Commercial insurance terms you should know about
ACORD Certificate of Insurance
An ACORD certificate of insurance is a form that shows proof of business insurance. It is widely recognized as the industry standard by almost 90% of insurers.
Actual Cash Value (ACV)
This is a way to determine the value of your business’ property that is getting repaired or replaced after a covered loss. The value is calculated by subtracting depreciation from the replacement cost.
An additional insured on your policy means coverage is extended to a third party. This can happen if a client asks you to provide business insurance coverage to a general contractor before working with you.
Admitted vs. Non-Admitted Insurance Carriers
Admitted insurance carriers follow state regulations. Non-admitted insurance carriers don’t follow these regulations. If an insurance company goes out of business, the state will make claim payments for admitted carriers, not non-admitted carriers.
The aggregate limit is the maximum amount of money your insurer will pay out during your policy period.
An insurance company may do a business appraisal to determine the value of your property. This helps the insurer know how much it’ll cost to repair or replace damaged property.
If there’s a dispute, business arbitration can help settle it instead of going through the court system. This process is generally cheaper and faster than the courts.
Blanket insurance means you can select one limit of insurance that will apply to some or all of your property. This limit can apply to your property at multiple locations.
Builder’s Risk Insurance
A specialized type of property insurance that helps protect buildings that are under construction. Builder’s risk insurance is also known as course of construction insurance.
Business Income Insurance
Business income insurance helps replace your lost income if you can’t run your operations because of covered property damage.
Business Interruption Insurance
Business interruption insurance is another name for business income insurance. It helps replace your business’ lost income if you can’t run your operations due to covered property damage.
Business Owner’s Policy (BOP)
A Business Owner’s Policy includes three essential coverages many business owners need to help protect them from claims of bodily injury or property damage to others. A BOP includes:
General liability insurance
Business income insurance
Commercial property insurance
Business Personal Property
Business personal property includes items your business owns such as inventory, equipment and furniture.
Care, Custody or Control
Describes that a person has responsibility over someone else’s property that’s in their care, custody or control.
Certificate of Liability Insurance
A certificate of liability insurance is proof that you have a general liability insurance policy to protect your business. Before a client agrees to work with your business, they may ask to see a certificate of liability insurance.
A claim is a request for cover under your insurance policy if your business experiences loss, damage or gets named in a lawsuit.
A claimant is a person that’s filing a claim. In the case of a liability loss, this can be a person that is seeking coverage from your business for their loss.
Claims-Made Insurance Policy
A claims-made insurance policy means your insurer helps cover claims that are made against your business during your policy period. Insurance policies are commonly written on this type of form.
Generally used in commercial property insurance, coinsurance is the minimum amount that the covered property must be insured for in order to avoid a penalty at the time of loss. This is usually a percentage amount of the full or assessed value of the property. It also most often applies to buildings.
Commercial Auto Insurance
business insurance termsIf you or your employees use a car to drive for business, commercial auto insurance can help protect you on the road. It can help cover another person’s injuries or property damage if an accident happens.
Commercial Earthquake Insurance
Commercial earthquake insurance helps protect your business if it gets damaged from an earthquake. This can include damage to your business’ building or property.
Commercial Flood Insurance
Commercial flood insurance helps protect your business from flood damage. You’ll have to get this as a separate policy because a commercial property insurance policy usually doesn’t cover these kinds of claims.
Commercial Property Insurance
Commercial property insurance helps protect your business’ owned or rented building and equipment.
Commercial Umbrella Insurance
Commercial umbrella insurance extends the coverage limits of certain liability policies, such as general liability insurance. So, if a general liability claim costs more than your limit, this type of insurance can help pay the difference.
Comprehensive General Liability Insurance
Comprehensive general liability insurance is an outdated term for general liability insurance. It refers to the same coverage.
The date from which continuous coverage has been maintained. This is similar to the retroactive date.
If your business is a victim of cyber extortion, it means someone stole personally identifiable information or business files and is demanding money to return them. Cyber extortion can also happen if someone takes control of your computer system and demands money so you can return to normal operations.
Cyber liability insurance includes a bundle of coverages to help your business respond to and recover from a cyberattack.
Data Breach Insurance
If your business loses personally identifiable information, data breach insurance helps cover your costs to:
Notify impacted customers, patients or employees
Hire a public relations firm
Offer credit monitoring services
Some insurers refer to this coverage as cyber insurance.
Your policy will include a declarations page, which lists important information about your business as well as the coverages and limits that apply to your policy.
This is the amount that you are responsible for before your insurance coverage starts and helps pay for a loss. When you get coverage, you’ll choose your business insurance deductible, which will impact your rate.
