A comprehensive guide to Canadian insurance terminology. Click any term to read its full definition.
Mandatory coverage in Canadian auto insurance that provides benefits to you and your passengers regardless of fault, including income replacement, medical and rehabilitation expenses, attendant care, and death and funeral benefits. Coverage amounts vary by province.
The value of insured property at the time of loss, calculated as the replacement cost minus depreciation. ACV considers the age, condition, and useful life of the item. This method of valuation typically results in lower claim payouts compared to replacement cost.
Relating to the statistical and mathematical analysis of risk used by insurance companies to calculate premiums, set reserves, and forecast future claims. Actuaries use probability theory, statistics, and financial models to assess insurance risk.
Coverage in a home insurance policy that pays for the extra costs of living away from your home if it becomes uninhabitable due to a covered loss, such as hotel stays, restaurant meals, and temporary rental costs. Also known as Loss of Use coverage.
A professional who investigates and evaluates insurance claims on behalf of the insurer. Adjusters assess the damage, determine the extent of the insurer's liability, and negotiate settlements with policyholders. In Canada, adjusters may be staff adjusters (employed by the insurer) or independent adjusters.
A licensed individual authorized to sell insurance products on behalf of one or more insurance companies. Captive agents represent a single insurer, while independent agents may represent multiple companies. Agents differ from brokers in that they primarily represent the insurer's interests.
The maximum total amount an insurance company will pay for all covered losses during a specific policy period, typically one year. Once the aggregate limit is reached, no further claims will be paid. Common in commercial and liability policies.
An insurance policy or coverage that protects against all causes of loss except those specifically excluded. All-perils coverage (also called open perils or all-risk) provides broader protection than named perils coverage but comes at a higher premium.
The process of determining which driver is responsible for an auto accident. In Ontario and some other provinces, fault is determined using the Fault Determination Rules. Being found at-fault affects your premiums and claims record. Multiple at-fault claims can result in being placed with a high-risk insurer.
The person or entity designated to receive the death benefit or insurance proceeds upon the death of the policyholder. Beneficiaries can be individuals, trusts, charities, or estates. It is important to review and update beneficiary designations regularly.
A temporary agreement that provides insurance coverage until a formal policy is issued. Binders are commonly used in property and commercial insurance to ensure the insured has immediate protection while the full policy is being prepared and underwritten.
A surety bond is a guarantee from a bonding company that contractual obligations will be fulfilled. Common types include bid bonds, performance bonds, and fidelity bonds. In Canada, bonding is required for government construction contracts and certain professional services.
A licensed professional who acts as an intermediary between insurance buyers and insurance companies. Unlike agents who represent specific insurers, brokers represent the client's interests and can shop among multiple insurers to find the best coverage and rates. In Canada, brokers are regulated provincially.
Coverage that compensates a business for lost income and ongoing expenses when operations are disrupted due to a covered event, such as fire or natural disaster. It covers the income the business would have earned during the restoration period, plus extra expenses incurred to minimize the interruption.
The savings component of a permanent life insurance policy (whole life or universal life) that grows over time on a tax-deferred basis. Policyholders can borrow against the cash value or surrender the policy for its cash value. Withdrawals may be subject to taxation.
A formal request made by a policyholder to an insurance company for coverage or compensation for a covered loss or policy event. The claims process involves reporting the incident, providing documentation, and working with an adjuster to determine the settlement amount.
A clause in property insurance requiring the policyholder to insure their property for a specified percentage of its value (typically 80-100%). If the property is underinsured, the policyholder must bear a proportional share of the loss. Also refers to the percentage of costs shared between insurer and insured in health insurance.
Optional auto insurance coverage that pays for damage to your vehicle resulting from a collision with another vehicle or object, regardless of who is at fault. This coverage is subject to a deductible and is typically required if you have a car loan or lease.
Insurance that protects businesses against claims of bodily injury, property damage, and personal injury (such as libel or slander) arising from business operations, products, or services. CGL is considered essential for virtually all businesses operating in Canada.
Insurance that covers a business's physical assets — buildings, equipment, inventory, furniture, and fixtures — against covered perils such as fire, theft, vandalism, and certain natural disasters. Coverage can be on a named perils or all-risk basis.
