Understanding your Business Insurance coverage



Actual Cash Value

Replacement Cost minus depreciation. The cost of a new item of similar make and model, less depreciation. (See Replacement Cost)

Additional Insured

In auto insurance, a person (other than the Named Insured) or organization protected by the policy through endorsement. This is typically (on an auto policy) an auto leasing company or may be an employer such as a real estate agency.


A licensed transactor of insurance who represents the Insurance Company and helps insurance customers obtain coverage.  

Aggregate Limits

The maximum amount an insurance carrier is contracted to pay out the policyholder within a specified policy period for all claims.

Agreed Value

A loss valuation in which the insured and the insurer agree upon an amount for a loss, usually with the help of a professional appraisal.


a) A written estimate of value of property to be insured completed by an individual trained to render such estimate. (See Arbitration)


Non-judicial resolution of dispute. Arbitration usually (in auto insurance) concerns matters of at-fault parties in an accident, resulting liability for injury and levels of such injury. Arbitration is conducted by a single neutral arbitrator. If the parties cannot agree on an arbitrator, then each shall select and the two so selected shall appoint the single neutral arbitrator. In Auto Insurance, if the dispute involves the value of the vehicle or the amount of damage the resolution may be accomplished by appraisal which is conducted by three vehicle appraisers. (See Appraisal)




An entity (person or organization) having legal possession of one's property without having title (right to sell) to such property. Bailees with regard to automobiles may be auto repair facilities, valet parking, car washes, etc.


When the holder of the policy has property replaced with a new version after a loss is incurred.


The act of effecting coverage.


A temporary contract of insurance.

Binder Date

The date and time that coverage is bound or put into effect. (See Bind)

Blanket Insurance

A type of policy that allows a business owner to insure multiple property types in a single location or one property type at several locations under a single policy.

Bodily Injury

Physical injury to the person of a Third Party. This includes sickness, disease, pain and suffering, emotional distress, loss of income and even death. (See Third Party)


A licensed transactor of insurance who represents the client. (See Agent; Bind)


A licensed individual who can act as an agent and broker representing one or more insurance companies.

Broker Fee

The fee for services rendered that is charged by a Broker. Such a fee is in addition to or separate from any Commission. (See Broker, Commission)

Builders Risk Insurance

This type of insurance covers all building materials used during construction, even when the goods are off-site and in transit.

Building Coverage

This type of insurance covers physical loss or other types of damage (i.e. fire) to a building or structures at the building’s location.

Business Auto Coverage Form (BACF)

This is a common contract for business auto liability insurance.  Although the form refers only to “autos,” autos are defined to include cars, trucks, trailers, vans or other vehicles designed for use on public roads.

Business Income from Dependent Properties

This type of policy covers loss of income due to damage(s) to the business property which the insured relies upon to conducts its operations.

Business Interruption Insurance

This type of coverage can reimburse the insured for continuing business expenses after the business shuts down because of a covered loss.

Business Owners Policy (BOP)

Property insurance and liability insurance bundled together for small businesses.

Business Personal Property Coverage

Coverage in the case of physical loss or damage to the business’ personal property (i.e. equipment, furniture, stock) as a result of fire or other covered incident.




The act, of either party in an insurance contract, of ending the contract prior to its expiration. Both parties are required to give written notice to the other party to effect such cancellation. The insurer is required to give at least ten-days (10) notice prior written warning of such cancellation.

Casualty Insurance

This type of policy covers legal liability of the insured for property damage and/or bodily injury to another party.

Claims Made and Reported

This type of coverage only covers claims made against the insured during the policy period, regardless of the actual date of the wrongful act.

Classic Auto

An automobile which has been substantially restored to original condition, the make and model of which the public has shown an unusual degree of interest (i.e. 1957 Ford Thunderbird, 1964 Chevrolet Impala S/S, Early Mustang Convertibles, etc.)


(a) Impact of an automobile with another object or person outside the vehicle or the upset (overturning) of such vehicle; (b) That coverage which pays for damage to the insured's vehicle, in the event of the above. This coverage is usually subject to a deductible. (See Deductible)

Collision Deductible Waiver (CDW)

That coverage which, in the event the insured's car is damaged in an accident which is the fault of an identified Uninsured Motorist, waives (or eliminates) the deductible requirement under the collision coverage when repairing the auto. (See Collision; Deductible)

Combined Single Limit (CSL)

A limits structure for Bodily Injury and Property Damage Liability or Uninsured Motorist Bodily Injury coverage which provides one single limit, which is the maximum payable for all damages in any one occurrence. Most commercial auto insurance is written CSL. (See Split Limits)

Commercial Auto Insurance 

This type of auto policy covers injuries and damages to the owner, employees and passengers. It only applies to business-related vehicles that are owned, rented or leased.

