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Actual Cash Value (ACV): The fair market value of property at a given time, measured in cash. ACV is determined by deducting an amount for depreciation (caused by physical wear and tear and/or obsolescence) from the replacement cost of the property.

Actual Loss Sustained: The actual amount of monetary loss caused by a suspension of the customer’s business and subsequent loss of income resulting from direct physical damage to the customer’s property; or, caused by additional expenses that would not have been incurred except for the physical damage to the property.

Additional Insured: A person other than the named insured (customer) 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.”



Business Interruption Insurances: Various types of insurance against business expenses and loss of income resulting from a fire or other insured peril.



Cancellation: Provisions in the insurance contract that allow either the insurer or the customer to terminate coverage during the policy period.

Certificate of Insurance: A written document stating that insurance is in effect. It includes a general statement of the policy’s coverage.

Claim: A request by the customer to be compensated by their insurance company for losses covered by an insurance policy.

Co-Insurance: An arrangement where the insured (customer) agrees to carry an amount of insurance equal to a certain percentage of the total value of the property insured. If the customer fails to do this, they agree to be a co-insurer of all losses large or small in the same ratio as their failure to comply with the percentage required. For example, a building valued at $100,000 with an 80% co-insurance clause would require insurance coverage of $80,000. If coverage is carried for only $40,000 then the customer is a co-insurer for $40,000 of the $80,000, and the insurance company is responsible for the same amount.

Commission: Compensation based upon amount of production. For example, insurance brokers are compensated on the basis of a percentage of the premium. The percentage varies with different lines of insurance.

Crime Coverage: Insurance to protect against losses from business-related crime. Protection can cover merchandise, money or other property loss from embezzlement, forgery, robbery, securities theft or another form of business-related crime.

Conditions: Terms of insurance contracts that impose obligations an insured person must satisfy to preserve coverage.



Deductible: A specified dollar amount assumed by the customer, which is deducted from the amount of loss In Business Interruption or Earthquake coverage, the deductible can be specified as a waiting period in hours, days, or as a percentage of value.



Equipment Breakdown Coverage (Boiler and Machinery): This coverage protects an organization against losses that result from a breakdown of heating, refrigeration, air conditioning equipment, pressure vessels, boilers, production machinery, electrical apparatus and/or electronic equipment.

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



Form: An insurance policy itself or riders and endorsements attached to it.



General Liability Coverage: Insurance designed to protect business owners and operators from a variety of liability exposures. These risks may include bodily injury or property damage sustained by customers of the business, due to the business owner's premises, operations or products.



Indemnity Agreement: A contract, express or implied, to repay in the event of a loss. The customer neither gains nor loses.

Insurance Policy/Contract: A contract between an insurance company and its customer for a specific period of time. It protects the customer financially against a loss. Insurance is also a mechanism for dispersing risk, because it shares the losses of the few among the many.

Insured: The person or organization protected by an insurance policy.

Insured Perils: Specific sources of loss (such as fire, liability or theft) covered by an insurance policy.

Insured Property: The insured property is the property covered by an insurance policy. It is typically covered against damage caused by fire, smoke, wind, hail, weight of ice and snow, lightning, theft and more. Property insurance also provides liability coverage in case someone other than the property owner or renter is injured while on the property, and takes legal action. Insured property is typically not covered for water damage caused by floods, tsunamis, drain backups, sewer backups, groundwater seepage, standing water and many other water sources. Policies also may not cover mold, earthquakes, nuclear events or acts of war, such as terrorism and insurrections.

Insurer: The insurance company that issues the policy.



Limits of Insurance: The maximum amount of coverage available under an insurance policy for any one occurrence. Also called the limits of liability, amount of insurance, or sum insured.

Loss Payee: Someone who is added to a policy because they have an insurable interest in the property insured due to a loan or other financial agreement. Usually added in respect to equipment and stock.



Premium: Money the customer pays to the insurance company for financial protection against specific risks for a specific time-span. Unlike the premiums for many forms of life insurance, personal insurance premiums are not intended to produce a reward other than financial peace of mind.

Property Coverage: Covers a customer’s property against damage, destruction or loss by a covered peril.



Quote: An estimate of the cost of insurance, based on information supplied to the insurance company.



Rate: The amount used to calculate premiums to be paid on an insurance policy.

Reinstatement: The reactivation of suspended or cancelled insurance policy.

Renewal: The act of keeping an active policy in place through acquiring a policy renewal, which is a certificate that attests to the fact that an insurance policy has been extended for another term.

Replacement Cost: The cost of replacing damaged or destroyed property without taking a deduction for depreciation. Replacement cost applies in certain circumstances or conditions as outlined in the policy.



Statutory Conditions: A mandatory set of conditions that apply specifically to all property and casualty policies. These are the same for all common law provinces and there is also a Quebec statutory conditions form.



Valuation: The means by which the value of property is determined at the time of loss.



Warranty: A statement attesting that something the customer says is true. An insurance contract is written on the principle of good faith, meaning each party must trust that the other is being completely truthful. For the contract to be valid, you may have to warrant that an assumption the insurer is making is true. If the insurance company discovers that one of the customer’s warranties is untrue, it may void the contract and not honour any claims made.


* Some definitions come from the Insurance Bureau of Canada website.