Optional auto insurance coverage that protects against damage to your vehicle caused by events other than collisions, such as theft, vandalism, fire, hail, flooding, or hitting an animal. Also known as 'specified perils' or 'all perils' depending on the scope.
Insurance specifically designed for condominium unit owners. It covers your personal belongings, improvements and betterments to your unit, personal liability, and your share of any assessment for damage to common areas. The condo corporation's master policy covers the building structure and common elements.
The amount and type of protection provided by an insurance policy. Coverage defines what risks, perils, or events are insured against and up to what financial limit the insurer will pay for a covered loss.
Insurance that pays a lump sum benefit if you are diagnosed with a covered critical illness, such as cancer, heart attack, or stroke. The benefit can be used for any purpose — medical treatment, living expenses, or paying off debts. Coverage in Canada typically includes 25+ covered conditions.
Insurance coverage designed to protect businesses against losses resulting from cyber attacks, data breaches, and other technology-related risks. Coverage typically includes costs for data recovery, notification of affected individuals, legal fees, regulatory fines, and business interruption caused by cyber events.
The amount of money paid to the beneficiary of a life insurance policy upon the death of the insured person. In Canada, life insurance death benefits are generally received tax-free by the beneficiary.
The amount of money a policyholder must pay out of pocket before the insurance company begins to cover a claim. Higher deductibles generally result in lower premiums. In Canada, deductibles vary by province and type of insurance.
The decrease in value of property over time due to age, wear and tear, or obsolescence. In insurance, depreciation is used to calculate actual cash value by subtracting accumulated depreciation from the replacement cost of an item.
Insurance that protects the personal assets of corporate directors and officers in the event they are sued for alleged wrongful acts in managing the company. D&O insurance covers legal fees, settlements, and other costs. It is increasingly important for both public and private companies.
Insurance that provides income replacement if you become unable to work due to illness or injury. Short-term disability (STD) typically covers the first few months, while long-term disability (LTD) provides benefits for extended periods, sometimes until retirement age. Benefits are usually 60-70% of pre-disability income.
An endorsement or separate policy that covers damage caused by earthquakes. Standard home insurance policies in Canada do not cover earthquake damage. This coverage is particularly important in British Columbia and parts of Quebec and Ontario, which are in seismically active zones.
The waiting period between when a disability begins and when benefit payments start in a disability insurance policy. Common elimination periods are 30, 60, 90, or 120 days. Longer elimination periods result in lower premiums. Similar to a deductible but measured in time rather than money.
An amendment or addition to an existing insurance policy that changes the terms or scope of coverage. Endorsements can add, delete, or modify coverage. Also known as a rider. Common endorsements include adding a new driver to an auto policy or extending coverage for specific valuables.
A type of professional liability insurance that covers professionals against claims alleging negligent acts, errors, or omissions in the performance of their professional duties. E&O insurance is essential for insurance brokers, real estate agents, financial advisors, and other professionals providing advice or services.
A provision in an insurance policy that eliminates coverage for certain risks, perils, or circumstances. Common exclusions include intentional damage, wear and tear, and certain natural disasters. Understanding exclusions is critical when purchasing insurance.
Supplemental health insurance that covers medical expenses not fully covered by provincial health plans, including prescription drugs, dental care, vision care, paramedical services (physiotherapy, chiropractic, massage), and medical devices. Commonly offered as part of employee group benefit plans.
Insurance coverage that protects against damage caused by flooding from external water sources such as rivers, lakes, or heavy rainfall. In Canada, flood insurance has historically been unavailable but is now offered by many insurers as an endorsement to home insurance following devastating flood events across the country.
A specified period after a premium due date during which the policyholder can make a payment without the policy lapsing. In Canada, insurance regulations typically require a grace period of at least 30 days for life insurance policies. During the grace period, coverage remains in effect.
An employee benefits package offered by employers that typically includes extended health care, dental, vision, life insurance, and disability coverage. Group plans offer lower premiums than individual policies because the risk is spread across the group. In Canada, group benefits are a key part of employee compensation.
