parts of a policy. 2) The conditions and requirements which commonly form part of contract documents.

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 Defence
In a high court action, a plea in reply to the Statement of Claim. It responds with admissions or denials to the allegations and sets out additional facts in the form of fresh allegations, perhaps even including a counter claim.

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

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

Stop Loss Ratio Reinsurance
See Aggregated Excess of Loss Reinsurance.

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.

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

Surplus to Policyholders
The sum of capital and net surplus of an insurer

Surplus Treaty
The most common form of reinsurance treaty for property. Reinsurers share the risk proportionally with the ceding company, the proportion varying according to the class of risk and the net retention of the insurance company.


Temporary Disability
A disability which is temporary in nature after which recovery is expected, as distinct from Permanent Disability which will continue for life, e.g., a broken bone may disable a person, pending its mending (a temporary disability); a leg taken off produces a permanent loss (a permanent disability).

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.

Term Policy
A policy written to cover a period longer than one year. If written for a period less than one year, it is a “short term” policy.

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

Theft at or after Fire
Generally considered as part of the fire risk. Sometimes, however, it is specifically excluded.

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.

Traumatic Injury
Physical damage caused by an accident from an outside source, e.g., a broken arm, a wound or shock. Quite separate from an illness caused by disease

An agreement between an insurance company and a reinsurer. The reinsurer automatically accepts a portion of the ceding company’s liability for a specified class or classes of business. Terms of the agreement are set forth therein, e.g., premium payment, loss limits, etc.


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

A condition in which the amount insured is less than the full value of the property insured, producing an inadequate premium based on only partial value or on anticipated probable loss.

Underinsured Motorist Coverage
The bodily injury and property damage coverage afforded by an automobile insurance policy where in an accident for which a third party is responsible and the Court awards judgement in favour of the insured, if the third party does not carry adequate liability insurance to cover the amount, the Underinsured Motorist Coverage of the insured’s automobile insurance policy will pay the difference to him up to the limits of his own policy. This would not be relevant where no-fault coverage apply.

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.

Underwriting Capacity
The maximum amount of money an insurer or reinsurer will risk in a single loss event on a single risk or in a given period.

Underwriting Profit (or Loss)
The excess of earned premiums over incurred losses and expenses is the underwriting profit. The reverse would be the underwriting loss.

Unearned Premium
The part of the premium which has not yet been earned; premium representing the unexpired portion of a policy.

Unearned Premium Reserve
A reserve fund of an insurance company or reinsurance company, representing the Unearned Premiums.

Uninsured Motorist Coverage
The bodily injury and property damage coverage afforded by an automobile insurance policy where, the insured’s company will make payment under the Uninsured Motorist Coverage of the insured’s policy if, for example, the insured sustains damage in an accident for which a third party is responsible and the Court awards judgement in favour of the insured, but the third party is uninsured and unable to make good payment. This would not be relevant where no-fault coverages apply.

Unnamed Insured
A party who is not named in an insurance policy but who nevertheless is covered by the policy.

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.


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 be paid in the event of a total loss of the property.

Vandalism and Malicious Mischief
The wilful injury or destruction of property. Insured against by the extended coverage endorsement of a property insurance policy.

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.


War Clause
A provision in an insurance policy relieving the insurer of liability if the loss is caused by war.

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.

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.

To insure, to underwrite or to accept an application for insurance.

Written Premium
Total of all premiums for policies issued and/or renewed in a given period, as opposed to Earned Premium.


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Suite 516
Ottawa, ON
K1R 6K7

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