Insurance terms Glossary
OVERVIEW OF COMMON TYPES OF INSURANCE AND INSURANCE TERMS
The following is an alphabetical list of common insurance terms
and types of insurance coverage:
ADDITIONAL INSURED
In the absence of a third party being added as an Additional Insured
or Additional Named Insured, any material breach of the policy by
the insured will void coverage, and no coverage would be available
under any circumstances.
ADVERTISING LIABILITY
Advertising injury protects the insured from lawsuits arising out
of advertising or promotional activities. It is important to note
that claims arising from intellectual property are excluded.
AGGREGATE LIMITS
The maximum limit that the policy will pay out irrespective of the
number of incidents or occurrences.
AUTOMOBILE LIABILITY COVERAGE
This coverage provides protection for injury to other people’s
property or injury to third parties themselves. While ICBC has an
absolute monopoly for providing coverage for the minimum liability
limit required by law, there are many alternatives for excess liability
and collision and comprehensive coverages.
AUTOMOBILE PHYSICAL DAMAGE COVERAGE
This provides coverage on an insured’s owned or long term
leased vehicles against loss or damage to the insured vehicle arising
from certain described perils, the most common being as follows:
- Collision Coverage
Pays for loss caused by the collision of the vehicle with another
vehicle or other object, or by the upset of the vehicle; and
- Comprehensive Coverage
Pays for loss caused by fire, theft, vandalism, falling objects,
windshield breakage, and various other perils other than collision
with another vehicle, object or its upset. Basic coverage is written
on an “Actual Cash Value” basis. This means that the
insurance company will pay the cost to repair the damage or the
actual cash value of the vehicle, whichever is less. The actual
cash value of a vehicle is considered its fair market value based
on vehicles with comparable mileage and mechanical condition.
A waiver of depreciation for the first two to three years after
the original purchase date of a new vehicle is offered in certain
circumstances.
AUTOMOBILE RENTAL CAR COVERAGE
Provides coverage to a business with third party liability insurance
for vehicles that are rented on a short-term basis and replaces
or augments the liability coverage offered by the automobile rental
company. In addition to third party liability, coverage can be obtained
to cover physical loss or damage to the rental car itself.
BOILER AND MACHINERY INSURANCE
This insurance protects against “accident to an object.”
While some wordings may vary, an accident is normally considered
to be a sudden and accidental breakdown of boilers, process equipment,
refrigeration and air conditioning equipment. The coverage applies
both to the equipment itself, to other property that you own, and
to property of others in your care, custody and control and which
you are responsible for insuring. Property policies do provide some
limited coverage but do not provide breakdown cover, and the size
of “objects” covered is very restricted by pressure
size or type of equipment.
BONDS
Fidelity Bonds
Fidelity bonds indemnify the employer against any loss of money
or other property that is sustained through any fraudulent or dishonest
acts committed by any of its employees, whether they were acting
alone or in collusion with others.
Surety Bonds
A surety bond is a three–party agreement in which the surety
company assures the obligee (owner) that the principal (contractor)
will perform a contract. Bonds used in construction are called contract
surety bonds. There are three primary types of contract surety bonds:
Bid Bond
Provides financial assurance that the bid has been submitted in
good faith and that the contractor intends to enter the contract
at the price bid and provides the required performance and payment
bonds;
Performance Bond
Protects the owner from financial loss should the contractor fail
to perform the contract in accordance with its terms and conditions;
and
Payment Bond
Assures that the contractor will pay certain workers, subcontractors,
and materials suppliers. This is often called a labour and materials
bond.
BUSINESS INTERRUPTION
This coverage responds after there has been physical loss or damage
to insured property and is generally unavailable on a “stand
alone” basis. The two principal forms of business interruption
coverage are:
Profits Insurance
Profits insurance can be purchased for a pre-determined indemnity
period (e.g. 12 or 24 months) and covers the reduction in sales
and the ongoing fixed expenses (standing charges) until the level
of profit returns to the same level as it was prior to the loss.
Gross Earnings Insurance
Gross Earnings coverage only offers coverage for the actual length
of time to repair or replace the damaged property.
Both coverages can be amended to deal with “ordinary payroll”
expense. In many situations both Gross Earnings and Profits coverages
can be supplemented by purchasing specific “Extra Expense”
cover that protects against additional costs incurred by carrying
on your business after a loss occurs to insured property.
In addition to the above forms of cover, which are referred to
as “actual loss sustained” forms, coverage can be
purchased on a “valued basis” with indemnity provided
on a fixed per diem amount subject to a specified number of days.
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