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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
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 →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 →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.
B
Binder
A temporary, written confirmation of coverage issued before the formal policy is delivered. It proves coverage is in force during the gap.
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 →Bodily Injury Liability
Coverage for third-party medical expenses, lost wages, and pain-and-suffering claims resulting from an accident you're liable for.
Business Interruption Insurance
Covers lost income and ongoing expenses if your business is forced to close due to a covered peril (fire, weather, etc.). Critical for service businesses.
Learn more: Commercial Property →C
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.
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.
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 →Cyber Liability
Coverage that responds to data breaches and cyber events — costs like notification, credit monitoring, legal defense, and sometimes ransomware response.
Learn more: Cyber Liability →Claim
A formal request for payment under an insurance policy. Claims must be reported promptly and include documentation of the loss.
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 General Liability (CGL)
Broad liability coverage for third-party bodily injury, property damage, and personal/advertising injury. Foundation coverage for most businesses.
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 →Cyber Liability Insurance
Covers costs from data breaches, ransomware, and cyber attacks — including notification, credit monitoring, legal fees, and business interruption.
Learn more: Cyber Liability →D
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.
E
Endorsement
A written change to a policy that adds, removes, or modifies coverage (e.g., adding an additional insured, scheduling new equipment).
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 →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.
Learn more: Workers' Compensation →Employment Practices Liability Insurance (EPLI)
Covers legal costs and damages from employee claims of wrongful termination, discrimination, harassment, and wage/hour violations.
Learn more: Employment Practices Liability →Experience Modification Rate (EMR)
A multiplier applied to your workers' comp premium based on your claims history. Above 1.0 = higher-than-average claims; below 1.0 = fewer claims.
F
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.
Learn more: Flood Insurance →G
General Liability (GL)
Core coverage for third-party bodily injury, property damage, and personal/advertising injury arising from your operations. The baseline most contracts require.
Learn more: General Liability →General Contractor
A contractor who oversees a construction project and subcontracts portions of the work. Often requires subcontractors to carry GL and add the GC as additional insured.
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 vehicles.
Learn more: Commercial Auto →Hired & Non-Owned Auto Liability
Coverage for vehicles you rent or borrow for business purposes. Protects you if you're liable for an accident while using a non-owned vehicle.
I
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 →Inland Marine Insurance
Covers equipment, tools, and property in transit or at multiple locations. Useful for contractors, photographers, and businesses with mobile assets.
Learn more: Inland Marine →Insurance Agent
A licensed professional who represents one or more insurance carriers and helps you select and purchase policies. An independent agent represents multiple carriers.
Insured
The person or business covered by an insurance policy. The policy owner is the named insured; others can be added as additional insureds.
Insurer
The insurance company that issues a policy and promises to pay covered claims. Also called the carrier.
L
Loss Run
A report from your prior carrier listing your claims history. Underwriters request it to price and approve new coverage.
Liability Insurance
Covers your legal responsibility for third-party bodily injury, property damage, or personal injury. Protects your business from lawsuits and damages.
Loss Control
Proactive measures to reduce risk and prevent claims — safety training, equipment maintenance, hazard inspections. Can earn premium discounts.
Loss History
A record of all claims and losses your business has reported over a period (typically 3–5 years). Insurers use this to assess risk and set rates.
M
Medical Payments Coverage
Covers medical expenses for third parties injured on your premises or due to your operations — regardless of fault. Limits are typically $1,000–$5,000.
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.
O
Occurrence vs. Claims-Made
Two policy triggers. Occurrence covers incidents that happen during the term regardless of when the claim is filed; claims-made covers claims filed during the term, often requiring tail coverage later.
Occurrence
A single event that causes injury or damage. Occurrence-based policies cover claims arising from incidents during the policy period, even if reported later.
P
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.
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 →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.
Personal & Advertising Injury
Coverage for third-party claims of libel, slander, copyright infringement, and invasion of privacy — common in GL policies.
Policy Period
The time span during which a policy is in force — typically 12 months. Coverage applies only to incidents occurring during this period.
Professional Liability Insurance
Covers errors, omissions, and negligence by professionals (accountants, consultants, architects). Also called errors & omissions (E&O) insurance.
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.
R
Rider
Another word for an endorsement — an attachment that modifies the base policy's terms or coverage.
Replacement Cost
Coverage that reimburses the full cost to replace damaged property with new items of similar kind and quality — typically higher than actual cash value.
Risk Assessment
An evaluation of your business's exposures and vulnerabilities. Insurers use risk assessments to determine rates and coverage requirements.
S
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 →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.
U
Umbrella / Excess Liability
Additional liability limits stacked on top of your GL, auto, or employer's liability. Frequently required by larger contracts and leases.
Learn more: Umbrella Liability →Underwriter
The insurance company employee or department that evaluates risk, determines rates, and decides whether to issue a policy.
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.
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 →Next step
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