Directors and Officers Liability Insurance (D&O)
This insurance helps protect your directors’ and officers’ personal assets if someone sues them claiming wrongful acts in managing the business. D&O insurance can help pay for:
If your employee gets hurt on the job, they may qualify for disability insurance if they’re diagnosed with a temporary or permanent disability. It helps protect their income if they’re unable to work due to a disability.
Employer’s Liability Insurance
Employer’s liability insurance helps protect your business if an employee sues you after getting a work-related injury or illness that’s not covered by workers’ compensation insurance.
Employment Practices Liability Insurance (EPLI)
Employment practices liability insurance helps protect your business if a former or current employee sues you for employment-related claims such as harassment, discrimination or wrongful termination.
A business endorsement means you’ve made a change to your insurance policy to add or remove coverage.
Equipment Breakdown Coverage
Typically included in commercial property insurance, equipment breakdown coverage helps repair or replace your business’ property that uses electricity or operates through a pressure system if it breaks down due to causes like mechanical breakdown or a power surge.
Errors and Omissions Insurance (E&O)
Errors and omissions insurance helps protect your business if a client sues you for mistakes in the professional services given to them. This coverage is also known as professional liability insurance.
Your business insurance policies includes a list of exclusions or events that your insurance company won’t cover.
This is part of workers’ compensation insurance, preventing your employee from suing your business for a work-related injury or illness if they get benefits.
The business insurance expiration date is when your coverage ends.
Extended Reporting Period (ERP)
An extended reporting period helps cover claims made against your business after your coverage expires. Businesses can buy this option after canceling coverage or when an insurer doesn’t renew the policy. Another name for the ERP is tail coverage.
Extra Expense Coverage
Extra expense coverage helps pay for certain costs that your business has if it cannot operate after covered property damage. It can help pay expenses that keep your operations running after covered property damage. This could include utility bills, rent and payroll, as well as expedited shipping for replacement property or renting a temporary location.
Fidelity bonds help protect your business from losses if your employee conducts a fraudulent act.
In business, a fiduciary is a person or business that has to act in the best interest of another party.
Fiduciary Liability Insurance
Fiduciary liability insurance helps protect your business from lawsuits claiming the mismanagement of employee benefit plans.
General Liability Class Codes
Insurance companies use general liability class codes to identify different types of businesses based on their risk level. Insurers use these codes to help determine costs.
General Liability Insurance
A type of business insurance that helps cover claims that your company caused bodily injury to someone else or property damage to another person’s belongings. General liability insurance is also known as commercial general liability insurance or business liability insurance.
When your insurance premium is due, a grace period is the amount of time an insurer gives you to pay the bill before you lose coverage.
Hired and Non-Owned Auto Insurance
Hired and non-owned auto insurance helps protect your employees if they drive their own personal vehicles or a rental car in the company’s name for business.
Hold Harmless Agreement
Hold harmless agreements protect a party from liability if there are damages or losses. These agreements are used in contracts.
An insurance policy that helps protect a person’s home and personal belongings. If you own a home-based business, your homeowners insurance typically doesn’t have enough coverage to protect your company.
A home-based business means a person runs their company from their house. To help protect their company, they’ll need to get a home-based business insurance policy.
Host Liquor Liability Insurance
Helps protect a business that doesn’t sell alcohol, but allows people to drink it on their property. Host liquor liability insurance is included in a general liability policy.
Business indemnity is an agreement between you and an insurance company to help make you whole after a loss.
Inland Marine Insurance
Inland marine insurance covers a range of specialized property that may be transported over land, such as:
Medical diagnostic equipment
Solar energy equipment
This coverage also helps protect property used for transportation or communication, like:
Commuter rail systems
Cell phone towers
A business insurance adjuster evaluates damages to determine how much an insurer will pay for losses.
Business insurance agents help business owners get the coverages they need to help protect their company. A business insurance broker typically works with larger businesses to help them get coverage.
Adding insurance endorsements to your policy changes the coverage. See “endorsements.”
The person, business or party named on a policy that has insurance coverage.
Invasion of Privacy
A type of claim that a general liability insurance policy can help cover. Invasion of privacy claims can happen if you use a person’s name or likeness to benefit commercially.
Business liability means your company is responsible for a loss.
Liability insurance is a broad term describing types of coverages that help protect you from different claims if you’re found responsible for losses.
Loss control is a service designed to help businesses create a safe work environment for employees.
A loss payee is the person or party who will get paid from a loss.
A report showing a business’ claims. Loss runs are also known as a claims history.
Management Liability Insurance
A group of coverages to help protect a business’ management team. Our management liability insurance includes:
Directors and officers insurance
Employment practices liability insurance
Fiduciary liability insurance
Kidnap and ransom/extortion insurance
Ocean marine insurance helps protect a business’ property and employees while transporting goods over water. This coverage applies to domestic and abroad travel and helps protect:
Minimum Earned Premium
The minimum earned premium is the lowest amount of money your insurer will take for an insurance policy.