Commercial Auto Policy

A policy which provides coverage for vehicles that are used for commercial purposes. This coverage is typically written for a commercial enterprise rather than an individual.

Commercial Earthquake Insurance

This type of insurance is the only kind that will cover property damage in the event of an earthquake.

Commercial Flood Insurance

This type of insurance covers flood damage due to natural disasters, including high waters and excessive rain.

Commercial Package Policy

This insurance plan provides a range of liability and property coverage.

Commercial Property Insurance

This insurance policy protects the owner’s owned or leased business property but not any equipment.


Compensation to the producing agent, broker, or agency for writing and servicing the policy from the insurance company. Generally a percentage of the Premium. (See Premium)

Compensatory Damages

Reimbursement for damages caused by injury or loss as a result of a covered act committed by the insured party.


That coverage which pays for direct and accidental damage to the insured's automobile, other than that caused by Collision. All losses not specifically excluded are covered and such coverage usually has a deductible.


Also referred to as Terms and Conditions. These are typically circumstances that must be present for the coverage to apply.


A promise or series of promises that are enforceable under the law.

Coverage Territory

Many commercial insurance policies limit protection to incidents that take place within a specific geographic location.

Cyber Liability

This type of liability insurance covers a business in the event that there is a data breach.



Data Breach Insurance

This coverage is preventative and can also lessen the consequences of confidential data being viewed, stolen or used by an unauthorized individual.


Also known as the "Dec Page" or merely the " Dec." That section of the insurance policy that distinguishes one policy from all others. It contains the insured's name, address, a description of the property insured, the premium, etc.


An amount of money which, in the event of a covered loss, the insured is required to pay prior to the insurer being liable for any damages. The purpose of a deductible is to eliminate the expense of processing small claims.


Coverage provided in most liability policies, which pays for the cost of defending the insured in the event of a lawsuit regarding a covered loss. Defense cost, in the auto policy, is said to be " unlimited," in that the policy requires the insurer to pay whatever is necessary, however, it is actually limited in that the insurer can pay policy limits in damages and thereby avoid the defense requirement entirely.

Directors and Officers Liability Insurance (D&O)

In the event that directors or officers of the insured company are accused of wrongful doing or negligence, this type of insurance covers legal costs and can protect the assets of the company from legal action.

Down Payment

An amount of money (usually a percentage of the premium plus any fees) which the insured must pay in order for the coverage to be bound. (See Bind)



Effective Date

The date and time (usually at 12:01 a.m.) in which the policy contract begins. Actual coverage may begin earlier than this due to a Binder. (See Binder Date)

Employee Benefits Liability Coverage

This type of insurance protects a business in the event that a new employee is not enrolled in a health plan properly.

Employee Dishonesty Coverage

This type of coverage reimburses a business after a loss due to the dishonest activity of one or more employees.

Employer’s Liability Insurance

This coverage protects an employer in the event that an employee files a lawsuit after getting injured at work.

Employment Practices Liability Insurance (EPLI)

This type of insurance protects the business against employee claims of discrimination, wrongful termination, harassment, breach of contract, and more.


A written agreement that adds or subtracts coverage on an insurance policy.

Errors and Omissions Insurance (E&O) 

This liability coverage protects the business in the event that the insured causes a client injury or personal loss as a result of an error or negligence.

Equipment Breakdown Coverage

This covers repairs or replaces equipment due to specific malfunctions (bursting, rupturing, etc.). The policy also covers computers, office equipment, phone systems, and many other types of equipment that are a part of business operations.

Errors and Omissions (E&O) 

This type of insurance protects a business against liability for errors or omissions in their duties. E&O covers financial losses, not bodily injuries and property damage.


Coverage that applies only after some other policy has paid its full policy limit. This may result from policy structure, such as in the case of an Excess Liability or Umbrella policy, or as a result of two policies applying to the same loss. (See Primary)

Excess Liability Coverage

Liability coverage that is written to provide higher Limits than those available in the Primary policy. This policy is only liable after the Primary policy has paid its full Limits for a covered loss. It is used where higher Limits of liability are needed, but the primary insurance company is unwilling or unable to provide such Limits. The Primary policy may provide Limits of 15/30/5 and the Excess policy 85/270/45 to provide total Limits of 100/300/50.


Language in a policy (or which may be endorsed onto a policy) which specifies that a given circumstance is not covered. An example would be intentional acts of the insured. If an insured were to damage property or cause bodily injury on purpose, the policy will not provide coverage due to the intentional acts exclusion. Another example would be the Named Driver Exclusion, which states that if a designated person specified by name is driving the automobile at the time of loss, the policy will not provide coverage.