A comprehensive insurance policy that covers your home, personal belongings, and provides liability protection. Standard homeowner policies in Canada cover perils such as fire, theft, windstorm, and liability for injuries on your property. Flood and earthquake coverage typically require additional endorsements.
The Insurance Bureau of Canada. IBC is the national industry association representing Canada's private home, car, and business insurance companies. IBC advocates on behalf of the insurance industry, provides consumer information, and works on policy issues affecting the industry.
A fundamental insurance principle stating that the purpose of insurance is to restore the policyholder to the same financial position they were in before the loss occurred, without profiting from the claim. Indemnity prevents policyholders from being overcompensated.
The termination of an insurance policy due to non-payment of premiums. When a policy lapses, coverage ends and the policyholder loses the protection. Some policies may be reinstated within a certain period, often requiring evidence of insurability and payment of back premiums.
Legal responsibility for one's actions or omissions that result in injury or damage to another person or their property. In insurance, liability coverage pays for damages and legal costs if the policyholder is found legally responsible for causing harm to others.
Insurance that covers bodily injury and property damage you cause to others in an auto accident. In Canada, minimum liability coverage is mandatory in all provinces and territories, with minimums ranging from $200,000 to $500,000 depending on the province. Most brokers recommend at least $1 million or $2 million in coverage.
The maximum amount an insurance company will pay for a covered loss under a policy. Limits can apply per occurrence, per claim, or as an aggregate over the policy period. Higher limits generally result in higher premiums.
Coverage that pays for additional living expenses or the cost of a rental vehicle when your insured property (home or car) is unusable due to a covered loss. In auto insurance, this covers rental car costs while your vehicle is being repaired.
An insurance policy or coverage that only protects against losses caused by perils specifically listed in the policy. Common named perils include fire, lightning, explosion, smoke, theft, vandalism, windstorm, and hail. If a peril is not named, it is not covered.
An auto insurance system where each driver's own insurance company pays for their injuries and certain other losses, regardless of who caused the accident. Canada has various forms of no-fault insurance depending on the province — some are pure no-fault (like Quebec, Manitoba) while others are modified no-fault (like Ontario).
The Office of the Superintendent of Financial Institutions. OSFI is the federal regulator responsible for supervising and regulating federally registered insurance companies, banks, and pension plans in Canada. It ensures that financial institutions are in sound financial condition.
An endorsement or add-on to home insurance that covers damage caused by overland flooding from rivers, lakes, or heavy rainfall. Standard home insurance policies in Canada typically exclude flood damage. This coverage has become increasingly important due to climate change and more frequent flooding events.
The Personal Information Protection and Electronic Documents Act. PIPEDA is the federal privacy law that governs how private sector organizations collect, use, and disclose personal information in the course of commercial activities. Insurance companies and brokers must comply with PIPEDA when handling client data.
A specific risk or cause of loss that may be covered by an insurance policy, such as fire, theft, windstorm, or hail. Policies may cover named perils (only those listed) or all perils (everything except specific exclusions).
The portion of a home insurance policy that covers your personal belongings — furniture, electronics, clothing, and other possessions — against covered perils like fire, theft, and water damage. Coverage can be on an actual cash value or replacement cost basis.
A written contract between an insurance company and the policyholder that outlines the terms and conditions of coverage, including what is covered, exclusions, limits, and the premium amount. Policies are legally binding documents governed by provincial insurance regulations in Canada.
The amount of money an insurance policyholder pays to an insurance company for coverage. Premiums can be paid monthly, quarterly, semi-annually, or annually. The cost is determined by factors such as the type of coverage, the insured's risk profile, claims history, and the insurance company's pricing model.
Insurance that protects manufacturers, distributors, and retailers against claims that their products caused injury or damage to a third party. In Canada, product liability claims can arise from defects in design, manufacturing, or failure to provide adequate warnings or instructions.
Also known as Errors and Omissions (E&O) insurance, this coverage protects professionals against claims of negligence, errors, or omissions in the professional services they provide. Essential for consultants, accountants, architects, engineers, IT professionals, and other service providers.
