As insurance policies are legal contracts they may contain phrases that, in addition to their everyday meanings, have special meanings with respect to insurance. They can also be very confusing. That's why we've put together this glossary of insurance terms to help you wade through the jargon.

Please note that in no way is this glossary meant to serve as an all encompassing listing of insurance terms but rather a quick reference guide. You should also refer to your specific policy wordings for a complete description of coverages, conditions and terms.

Absolute Liability - Liability that occurs where one has a duty to fill no matter what the circumstances may be. Absolute Liability is often found in cases involving explosives and automobiles, that is an insured or insurance company may be responsible to a third party irrespective of any statutory faults, negligence or breaches on the part of the insured.

Actual Cash Value - The actual or current value at the time of the loss. This may be the cost of replacing the article with a similar model and in similar condition. It may however involve the price of the article plus any appreciation since its purchase and less depreciation.

All Risk Policy - A policy which does not state coverage on specific perils but covers all perils subject to certain limitations as set out in the policy. It's the reverse of the Named Perils policy.

Betterment - Where the results of repairs or replacement due to a loss results in the insured receiving something better than he had before the loss. The difference is known as "betterment." In most instances, this difference is discussed before the repairs or replacement is made and the insured has agreed to an appropriate figure as to his contribution for this "betterment." This is also referred to as "new for old."

Claim - Strictly speaking, a claim is the exercising of the right of an insured person to be reimbursed by his or her insurance company for certain financial losses suffered. It can be any notification of a possible loss under an insurance policy whether or not any payment is likely to follow

Claimant - One who makes a claim. It is commonly used in identifying a third party who is making a claim against the insured. Technically, however, it also applies to an insured that is making a claim against the insurance company.

Comprehensive Coverage (car) - The type of car insurance covers damage to the vehicle from causes other than collision such as flood, hail, explosion, theft, windstorm etc. It generally excludes Collision and Upset which is insured separately.

Deductible - The deductible is the portion of the insured loss that you pay; the amount appears on your policy. It's generally a cost-effective way for policyholders to "self-insure."

Depreciation - The decline in value of property from any cause - such as use, wear-and-tear, obsolescence, etc. Depreciation is taken into account when arriving at the proper amount to be insured, or the amount of loss to be paid, unless the insurance is on a valued or replacement cost basis.

Earned Premium - The premium for the amount of insurance used. The amount of premium which would pay for insurance from the inception date of the policy until the particular date at which it is desired to calculate the earned premium. It is the expired portion of a premium.

Effective Date - The date of inception of an insurance policy or bond. The date at which the protection becomes effective. All policies become effective at 12:01am on the effective date.

Expiration Date - The date of termination of a policy. At that date, it automatically expires. The expiration takes place at 12:01am on the noted expiration date.

Facility Plan - An insurance market for poorer automobile risks. It enables all companies to take whatever risks are prescribed by their underwriting policies and transfer them to the "facility". It's underwritten by all insurance companies doing business in a described province.

Flat Cancellation (or Flat Rate Cancellation) - The cancellation of a policy in such a manner that the termination of a policy coincides exactly with its inception. In certain special circumstances, a policy can be "cancelled flat" and the insured is entitled to receive a full refund of the premiums he/she has paid and the policy is in effect, cancelled from the beginning.

Fleet Policies - A commercial enterprise may own many motor vehicles and all the vehicles may be listed on one policy. This form is known as a fleet policy. "Fleet Policy" premiums may be adjusted for in one of two ways: I) each time the insured adds or deletes an item or II) the policy provides automatic coverage on newly purchased vehicles and then the premium is either adjusted for on a reporting basis or one of the other methods used to avoid frequent computations after each change.

Fraud - An act of willful deception and dishonesty carried out with a view to securing some advantage, profit, etc. to which one is not entitled, at the expense of another. Fraud increases everyone's insurance costs. To help keep down costs for honest policyholders, insurers prosecute those who make fraudulent claims.

Lessor - The grantor of a lease.

Legal liability - means liability at law for the consequences of some negligent act as opposed to liability for breach of contract.

Loss of Use - Insurance protection against loss due to the inability to use a property because of its damage or destruction.

Market Value - The value of assets (e.g. stocks, bonds, debentures, real estate, etc.) based on a current market valuation.

Misrepresentation - The assertion of a material fact, which the insured knowingly perverts. The failure of the applicant for insurance to make a fair disclosure of all pertinent and attendant circumstances, might void the policy.

Mortgagee - The person who has loaned his money to another and taken the security of property in exchange.

Mortgagor - A person who mortgages property by borrowing money and using it as security.

Named Insured - The person in whose name the policy is issued, the policyholder, is often referred to as a "named insured." Technically, he or she would be the first party to the contract, the second party being the insurance company that issues the policy.

Named Perils Policies - Policies that specifically state the perils against which protection is given and no others. This is distinct from "All Risk Policy," which covers all risks of all perils with the exception of certain specific perils outlined in the policy.

Negligence - The omission to do something which a reasonable and prudent person would in similar circumstances have done, or doing something which a reasonable person in such circumstances wouldn't do.

"No-fault" - Insurance that pays for some or all of the insured person's loss, no matter who caused it, is often described as "no-fault" coverage. Despite its name, it really does matter who caused the damage, because if you're at fault, your insurance premiums may increase.

Premium - An insurance premium is the money the policyholder pays to the insurer for financial protection against specific risks for a specific time span. Unlike the premiums for many forms of life insurance, property and casualty insurance premiums are not intended to produce a reward other than financial peace of mind.

Pro-rata cancellation - An arrangement for the termination of an insurance contract usually by the insurance company in which the insured is refunded the exact proportion of the premium which has not yet been used.

Replacement Value - The cash value representing what it would cost to replace the particular article that is the subject of insurance.

Subrogation - The substitution of one person or company, for another so that the rights and duties of the original person or company becomes operable by the other.

Third party - The first person referred to outside the particular transaction involved. In an Insurance Liability policy the third party is a person who may be injured or whose property may be damaged other than the insured or insurance company. There may be many third parties in one case.

Value - A property is vacant when the normal occupant is absent and the contents have been removed.

Unoccupied - Where the premises is complete with its content except for the human beings, such persons being temporarily away from the premises as for example on vacation or any other reason.