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Business Insurance Glossary

Key terms used in insurance.

Defining your coverage with terminology.

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What your policy covers is defined by the terminology used in your policy and by your agent. Understanding your insurance coverage starts with knowledge of the industry language. Use this glossary to look up key terms.

Commercial Insurance Terms
Admitted carrier

An insurance company authorized to do business in the state they are licensed in.


A survey of the financial records of a person or organization conducted annually (in most cases) to determine exposures, limits, premiums, etc.

Automobile Liability

Liability coverage provides protection for your liability to third parties in event of an accident or occurrence for which you are held legally liable. This coverage is required for vehicle owners by financial responsibility laws.

Additional insured

A person or organization not automatically included as an insured under an insurance policy who is included or added as an insured under the policy at the request of the named insured.

Additional insured endorsement

Policy endorsement used to add coverage for additional insureds by name—for example, mortgage holders, lessors, or general contractors.

Agency Fees

Fixed cost charges as compared to percentage charges (called “commissions”).

Aggregate Limit

An insurance contract provision limiting the maximum liability of an insurer for a series of losses in a given time period—for example, a year or for the entire period of the contract. Sometimes called “annual aggregate limit.”

Bailees Liability Coverage

Normally, this is inland marine insurance, despite the title. This type of coverage is designed for a bailee to provide coverage for liability for the property of customers, in that bailee’s care, custody, or control. Although this coverage was designed to cover the bailee’s liability exposure, it can often be endorsed or have options exist to provide a no-fault coverage to protect the customer’s property against any damage, whether or not there is negligence and subsequent liability


A temporary or preliminary agreement that provides coverage until a policy can be written or delivered.

BOP – Business Owners Policy

Similar to the commercial package policy (CPP), it provides broad property and liability protection in a single contract and is designed for small and medium-sized mercantile, service, office, or apartment risks.

BPP (Equipment and Inventory Limit)

Business personal property includes, but is not limited to inventory, furniture, supplies, equipment, phone systems, computers, other machinery, and property of others in your care at your business location.

Building Limit

This coverage provides protection against covered losses or damages to the commercial building you own or are required to insure.

Business Auto Policy

Coverage designed to provide a “standard” form for insuring commercial vehicles (other than private passenger cars).

Business Income

Coverage pays for loss of earnings or income when business operations are interrupted, curtailed, or suspended due to property loss as a result of an insured cause of loss. Also covered are loss of rents and rental value. Extra expenses incurred to continue operations at another location are included as long as they reduce the total amount of loss.

Business Liability

Provides protection for your company in the event that you cause certain injury to others. This could include injury or damage to a person or property. It does not include professional liability for your errors or omissions.

Collision Coverage

Collision covers physical damage to your vehicle that occurs in an accident with another vehicle.

Completed Operations

Under a general liability policy, work of the insured that has been completed as called for in a contract, or work completed at a single job site under a contract involving multiple job sites, or work that has been put to its intended use.

Comprehensive Coverage

Comprehensive covers physical damage to your vehicle that occurs from causes other than a collision.

Contents/Equipment Used Off-Site

This insurance provides coverage for your insured business’s personal property and equipment while being used away from the insured location.


In a policy providing a deductible clause, this is the amount that must first be subtracted from the total damage incurred before determining the insurance company’s liability. The deductible may be in the form of a number of dollars, a percent of the loss, a percent of the value of the insured property, or a period, as in health insurance.

Equipment Breakdown Coverage

Protection against loss from disruption of boilers and machinery by an insured peril: loss to the boiler and machinery itself, damage to other property, business interruption losses, or all three. Also known as machinery breakdown insurance.

Employee Dishonesty

This insurance provides coverage for any financial losses to your business resulting from acts of dishonesty by employees during the course of their employment you.

Employer’s Liability

Employers Liability Insurance Coverage protects you (the employer) in the event that you are sued by a third party for injuries to your employee. These third parties could include the spouse or children of an injured employee. As with any liability claim, negligence must be proved

Employment Practices Liability

This insurance provides coverage for legal costs to defend claims involving sexual harassment, wrongful termination, and discrimination including legal liability for such acts.


A provision of an insurance policy or bond referring to hazards, perils, circumstances, or property not covered by the policy. Exclusions are usually contained in the coverage form or causes of loss form used to construct the insurance policy.

Experience modifier

A factor used in workers’ compensation developed by measuring the difference between the insured’s actual past experience and the expected or actual experience of the class. This factor may be either a debit or credit and, therefore, will increase or decrease the standard premium in response to past loss experience. When applied to the manual premium, the experience modification produces a premium that is more representative of the actual loss experience of an insured. An employer with average experience has a modifier of 1.0 and would pay the manual premium. Employers with poorer loss experience would have modifiers greater than 1.00 and would pay more than manual premium. Those with good experience would have modifiers below 1.00 and pay less than manual premium.

