Knowledge of common insurance terms can help you understand your insurance representative and your insurance policy. These are some terms you should be familiar with.

Actual Cash Value
The fair market value of property taking into account factors such as depreciation that might reduce the value of the property.

An insurance agent sells insurance exclusively for one insurance company.

All Risk
This is the broadest coverage. It provides coverage for everything except the listed exclusions.

Aggregate Limit
The maximum limit that a policy will pay in a specific term. For example a $2 million CGL policy may have an annual aggregate of $6 million.

Bodily Injury
The CGL policy describes bodily injury as physical harm to someone, including bodily harm, sickness, disease and death.

Boundary Form
It is an important risk management tool that is designed to protect your employees or volunteers by clearly listing activities they should never do. It should clearly state the consequences of performing any of these activities, such as immediate termination.

An insurance broker sells insurance for more than one company.

Request by an insured for payment under an insurance policy for an insured loss.

Claims-made policy
Provides coverage for claims that are reported during the policy term even though the event may have occurred a number of years ago. Director and Officers Insurance is often sold as a claims made policy.

The amount by which a paid loss is reduced. A $1,000 deductible will reduce a $5,000 loss to $4,000 paid to the Insured.

Indemnification Clause
This clause should be included in the by-laws of a nonprofit. It states that the nonprofit will assume the costs if there is a claim against the directors and officers related to their service on the board. This clause protects the personal assets of the directors and officers and it allows for a Directors and Officers policy to respond if there is a claim.

A contract between an insurance company and its customer for a specific period of time. It protects the customer financially against specified losses.

Is the organization or person who purchases an insurance policy to protect them from financial loss caused by insured perils.

Is the company providing the insurance policy.

Is a legally enforceable obligation. Liability can arise from your actions or your failure to act and results in harm to another.

Named Perils
Provides coverage for the perils listed subject to the exclusions listed. It provides less coverage than an all risk policy.

The failure to do what a reasonable and prudent person would do or to do what a reasonable and prudent person would not do.

An event that results in an insured loss.

Occurrence based policy
Cover claims that occur during the policy term. Automobile and property insurance are examples of occurrence based policies.

Is the cause of the loss or damage. A property policy will provide cover against the perils of fire and windstorm.

Personal Injury
The CGL policy describes personal injury as damage to the mind or emotions most commonly arising out of libel or slander or malicious prosecution. Bodily injury and property damage are described separately.

Policy Condition
Is a list of requirements applying to the insured and insurer regarding issues such as cancellations and requirements after a loss. There are provincial statutory conditions as well as conditions specific to an insurer’s policy.

Replacement Cost
The cost of replacing property with no deduction for depreciation.

Section A Third Party Liability
This insurance covers you if you are responsible for an accident that causes damage or harm to other people and/or their property. Your insurance will compensate other people often referred to as third parties.

Section B Accident Benefits
Provides limited payments to each insured person for bodily injury or death as a result of an automobile accident.

Section D Uninsured Automobile Coverage
This insurance covers you if you are not at fault for an accident and the person who is responsible does not have insurance coverage.

A warranty as it relates to an insurance policy is agreement that if not complied with may result in a particular loss not being covered. For example a locked vehicle warranty may stipulate that theft from a vehicle is only covered if the vehicle is locked.

See the IBC website for more definitions.

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