Definitions For Common Car Insurance Terms
An undesirable incident that happens suddenly and unexpectedly, resulting in the damage or loss of life, property, time and/or equipment.
An added charge to your policy that covers any extra risk factors regarding the insured item or person. For example: if you buy a Mercedes Benz you would have to pay an additional premium for theft coverage.
An authorized insurance company representative that gives insurance advice in addition to creating, modifying and terminating insurance contracts
Coverage that provides indemnity and/or compensation in the event of injury to a person, damage to property and/or to an automobile that involves the insured vehicle.
Any damage inflicted on the structure or function of the body as a result of a car collision.
An insurance agent that sells insurance policies for more than one company.
Regardless of whether or not payments are approved, a claim is an insurance policy holder's notification and/or request to have their financial losses paid for by their insurance company in the event of an automobile collision.
Canadian Loss Experience Automobile Rating (CLEAR)
This is the method used by many insurance companies all across Canada as a way to classify different models of cars for insurance purposes by using historical claims data, including Collision, Comprehensive, Direct Compensation - Property Damage, and Accident Benefits coverages.
The impact between two vehicles as one strikes the other.
Sometimes referred to as "Section C", it is an optional type of auto insurance that covers the cost of repairing the insured vehicle if it is damaged in a collision or upset.
Commercial Auto Insurance
Depending on the kind of business being operated and the owners of business's vehicles, commercial auto insurance is the financial protection provided to that business in case of any losses or damage to the vehicles used by the business and/or their drivers.
Comprehensive Automobile Coverage
Usually excluding loss by collision or upset, comprehensive automobile coverage is an item in an automobile physical damage policy that insures against loss or damage by miscellaneous causes such as fire, theft, windstorm, flood, vandalism, etc.
Usually referring to auto insurance, compulsory insurance is any insurance required by law.
The withholding of pertinent risk information from an insurance company when applying for or buying an insurance policy.
The financial protection in the parameters and conditions outlined in an insurance contract.
The amount of money the policy owner has to pay for damage and/or losses before their insurance company provides the coverage outlined in the insurance contract.
A clause that defines the amounts of money the insured and insurer(the insurance company)has to pay toward damage and/or loss.
Deferred Premium Payment Plan
A plan that allows the insured to pay their premium over a span of time.
The deterioration of property value through use, aging and obsolescence.
Direct Compensation - Property Damage (Ontario, Quebec, New Brunswick)
Coverage paid directly to the policyholder by the insurance company instead of by the at-fault driver, for any damage and/or loss of the insured automobile or it's contents in a collision caused by the driver of another vehicle.
Usually associated with fire policies thus qualifying for reduced rates, a disappearing deductible is the dollar amount (to be paid by the insured) that can shrink until it disappears entirely according to the increase of loss, in which case the policy holder becomes eligible for full coverage. Deductible amounts often fall between $500.00 - $5,000.00 and the limit at which the deductible disappears usually begins somewhere between $5,000.00 and $25,000.00.
The denial of being held responsible for a cause, for example, denying coverage because a policy holders claim does not meet with the conditions outlined in the insurance contract.
Bringing the attention to and making something known that was previously unknown.
Drive Other Cars Clause
A provision that protects the policy holder when driving in vehicles other than the ones mentioned in the insurance contract.
Driver Training Credit
To encourage driver education courses at schools and colleges, many insurers grant premium rebates to applicants for private passenger automobile insurance who have successfully completed an approved training program. As a way to create incentive toward driver education, many insurers offer a premium rebate for private passenger automobile insurance to applicants who successfully complete an approved training program.
Based on the insured's exposure to loss during the coverage period of the policy and the premium schedule, earned premium is the portion of the premium that is considered 'earned' by the policy holder.
The date on which the insurance contract comes into effect and it's coverage can be provided to the insured, in the event of an eligible claim.
An approximation of the anticipated premium that can either be increased or decreased in the final premium calculation.
Anything outlined as not covered by the insurance policy, whether it be risks, perils or properties.
The date the policy's coverage will end and protection will no longer be provided till the policy is renewed.