The Registered Insurance Brokers of Ontario. RIBO is the self-regulatory body responsible for licensing, regulating, and disciplining insurance brokers in Ontario. All insurance brokers operating in Ontario must be registered with RIBO and meet ongoing education and ethical standards.
The cost to replace damaged or destroyed property with new property of similar kind and quality, without deducting for depreciation. Replacement cost coverage generally provides higher claim payouts than actual cash value but comes with higher premiums.
An additional provision attached to an insurance policy that adds benefits or amends the original terms. Riders are commonly used in life and health insurance to customize coverage, such as adding critical illness or disability benefits.
The process of identifying, analyzing, and evaluating potential risks to determine the likelihood and impact of a loss. Insurance companies use risk assessments during underwriting to set appropriate premiums and coverage terms.
The amount of money an insurance company agrees to pay a policyholder for a covered loss or claim. Settlements can be reached through negotiation, mediation, or legal proceedings. The goal is to restore the policyholder to their pre-loss financial position.
An endorsement to home insurance that covers damage caused by water backing up through sewers, drains, or sump pumps into your home. This is not included in standard home insurance policies and must be added separately. It is one of the most common and recommended add-ons in Canada.
The legal right of an insurance company to pursue a third party that caused a loss to the insured in order to recover the amount paid on the claim. For example, if another driver causes an accident, the insurer may subrogate against the at-fault driver's insurer to recover costs.
An additional charge added to an insurance premium, typically as a result of an at-fault accident, traffic violation, or other risk factor. In auto insurance, surcharges can significantly increase premiums for several years following an incident.
Insurance coverage for renters that protects personal belongings, provides liability coverage, and covers additional living expenses if the rental unit becomes uninhabitable. Also known as renter's insurance. It does not cover the building itself — that is the landlord's responsibility.
Life insurance that provides coverage for a specific period (term), such as 10, 20, or 30 years. If the insured dies during the term, the beneficiary receives the death benefit. Term life is generally more affordable than permanent life insurance but does not build cash value. It can often be renewed or converted to permanent coverage.
Insurance coverage that protects the policyholder against claims made by a third party (someone other than the insurer or the insured) for bodily injury or property damage. This is the most fundamental type of liability coverage and is mandatory in auto insurance across Canada.
Insurance that protects property owners and mortgage lenders against losses due to defects in title, liens, encumbrances, or other title-related issues that existed at the time of purchase. Title insurance is a one-time premium paid at closing and is increasingly common in Canadian real estate transactions.
A situation where the cost to repair damaged property exceeds its value or the property is completely destroyed. In auto insurance, a vehicle is typically declared a total loss when repair costs exceed 70-80% of the vehicle's actual cash value. The insurer then pays the ACV rather than repair costs.
A type of personal liability insurance that provides additional coverage beyond the limits of your existing home, auto, or watercraft policies. Umbrella policies kick in when the limits of your underlying policies are exhausted and typically provide coverage in increments of $1 million.
The process by which an insurance company evaluates the risk of insuring a particular person, property, or entity and determines the premium to charge. Underwriters assess factors such as health, driving record, property condition, and claims history to decide whether to offer coverage and at what price.
Coverage that protects you if you are injured or your vehicle is damaged by a driver who does not have insurance or cannot be identified (hit-and-run). In most Canadian provinces, this coverage is included as part of the mandatory auto insurance package.
A flexible permanent life insurance policy that combines a death benefit with a savings/investment component. Policyholders can adjust premiums and death benefits within certain limits. The cash value earns interest based on market performance or a guaranteed minimum rate.
An endorsement available on new vehicle insurance policies that waives the depreciation on a vehicle in the event of a total loss during the first few years of ownership. This ensures you receive the full purchase price rather than the depreciated market value.
A type of permanent life insurance that provides coverage for the insured's entire lifetime, as long as premiums are paid. Whole life policies have a guaranteed death benefit, fixed premiums, and a cash value component that grows over time on a tax-deferred basis.
A provincially mandated insurance program that provides wage replacement and medical benefits to employees injured in the course of employment. In Canada, workers' compensation is administered by provincial boards (e.g., WSIB in Ontario, WorkSafeBC in British Columbia). It operates on a no-fault basis.