In Ontario, most insurance policies covering personal goods and automobiles (such as basic home insurance and car insurance policies) are written in plain English. Insurance policies covering commercial operations can be written in plain English or in a more formal language that is sometimes difficult to understand if you do not work in the insurance business or the legal profession.

In each case some words are unfamiliar to many of us. For this reason, Rhodes & Williams has added a section to explain these insurance terms. This is not a complete list of all terms in all policies, so if you come across another insurance term you don't understand in your policy, please contact us and we will send you an explanation and then add it to this page.

General Insurance Terms

Actual Cash Value (ACV): It is usually considered to be the cost of replacing or restoring property at prices prevailing at the time and place of the loss, less depreciation. However, courts in a variety of ways have defined it depending on the circumstances.

Adjuster: A person who investigates and settles losses, usually for an insurance carrier.

Agent: An insurance agent is an individual who sells insurance products for ONLY ONE COMPANY and generally sells only its products.  (See the definition of insurance Broker below)

All Risks Policy: Coverage by an insurance contract that promises to cover all risks of direct physical loss or damage except those specifically excluded in the policy.

Amendment: A formal document changing the provisions of an insurance policy signed jointly by the insurance company officer and the insurance policy holder or his authorized representative.

An Act of God: An act of God is a flood, earthquake or any other accident or event arising purely from natural causes and without human intervention, of such a nature of magnitude that it could not have been foreseen or prevented by reasonable care or foresight. Contrary to popular belief, acts of God are sometimes insured against.

Automobile Liability Insurance: Protection for the insured against financial loss because of legal liability for car-related injuries to others or damage to their property.

Automobile Physical Damage Insurance: Coverage to pay for damage to or loss of an insured automobile resulting from collision, fire, theft, or other covered perils.

Bailee: A bailee is a person or business that for a consideration, takes care, custody and control of the public's goods for some reason. The bailee must under law assume a high degree of responsibility to the public for the safekeeping of its property.

Broker: A broker is someone who sells insurance products for many different insurance companies. This allows them to compare price and coverages to best suit individual clients. (See The Benefits of Using An Broker.)

Canadian Loss Experience Automobile Rating (CLEAR Rating): A car insurance rating system that groups cars based on their claims experiences, such as repairs, injury claims, frequency of theft. Your premium may vary depending on whether or not your insurer uses CLEAR rating. For example, if your car's repair costs are fairly economical, an insurer that uses CLEAR rating might be able to give you a lower rate. About 50% of insurers use CLEAR rating to establish their rates.

Constructive Total Loss: Constructive Total Loss is suffered when the cost of repair is more than the property is worth.

Deductible: The deductible is the portion of an insurance claim that you pay. For example, if vandals cause $1000 damage to your car, you pay the amount of your comprehensive coverage deductible (ex. $300) and your insurance company pays the rest (up to the limit of your policy).

Driving Record: Your driving record is used to describe your driving history, including any accidents or traffic convictions.

Effective Date: The date on which the insurance under a policy begins.

Endorsements: Endorsements are used to make changes (i.e. by adding or deleting coverage in an auto policy). Endorsements are known as Ontario Policy Change Forms and are referred to as OPCF.

Errors and Omissions Insurance: Liability insurance policy that provides protection against loss incurred by a client because of some negligent act, error, or omission by the insured. The insured is normally a professional or consultant.

Exclusion: An exclusion is an insurance policy provision referring to Perils or property the Policy does not insure.

Exposure Loss: An exposure loss is one where the damage to the insured's premises results from a fire or other insured Peril which originates elsewhere and has spread to the insured premises.

Facility: A pooling mechanism for insureds not able to obtain car insurance in the voluntary market. Insurers write and issue policies but spread premium and losses on those policies to a central pool in which all insurers share.

Floater Policy: A Floater Policy is one whose protection follows moveable property within the territory specified in the policy.

Group Discount or Rate: A discount or rate provided to a member of an eligible group. An eligible group may include employees of the same employer, a member of a union, professional or occupational association. It often includes car insurance, home insurance and possibly other insurance coverages.

Hazard: Condition that creates or increases the chance of loss.

Indemnity: A Policy must be a contract of indemnity, that is, it must indemnify the Insured for the loss, and no more than the loss. The principle of indemnity is to try to put the Insured back as closely as possible into the same financial position that existed immediately before the loss occurred - no more and no less.

Lapse: The termination or discontinuance of an insurance policy.

Marine Franchise Clause: A Marine Franchise Clause is a type of deductible clause that says that if a loss exceeds a stated amount, the loss is paid in full. Below that amount the entire loss is assumed by the Insured.

Misrepresentation: Usually refers to an attempt by the Insured to secure a lower rate from the underwriter by deliberately misrepresenting his Risk as lesser than it actually is. The consequences of misrepresentation can be extreme - it could result in your insurance contract being deemed void.

Named Insured: A person named in an insurance policy and for whom the insurance policy is primarily written. It is distinguishable from the simple word "insured" in that an insured includes both named and unnamed insureds. It is distinguishable from unnamed insured in that it identifies the specific party in the policy.

Named Perils Policies: Insurance policies that specifically state the perils against which protection is given, and no others. This is distinct from the All Risk Policy, which covers all risks of direct physical loss or damage except those specifically excluded in the policy.

Obligee: A person or corporation under a fidelity or surety bond who is protected from loss.

Partial Loss: A partial loss is one that neither totally destroys and renders worthless the insured property, nor exhausts the amount of insurance, as opposed to Total Loss.

Peril: A peril insured against is a specific event causing loss or damage - such as the damage to building caused by fire or windstorm, or damage in a collision between two autos.

Renewal: An extension of an insurance policy for an additional policy period as the current policy is about to expire, is known as a renewal.

Subrogation: is the legal process by which the insurer seeks to recover from the third party who caused the loss, the amount the insurer has paid its Policyholder.

Specified Perils: Covers your automobile against losses caused by fire, theft, attempted theft, lightning, windstorm, hail or rising water, earthquake, explosion, riot or civil disturbance, the forced landing of aircraft, the stranding, sinking, burning, derailment or collision of any kind of transport on which your automobile is being transported.

Tenant: One who holds property, houses or land, owned by another, by payment of rent.

Underwriter: The insurance company or group that underwrites or insures a particular risk.

Valued Policy: An insurance policy wherein the parties agree at the time of issuance on the value of the property insured.