Fault Determination Rules
To the exclusion of injury claims, in Quebec, New Brunswick and Ontario, Fault Determination rules are the charts used to determine such factors as fault, responsibility for Direct Compensation and Property Damage claims in car collision cases. In other areas, insurance companies sometimes use company 'settlement' charts, handling claims against each other, these rules, however, are not legally binding on the policy holder. In the event where more than one driver is found to be at fault for a collision, each drivers' insurance company may become involved in the arrangement of a settlement. If there is a dispute about the drivers' level of responsibility, however, the case may need to be taken to court to be resolved.
Any false statement whether made carelessly, recklessly or with the intent of causing others to act on it to their own detriment. Usually occurs intentionally in regards to the disclosure of a risk in order to obtain insurance coverage or as proof of loss after the loss occurs.
Usually your primary residence, the Garaging location is the postal code where your vehicle parked or garaged when not in use.
Graduated Driver’s Licensing
A staged introduction into the driving environment set up for new drivers to gain more experience and demonstrate their ability to handle increased risk as a means to earn more driving privileges.
Highway Traffic Act
First introduced in 1923 to reduce traffic accidents, Highway Traffic Act is an Ontario law which regulates such things as vehicle licensing, traffic offense classification, the administration of loads and other transportation issues. Not abiding by the various regulations of this act may be an offense but doesn't necessary constitute legal liability although such an offense may be used to determine liability.
Hit and Run Accident
Considered an offense under the Highway Traffic Act, a Hit and Run Accident is when a collision occurs between a motor vehicle and/or another motor vehicle, object or pedestrian and the at fault driver leaves the scene of the accident without identifying him/herself to the authorities.
An electronic anti-theft device that automatically arms a vehicle that has been switched off in order to prevent an unauthorized person from being able to start the vehicle. (You can find more information under Canadian Standard for Automobile Theft Deterrent Systems)
A contract between an insurance company and it's customer, financially protecting the customer against loss for a specified duration of time by dispersing the risk among it's group of clients.
Insurance Bureau of Canada (IBC)
The Canadian trade association for the insurance companies that provide nearly 95% of the home, car and business insurance sold in Canada. IBC works to benefit it's members and consumers by advocating public policies that create and maintain a healthy insurance marketplace, facilitates communications and seeks consensus between its members and develops and implements solutions to common insurance concerns.
A written contract providing conditional financial protection for a specified duration of time in regards to the person(s) and/or property(ies) insured as defined in the policy.
The entity (individual, business or group) who is financially protected by an insurance policy against damage or loss as defined in their insurance contract.
An expired insurance policy which has not been renewed or extended.
A legally enforceable obligation as when Liability insurance is paid for the damages or losses suffered by others for which the insured person is legally responsible.
Insurance that indemnifies the insured for sums he may be legally required to pay to third parties as damages for bodily injury as well as damage to or loss of property.
The amount beyond which an insurance company will not provide protection to the insured for liability coverage. For example, when the liability limit for an auto insurance policy is $1 million for liability coverage, if a policyholder is successfully sued for more than $1 million the difference will be paid out of the insured's pocket.
Like Kind and Quality (LKQ)
Referring to the replacement of damaged or lost property with used property of similar type and condition.
Interchangeable with the word claim, it's the amount paid by the insurer to the insured when an eligible loss has occurred as outlined in the policy.
Loss of Use Insurance
Used to compensate for the loss of use of property as defined in the policy and is the most commonly purchased optional coverage in auto insurance. An example of Loss of Use Insurance is when the insurance company pays for the use of a rental car while the insured car is being repaired.
Any information about the subject of insurance(such as, insured risk)that would change the underwriting basis of the insurance and could potentially cause the insurer to either refuse the application or charge a higher rate.
When a policyholder or applicant makes a false statement of a material (important) fact on the application, he or she has committed a material misrepresentation, which may result in the loss of coverage.
he type of auto insurance that provides compensation for personal injury and death arising out of a motor vehicle accident regardless of who's at fault, however it may cause an increase in future premiums for the driver responsible for the collision.
A contract of insurance is based on the utmost good faith. An applicant for insurance is required to disclose to the company all material facts which are necessary to underwrite a policy. If the applicant does not disclose all these facts, he/she is guilty of non disclosure and may risk the loss of coverage.
Notice of Termination
The conditions of an insurance contract outline how a policy may be terminated during its term. For example, a policy can be terminated by the insured at any time, however the insurer must give the insured a certain number of days notice of termination beforehand by registered mail and fewer days necessary, if the written notice of termination is personally delivered.
