Reviewed by Stefan Tirschler
Updated September 6, 2022
clause | ˈklȯz
Definition: A section of a contract dealing with a particular subject.
Some home insurance contracts include a co-insurance clause.
In a legal contract (including an insurance policy), a clause is a section that deals with a specific subject. Each clause lays out points of understanding between the parties to the agreement.
Clauses aren’t of a specific length or format. Some clauses are a single paragraph, while others span many pages. It depends on how much detail that section of the contract needs.
Within each clause are details about who needs to do what, and what happens if they don’t do it.
Some types of clauses reoccur across many contracts. Common clauses include:
While these are all common clauses, they aren’t necessarily identical from contract to contract.
There’s no standard way to designate different clauses within a contract, but there are some common forms you’ll see. Contracts often use a numerical system to separate clauses. Often, clauses are further divided into subclauses, which have separate numbering systems. Often, subclauses use letters or roman numerals to separate them from the numbering system of the main clauses.
For example, you might see a contract that’s structured like this:
In theory, this makes a contract easy to read. But, if you’re not used to reading contracts, you may find it more confusing than helpful—especially in a complex contract with sub-sub-sub-sub-subclauses.
Sometimes, a subclause is simply a very long sentence split into multiple line items to make it easier to read. When a clause or subclause is only part of a longer sentence, it’s known as a subordinate clause:
In the example above, items a, i, ii, and iii are all subclauses; i, ii, and iii are also subordinate clauses.
An insurance policy is a contract. Like other contracts, they are made up of clauses. Within a home insurance policy, you’ll find sections that deal with insured perils, coverage limits, exclusions, deductibles, limitations, and other topics.
Every insurance provider writes their policies a little differently. But, there are some clauses in Canadian insurance policies that the law requires.
For example, if you have a mortgage, your homeowner’s insurance policy will include some version of the Standard Mortgage Clause. The main purpose of this clause is to ensure the mortgage lender is covered even if the homeowner does something that nullifies their own coverage—like intentionally damaging the house.
Other common home insurance policy clauses include the Statutory Conditions—also required by law. These describe what happens in cases of misrepresentation, how the policy can be cancelled, and the policyholder’s responsibilities following a loss (amongst other things).
Looking for another insurance definition? Look it up in The Insurance Glossary, home to dozens of easy-to-follow definitions for the most common insurance terms. Or, get an online quote in under 5 minutes and find out how affordable personalized home insurance can be.
About the expert: Stefan Tirschler
Stefan is responsible for underwriting leadership, market expansion, and product research and development for Square One's operations. Stefan has earned his Fellow Chartered Insurance Professional designation, and maintains a level 2 general insurance license in British Columbia, Alberta, Saskatchewan, Manitoba and Ontario. Stefan is also an Education Committee member and CIP/GIE instructor for the Insurance Institute of Canada.
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