Back to Basics, Part Three: The Language of Insurance, J-Z (well, L-W Really)

As a continuation of last week’s insurance lingo post, below are commonly used insurance terms from the second half of the alphabet.

Lapse – the non-renewal of a policy, either by choice, or by failure to pay the premium in time.

Use it in a sentence: If you do not pay your premium by March 3^rd, your policy will lapse and you will no longer have any coverage.

Liability insurance – coverage for defense and settlement costs when you are charged with causing damage and/or bodily injury to a third party or their property.

Use it in a sentence: Liability insurance is an important part of your financial health

Loss – the basis of a claim, usually the damage, destruction, or disappearance of property, or bodily injury.

Use it in a sentence: This wind damage is the second loss you have sustained this year.

Market – an insurance company, or a collective term for many insurance companies who offer similar products.

Use it in a sentence: We will move your policy to a new market.

Use it in a sentence (again): The property insurance market is hard right now, so it is difficult to find a low premium with any company.

Material Change – a change to information that is used to determine premium, risk level, and acceptability to an insurer.

Use it in a sentence: You must inform your home insurance broker if you take out a second mortgage on your home because this is a material change.

Negligence – failure to do something that a reasonable person would do, or doing something that a reasonable person would not do.

Use it in a sentence: The business owner demonstrated negligence by not warning customers of a slippery floor after mopping the entryway.

Personal Injury – non-bodily injury to a person, such as libel or slander.

Use it in a sentence: His son’s inaccurate and defaming tweets towards his English teacher constitute personal injury.

Policy – the contract of insurance between the insurer and the insured that documents the terms, conditions and agreements of the contract.

Use it in a sentence: Your policy includes a list of conditions that you must meet for coverage to be valid.

Peril – anything that may cause a loss, such as fire, burglary, landslides.

Use it in a sentence: On Vancouver Island, earthquakes are a worrisome peril.

Premium – the money paid in exchange for insurance coverage.

Use it in a sentence: You must pay your premium in order for coverage to continue.

Premises – the location of a residence or business insured by a policy.

Use it in a sentence: In addition to the house, there is a detached five car garage on the premises.

Reinstate – to get a policy back in force after it was cancelled or lapsed.

Use it in a sentence: If you pay your premium in full before January 30^th, we can reinstate the policy.

Replacement Cost – the cost to replace property with a new one of the same kind and quality, without depreciation.

Use it in a sentence: The replacement cost value of your trailer is $20,000.

Risk – the possibility of loss or damage. To make things more confusing, we also use “risk” to refer to property or objects we insure.

Use it in a sentence: With a wood-burning stove in your basement, the risk of fire increases.

Use it a sentence (again): They have two risks: their house in Saanich, and their cabin on Salt Spring.

Subrogation – the process by which the insurer attempts to recover the costs of your claim from a third party who was responsible for the claim.

Use it in a sentence: The insurer will pay your loss and then the claim will be subrogated.

Underwriter – a person who works for an insurance company and reviews risks to determine their acceptability.

Use it in a sentence: The underwriter has asked for more information on your woodstove.  

Warranty – a condition placed on your policy indicating what you must or must not do in order for your coverage to be valid.

Use it in a sentence: There is a warranty on your policy indicating you may only operate your boat within certain navigational limits.

Reminder: Some of these words are defined differently by different insurers. Refer to the first page of your policy wording for exact definitions.

Check back for future installments of Back to Basics to help you better understand your insurance policies!