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Commercial Insurance Glossary
A comprehensive guide to commercial insurance terminology. Look up key concepts to better understand your coverage options.
A
Actual Cash Value (ACV)
The replacement cost of damaged property minus depreciation. Often lower than replacement cost coverage, which reimburses the full cost to replace with new items.
Additional Insured
A person or business added to your policy by endorsement so they share certain coverage — commonly required by contracts (e.g., a general contractor on a subcontractor's policy). Different from a certificate holder, who only receives proof of insurance.
Learn more: General Liability →Admitted Carrier
An insurance company licensed and regulated by the state's Department of Insurance. Policies from admitted carriers are backed by the state guaranty fund if the insurer becomes insolvent.
Aggregate Limit
The most an insurer will pay for all covered claims during a policy period, as opposed to the per-occurrence limit, which caps a single claim.
Audit (Premium Audit)
A review carriers perform — often on workers' comp and general liability — after the policy term to reconcile estimated payroll or sales with actual figures, which can adjust your premium up or down.
Learn more: Workers' Compensation →Additional Living Expense (ALE)
Coverage for temporary housing and extra costs when a covered peril makes your commercial property uninhabitable during repairs.
B
Blanket Coverage
A single limit that covers multiple items, locations, or categories of property under one amount — instead of scheduling each separately with individual limits.
Learn more: Commercial Property →Binder
A temporary, written confirmation of coverage issued before the formal policy is delivered. It proves coverage is in force during the gap.
Bobtail Insurance
Liability coverage for owner-operators driving their truck without a trailer and not under dispatch. Fills the gap when motor carrier insurance doesn't apply.
Learn more: Bobtail Insurance →Bodily Injury Liability
Coverage for third-party medical expenses, lost wages, and pain-and-suffering claims resulting from an accident you're liable for.
Builders Risk
Temporary property coverage for buildings under construction, renovation, or installation — covers the structure, materials, and fixtures until the project is complete.
Learn more: Builders Risk →Business Income Insurance
Covers lost income and ongoing expenses (rent, payroll, utilities) if your business is forced to close due to a covered peril like fire or storm damage.
Learn more: Commercial Property →Business Owners Policy (BOP)
A packaged policy that bundles general liability with commercial property (and often business income) at a competitive price — popular with small storefronts, offices, and service businesses.
Learn more: Business Owners Policy →Bailee Coverage
Insurance for property belonging to others that's temporarily in your care, custody, or control — common for dry cleaners, jewelers, and repair shops.
C
Cargo Insurance
Coverage for goods and freight you're hauling on behalf of others. Pays for damage or loss to the cargo while in transit.
Learn more: Motor Truck Cargo →Certificate of Insurance (COI)
A one-page document proving you carry insurance and showing limits and policy dates. It does not grant coverage to the recipient — that requires an additional insured endorsement.
Claims-Made Policy
A policy that covers claims filed during the active policy period, regardless of when the incident occurred (as long as it's after the retroactive date). Requires tail coverage if you switch carriers.
Learn more: Professional Liability →Class Code
A numeric code (e.g., NCCI for workers' comp) describing the type of work performed. It heavily influences your rate because it reflects the risk of that activity.
Coinsurance
A clause requiring you to maintain coverage equal to a percentage of your property's value (often 80–100%). Failing to do so reduces claim payouts proportionally.
Commercial Auto
Coverage for vehicles used in your business — liability for injury/damage you cause plus optional physical damage for your own vehicles. Personal auto policies typically exclude business use.
Learn more: Commercial Auto →Commercial General Liability (CGL)
Broad liability coverage for third-party bodily injury, property damage, and personal/advertising injury. The foundation coverage most contracts require.
Learn more: General Liability →Commercial Property Insurance
Covers your building, equipment, inventory, and business personal property against fire, theft, weather, and other covered perils.
Learn more: Commercial Property →Completed Operations
The part of your GL policy that covers claims arising from work you've already finished — for example, a plumbing repair that leaks months after the job is done.
Learn more: General Liability →Comprehensive Coverage
Physical damage coverage for your vehicle from non-collision events — theft, vandalism, hail, fire, flooding, or hitting an animal.
Learn more: Commercial Auto →Collision Coverage
Physical damage coverage for your vehicle when it collides with another vehicle or object, regardless of fault.
Learn more: Commercial Auto →Contractual Liability
Coverage for liability you assume under a written contract — for example, a hold-harmless agreement in a lease or subcontract.
