Glossary of Home Insurance Terms

Insurance is a very confusing thing to manage for the average person; after all, why should people know the difference between an actuary and an advisor? With this in mind, we at Bluecouch have created a detailed A to Z glossary on the ins and outs of the craft.

A

Actuary

An actuary is someone who looks at a class of risk and determines how likely certain events are to happen, and as a result how much insurance premiums should cost for that class of risk. For example, an actuary will look at all of British Columbia as a class or risk and determine how much each coverage line (fire, earthquake, flood, etc.) should cost. 

Advisor/Broker 

Advisors and brokers are insurance advocates who work with the Insured/Claimant (You)  to ensure the Insured purchases the correct type and limit of insurance. In most circumstances, Advisors work with only one insurer (mostly Direct Writers) and are employees of the insurance company. Adversely, Brokers work with many insurance companies and are not employees of the insurance companies.  The mandate of both Advisors and Brokers is to be an advocate for the Insured/Claimant. 

Adjuster

Adjusters (who could be independent adjusters or employees of the insurance company) determine the scope of the damages once a loss has occurred and review the policy document wording to assess if coverage exists and how coverage will be applied. They also assess damages and investigates claims to make sure they aren’t fraudulent.

Actual Cash Value (ACV)

ACV is when it’s time to resolve an insurance claim your insurance company will take into account the value of the item at the time of its loss. For example, suppose your item being replaced is a 5-year-old computer. In that case, the insurance company will take into account how much the value of that item has depreciated and will compensate you either with cash worth a computer with five years depreciation or replace the computer with another 5-year-old model.

Appraisal

An appraisal determines how much an item is worth. E.g. your family heirloom is appraised at $2,000.

Amount of Insurance 

This means the maximum amount the Insurance company will pay for any one occurrence or incident, no matter how many people covered by this policy are involved. Different amounts apply to different coverages, and these amounts are shown on the Insurance Policy Dec pages.

B

Binding the Policy

Binding the policy is the final step with your insurance, where it is confirmed that your coverage is in place.

Building Code

Building code is a set of rules that state the specified building standards required after property damage.

C

Coverage

Determines what your insurance policy will specifically cover in case property is damaged or someone brings legal action to you based on something that occurred with your property.

Class Average

An actuary looks at a whole set of postal codes and comes up with a "rate", aka the class average rate. At that point, the underwriter (see below), takes this "class average" and applies a surcharge or discount to that class average rate to make it applicable to a specific house. Essentially, depending on your neighbourhood, credit score, past claims experience, etc. your rate will go up or down.

D

Data Problems

Any data during a claim that is inputted as incorrect either by yourself or the person processing your information. E.g. you put your house as built-in 1910 instead of 1970 and end up paying more for your insurance.

• Erasure, destruction, corruption, misappropriation, misinterpretation of data,

• Error in creating, amending, entering, deleting or using data, or

• Inability to receive, transmit or use data

Deductible

This is the amount you personally will have to pay as part of your insurance policy. If you have a 10% deductible, you have to pay 10% of the costs if there are damages.

Duties After Loss

Duties after loss is typically a series of steps you must take after submitting proof of loss. The required steps will depend on your insurance company.

E

Endorsement

An endorsement is a change in your policy whether something has been added, removed, or modified. Any change is called an endorsement.

Effective Date

Effective date is the date that your coverage goes into effect (aka, “starts working”)

Exclusions

Sources of damage that aren’t covered by an insurance policy, exclusions depend entirely on your policy.

F

Fine Arts

This means items described on the Coverage Summary, which are designated as fine arts.

Fungi

Includes, but is not limited to, any form or type of mould, yeast, mushroom or mildew whether or not allergenic, pathogenic, or toxigenic, and any substance, vapour or gas produced by, emitted from or arising out of any fungi or spore(s) or resultant mycotoxins, allergens, or pathogens. 

Floater (Scheduled Items)

Floater insurance is for items that can be easily moved from location to location. It is typically used for expensive items that aren’t fully covered by property insurance.

Fire Wall

No, not like on the computer. A fire-resistant wall erected to slow or stop the spread of fire between parts of a building. Similar in practice to a fire door.

I

Insured Perils

The Insurance Company will insure your special items described on the Coverage Summary against All Risk or direct physical loss or damage subject to the terms, conditions, limitations and exclusions of this form. 

Insured/Claimant

An Insured/claimant would be you, dear reader. The Insured is the person who has insurable interest and is purchasing the insurance product.  If you seek to be paid out by the insurance company due to an incident (e.g. losing your house to a fire), you are considered a claimant as you seek a claim (Often for money).

L

Lapse

A lapse is when you choose not to renew your insurance policy.

Limit

The maximum amount the insurer will pay for a claim that your insurance policy covers. So, for example, if you have damages totalling $9,000 and the insurance limit is $5,000 you (the claimant) are on the hook for that $4,000.

N

Named-peril policy

Named peril policy is when your insurance policy only covers the named specific hazards (Hazard being an incident such as flood, fires, mudslide) in your policy

Notice to Authorities

When loss or damage is suspected due to malicious acts, (e.g. robbery or vandalism), immediate notice must be given to a law enforcement agency.

O

Overland Water Coverage

Slightly different from flood coverage, overland water coverage covers events when water enters your home from above-ground areas such as freshwater lakes and rivers, heavy rainfall, and sewer lines. This may already be included in a flood package with your insurance company.

Other Structure/Detached Coverage

This coverage applies to other detached structures on your property, such as sheds and garages.

P

Property Not Insured

There is no coverage for:

• Property in any fairground, exhibition or exposition for exhibition or sale;

• Any property illegally acquired, kept, stored or transported, or property subject to forfeiture;

• Any property lawfully seized or confiscated, unless such property is destroyed to prevent the spread of fire,

Premiums

Insurance premiums are how much you will be paying based on your type of insurance and the amount of coverage. To put it simply, it is the amount of money you pay for insurance.

Peril

A chance event that is unexpected and accidental (for example, Property loss through disasters such as a fire or hurricane)

S

Spore(s)

Include, but is not limited to, any reproductive particle or microscopic fragment produced by, emitted from or arising out of any fungi.

Spouse

Means: 

• Either of two persons who are married to each other or who have together entered into a marriage that is voidable or void; or

• Either two persons who are cohabiting and identify as partners and have together continuously for a period of two years, or if they are natural or adoptive parents of a child, for a period of one year.

T

Terrorism

Insurance defines terrorism as an ideologically motivated unlawful act or acts, including but not limited to the use of violence or force of threat of violence or force, committed by or on behalf of any group(s), organization(s) or government(s) to influence any government and/or instilling fear in the public or a section of the public. 

Tenant

A Tenant is someone who pays rent for the home they live in.

U

Underwriter

This is someone who takes the class pricing determined by an actuary and adjusts it (with a discount or surcharge) depending on how each specific risk measures against the class average. For example, an underwriter would likely consider where you live “high risk” if you live at the foot of an active volcano. As such he will apply a surcharge for your specific risk on top of the class average rate determined by the actuary.