Multinational insurance helps protect businesses that have locations or operations in other countries. This coverage is also known as global insurance.
The named insured in your policy is the person or business that has business insurance coverage.
Insurance written on a named perils policy means claims are only eligible for coverage if they were caused from specific hazards or events listed in your policy.
Nose coverage helps protect your business from claims filed for an incident that happened during an older policy that you used to have. This is also known as prior acts coverage.
Occurrence-Based Insurance Policy
If an insurer writes your insurance on an occurrence policy, it means claims are eligible for coverage if the incident happened during your policy period. Claims can get reported at any time, even after your policy’s expiration.
An open perils insurance policy helps cover losses from all events, hazards or causes, except for those specifically excluded in the policy. You’ll typically see this type of policy with property insurance.
Your insurance policy may have a per-occurrence limit, which is the maximum amount of losses your insurer will cover per claim.
Personal and Advertising Injury
A type of claim that general liability insurance covers. Personal and advertising injury includes bodily injuries and copyright infringement.
Another word for your cost for insurance. When you get a policy, your premium is your annual cost.
Prior Acts Coverage
If you change insurance carriers, prior acts coverage helps protect your business from claims for events that occurred during an old policy.
If your products or completed service causes bodily injury or damages to another person’s property, products-completed operations insurance can help cover losses. This is typically included in a general liability insurance policy.
Products-Completed Operations Aggregate
The products-completed operations aggregate is the maximum amount during your policy period that your insurance company will cover for claims that a product or completed service caused bodily injury or property damage.
Professional Liability Insurance
Helps cover claims that your business made a mistake in the professional services given to a client. Professional liability insurance is also known as errors and omissions (E&O) insurance.
Proof of Loss
A proof of loss is a document that an insurer sends to a property policy holder following loss or damage to their property. This document includes details about the loss, including the cause and the amount being claimed.
Business property insurance helps protect your company’s building and equipment. This coverage applies whether it’s owned or rented property.
Your insurance policy will list qualifying events that are eligible for coverage if they cause a loss.
A business insurance quote is an estimated cost for a unique policy with coverages to help protect your business.
Repetitive Stress Injury
A type of injury that develops over time due to repetitive motions. Employees can receive workers’ compensation benefits if they develop a repetitive stress injury from work.
Replacement value is the cost it’ll take to replace property with the same or similar property.
A feature in claims-made insurance policies. It helps protect your business from claims reported for incidents that occurred on or after a specific date.
A business insurance rider is an addition that provides more coverage than the basic policy.
Risk management is a strategy to identify and prevent risks. Another term for this is loss control.
Small Business Insurance
Small business insurance helps protect small business owners from claims and lawsuits that can come up during normal operations. This includes claims of:
Lost or stolen personally identifiable information
A sole proprietorship is a business that the owner runs.
Standard of Care
The expectation that a business will provide quality services to a customer or client. If they believe you didn’t meet the standard of care, they can sue your business.
Stop Gap Coverage
Stop gap coverage gives a business employer liability insurance if it’s not included in its workers’ compensation policy.
Strict liability means the business owner is responsible for property damage or bodily injury that their products cause, even if they’re not at fault.
Subrogation gives an insurance company the right to pursue a third party if they caused a loss to the insured.
Surety bonds involve three parties. It’s a contract where one party will take on the financial responsibility of another party if they’re unable to pay.
Helps cover claims reported after a business’ policy expires. The claim has to be for an incident that occurred during the policy period to be eligible for coverage. Tail coverage is also known as an extended reporting period.
A tort is a wrongful act that causes another person damages or harm.
A person who commits a tort.
Triple Net Lease
A triple net lease, or NNN lease, means the tenant agrees to pay for taxes, building insurance and maintenance on the property.
With business insurance, underwriting means a team of specialists are examining a company’s risk and determining how much the rate will be. They’ll make decisions about whether the risk is acceptable for the company.
Vicarious liability means your business can be liable for the actions of a third party, such as your employees or contractors you work with.
Workers’ Compensation Class Codes
Workers’ compensation class codes identify the type of work a business is in and the amount of risk workers face. These codes are assigned by the National Council on Compensation Insurance (NCCI).
Workers’ Compensation State Fund
Businesses in a monopolistic state who are unable to get coverage through an insurance company can go through a state fund for workers’ comp. These programs are funded through government money.
Workers’ Compensation Insurance
Workers’ compensation insurance gives employees benefits to help them recover from a work-related injury or illness. Most states require employers to carry this type of business insurance.
Purchases that are used for both personal and business reasons can be partially written-off on taxes. Learn more about whether business insurance is tax-deductible.