Cyber Liability Insurance
Coverage that responds to data breaches and cyber events — costs like notification, credit monitoring, legal defense, forensic investigation, and sometimes ransomware response.
Learn more: Cyber Liability →Certificate Holder
The party named on a Certificate of Insurance who receives proof of your coverage. Being a certificate holder does NOT grant coverage — that requires additional insured status.
Cross-Liability
A provision treating each named insured as if they had separate policies, so one insured can make a claim against another insured under the same policy.
D
Declarations Page (Dec Page)
The first page(s) of your policy summarizing who's insured, what's covered, policy limits, deductibles, premium, and the policy period. The quick-reference snapshot of your coverage.
Deductible
The amount you pay out of pocket on a covered claim before insurance pays. Higher deductibles usually lower premium but increase your share of a loss.
Duty to Defend
The insurer's obligation to provide and pay for your legal defense when a covered claim is made — even if the lawsuit is groundless. Broader than the duty to indemnify.
Directors & Officers (D&O) Liability
Coverage for company directors and officers against personal liability for decisions made while managing the organization — covers legal fees, settlements, and judgments.
E
Employment Practices Liability (EPLI)
Covers legal costs and damages from employee claims of wrongful termination, discrimination, harassment, retaliation, and wage/hour violations.
Learn more: Employment Practices Liability →Endorsement
A written change to a policy that adds, removes, or modifies coverage (e.g., adding an additional insured, scheduling new equipment). Also called a rider.
Equipment Breakdown Coverage
Covers sudden, accidental breakdown of mechanical and electrical equipment — boilers, HVAC, refrigeration, computers — including repair costs and lost income.
Learn more: Commercial Property →Errors & Omissions (E&O)
Another name for professional liability — covers claims that your professional advice or service was negligent and caused a client financial harm.
Learn more: Professional Liability →Excess Liability
Additional limits that sit above your primary policies (GL, auto, employer's liability). Unlike umbrella, excess typically follows the same terms as the underlying policy without broadening coverage.
Learn more: Umbrella Liability →Exclusion
Specific situations, perils, or property a policy will not cover. Reading exclusions is as important as reading what's covered.
Experience Modification Factor (EMR / Mod)
A multiplier on workers' comp premium based on your claims history versus peers. Below 1.0 lowers premium; above 1.0 raises it. Calculated by NCCI or your state rating bureau.
Learn more: Workers' Compensation →Earned Premium
The portion of your premium the insurer has 'earned' by providing coverage for time elapsed. If you cancel mid-term, you may receive a refund of unearned premium.
Extra Expense Coverage
Pays for costs above normal operating expenses to keep your business running after a covered loss — renting temporary space, expedited shipping, overtime labor.
F
Fiduciary Liability
Coverage for claims alleging mismanagement of employee benefit plans — 401(k)s, health plans, pension funds. Protects plan administrators and trustees.
Flood Insurance
Separate coverage for flood damage (not included in standard commercial property policies). Required by lenders if your property is in a flood zone. Available through NFIP or private markets.
Learn more: Flood Insurance →First-Party Coverage
Insurance that pays for your own losses (your property, your income) as opposed to third-party coverage, which pays claims others make against you.
G
Garage Liability
Specialized liability coverage for auto dealerships, repair shops, and service stations — covers bodily injury and property damage arising from garage operations.
Learn more: Garage Liability →Garagekeepers Coverage
Covers physical damage to customers' vehicles while in your care, custody, or control — essential for auto repair shops, body shops, and parking facilities.
Learn more: Garagekeepers →General Aggregate
The total maximum an insurer will pay for all claims (except products/completed operations) during a policy period. Once exhausted, no further claims are paid.
Grace Period
A window after a premium due date during which coverage remains active even if payment hasn't been received — typically 10–30 days depending on the policy and state.
Gross Premium
The total premium before any credits, dividends, or return premiums are applied. Includes the base rate plus any surcharges, taxes, and fees.
H
Hired & Non-Owned Auto (HNOA)
Liability coverage for vehicles you rent or for employees' personal vehicles used for business — fills a common gap when you don't own a fleet.
Learn more: Commercial Auto →Hold Harmless Agreement
A contractual clause where one party agrees to indemnify the other for certain liabilities. Often triggers the need for additional insured status and contractual liability coverage.
