Clover Insurance Brokers
3800 Steeles Ave West, Suite 201E,
Woodbridge, Ontario L4L 4G9
A Division of Wood & Kirkpatrick LTD, 
Canada's Oldest Broker Since 1821 
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Quote #8589
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Glossary of insurance terms


Relinquishment of ownership of property that has been lost or damaged and "abandoned" to the Insurance Company for the purpose of claiming a total loss.

Above Ground Swimming Pool

Swimming pool built above ground level.

Absolute Liability

Liability that occurs where one has a duty to fill no matter what the circumstances may be. Absolute Liability is often found in cases involving explosives and in many automobile laws an insured or insurance company may be responsible to a third party irrespective of any statutory faults, negligence or breaches on the part of the insured.


An unusual unexpected result, attending the performance of a usual, necessary act; and unexpected event which happens by chance or which does not take place according to the usual course of things. This definition is very simplified. Many pages have been written in judgments defining "Accident" if the matter is likely to become involved or complicated such definitions are readily available in juris-prudence. Generally however this definition broadly covers the interpretation of the word as given by the Courts today.

Accident Prevention

ethods insurers and their insureds use to reduce accidents, e.g., removing 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.

Accounts Receivable Insurance

Coverage that protects business against their inability to collect their accounts receivable because of the loss of supporting records. See Credit Insurance

Actual Cash Value

The actual or current value at the time of the loss. This may be the cost of replacing the article with a similar model and in similar condition. It may however involve the price of the article plus any appreciation since its purchase and less depreciation.

Actual Cash vs. Replacement Cost

Property insurance is based on values and it is important for both parties of the insurance contract to have a complete understanding of the insured values, it facilitates a satisfactory settlement.

Basically, in the determination of insurable values, there are two methods of insuring property to be considered:-

Replacement Cost Basis 
The term "replacement cost" denotes the cost of replacing the property lost or destroyed without deduction for depreciation. 

Actual Cash Value Basis 
The term "actual cash value" denotes the cost of replacing the property lost or destroyed and then deducting factors for depreciation or betterment. 

Care should be taken not to utilize "book" or "depreciated" values, as these normally reflect the maximum depreciation allowable under tax schedule and other purposes and not the true insurable value. Please note that replacement cost and actual cash value are not the same as "market value" which is determined by other factors, e.g. location, desirability and land value.

Actual Damage

Damage that really exists in fact, as distinguished from potential or possible damage.

Additional Insured

An individual or a corporation other than the one named in the insurance policy 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 the insured's consent. The additional insured may be

"named" or "unnamed" in the insurance policy.

Additional Living Expense Insurance

A provision in many policies to provide reimbursement for costs above the normal living expenses, incurred because the insured is forced to live away from home while the home is being repaired because of fire or other damage. It applied to such expenses as restaurant meals, hotel rooms, transportation, etc. The company however is bound only to pay to maintain the insured's usual standard of living.

Additional Premium

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


An individual who represents an insurer on 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.


The process of arriving at an amount of settlement in a claim. It may consist of a series of computations to arrive at the amount of a loss as for example, in an uncomplicated fire loss or 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 Expenses

Expenses paid in connection with the settlement of claims, both internal (company) and external (consultants).


Total sum of insurance payable during the term of the policy.

Alarm System

System guarding against theft and/or fire.

Alarm Valve

A valve in automatic sprinkler systems, which automatically operates an alarm; sometimes a loud gong, and sometimes a signal directly to the fire department. This is an alarm valve. It operates if and when a sprinkler head has opened.

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 if 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.


The paying back of a debt by spreading the payments (which include a portion of both principal and interest) over a period of time.

Amount Subject

The amount of exposure in any one loss from the peril against which insurance is issued. Underwriters and company inspectors are responsible to see that the amount subject is in order. For example, in the case of fire insurance it is necessary to know the construction of the building, the fire protection afforded, whether a fire is likely to be confined to a small area or destroy the entire building, and if confined just what are the relative values in the areas most likely to be subject to fire. Attached and adjoining buildings and property must also be considered, both with respect to any possibility of there being a fire hazard to the insured premises and conversely whether insurance is carried by the same company on such property so that in the event of a fire at the insured's premises an adjoining or nearby building also insured in the same company may also be a loss thus increasing the amount of potential loss from a fire at that particular location.

Amount of Insurance

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


The person or firm requesting insurance.


The monetary valuation on a property.


To set and state in writing the true value of property.


Are persons who because of their special knowledge are vested with authority in determining the real value of the property or damage.


An arrangement for reaching agreement between two sides by which both sides submit their case to a committee or a person who generally is vested with the authority of giving a final answer to the dispute. In fire policies this is now commonly referred to as "appraisal". The arbitration may be voluntary between any two persons who make up their own terms of reference and generally decide beforehand, whether or not they will be bound by the ultimate ruling. Where arbitration exists because of an agreement, the terms of reference for arbitration appear in the agreement.

Arbitration Clause

A clause in an insurance policy, reinsurance contract, or other contract that provides arbitration in the event of a disagreement.

