Insurance glossary



TermDefinition
Agent

Someone who represents one insurance company and sells its insurance products. In some cases, a life insurance agent may represent several different insurance companies.

Agents must usually be licensed in the province or territory in which they do business.

Actual cash value

The replacement cost of the insured property, less depreciation (loss of value due to the age and condition of the item). This is one method of determining the amount of money the insurer will reimburse you if you make a claim.


Premiums for policies with actual cash value are generally less expensive than those for policies with replacement value.

Beneficiary or beneficiaries

The person(s) named on the life insurance policy who will receive the death benefit when the life insured dies. For example, you may want to name your spouse or child as the beneficiary of your life insurance policy.


Beneficiaries may be revocable or irrevocable.

If the beneficiary is revocable, the policy owner can change the beneficiary at any time without advising the beneficiary.


If the beneficiary is irrevocable, the policy owner must have the irrevocable beneficiary’s written permission before making beneficiary changes.
BenefitAmount that the insurer will pay you if the insurer accepts your claim.
Broker

Person or company who sells the insurance products of several different insurance companies.

Brokers must usually be registered in the province or territory in which they do business.
Cash value

Cash amount that the life insurer pays to the policyholder when a life insurance policy is cancelled.

It may also be possible to take out a loan against the cash value of the policy.

The cash value is not usually added to the face value of your policy, which is paid out upon your death.

This term is normally used with a permanent life insurance policy.
ClaimOfficial notice you provide to your insurer requesting payment for a loss covered by your insurance policy.
Claim investigation
Process used by insurers to get the claim information necessary in order to decide whether to pay a claim.
Coverage

Amount of protection you have purchased.


The maximum amount of money the insurance company will pay you if you make a claim for a loss or event covered by your policy.
Death benefit

Amount of money that the insurer will pay your beneficiary or beneficiaries upon death of the life insured.


This term is normally used with a life insurance policy.
Deductible

Amount of your claim that you agree to pay before the insurer pays the rest.


Choosing a higher deductible will decrease the cost of your insurance premiums because you agree to pay for a larger part of your loss.


This term may be used with health, dental, home and auto insurance policies.
Exclusions

Types of claims that are not covered by your policy. Read your policy carefully and make sure you understand what is and is not covered.  If you have any questions, please do not hesitate to ask your insurance agent or broker.


For example:


  • Some health insurance policies may exclude certain medical conditions you had before you applied for   the insurance.
  • A travel policy may exclude claims made if you travel to a high-risk country.
  • A home insurance policy may exclude claims for some types of water damage (e.g. sewer back-up).

You may be able to buy extra insurance, known as a rider or endorsement, to pay for risks not covered in your basic policy.


InsuredPerson(s) protected by the insurance policy.
InsurerInsurance company that issues the insurance policy.
Material facts

Things you know that could affect an insurance company’s decision about whether to insure you and what price (premium) you will pay.
 
For example, if you are applying for life insurance, you must tell the insurer if you smoke.


If you do not tell the insurer about material facts, the insurer could cancel your policy and refuse to pay any claims.
Policy

Legal contract between you and the insurer.


The policy specifies:


  • what risks are covered by the insurer
  • under what circumstances the insurer will make a payment to you
  • how much money or what type of benefit you will receive if you make a claim. The amount of money or level of benefit you would receive depends on the amount of your damage or loss.

Policy holderPerson who owns the insurance policy; usually, but not always, the insured.
Pre-existing conditionMedical condition you know you already have before you apply for insurance—for example, asthma, high blood pressure or heart disease.
Premium

Amount you pay to buy insurance.


The premium is usually paid monthly, quarterly or annually. The amount of your premium may change upon policy renewal.
Replacement value

The actual cost to replace an item destroyed or damaged in the event of an insured loss. This is another method of determining the amount of money the insurer will reimburse you if you make a claim.


Premiums for policies with replacement value are generally more expensive than those for policies with actual cash value.
Rider

An extension of coverage added to your insurance policy, for an additional cost, for risks not covered in a basic policy. Also known as an endorsement.


Check with your insurer to find out what is and is not covered by your policy and for what risks you might need extra coverage.
RiskProbability that an insured event, such as loss, injury or death, will happen while your policy is in effect.
Underwriting

The process that the insurer uses to evaluate the risk associated with potential clients and to assess their eligibility to receive coverage.


The underwriting process will determine:


  • how much coverage to provide the client
  • premium to be paid by the client.




Source: Understanding Insurance Basics, page 2-27, Financial Consumer Agency of Canada, 2012. Reproduced with the permission of the Commissioner of Financial and Consumer Agency of Canada, 2013.  



The FCNB does not endorse any designation or profession. You should always verify the person’s qualifications before seeking advice. It is critical that you check an individual’s registration or licence status, and the types of products or services they are registered or licensed to sell.

 

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