I
Indemnity
The principle of restoring you to the financial position you were in before a loss — no better, no worse. Insurance is fundamentally a contract of indemnity.
Independent Agent
A licensed insurance professional who represents multiple carriers (not just one company) and can shop the market on your behalf for the best coverage and price.
Inland Marine
Despite the name, this covers movable business property and equipment — tools, contractor equipment, and goods in transit — that standard property policies may not.
Learn more: Inland Marine →Insurable Interest
A legal or financial stake in the property or person being insured. You can only insure something you'd suffer a financial loss from if it were damaged or destroyed.
Indemnification
A contractual obligation where one party agrees to compensate another for losses or damages. Insurance policies are contracts of indemnification.
Installation Floater
Inland marine coverage for materials and equipment during installation at a job site — covers transit, storage, and installation until the project is accepted.
Learn more: Inland Marine →K
Key Person Insurance
Life or disability insurance on a critical employee or owner whose loss would severely impact the business financially. Proceeds help the company survive the transition.
L
Liability Insurance
Covers your legal responsibility for third-party bodily injury, property damage, or personal injury. Protects your business from lawsuits and damage awards.
Liquor Liability
Coverage for businesses that sell, serve, or manufacture alcohol — protects against claims arising from intoxicated patrons causing injury or property damage.
Learn more: Restaurant Insurance →Loss Control
Proactive measures to reduce risk and prevent claims — safety training, equipment maintenance, hazard inspections. Can earn premium discounts.
Loss Run
A report from your prior carrier listing your claims history (typically 3–5 years). Underwriters request it to price and approve new coverage.
M
Medical Payments Coverage (MedPay)
Covers medical expenses for third parties injured on your premises or due to your operations — regardless of fault. Limits are typically $5,000–$10,000 per person.
Minimum Premium
The lowest amount a carrier will charge for a policy regardless of exposure size. Even a one-person operation pays at least the minimum premium for their class.
Manuscript Policy
A custom-written insurance policy tailored to a specific insured's unique risks — not a standard ISO form. Common for large or complex commercial accounts.
Moral Hazard
The increased risk of loss when an insured has less incentive to prevent it because insurance will cover the damage. Deductibles and coinsurance help mitigate this.
N
Named Insured
The person or entity specifically listed on the policy as the primary insured, with the broadest rights and responsibilities under the contract.
NCCI (National Council on Compensation Insurance)
The organization that develops workers' comp class codes, calculates experience mods, and provides rate-making data in most states.
Learn more: Workers' Compensation →Non-Admitted (Surplus Lines) Carrier
An insurer not licensed in your state but allowed to write hard-to-place risks through surplus lines brokers. Not backed by the state guaranty fund.
Named Peril
A policy that only covers losses from specifically listed causes (fire, theft, windstorm, etc.). Contrast with 'open peril' (all-risk) which covers everything not explicitly excluded.
O
Occurrence
A single event or continuous exposure that causes injury or damage. Occurrence-based policies cover claims arising from incidents during the policy period, even if reported years later.
Open Peril (All-Risk)
A policy that covers all causes of loss unless specifically excluded. Broader than named-peril coverage and generally preferred for commercial property.
Learn more: Commercial Property →P
Per-Occurrence Limit
The maximum amount an insurer will pay for a single claim or incident. Different from the aggregate limit, which caps total claims in a period.
Performance Bond
A surety bond guaranteeing a contractor will complete a project per the contract terms. If the contractor defaults, the surety pays to finish the work.
Learn more: Surety Bonds →Personal & Advertising Injury
Coverage within GL for third-party claims of libel, slander, copyright infringement, wrongful eviction, and invasion of privacy.
Policy Period
The time span during which a policy is in force — typically 12 months. Coverage applies only to incidents occurring during this period.
Premium
The amount you pay for coverage, usually annually or in installments. It's driven by class code, payroll/revenue, limits, location, and loss history.
Primary and Non-Contributory
An endorsement making your policy respond first (primary) and not seek contribution from the additional insured's own policy. Commonly required in construction contracts.
Learn more: General Liability →Products Liability
Coverage for bodily injury or property damage caused by products you manufacture, sell, or distribute after they leave your possession.
Professional Liability
Coverage for claims that your professional services or advice were negligent — essential for consultants, agencies, contractors who design, and licensed professionals.
Learn more: Professional Liability →Property Damage Liability
Coverage for damage to third-party property caused by your business operations or negligence. Typically paired with bodily injury liability in GL policies.
