How to Speak Insurance
Insurance-speak can be complicated. Unless you’re fluent in the intricacies of floaters or fortuitous events, it can be difficult to decipher what your policy means. That’s why we’ve put together this handy glossary of insurance terms, with definitions that are easy to understand. That way, we know that when it comes time to talk about insurance, you’ll be ready.
Actual Cash Value/ Replacement Cost
When it comes to resolving insurance claims, there are two ways that an item or possession can be replaced. Let’s say that the item being replaced is a 10-year-old TV. If that TV is insured under a ‘replacement cost policy’, you’ll receive either a brand new version of your TV, or a brand-new version of a comparable model. If it’s covered under an actual cash value policy, this coverage takes into account how much the TV has depreciated since it was new, and you’ll receive a 10-year-old TV in response to your claim.
This is someone who assesses risk and determines how likely certain events are to happen, and as a result, how much insurance premiums should cost.
Advisors are on the front lines, working directly with customers to provide advice and guidance on what kinds of insurance policies are available, as well as what policy makes the most sense for each person, group or family.
Binding the Policy
After selecting your coverage, reviewing the quote, and accepting the terms, 'binding the policy' is the final stage, when the application for insurance is officially accepted.
A comprehensive policy covers the widest range of possible perils.
Consequential & Direct Damage
There are two main types of damages—those that happen to your property, and those that result from the damage that happens to your stuff. It sounds complex, but it’s actually quite simple. If your laptop is damaged, that’s direct damage. If your laptop is damaged—meaning you can’t finish editing photos you owe to a client—that’s a consequential damage. Direct damages are usually covered under home insurance policies, while consequential damages may be excluded.
When you’re filing an insurance claim, you pay something called a ‘deductible’. A deductible is the portion of a claim that you’re responsible for paying, and is chosen by you, based on the value of whatever you’re insuring.
When an insurance policy changes in scope—whether something is added, removed, or modified—those changes are called endorsements.
Some things aren’t covered by an insurance policy, like vermin, rodents, or wear and tear. These are called exclusions.
When it comes to insurance policies, there are certain caps and limits on the coverage of expensive and easily moveable items (like jewellery). When you reach the cap, and require additional coverage, you may need to take out something called a ‘floater’. A floater is an addition to your policy, which covers the value of your items that exceed your base coverage, and would take care of the replacement cost of these items if something were to happen to them.
When it comes to insurance, there’s a difference between something happening by accident or chance, and something that’s done on purpose. If an accident occurs, that’s a fortuitous event, and may be covered. If damage is done on purpose, or because of neglect, it is not a fortuitous event, and is likely not covered by insurance policies.
This is a person that vouches for you and confirms that what you say is accurate, and that you’re able to hold up your end of the bargain.
When winter hits, ice can clog your gutters, preventing snow from draining properly. With nowhere else to go, melting snow can get under the shingles and into the walls, causing substantial damage to your house. That’s what we called an ice dam.
This is just a very legal-y way of saying that two or more people co-own something, and if one of those people dies, ownership passes directly to the surviving parties.
Known Loss Rule
This is a rule that prevents making a claim on something that you lost or broke before the policy started. This is also known as misrepresentation.
It might seem like mortgage payments last a lifetime, but in some tragic cases, they last longer than that. That’s where mortgage insurance comes in. If you can’t pay off the remainder of your mortgage due to death or disability, an insurer steps in to pay off the remaining debt.
This is pretty common in most auto insurance policies, and it simply means that if you lend someone your car, they’re covered under your policy. So, if you’re ever feeling sleepy behind the wheel, feel free to let your friend drive. (That is, if they know how to drive).
These are the forces or events that can cause damage to the thing you’ve insured. They range from common natural disasters (like lightning, wind, or hail) to the rarest (like earthquakes).
This is the document that details the terms and conditions of your insurance coverage.
These are the written terms and conditions of an insurance policy. Usually, these terms will be agreed upon verbally first, then put on paper.
A ‘premium’ is what you pay to purchase insurance. To calculate how much this costs, we use an algorithm that takes into account past behaviour to try and determine future risk.
A quote is an assessment of what your insurance will cost, based on the coverage you selected and the information you’ve provided to us. While a quote isn’t an official offer of insurance, it’s usually pretty close to what the final cost will be.
We all procrastinate, and in insurance terms, that procrastination is called a reporting lag. This lag refers to the period of time between when an incident occurs, and when that incident is first reported to us.
When an insurance claim involves a loss caused by a third-party, an insurance company has the right to pursue legal action on your behalf, to cover the value of that claim.
A tertiary beneficiary is the third person in line to receive life insurance benefits. If something unfortunate happens, and the first and second beneficiaries are deceased when the proceeds of the policy pay out, those proceeds go to person number three.
Utmost Good Faith
This is a way of saying that when it comes to insurance, everyone involved is expected to be honest and disclose all the important facts when they enter into an agreement.