Glossary of Small Business Insurance Terms

A

Actual Cash Value (ACV)

The value of your business’ property that needs to be replaced or repaired after a covered loss, calculated by subtracting depreciation from replacement cost.

Aggregate Limit

This is the maximum amount of money your insurer will pay you out during your policy period.

Arbitration

This is a way to settle a dispute without the court system, it’s usually cheaper and faster than the courts.

B

Business Appraisal

This is to determine the value of your property, which helps the insurer determine how much it’ll cost to repair or replace any damages to the property.

Blanket Insurance

This is where you can select one limit of insurance that will apply to some or all of your property, at multiple locations.

Builder’s Risk Insurance (Construction Insurance)

A kind of property insurance that protects buildings that are under construction.

Business Appraisal

This is to determine the value of your property, which helps the insurer determine how much it’ll cost to repair or replace any damages to the property.

Business Income Insurance (Business Interruption Insurance)

This helps replace any lost income if you can’t run your business because of covered property damage.

Business Owner’s Policy Insurance (BOP)

A Business Owner’s Policy includes two essential coverages combined into one, general liability insurance and commercial property insurance.

C

Care, Custody or Control

When a person has responsibility over someone else’s property in their care, custody or control.

Certificate of Liability Insurance

Proof that you have a general liability insurance policy to protect your company. Some clients may ask to see this certificate before agreeing to work with you.

Claim

A request for cover under your insurance policy if your business should experience a loss, damage or gets sued.

Claimant

The person filing a claim. In liability loss cases, this is the person seeking coverage from your business for their loss.

Claims-Made Insurance Policy

This is used when your insurer helps cover claims that are made against your business during the policy period — a very common form for many insurance policies.

Coinsurance

Used in commercial property insurance, this is the minimum amount that the covered property must be insured for in order to avoid a penalty during a loss.

Commercial Earthquake Insurance

Protects your business if it ever gets damaged in an earthquake.

Commercial Flood Insurance

Protects your business if it ever gets damaged in a flood.

Commercial Property Insurance

Protects your business’ owned or rented building and equipment in the premises.

Commercial Umbrella Insurance

Extends the coverage limits of certain liability policies. If a general liability claim costs more than your specified limit, this can help pay the difference.

Continuity Date

The start date from which coverage has been maintained continuously.

Cyber Extortion

When someone stole personally identifiable information or business files from your company, and demands a ransom to return them.

Cyber Liability

A bundle of coverages to protect your business in the event of a cyberattack.

D

Data Breach Insurance

Coverage that helps protect if your business loses personally identifiable information

Declarations Page

Every policy includes a declarations page. It lists important information about your business, and the coverages and limits that apply to your policy.

Deductible

The amount that you are responsible for before your insurance coverage starts.

E

Endorsement

When you’ve made a change to your insurance policy, such as adding or removing coverage.

Equipment Breakdown Coverage

Typically a part of commercial property insurance, equipment breakdown coverage helps repair or replace your business’ property if it breaks down.

Errors and Omissions Insurance (E&O) or Professional Liability Insurance

Protects your business if a client sues you for mistakes in the professional services you gave them.

Exclusion

Events that your insurance company won’t cover.

Expiration Date

When your business insurance coverage ends.

Extended Reporting Period (ERP) or Tail Coverage

Helps to cover claims made against your business after your coverage expires.

Extra Expense Coverage

Helps pay for certain costs that your business has if it cannot operate after covered property damage. May include utility bills, rent and payroll, as well as expedited shipping for replacement property or temporary rentals.

F

Fidelity Bonds

Helps protect your business if your employee conducts a fraudulent act.

Fiduciary

A person or business that must act in the best interest of another party.

Fiduciary Liability Insurance

Protects your business from lawsuits claiming the mismanagement of employee benefit plans.

G

General Liability Class Codes

Used to identify different types of businesses based on their risk level, used to help determine costs.

General Liability Insurance

Helps to cover claims that your company caused bodily injury to someone else or property damage to another person’s property.

Grace Period

The amount of time an insurer gives you to pay your bill before you lose coverage.

H

Hold Harmless Agreement

Protects a party from liability if there are damages or losses, used in contracts.

Host Liquor Liability Insurance

Protects businesses that don’t sell alcohol, but allow people to drink it on or near their property.

I

Indemnity

An agreement between you and an insurance company to help pay you back after a loss.

Insurance Agent/Broker

Helps business owners get the coverage they need to help protect their company.

Insured

A person, business or party named on a policy that has coverage.

Invasion of Privacy

A type of claim that a general liability insurance policy may help cover. These include if one uses a person’s name or likeness to benefit commercially.

L

Liability

When your company is responsible for a loss.

Liability Insurance

A broad term describing types of coverages that help protect you from different claims.

Loss Payee

The person or party who gets paid from a loss.

Loss Runs or Claim History

A report showing a business’ claims.

N

Named Insured

A person or business named in the business insurance coverage.

O

Open Perils

A policy that helps cover losses from all events, hazards or causes, except for specifically those excluded in the policy.

P

Per-Occurrence Limit

The maximum amount of losses, you can be covered for per claim.

Personal and Advertising Injury

Typically covered in general liability insurance, this includes copyright infringement.

Premium

The annual cost for your insurance.

Prior Acts Coverage

If you change insurance carriers, this protects your business from claims for events during an older policy.

Products-Completed Operations

If your products or completed service causes bodily harm or property damages to another person this helps cover losses. It’s typically included in your general liability insurance policy.

Products-Completed Operations Aggregate

The maximum amount during your policy period that your insurance company will cover for claims that a product or completed service had caused injury or property damage.

Proof of Loss

A document that an insurer sends to a policy holder following loss or damage to their property.

Property Insurance

Protects your company’s building, tools and/or equipment, either owned or rented.

Q

Qualifying Event

Events that are eligible for coverage if they cause a loss.

Quote

The estimated cost for a policy with coverages to help protect your business.

R

Replacement Value

The cost to replace property with the same or similar property.

Retroactive Date

Helps protect your business from claims reported for incidents that occurred on or after a date.

Rider

An addition that provides more coverage than a basic policy.

Risk Management or Loss Control

A strategy to identify and prevent risks.

S

Small Business Insurance

Helps protect small business owners from claims and lawsuits that occur during normal operations.

Standard of Care

A customer’s expectation that a business will provide quality services.

Subrogation

The right to pursue a third party, by an insurance company, if they caused a loss to the insured.

Surety Bonds

A contract where one party takes on financial responsibility of another party if they’re unable to pay.

T

Tort

A wrongful act that causes another person property damage or bodily harm.

Tortfeasor

One who commits a tort.

Triple Net Lease

A lease where the tenant agrees to pay for taxes, building insurance and maintenance on a property.

U

Underwriting

When a team of specialists are examining a company’s risk, while determining how much their rate will be.

V

Vicarious Liability

A situation where your business can be liable for the actions of a third party, such as your employees or contractors you work with.