Fidelity Bond

This is an insurance policy that reimburses an employer for losses resulting from dishonest acts of employees. May be written to cover specific employees or all employees, using either a schedule or blanket basis or by scheduling positions versus named persons.

Hired Auto Liability

Hired auto liability covers your liability to others that occurs because of an accident involving a vehicle you’ve rented or borrowed.

Medical Payments Insurance

This coverage pays the cost of medical care to an injured party regardless of whether the policyholder is liable. It is written in conjunction with general and personal liability policies. A similar coverage, automobile medical payments insurance, is available in automobile liability policies.

Motor Truck Cargo

This inland marine form indemnifies an owner or operator of a motor truck, on which is carried property of others, against what the owner or operator may become liable to pay to the owners of the property carried as the result of loss or damage occurring while transporting the property. The Interstate Commerce Commission (as well as the laws of many states) requires a common carrier to have such insurance before being licensed.

Non-Owned Auto Liability

Non-owned auto liability covers you for your liability to others that occurs because of an accident involving a vehicle you do not own or rent.

Personal Injury Protection

Also called “no-fault” coverage, this is designed to respond to medical bills incurred by you, without regard to who was at fault in an accident.

Professional Injury Protection

A class of insurance policies that indemnifies the insured for third-party liability claims due to negligence in the performance of professional services. Professionals include doctors, lawyers, engineers, insurance agents, and others.

Property Deductible

Insurance coverage does not apply until the amount of a loss exceeds the value that has been selected as a deductible.


The premium basis used to calculate premiums in workers’ compensation insurance and, for some classifications, in general, liability insurance. Also known as “remuneration.”

Payroll Audit

A review of an insured’s payroll records by a representative of the insurer to determine the earned premium on a policy such as workers compensation

Per Occurrence Limit

In liability insurance, the maximum amount the insurer will pay for all claims resulting from a single occurrence, no matter how many people are injured, how much property is damaged, or how many different claimants may make claims.

Policy Limit

The maximum amount a policy will pay, either overall or under a particular coverage.


The amount of money an insurance company charges for insurance coverage.

Premium Financing

The A policyholder contracts with a lender to pay the insurance premium on his/her behalf. The policyholder agrees to repay the lender for the cost of the premium, plus interest and fees.

Replacement Value

The full cost to repair or replace the damaged property with no deduction for depreciation, subject to policy limits and contract provisions.


The restoring of a lapsed policy to full force and effect. The reinstatement may be effective after the cancellation date, creating a lapse of coverage.

Risk Management Techniques

Methods for treating risks. Traditional risk management techniques for handling event risks include risk retention, contractual or noninsurance risk transfer, risk control, risk avoidance, and insurance transfer.


Usually known as an endorsement, a rider is an amendment to the policy used to add or delete coverage.

Sewer Or Drain Back-up

This insurance covers damage caused by water that backs up, overflows, or is otherwise discharged from a sewer, drain, sump, sump pump, or related equipment as a result of a covered cause of loss.

Stop Gap

An endorsement that is primarily used to provide employers liability coverage for work-related injuries arising out of exposures in monopolistic fund states (fund workers compensation policies do not provide employers liability coverage).


The assignment to an insurer by terms of the policy or by law, after payment of a loss, of the rights of the insured to recover the amount of the loss from one legally liable for it.

Surety Bond

This is a written agreement wherein one party (the surety) obligates itself to a second party (the obligee or beneficiary) to answer for the default of a third party (the principal) in failing to perform specified acts within a stated time. Such obligations include payment of debts and responsibility for defaults.

Surplus Lines

Risks placed with non-admitted insurers.


This type of insurance supplements your existing General Liability and Business Property and Commercial Auto policies to cover certain catastrophic liability claims.

Underinsured Motorist

Underinsured Motorist Coverage protects you from costs you incur that are caused by another driver who carries limits of liability insurance that are insufficient to cover your costs arising from an accident.


The process of determining whether to accept a risk and, if so, what amount of insurance the company will write on the acceptable risk, and at what rate. Underwriters are companies, individuals, or insurance companies that carry on this critical activity for their own account or for that of others.

Uninsured Motorist

Uninsured Motorist Coverage pays for damages to you and your vehicles when the accident is caused by someone else who doesn’t have insurance or when you don’t know who caused the accident (such as a hit-and-run).

Valuable Papers

This insurance provides coverage for the replacement of a commercial operation’s valuable papers, records, and forms including electronic media. Typically, coverage is limited to the cost of recreating or restoring the lost or damaged documentation.

Waiver Of Subrogation

An agreement between two parties in which one party agrees to waive subrogation rights against another in the event of a loss. The intent of the waiver is to prevent one party’s insurer from pursuing subrogation against the other party.

Workers’ Compensation

Workers’ Compensation insurance protects employees by providing medical and income benefits for job-related injuries or illnesses. The limits and benefit levels vary by individual state statutes. In most states worker’s compensation insurance is required by law if a business has regular employees.

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