Extra Expense Coverage

This added coverage takes care of the costs of continuing business operations after a covered loss or damage to insured property. This coverage would pay for rent in an alternative office and anything else necessary to keep operations running.



Fidelity Bonds

This is insurance that covers an employer from employees’ dishonest deeds which may affect that business.


The person who handles benefit funds in a company.

Fiduciary Liability Coverage

This type of policy covers the person who handles benefit funds in a company in the event that there is a breach of duty.

First Party

The insured. A first party loss is a loss that involves injury and/or damage to the property of the insured. (See Third Party)



General Liability Insurance

This type of insurance protects a business from lawsuits having to do with bodily injury or property damage and is separate from commercial vehicle insurance.

Group Health Insurance

Medical insurance offered to the employees of a company.

Group Life Insurance

This type of insurance is a death benefit that the company pays out to beneficiaries after the employee’s death.



Hired Autos

Usually, this term refers to any autos the insured leases, hires, rents or borrows from someone in the policy declarations.

Hold Harmless Agreement

Usually, in a written contract, this agreement holds a contracted third party liable if the agreed upon work they perform causes a loss.




The objective in a property-and-casualty contract to restore the insured’s financial situation to what it was previous to the loss.

Insurable Interest

This term in commercial property insurance means a financial stake in a piece of property.


The contractual transfer of the financial consequences of loss.


Anyone named on the declarations page or driving the insured vehicle with the permission of an insured. (See Permissive User)

Insuring Agreement

A promise made by the insurance company, which outlines its duties. Exclusions, Conditions, and definitions that appear later in the policy modify this promise.



Key Person Insurance

This type of life insurance provides coverage for the person in a business whose absence would greatly impact the company.





The legal responsibility for injury done by the insured to a Third Party, or damage done to their property. (See Third Party)


Maximum amounts payable under a given coverage. May be per person, per occurrence, per day or per year. (See Split Limits; Combined Single Limit)

Loan/Lease Gap

In the event of a total loss, the insurer's actual cash value (ACV) payment may or may not be sufficient to pay off the loan or lease. With this coverage, the insurance company will pay additional funds needed to end the contract.

Loss Control

A tool that works in reducing the amount of loss a company suffers.

Loss of Consortium

A situation in which a spouse claims that the bodily injury of a partner deprives them of the benefits of a family relationship due to the injury.

Loss Payable Clause

A clause that authorizes insurance to pay a third party (loss payee).

Loss Payee

Typically the finance company holding title to the owned auto.



Marine Insurance

This type of insurance covers the damage (or loss) of ships, equipment, cargo, terminals or any property that is being held, transferred or acquired between two locations.

Material Misrepresentation

Falsification of fact(s) that allows an insurance company to refuse to rescind a contract.

Mechanical Breakdown Protection

Extends mechanical breakdown protection for auto repairs beyond the basic warranty term provided by the vehicle manufacturer. Subject to a per breakdown deductible, this coverage applies to the specific vehicle assemblies named in the policy

Medical Payments

An optional auto coverage which pays for the medical expenses of the Named Insured, members of his/her family, and passengers of his/her car if injured in a Collision accident. The Named Insured and Relatives are also covered if struck as a pedestrian. This coverage is Excess to any other medical insurance. (See Excess)

Money and Securities Coverage

This type of coverage protects money and securities while on-site, off-site or in transport to/from the premises of the business.



Named Insured

That person so listed on the Declarations and his/her spouse if a resident of the same household.

Named Peril

An event, risk or hazard that is listed on and covered by your policy.

Non-Owned Auto

A borrowed or rented automobile.




An event or series of events which causes Bodily Injury and/or Property Damage. May include repeated or continuous exposure to the same injurious condition.

Occurrence Coverage Form

This form covers a claim that occurred during the policy period regardless of when it is reported.


In auto insurance, that person seated immediately behind the steering controls of the automobile and no other person.



Performance Bond

This type of surety bond is also called a contract bond. It is issued by the insurance carrier to a bank to guarantee the completion of a contract.

Personal and Advertising Injury

This policy covers malicious prosecution; wrongful eviction; wrongful entry, or invasion of private occupancy; libel, slander or disparagement of goods, products or services; copyright infringement in advertising and more.

Personal Injury Protection (PIP) Coverage

This type of coverage protects a business in the event that a third party suffers an injury (not bodily injury) due to false arrest, wrongful eviction, slander and a whole host of other reasons.

Personal Liability Insurance

This coverage is part of a homeowners or renters insurance policy. This type of policy covers legal fees and protects a business owner against personal financial loss if at fault for another’s bodily injury or property damage.


