Information Is Your Best Insurance
One of our mantras at BlueCircle is that there is no better insurance than information, so it’s our objective to help people understand what insurance is all about, what the terminology means, and what we can do to protect you and all you own, the right way!
[in-shoo r–uh ns, –shur-]
- the act, system, or business of insuring property, life, one’s person, etc., against loss or harm arising in specified contingencies, as fire, accident, death, disablement, or the like, in consideration of a payment proportionate to the risk involved.
- coverage by contract in which one party agrees to indemnify or reimburse another for loss that occurs under the terms of the contract.
- the contract itself, set forth in a written or printed agreement or policy.
Technically, insurance is a principle of risk management, based on assumptions of expected outcomes, in which the law of averages is applied in theory, or in practice, to approximate those outcomes, quantify risk factors and determine the cost of indemnity.
This is applied as an undertaking by one person to indemnify another person against loss or liability, in respect to a certain risk of peril, by providing a method of risk sharing through the distribution of a loss by one person amongst a group of many people.
Additionally, one of the basic tenets of insurance is that the insured should not profit from the loss or damage but be returned as near as possible to the same financial situation that existed prior to the loss.
12 insurance terms everyone should know!
Broker: is your personal insurance expert who works for you. Using their extensive background knowledge and experience, they can help you determine your insurance needs, examine any risk and shop around for the best coverage and price. That sounds exactly like BlueCircle!!
Insurer: is the insurance company that is responsible for providing the actual insurance coverage being offered. They determine insurance premiums and provide a range of deductible levels for your coverage needs. They also determine the policy coverages and exclusions, as well as handle the claims process.
Insured: this is you, the person who will receive indemnity should there be a loss.
Indemnity: the payment made by the insurer to the insured to cover a loss.
Premium: is the amount you pay monthly or annually for insurance protection. There are several factors that determine your insurance premium including where you live, your age, claims history, driving habits, type and /or value of your vehicle, age, insurance experience, employment, and/or the characteristics of your home.
Deductible: is the amount that you, the policyholder, are required to pay out of your own pocket before your insurer will cover the remaining costs of a claim. In some cases, you can increase your deductible to save money on your premiums. Different policies and coverage have different deductibles, so always check with your broker if you are unsure. Sometimes referred to as “risk retention”.
Sub-limit: a homeowners, condo or tenants insurance policy will have limits on how much reimbursement you will receive from the insurance company if you have a claim. Different claims have different limits. For example, the maximum payout you would receive for sewer backup damage will differ from the amount received for a damaged roof due to a hailstorm. Your specific sub-limit will be detailed in your policy documents. To confirm how much coverage is available, read your insurance documents and/or speak to your broker who will explain.
Collision Coverage: is an optional coverage that pays for damage to your vehicle caused by an at-fault collision with another vehicle, object (such as a tree, guard rail or debris) or by an upset (rollovers). If you are driving a leased or financed vehicle, you may be required to purchase this coverage to protect the car owner or lender’s investment.
Comprehensive Coverage: is car insurance coverage that provides additional protection for your vehicle against damage including break-ins, flood and water damage, fire, vandalism and falling objects. Although it is not required by law, comprehensive coverage may be a good idea depending on what kind of vehicle you drive. If you are driving a leased or financed car, you may be required to purchase this coverage to protect the car owner or lender’s investment.
Accident Benefits & Liability Coverage: is mandatory coverage for all vehicle owners in Canada. Accident Benefits and liability insurance provides coverage for any incident involving your vehicle while it is being driven. This includes coverage for medical treatment, income replacement, and other benefits to help if you are injured in an accident, as well as if someone takes legal action against you as a result of an accident. It also provides coverage to any property damage caused by the vehicle.
Actual Cash Value: or ACV, is the cost of replacing damaged or destroyed property while factoring in depreciation and obsolescence. For example, a ten-year-old couch wouldn’t be replaced at current full value due to the decade of depreciation. Other items, such as scheduled antiques or artwork, may actually increase in value over time. To receive full coverage for these items, they may need to be listed specifically in your policy and/or have an appraisal. Speak to your broker about special limits within some policies that offer coverage for jewelry and antiques.
Replacement Cost: refers to the cost to replace damaged or destroyed property with an item of similar quality without considering depreciation. Using the example of the ten-year-old couch, a customer with replacement cost protection would be reimbursed the cost of purchasing a brand new couch.
Here are a few more terms that will help you better understand your insurance policies and coverage.
Binding: essentially this means that coverage is in place but a policy has not been issued yet.
Coinsurance: a clause under which you, the insured, share in a loss with the insurer.
Depreciation: decrease in the value of property items over a period of time, typically due to use, obsolescence, or wear and tear.
Endorsement/Rider: an amendment to an insurance policy to add or remove specific coverage.
Grace Period: a time period after the due date of a premium, during which the overdue payment may be made without penalty.
Limits: the maximum amount a policy will pay under a particular coverage, or overall.
Named Perils: specific perils or dangers which are listed for coverage on the policy.
Umbrella Policy: an added policy that pays for liability losses in excess of those covered in a regular homeowners or auto insurance policy
Water Damage Extension/Sewer Backup Coverage: protection against damage caused by water from a sewer, sump, septic tank, eavestrough, downspout or drain.