How’s your damage insurance vocabulary?
Article revised on 19 November 2018
Words used in everyday speech can take on a whole new meaning in the insurance world. Consider the word “premium,” for example. It can mean superior or exceptional in everyday speech.
Because we know it is always reassuring when you understand what you’re buying, we have prepared a glossary of 12 terms used in the damage insurance industry.
1- Property and casualty insurance
DAMAGE INSURANCE is a type of insurance that covers an insured’s property (automobile and various other vehicles, home, business, etc.) or the insured’s liability in the event of fire, accident, etc.
An ENDORSEMENT is additional coverage that can be added to your insurance contract and which usually comes at an extra cost. Adding an endorsement allows you to have coverage for property or situations that are not usually included in a basic contract.
For example, you can ask your insurer to add an endorsement to your home insurance policy in order to have more comprehensive coverage for a particular item, such as a spa, a swimming pool or a valuable piece of art. Certain endorsements can also be added to your policy to cover damage such as that caused by water leakage or sewer backup.
3- Automobile Claims Database (FCSA)
The AUTOMOBILE CLAIMS DATABASE (FCSA) keeps a six-year record of all automobile losses (thefts, accidents and incidents of vandalism). Even an undeclared, minor fender-bender will be entered in the database if the other driver filed a claim. The FCSA gives insurers reliable statistics to use when setting automobile insurance rates.
The DEDUCTIBLE is the portion of expenses that you have to pay in the event of an insurance claim. The higher the deductible, the lower your insurance premium, but you pay more in the event of a claim.
For example: You have selected a $500 deductible for your home insurance. Following water damage, you submit a claim to your insurer and receive confirmation that the damage is covered under your policy. Since the bill for repairs is $900, you pay the $500 deductible, and your insurer pays the balance of $400.
INDEMNIFICATION refers to benefits that the insurer pays to compensate for the loss or breakage of an insured item following an event covered under your insurance policy. The insurer may:
- Have the property repaired
- Purchase a replacement for the property that was insured
- Pay you a sum of money as compensation for the loss or damage.
In all cases, you and the insurer are bound by the conditions set out in your insurance contract.
The home or auto insurance PREMIUM is the amount you pay to insure your property. In return for that amount, your insurer agrees to assume certain expenses relating to an unfortunate event, such as an accident, breakage in your residence, a theft or a fire, according to the conditions set out in your contract.
An automobile insurance premium is calculated based on a number of criteria such as use of the vehicle, the type of vehicle to be insured, driving record, etc. A home insurance premium is calculated based on such factors as the year of construction, value and contents of the home.
Submitting a CLAIM means asking your insurer to pay you compensation when you sustain a loss that is covered under your insurance contract. The amount paid by your insurer to compensate you for the loss or damage to your property is determined based on your insurance policy.
8- Civil liability
CIVIL LIABILITY insurance covers you if you are held liable for unintentional bodily injury or accidental damage to someone else’s property. In these situations, you have a legal obligation to repair the damage. This often represents substantial compensation amounts, which civil liability insurance protects you from having to assume.
This protection would also cover you if you had to defend yourself in court after being served a formal notice, alleging your civil liability. Your insurer would bear the expenses of your defence, including your lawyer’s fees and court costs.
This protection, which is included in basic home and auto insurance plans, can be increased for a few dollars more, to ensure that you have adequate protection in any situation that may arise.
A LOSS is an event that causes damage to your property, including your home or your car, or that results in the loss of your property.
Car theft, traffic accident, house fire and water damage would all be examples of a loss.
10- Extra premium
An EXTRA PREMIUM is an insurance cost that is added to the regular premium. This supplement is used to enhance your protection through the addition of a benefit.
For example, if you want to have additional civil liability insurance coverage during a trip to the United States, you will be charged an extra premium. The same applies if you decide to install a wood stove in your home.
11- Replacement value
The REPLACEMENT VALUE is an option that is added to your insurance contract. In the event of a covered loss, the replacement value option enables you to receive a benefit that’s based on the current cost of repairing or replacing the item. This means that your insurer will not take into account the loss of value associated with wear and tear (depreciation) when calculating the amount of your benefit. You must pay a higher premium to obtain the replacement value option.
12- Leisure vehicle
LEISURE VEHICLES include watercraft (such as pleasure and sport fishing watercraft), trailers, motorhomes, motorcycles, mopeds, snowmobiles and ATVs (including side-by-sides).
In closing, you should never hesitate to ask questions if your insurance representative uses words you don’t understand! As an expert in the field, your agent is there to help you understand about the insurance coverage you’re buying!
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