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:
NON-OWNED COVERAGES
These can be broken down into three distinct areas:
Non-Owned Automobile Liability:
The standard non-owned automobile liability policy insures against
the liability imposed by law upon the insured for loss or damage
arising from the use or operation of any automobile not owned in
whole or in part by or licensed in the name of the insured and results
in the bodily injury to or the death of any person or damage to
property of others not in the care, custody or control of the insured.
Some examples of a non-owned exposure are:
• An employee of the insured using their personal automobile;
and
• A delivery company has been hired to deliver the insured’s
product.
Non-Owned Watercraft Liability:
A commercial general liability policy usually excludes bodily injury
or property damage arising out of the ownership, maintenance, use,
operation, loading or unloading, or entrustment to others, by or
on behalf of any Insured of any watercraft. As the exception to
the exclusion is only applicable when the watercraft is less than
8 metres long, there is a possible gap in coverage and hence the
need for non-owned watercraft liability.
Non-Owned Aircraft Liability:
A standard commercial general liability policy excludes liability
arising from the ownership, use or operation of any aircraft. The
definition of aircraft includes fixed wing aircraft and helicopters.
By virtue of the exclusion it becomes necessary to purchase non-owned
aircraft liability insurance. Dependant on the exposure and circumstances
involved, it may be sufficient to be added as an additional insured
to the aircraft owners’ policy.
OCCURRENCE LIABILITY POLICIES
Coverage applies as long as the claim arises during the term of
the policy. For example, 50-year-old policies are being called upon
to support claims involving asbestos as well as “sexual exploitation”
claims.
PERSONAL INJURY
Personal injury provides coverage for exposures such as false arrest,
detention, libel, slander, wrongful entry, or eviction.
PERSONAL LINES
This coverage is mentioned because of the importance of the cover
to business owners and executives. All too often great care is exercised
in ensuring adequate coverage for the business and the personal
side is ignored. All homeowners’ policies contain coverage
and property restrictions but the following are of note:
• earthquake coverage is purchased separately and should
be purchased on both your home and the contents of the home;
• flood coverage is NOT available; and
• low dollar loss limits are applicable to many kinds of property
including: jewelry, silver and gold, bicycles, coin and stamp collections.
There can be significant differences in the wording used by different
underwriters. For example, some insurers do not require that replacement
structures be on the same site, although most do. Similarly, some
insurers do not require you to actually replace contents after a
loss before they reimburse you for the replacement cost, although
again, most do. Some underwriters have no additional limit on living
expenses, which can be significant if, for example, your home is
destroyed in a fire and will take many months to replace.
PRODUCT RECALL COVER
Any large corporation with significant sales should investigate
this form of coverage. Any error in the manufacturing process or
a government requirement to recall a product will cause enormous
costs and potential loss of reputation.
PROFESSIONAL LIABILITY INSURANCE
In the case of a lawsuit alleging negligence in the services a professional
provides or claiming breach of contract, professional liability
coverage protects the named professional from financial loss. There
are many different forms of this coverage, including:
Errors and Omissions
Typically, insurance brokers, accountants, lawyers, architects
and engineers carry this cover.
Malpractice
This cover is designed for the medical field.
Publishing
All publishers should be alert to this form of cover, ranging
from newspapers and magazines to technical and fictional works.
Producer’s Liability
A cover designed for protecting movie and documentary producers
against suits for title and copyright infringement, plagiarism,
and the like.
While the General Liability coverage is normally written on an
occurrence basis, Professional Liability coverage, as with Directors
and Officers Liability, is always written on a “claims made”
basis - coverage begins on the effective date of the policy and
expires on the last day of the policy (i.e. all coverage ceases
on that day). Any and all incidents that may give rise to a claim
must be reported to the insurer prior to expiry. Great care must
be taken whenever changing underwriters to ensure continuity of
coverage.
PROPERTY INSURANCE
The protection of a corporation’s physical assets includes
buildings, stock, equipment, and tenant’s improvements.
N.B. Earthquake deductibles can vary from 2% to 10% (or more) of
the value of property insured not a percentage of the claim,
Property insurance includes Business Interruption and Extra Expense
cover.
Deductibles should be affordable by the corporation but outside
of the “usual” type of business occurrences or incidents.
If the deductibles are low the premium monies will be wasted, as
they will simply be being “traded” with underwriters
(this comment is true for ALL types of insurance).
RECIPROCALS
Reciprocals are gaining favour once again and provide a looser arrangement
than captives. Reciprocals occur where a number of organizations
or businesses in similar industries band together to insure each
other’s losses. One of the best-known reciprocals is the Universities
Reciprocal across Canada.
REPLACEMENT COST AND ACTUAL CASH VALUE (“ACV”)
Replacement cost provides, as the name implies, new for old on buildings
and equipment.
Actual cash value, on the other hand, provides insurance for the
depreciated value of the property insured.
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