Small Business Insurance Terms & Definitions

Unless you're a lawyer as well as a small business owner, it can be difficult to navigate the legalese and contractual jargon of your insurance policies. For most of us, the policies might as well be written in another language, and as a small business owner, you don't really have a choice but to wade into the uncharted territory of insurance lingo. The financial health of your small business depends on it. That's why Insureon has compiled this practical, no-nonsense guide to small business insurance terminology.

Actual cash value
The current value of an insured piece of property.
Additional insured
Anyone besides a policyholder who is covered by an insurance policy.
Admitted / non-admitted insurance company
Admitted insurance companies are approved by a state’s insurance department, which means if the insurance company can’t pay a claim, the state can step in to pay it. Non-admitted carriers aren’t backed by the state.
Aggregate limit
The maximum amount of money your insurer will pay for all your covered losses during the policy period.
A structured process in which a trained professional determines the value of an asset to facilitate a financial transaction for business or personal purposes.
A way for two parties to end a dispute out of court.
Assessed value
The value of commercial property as determined by city hall or a municipal assessor.
Business interruption insurance
A rider or endorsement that can be added to a property insurance or business owner's policy.
Business owner's policy
An insurance bundle for small businesses that includes property insurance and general liability insurance.
Business personal property (contents)
Moveable business property, such as computers, supplies, and equipment.
Care, custody, or control
an exclusion in general liability and commercial auto insurance policies that removes coverage for someone else’s property that is damaged while in your possession.
Certificate of liability insurance
A document that proves your business has liability insurance.
A formal request for compensation that you file with your insurance provider.
A person who files a claim in order to receive benefits.
Claims-made insurance policy
A claims-made policy provides benefits only if you file a claim while it’s active.
Coinsurance can refer to two different things: insurance that is provided by more than one insurance company, or coverage rules set by your insurer.
Commercial auto insurance
Coverage for vehicles owned by your business.
Comprehensive general liability insurance
An outdated term for general liability insurance – its use was discontinued in the insurance industry because of its inaccuracy.
Contingent business interruption insurance
Insurance that provides financial assistance when the loss of a primary supplier, partner, or customer affects your ability to do business.
Continuity date
The earliest date from which a small business has maintained continuous insurance coverage.
Cyber extortion
An online crime in which a hacker threatens to damage your business unless you pay a ransom.
Cyber liability insurance, first party
Insurance coverage for the cost to respond to a hack or data breach on your computers.
Cyber liability insurance, third party
Liability insurance for businesses sued after their customers are hacked.
Declarations page
The first page of an insurance policy, which summarizes its key points.
The sum of money you, the insured, must pay out of pocket before your insurance benefits kick in.
Digital assets
Digitally stored content (on a hard drive, removable device, or the cloud) owned by an individual or a business.
Disability insurance
Insurance that provides income when an employee is unable to work due to an illness or injury that occurred away from work.
Disaster recovery plan
A set of procedures and steps to protect businesses and aid in recovery after a natural or man-made disaster.
Employment practices liability insurance
An employer's responsibility to treat employees fairly and not discriminate against them or violate their civil rights, as interpreted and enforced by the Equal Employment Opportunity Commission (EEOC).
Equipment breakdown coverage
Insurance that provides funds to repair or replace damaged machinery or equipment that has suffered a mechanical or electrical failure.
Errors and omissions insurance
Liability insurance that protects you in the event of a professional error, oversight, or act of negligence.
Exclusive remedy
A workers' comp provision that prohibits injured employees from suing their employer if they are receiving workers' comp benefits.
Extended reporting period
A feature you can add to your professional liability insurance policy that allows you to report claims even after the policy expires.
Extra expense coverage
Commercial insurance that pays for a policyholder’s additional costs while recovering from a major disruption.
General liability class codes
Codes used by insurers to classify small businesses according to the risks they face.
General liability insurance
Business insurance that protects you from a variety of common third-party claims, including property damage, bodily harm, and personal injury.
Grace period
Extra time after a policy's expiration date when a small business can still be covered.
Hired and non-owned auto insurance
Auto coverage for rental cars and employee vehicles.
Hold harmless agreement
A legal agreement that requires the parties with whom you are doing business to refrain from suing you under certain circumstances.
Homeowner's insurance
An insurance policy that protects your personal real estate.
