Understanding Insurance Basics

Agent

Someone who represents one insurance company and sells its insurance products. In some cases, a life insurance agent may represent several different insurance companies.

Agents must usually be licensed in the province or territory in which they do business.

Broker

Person or company who sells the insurance products of several different insurance companies.

Brokers must usually be registered in the province or territory in which they do business.

Claim

Official notice you provide to your insurer requesting payment for a loss or event covered by your insurance policy.

Claim investigation

Process used by insurers to get the claim information necessary in order to decide whether to pay a claim.

Coverage

Amount of protection you have purchased.

The maximum amount of money the insurance company will pay you if you make a claim for a loss or event covered by your policy.

Deductible

Amount of your claim that you agree to pay before the insurer pays the rest.

Choosing a higher deductible will decrease the cost of your insurance premiums because you agree to pay for a larger part of your loss.

This term may be used with health, dental, home and auto insurance policies.

Exclusions

Things that are not covered by your policy. Read your policy carefully and make sure you understand what is and is not covered.

For example:

• Some health insurance policies may exclude certain medical conditions you had before you applied for the insurance.
• A travel policy may exclude claims made if you travel to a high-risk country.
• A home insurance policy may exclude claims for some types of water damage.

You may be able to buy extra insurance, known as a rider or endorsement, to pay for risks not covered in your basic policy.

Insured

Person(s) protected by the insurance policy.

Insurer

Insurance company that issues the insurance policy.

Policy

Legal contract between you and the insurer.

The policy specifies:

• what risks are covered by the insurer

• under what circumstances the insurer will make a payment to you

• how much money or what type of benefit you will receive if you make a claim. The amount of money or level of benefit you would receive depends on the amount of your damage or loss.

Policyholder

Person who owns the insurance policy; usually, but not always, the insured.

Premium

Amount you pay to buy insurance.

The premium is usually paid monthly, quarterly or annually. The amount of your premium may change over time.

Rider

Clause or term added to your insurance policy to provide protection, for an additional cost, for risks not covered in a basic policy. Also known as an endorsement.

Check with your insurer to find out what is and is not covered by your policy and for what risks you might need extra coverage.

Risk

Probability that an insured event, such as loss, injury or death, will happen while your policy is in effect.