Any insurance policy which provides two or more kinds of insurance in the same policy.
Physical Damage Coverage (Automobile)
The section of an automobile policy that provides coverage for damage to the insured vehicle. Either including or excluding coverage for damage caused by collision or upset, it can provide coverage against all perils as in comprehensive coverage or provide coverage for only specified perils.
Legally binding contract effecting insurance or certificates thereof, including all clauses, riders, endorsements and renewals.
Provisions which state the rights and duties of both the insured and the insurer.
A kind of service charge added to the initial premium for the cost of issuing a policy, establishing records and other expenses.
The maximum amount an insurer will pay under a policy, overall or under a particular item of coverage.
Period between anniversary dates.
A group of insurers or re-insurers who share agreed-upon amounts of premiums, losses and expenses to provide coverage for particular types of risks.
The money a policyholder pays to the insurer for financial protection against specific risks for a certain duration of time. Unlike the premiums for many forms of life insurance, general insurance premiums are not intended to produce a reward other than financial peace of mind.
The previous insurance policy that came before the current insurance coverage.
Private Passenger Vehicle
Any vehicle not used for commercial purposes, such as a small family van or car; however, if this same vehicle is used full time as a delivery vehicle it is considered a commercial vehicle.
Statements in an insurance policy which explain the benefits, conditions and other features of the insurance contract.
An estimated cost of insurance, based on the information supplied to the insurance company.
The amount either established or reviewed by the government that is used to calculate the premiums to be paid on an auto insurance policy.
Registered Insurance Brokers of Ontario (RIBO)
RIBO is a legislation in Ontario that requires the licensing and self regulation of all provincial brokers selling insurance to the public. (Not to be confused with agents that represent a specific company.)
Regular Insurance Market
When the insurance business environment is operating effectively, low-risk consumers find that auto insurance is available to them from any insurance company and at a reasonable price.
A certificate which attests the extension to the insurance policy's duration for another term.
A system through which insurance is made available to customers that represent unusually high risks. This insurance is provided through Facility Association.
A chance of loss or injury for which an insurance claim may be submitted. For a risk to be insurable, events that could result in a claim must be unexpected (see Accident and Occurrence). For example, the possibility that a visitor to a policyholder’s home will injure himself or herself by falling on the steps is an insurable risk, because such a fall would be unexpected. Expected losses, such as the gradual wearing-out of clothes or the rotting of fruit, are not insurable risks.
Generally to meet the requirements of local legislation, standard forms are any insurance forms worded identically by all insurance companies.
The basic amounts of indemnity provided under a liability policy or the liability section of a policy that can be increased by agreement, with an additional percentage charge.
- The type of policy issued by a company, as in fire lines, automobile lines and casualty lines
- A given set of exposures making up an account, for example when an underwriter agrees to accept fifty percent of the line.
- The classes of business provided by an insurer, whether they be Personal Lines or Commercial Lines.
A person who isn't high risk, according to a company's underwriting standards, and is entitled to purchase insurance protection without special restrictions.
Statement of Claim
A written statement by a plaintiff detailing the facts which support the claim against the defendant and the requested coverage.
The period of time between the start date and expiration date of an insurance policy or bond.
An underwriter is an employee of an insurance company who looks at an insurance application and based on the risk presented by the applicant, the underwriter decides whether or not the insurance company can or should provide the applicant with coverage.
Rules set individually by insurance companies for the use in assessing the risks taken when insuring particular customers.
Appraisal estimation of the worth of an item.
A policy which provides that a special amount shall be paid in the event of a total loss of the property.
Vehicle identification number (VIN)
A combination of letters and numbers 17 characters in length that can be used to identify the make, model, and year of a car. The number is usually found on the dashboard of a vehicle on the driver's side, and listed on the vehicle registration and title.
- The prescribed wording of certain parts of a policy.
- The conditions and requirements which commonly form part of contract documents.
The intentional relinquishment of a known right. A waiver under a policy is required to be clearly expressed and in writing.
A statement by the policyholder that certain conditions of the insured risk exist or will be met. If found to be false, it provides the basis for voidance of the policy.
An action taken during claims negotiations that is intended to be without detriment to the existing rights of the parties.
- Invalid, not legally binding
- An insurance contract that is prohibited by law and thus cannot be held as a valid contract.