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Insurance Terms

The following definitions are for information purposes only, and are not official definitions under the Acts.

absolute liability the insurance company’s responsibility to a third party regardless of any statutory breaches on the part of the insured

actual cash value replacement or market value less depreciation

adjuster person who acts on behalf of an insurance company or an insured in the settlement of claims

agent/broker a person who solicits or offers insurance products on behalf of insurance companies

at-fault accident those accidents which occur because of your own actions. Comprehensive claims such as windshield damage, or stolen stereos are not considered accidents. They are comprehensive claims made against that portion of your coverage, if you carry it for damage to your own vehicle.

cancellation the termination of an insurance contract before it expires.

cancellation (flat) an insurance company cancels a policy as of its effective date, without charging any premium to you. This may happen if an insurance company realizes it has given an incorrect quote. It may cancel the policy and refund all your money. It may also do this if they void the policy. It may void a policy if it determines that not all material information was provided to them to properly assess the risk.

cancellation (pro-rata) an insurance company cancels a policy and adjusts the premium in proportion to the time the coverage was in effect. It refunds a portion of the premium back to you.

cancellation (short-rate) an insurance company cancels a policy at your request before the expiry date and charges a premium larger than what would be applicable for the period insured. This must be provided for in the policy. Generally, this increased charge is made because fixed expenses have been incurred by the insurance company. Insurance companies often use fixed rate tables to calculate the premium they have earned.

claim a demand for payment for a loss under an insurance policy

deductible The amount of a claim that you are required to pay. For example, if you have $1000 worth of damage done to your car from vandalism and your deductible is $500, you will be responsible for $500 of the cost. The insurance company will pay for the other $500.

driving convictions these are any offences under the Motor Vehicle Act or the Criminal Code of Canada. They include speeding, careless driving, impaired driving, not wearing a seatbelt. These convictions are included on your driver’s abstract which insurance companies are able to obtain as part of their underwriting rules. If you have one or more driving conviction, your insurance premium will likely increase.

endorsement a form amending the terms of the policy. Sometimes called a rider. insurance premium - the price you pay for the insurance policy, based on the risk assessment

Facility Association The Facility Association is a non-profit group of insurance companies that agree to insure very high-risk drivers, but for relatively high premiums. It is also commonly known as the insurer of last resort.

lapse in coverage Companies rate a policy based on continuous insurance history. A short lapse in coverage is no longer a reason to decline someone insurance. It is however a factor in the rate charged by an insurer. Before canceling a policy for a short term, check with your insurance broker to determine how the lapse in coverage will affect you and future insurability.

not-at-fault accidents A not at fault accident occurs by action other than your own. For example, when you stop at a stop sign and someone hits your rear bumper. (Please note, a windshield or a stolen stereo are comprehensive claims and while they are also not at fault they do not involve the vehicle moving.)

premium the price you pay for the insurance policy, based on the risk assessment.

risk the likelihood that a person or thing insured may suffer injury, damage, or loss. third party liability insurance - protects the insured against liability arising out of bodily injury or property damage to others

third party liability insurance protects the insured against liability arising out of bodily injury or property damage to others. The insured and the insurer are the first and second parties to the insurance contract.

underwriter a person who decides if an insurance risk is acceptable. He/she decides in what amount and on what terms the insurance company will accept the risk. Also called an insurer.

underwriting rules rules used to assess the risk in insuring you. In Nova Scotia, these rules are established by the insurance companies and are based on their own business needs.


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Tel: 902-424-5613
Fax: 902-424-1298