Payment Bond
A surety bond guaranteeing that a contractor will pay subcontractors, laborers, and material suppliers. Required on most public construction projects.
Learn more: Surety Bonds →Pollution Liability
Coverage for cleanup costs and third-party claims arising from pollution events — typically excluded from standard GL policies and requiring a separate policy.
Premium Finance
A loan arrangement allowing you to pay your annual premium in monthly installments through a finance company, rather than paying the full amount upfront.
R
Replacement Cost
Coverage that reimburses the full cost to replace damaged property with new items of similar kind and quality — no deduction for depreciation.
Retroactive Date
The date on a claims-made policy before which incidents are not covered. Moving to a new carrier without maintaining the same retroactive date creates a coverage gap.
Risk Assessment
An evaluation of your business's exposures and vulnerabilities. Insurers use risk assessments to determine rates and coverage requirements.
Rescission
The voiding of a policy from inception — as if it never existed — typically due to material misrepresentation on the application. More severe than cancellation.
S
Self-Insured Retention (SIR)
Similar to a deductible, but you handle the claim (including defense costs) up to the SIR amount before the insurer's obligation begins. Common in umbrella and professional liability.
Subcontractor
A contractor hired by a general contractor to perform specific work. Subcontractors typically must carry GL insurance and add the GC as additional insured.
Learn more: Contractor Insurance →Subrogation
Your insurer's right to pursue a third party who caused a loss after paying your claim — recovering some or all of what they paid on your behalf.
Surety Bond
A three-party guarantee (you, the obligee, and the surety) that you'll fulfill an obligation — common for licenses, permits, and construction contracts. It's not insurance for you; it protects the obligee.
Learn more: Surety Bonds →Scheduled Equipment
Specific items individually listed on your policy with their own values and descriptions — ensures each piece has dedicated coverage rather than falling under a blanket limit.
Learn more: Inland Marine →Spoilage Coverage
Insurance for perishable goods (food, pharmaceuticals) that are ruined due to equipment breakdown, power failure, or contamination. Critical for restaurants and grocers.
Learn more: Restaurant Insurance →Stop-Loss Insurance
Coverage that caps the total claims a self-insured employer pays in a year. Once claims exceed the stop-loss threshold, the insurer reimburses the excess.
T
Tail Coverage (Extended Reporting Period)
An extension purchased after a claims-made policy ends, allowing you to report claims for incidents that occurred during the policy period but weren't discovered until after cancellation.
Third-Party Liability
Your legal responsibility to someone outside the insurance contract (a customer, vendor, or member of the public) for injury or damage you caused.
Terrorism Insurance (TRIA)
Coverage for losses from certified acts of terrorism, made available through the Terrorism Risk Insurance Act. Offered as an optional add-on to commercial property policies.
U
Umbrella Liability
Additional liability limits stacked on top of your GL, auto, and employer's liability. May also broaden coverage beyond the underlying policies.
Learn more: Umbrella Liability →Underwriter
The insurance company employee or department that evaluates risk, determines rates, and decides whether to issue a policy.
Underinsured Motorist Coverage
Protects your business vehicles and occupants when the at-fault driver's liability limits are insufficient to cover your damages.
Learn more: Commercial Auto →Uninsured Motorist Coverage
Protects your business vehicles and occupants if hit by an uninsured or hit-and-run driver. Covers medical expenses and vehicle damage.
Learn more: Commercial Auto →V
Vacancy Clause
A policy provision that limits or excludes coverage if a building is vacant beyond a specified period (usually 60 days). Common in commercial property policies.
Learn more: Commercial Property →Valued Policy
A policy that pays a predetermined amount in the event of a total loss — regardless of the property's actual value at the time. Common for fine art and antiques.
Vicarious Liability
Legal responsibility for the actions of another party — for example, an employer's liability for employee negligence, or a GC's liability for subcontractor work.
W
Waiver of Subrogation
A policy provision (often by endorsement) where your insurer agrees not to pursue a third party you've contractually agreed not to hold liable — commonly required in construction and lease contracts.
Workers' Compensation
Coverage for employee work-related injuries and illnesses — medical costs, lost wages, and employer's liability. Required by law in most states once you have employees.
Learn more: Workers' Compensation →Wrap-Up Insurance (OCIP/CCIP)
A single policy covering all contractors and subcontractors on a large construction project. An OCIP is owner-controlled; a CCIP is contractor-controlled.
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