Host liquor liability insurance
Host liquor liability insurance protects businesses that don't manufacture, serve, or sell alcohol from the cost of liquor-related lawsuits.
The compensation you owe an injured or damaged party.
Inland marine insurance
Coverage that protects your business equipment and tools in transit.
Insurance adjuster
Someone responsible for investigating and settling claims submitted to an insurer.
Insurance agent / broker
People who sell insurance policies – they do not provide insurance.
The person or business entity that receives financial support or other benefits after an insurance claim.
New technologies in the insurance industry that improve customer experiences, simplify policy management, and increase competition.
Invasion of privacy
The violation of a person’s freedom to control their image and be left undisturbed in private spaces and conversations.
Legal liability
A responsibility to pay debts, which is a part of both criminal and civil law.
Lessor’s risk only
Insurance that provides liability protection for commercial landlords.
Liability insurance
A general term for the type of risk financing that can protect your business when someone files a lawsuit against it.
Loss payee
A person or organization listed on an insurance policy’s declarations page that is entitled to receive claim payments before the policy owner.
Loss runs
Insurance carrier reports that show how many claims you’ve filed under your business insurance policies.
Minimum earned premium
The smallest amount of money an insurance company is willing to accept for writing a business insurance policy.
Named insured
A person or business entity listed on an insurance policy’s declarations page.
Named perils
Covered losses that are explicitly described in your insurance policy.
Nose coverage
Insurance protection for incidents that occurred before you purchased your current claims-made insurance policy.
Occurrence-based insurance policy
A type of policy that pays for losses that occur during the policy period, even if it’s no longer active when you file a claim.
Open perils
A type of property insurance that covers damage to your possessions from all causes except those your policy specifically excludes.
Per-occurrence limit
The most your insurance company will pay for a single covered loss under the terms of your policy.
Personal and advertising injury
An infringement on a person or business’s personal or intellectual rights. It can include libel, slander, and copyright infringement.
The amount of money your insurance provider charges you for coverage, usually as yearly or monthly payments.
Prior acts coverage
Insurance protection for incidents that happened before you bought your existing claims-made insurance policy.
Products and completed operations
Coverage that protects you from customer lawsuits alleging property damage or injury due to your product or service.
Products and completed operations aggregate
The maximum amount your general liability policy will pay for products or completed operations liability claims.
Professional liability insurance
Liability insurance that covers lawsuits when you are sued for professional errors or omissions.
Proof of loss
A formal statement that you, the insured, send to your insurance provider in the event of a loss.
Property insurance
Insurance coverage that helps businesses replace and repair damaged property.
Qualifying event
Any significant change to your business that affects your insurance needs.
An estimate of your premium cost for a specific type of insurance policy.
Replacement value
The value of purchasing a new replacement for lost or damaged property.
Retroactive date
The earliest date that your professional liability or errors and omissions policy will cover a claim.
Additional insurance protection you can purchase separately and "tack on" to your primary insurance policy.
Risk management
The method of identifying and minimizing risks that threaten your business.
Sole proprietorship
A business owned by one person who is responsible for all of its debts, taxes, and legal liabilities.
Stop gap coverage
Insurance that protects business owners from lawsuits filed over workplace injuries. It’s used when coverage isn’t included in a state-run workers’ compensation program.
A way for an insurer to recoup money paid on a claim.
Tail coverage
An endorsement to your insurance that allows you to file a claim against your policy after it expired or was canceled.
A civil wrong that causes someone unfair loss or harm.
Someone who commits an act – often unintentionally – that harms another person or causes someone an unfair loss.
Triple net lease
A rental agreement in which the tenant pays for building maintenance, property insurance, and property tax in addition to base monthly rent.
Umbrella insurance
A business insurance policy that can help you pay additional claim expenses when a primary policy's limits are maxed out.
The process that an insurance provider uses to assess and evaluate the risks of potential insurance buyers.
Vicarious liability
The legal framework that allows you or your business to be held financially responsible for another party’s actions or negligence.
Workers' compensation class codes
Numbers that insurers use to classify companies and employees by exposure to risks.
Workers' compensation insurance
Business insurance coverage that helps employers pay for medical expenses in the event that an employee suffers from a work-related injury or illness.
Workers' compensation state fund
A government-funded organization that provides workers’ comp insurance to employers and employees in a specific state.
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