Architects' and Engineers' Professional Liability Insurance

Coverage provides compensation on behalf of architects and engineers for claims arising out of their professional services caused by error, omission or negligent acts.


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

As Their Interest May Appear

Phrase commonly used in the loss payable section of an insurance policy where the insurable interest in a property is either unknown or presently unascertainable, e.g. "Loss payable to A and B as their interest may appear" This leaves the whole question of title to the insurance monies to be settled between the insured and the person whose name appears in the loss payable portion of the policy.


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


Legal transference; the transfer of an entire interest from one party to another. Insurance policies are personal contracts and are not transferable except to spouse unless special consent of the insurance company is granted.


1. To undertake or promise. In insurance, a company or an underwriter "assumes" a risk when he agrees to insure it. That is when insurance attaches.

2. Common usage pertains to acceptance of a risk by a reinsurer from an insurer.

Assumption of Risk

1. The legal doctrine of assumption of risk, also know as "volenti non fit injuria," where a person knows of the facts and existence of a dangerous condition and voluntarily exposes himself to it.

2. The accepting of a risk by an insurance company.


The entity which the insurance company has undertaken to indemnify and protect against loss from certain perils. It is interchangeable with the word "insured".


A policy "attaches" when it comes into force, e.g., when its term starts.


A private person who has been given legal power to act in one's stead. The power of attorney may be in general, namely to act in all matters, or may be specific authorizing the individual to act on behalf of another only in a specfic matter.

Attractive Nuisance

The leaving of something attractive to children but dangerous to them, such as a piece of contractor's equipment, supplies, etc., near the road, even though on private property is known as an "Attractive Nuisance." Property owners are liable when they knowingly leave a dangerous instrument or create a dangerous situation in a place apt to be frequented by children who do not realize their peril and are attracted to the situation probably to play, but are injured.

Automatic Reinstatement

Most insurance policies insure against loss of property up to a certain amount. If half that amount has been paid in one loss, during the policy year, then only the other half remains as the amount of the insurance for the balance of the year. The policy, however, may be brought up to the full amount by paying an additional premium. In some policies, however, the amount of insurance is automatically reinstated immediately after the loss so that the amount quoted for insurance remains the same even though the insured, in a series of losses, may have collected an amount totally in excess of the principal amount named in the policy.

Automatic Sprinklers

A device to protect property from damage by fire in which water is piped to devices called "sprinkler heads," which melt with heat and release water to extinguish a fire.

Automobile Fleet

A group of automobiles under the same ownership and management which may, because of the number, justify a discount in the insurance premium. Usually five or more vehicles.

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.

Average Clauses

Clauses which estimate the proportion of actual compensation for the loss which is to be paid, having regard to the total amount of the loss, and the relation of this amount to the value.

Bad Faith

1. Design to deceive or mislead another.

2. Conscious wrongdoing.

3. Constructive fraud.


A person to whom goods are entrusted. Also called a Depository. A gratuitous bailee is one who has the property of another without consideration. e.g., a neighbour stores a wheelbarrow in the winter without payment and merely for convenience of the owner (bailor). A bailee for hire is one who makes a profit or charge for his services in storing the goods of the bailor (customer). e.g., a furrier (bailee) storing a fur coat for a customer (bailor). A greater degree of care is required in the case of the bailee for hire.


Person to whom goods or property are entrusted for a stated purpose, whether in exchange for payment (consideration) or not. (Bailee)


Proposal made by the prospective policyholder to an insurance company to obtain the cost of a premium for a specific period.

Bid Bond

A bond insuring a contractor submitting a bid on a job will, if the bid is accepted, enter into a contract to do the job and if required to do so, to supply a contract bond (or performance bond).


Temporary proof of insurance of property, pending issuance of a policy. The binder has the same value as the policy, and must be terminated in the same manner as an issued policy would be.

Bodily Injury

Bodily injury is the injury or damage to the physical body of an individual or the destroying of it. It does not include the inanimate injury such as hurt feelings, embarrassment, false arrest libel, slander, etc. (see also personal injuries which includes these further perils).


A guarantee or surety bond is not necessarily carried by an insurance company, although many insurance companies do use their corporate structure and strength in the value of becoming surety to another even though strictly it is not insurance. A bond issued by an insurance company generally protects an individual or corporation known as an obligee from loss arising out of the act or failure of another known as the principal. A fidelity bond is one in which the obligee is usually an employer and the principal an employee and protects against the principal's fraudulent acts, such as embezzlement, conversion, theft, etc. A surety bond - the surety, which may be an insurance company, protects a company or individual known as the obligee against failure of performance of another individual or corporation known as the principal. e.g., a municipality is building a building and lets a contract to a general contractor. The municipality would probably require a bond on the contractor to establish the ability to complete the contract. There are, of course, many other applications. A penalty bond is one in which, in the event of default of the person bonded (principal) the entire amount of the limited bond is due tot he obligee to protect from this and other losses.

Break-and-enter theft, “ B&E”

Wrongful taking of property, without the consent of its owner, following forced entry into a building or property.

Broad Form

Insurance coverage that protects you from all risks to the building and named perils only to the contents