Common Business Insurance Terms

December 14, 2022 | Insurance 101

In order to be well-informed about business insurance, it’s important to understand the unique industry language. Below are some of the more common terms used by business insurance companies.

A

ACORD certificate - A document that is used to summarize and provide information about insurance coverage

Additional insured - A person or organization added as an insured to a policy who is not the original policyholder

Aggregate limit - The maximum amount an insurance company will pay for all covered losses during the policy period

B

Bodily injury - A physical condition that may require treatment

Business insurance - Coverage designed for and sold to businesses as opposed to consumers

Business interruption coverage - Coverage for lost income resulting from covered physical damage or covered physical property damage to your place of business

Business owners policy (BOP) - A policy that conveniently combines general liability coverage with property coverage

C

Care, custody, and control - A phrase meaning that property is in your possession or that you are responsible for

Certificate of Insurance (COI) - A document provided by your insurer that summarizes and provides information about what coverages are included in a policy

Claim - Notification to your insurer that you’ve suffered a loss and are requesting payment under the terms of your insurance policy or that a third party has suffered damages for which your business may be liable

Claimant - The person reporting a claim

Claims-made policy - Insurance that covers incidents that are reported during the policy period

Commercial auto insurance - Coverage for liability resulting from the use of company-owned or leased vehicles, as well as damage to the vehicles

Commercial insurance - Another term for business insurance

Commercial umbrella insurance - Coverage for claims that exceed the limit of the underlying liability insurance policy (often simply umbrella insurance)

Covered event - An event for which you can receive compensation under the terms of an insurance policy (also called a qualifying event)

Cyber insurance - Coverage for costs related to system hacks or data breaches where someone has sensitive data or information and is likely to use it to commit fraud

Cyber liability insurance first-party expenses - Expenses such as forensic IT review, legal review, notification of affected individuals, services for affected individuals, and public relations services following a covered incident

Cyber liability insurance third-party expenses - Expenses related to the company’s defense and liability costs following a covered incident

D

Declarations page - The first page of an insurance policy, which summarizes its terms and other key information such as who's covered and the amount of coverage

Deductible - The amount paid by a policyholder toward a claim

Disaster recovery plan - A document describing how a business will respond following an event that significantly hinders its operations

E

Employment practices liability insurance (EPLI) - Coverage for lawsuits filed by employees relating to their hiring, management, or termination

Endorsement - An add-on to an insurance policy that enhances or modifies its coverage

Equipment breakdown coverage - Insurance that pays for the repair or replacement of equipment that suffers electrical or mechanical failure

Errors and omissions insurance (E&O) - Insurance that protects companies that provide professional advice or services in the event they make a mistake and are sued for causing financial harm to a client (also called professional liability insurance)

Extended reporting period - An addition to a claims-made policy that extends protection beyond the end of the policy period (also called tail coverage)

G

General liability insurance - Coverage for a wide array of risks that can create liability for a business, primarily bodily injuries to third parties or damage to their property

Grace period - Extra time specified in a policy for a business to pay its overdue insurance premium before their coverage is terminated

H

Hired and non-owned auto insurance - Insurance that covers vehicles not owned or leased by the company, such as an employee’s personal vehicle used for deliveries

I

Independent contractor - A self-employed person who provides services to businesses or individuals (sometimes called a freelancer)

Insurance adjuster - A person who investigates and helps settle insurance claims

Insurance class codes - Codes insurers use to categorize businesses based on their risks and to guide pricing

Insured - The person or entity covered by an insurance policy

Insurtech - Short for insurance technology, meaning the tools and systems insurance companies use to enhance their operations and offerings

L

Legal liability - A person or company's responsibility under the law to compensate another as a result of their actions or failure to act

Liability insurance - Broad term used to describe different kinds of insurance that provide coverage when someone files certain types of lawsuits or reports a claim against the insured

Libel - Publishing or displaying untrue statements that harm the reputation of a person or business

Limited liability company (LLC) - A type of company formed by a business owner to separate their business and personal liability

Loss payee - A person listed on policy documentation that is entitled to payment from a claim before the policyholder

N

Named insured - A business or individual listed on a policy’s declarations page

Named perils - A feature of insurance meaning a policy only covers listed events or hazard

O

Occurrence policy - Insurance that provides coverage for incidents that occur during the policy period, regardless of when the policyholder reports the loss (even if they file the claim after the policy period ends) 

P

Premium - The sum you pay to your insurance company for coverage (not to be confused with a deductible, which is related to a specific claim)

Prior acts coverage - A feature of some types of insurance policies that provides coverage for incidents that occurred before the insured purchased the policy

Professional liability insurance - A type of insurance that protects an individual or company when a customer or client claims they were harmed by the insured's business mistake (also called errors and omissions or E&O insurance)

Property damage - Physical damage to a business asset (office or warehouse space, equipment, vehicles, etc.)

Q

Qualifying event - See Covered event

Quote - Notification from an insurance company of what you’ll pay for coverage

Retroactive date - A provision in many claims-made policies that indicates the date when coverage begins, with claims filed prior to this date likely not covered

Rider - See Endorsement

Risk management - Practices a business engages in to identify, assess, and control various risks to its organization

S

Slander - A spoken statement that is untrue or defamatory and harms the reputation of a person or business

Small business insurance - Business insurance with attributes designed for companies that are privately owned or held by a partnership and typically have from 1 to 1,000 employees

Sole proprietorship - An unincorporated business held by one owner

Startup - A newly formed business in the beginning stages of operations

Subrogation - A legal action where an insurance company pursues a third party that caused an insurance loss to the insured

T

Tail coverage - See Extended reporting period

U

Umbrella insurance - Insurance that protects your business from claims that exceed the limit of the underlying liability insurance policy (also called commercial umbrella insurance)

Underwriting - The process of evaluating risk before offering insurance to a business

V

Vicarious liability - A situation where a business or individual is held is held responsible for damages or harm caused by someone else

W

Workers’ compensation insurance - Generally-mandatory insurance for companies with employees that pays the medical costs and lost wages of workers who are injured on the job and also protects the business from certain liabilities

Workers’ compensation insurance audit - A mandatory process at the end of a policy period used to adjust the premium based on payroll during the policy period

Workers' compensation insurance class codes - Classifications insurers apply to businesses and their employees to help determine the premium for a policy period

Workers' compensation state fund - A fund in some states that covers workers’ compensation claims