Glossary: Key Insurance Terms

Declaration Page: The summary page of your insurance policy, which gives you a detailed overview of the specifics regarding the coverage of your home. The fine print will be contained in the long-form policy.

Deductible: A specified amount of money that you must pay before the insurance company will pay a claim.

Additional Living Expenses: The additional costs of living incurred by you and your family (the policy holders), if you are displaced from your place of residence. These expenses include, but are not limited to: hotels, rent, emergency clothing, mileage, postage, etc.

Personal Contents: The individual items in your home. This includes, but is not limited to, furniture, clothing, food, linens, etc.

Schedule of Loss: A document with a list of personal contents that were damaged or destroyed due to your residential loss.

Replacement Cost: The cost to replace your personal items if you were to repurchase them. It is one way the insurer values your items.

Actual Cost Value: The cost of your personal items with depreciation deducted from their value. This is typically what the insurer attempts to pay most individuals and families. For example, if you owned a $500 couch for 3 years, which was destroyed in a residential fire, the insurer would likely offer you approximately 50% of the value of the couch ($250).

Depreciation: A reduction in the value of your personal contents with the passage of time, due to wear and tear.

Market Value: The amount something can be sold for on the market. For example, your home may be worth $400,000, but to rebuild your home, it will only cost the insurer the replacement cost (materials, labour, etc.), which may be far less than the market value.

Specified Peril: Part of an insurance policy that covers certain types of loss. Typically these types of losses are not subject to personal content limits. For example, if fire is a specified peril in your policy, you may not be subject to the $10,000 limit for jewellery that is listed. Each policy has a different definition of “specified peril.”

Upgrade Coverage: Also known as ordinance or law coverage. After a residential loss, certain rebuilding requirements may be needed due to changes in bylaws over time. For example, new sprinkler systems may need to be put in. Since your insurance is only required to rebuild your home, as it was, upgrade coverage helps ensure the property owner is “up to code” without being out of pocket.

Global Cash Settlement: A settlement agreement between you and the insurance company, where you are not forced to repurchase items and submit receipts. You receive a lump sum payment, typically for all your personal contents, and can proceed with the funds as you wish.