A legal Contract which contains the agreement between the Insurer and the Named Insured. A Policy is made up of five (5) parts:

  • The Declarations
  • The Insuring Agreement(s)
  • The Exclusions
  • The Conditions
  • The Definitions

Policy Jacket

A preprinted brochure which contains all policy language except that contained in the Declarations Page and Endorsements. In the Policy Jacket you will find the Insuring Agreement(s), Exclusions, Conditions and Definitions.

Premises Liability Coverage

This type of policy protects the insured in the event that a third party suffers an injury on the premises of the business.


Consideration paid by the insured for the policy. The cost of the policy.


That policy which must pay first in the event of loss. This would be due to the wording of the policy as in the case of an Excess Liability policy or where two policies apply to the same loss. (See Excess)

Proof of Non-Fault/ No B/I

Documentation required by the insurer to support not charging for an accident or not assigning points for bodily injury in an accident. Acceptable forms include a police report, a letter from the previous insurer or a letter from the insurance company of the other party in the accident. The insurer may accept a copy of the claims check stub if it contains sufficient information.

Property Damage

Damage or destruction including loss of use of a Third Party's property. Reduction in value is the measure of Property Damage.

Punitive Damages

This may be awarded in a civil lawsuit that seeks compensation for injury, negligence, libel or breach of contract.




An estimate of the cost of insurance given to a prospective client. This estimate does not constitute an offer and therefore is not enforceable. It is literally an invitation to the prospective client to make an offer. The offer, which may be accepted or rejected, is the policy application.



Reinstate with Lapse

The act of re-activating a policy which has ceased to be valid due to expiration or cancellation. There is a period between the cessation of coverage and its reinstatement during which the insurance company provided no coverage. (See Cancel)

Rental Reimbursement

That optional coverage which will reimburse the insured for the expense of renting a vehicle while his/her vehicle is in the shop due to a covered loss. Coverage is usually written with a per day Limit and a maximum number of days per Occurrence. (See Limit; Occurrence)

Repair or Replacement Cost

The cost of repairing or replacing the damaged property with new property of like kind and quality without deduction for depreciation. (See Actual Cash Value)

Replacement Cost

When property is damaged and replaced with new property or something of the same quality, this is the amount it cost.


Also called an endorsement, this is an additional document to a policy that alters or enhances the insurance policy’s terms.


Rideshare refers to the taxi-like service that people provide through companies that connect passengers to drivers via a smart phone app. Examples of these companies are, but not limited to: Uber, Lyft, Sidecar, etc. Click here to learn more about Rideshare Insurance.



Stated Value or Stated Amount

A term used to value property and commonly used in auto insurance. It means that in the event of a loss the insurer will pay the actual cash value, the repair or replacement cost, or the amount stated in the declarations page, whichever is least. This, in effect, places a "ceiling" on the amount to be paid in the event of loss.


The transfer of the insured's legal right against an injuring Third Party to the insurance company. (See Third Party)

Surety Bond

This is a three-party bond that guarantees that the guarantor will pay the obligee an agreed upon amount if the principal fails to meet his/her obligation.



Third Party

Someone not protected by the Insurance Policy. Typically the other party in an auto accident. (See First Party)


The optional auto insurance coverage which will reimburse the insured for the expense of towing or repairs at the place of disablement in the event the vehicle becomes disabled. Coverage is written with a per Occurrence Limit. (See Occurrence; Limit)

Trailer Liability

Trailer Liability is always provided by the towing vehicle. (See Liability)

Transit Insurance

This type of coverage protects your shipments by car, truck, rail or air and from the moment the goods leave the business premises to the time they are delivered to the intended destination.




This is the review of potential risks in an insurance applications to determine premiums.


A broad liability coverage form that provides another layer of liability coverage so the business can settle claims and cover the cost of legal judgments. The form also provides coverage for some exposures that are not covered by the underlying policies such as coverage for libel and slander (Personal Injury). (See Liability)

Uninsured Motorist Bodily Injury (UMBI)

That coverage which, in the event the insured is injured in an accident which is the fault of an Uninsured Motorist, covers the Bodily Injury expense of the Named Insured, Relatives and passengers in his/her auto. The coverage is generally written with a per person and per Occurrence limit. (See Occurrence, Limit; Named Insured)

Uninsured Motorist Property Damage (UMPD)

That coverage which, in the event the insured's car is damaged in an accident which is the fault of an Uninsured Motorist, pays the cost of repairing the auto. This coverage is only written when the policy does not cover collision and has a variable maximum Occurrence Limit. (See Collision Deductible Waiver)




Voluntary relinquishment of a certain right.

Water Damage Coverage 

This type of policy protects your business from losses due to floods and surface water. It covers the backup of sewers and drains/pumps.      

Workers Compensation Insurance 

This policy provides a payout for an employee’s lost wages and medical costs as a result of a work-related illness or injury. It forfeits the employee’s right to sue the employer.