Business Insurance Glossary

Insurance that protects against loss when you can't collect money owed to you because your records were damaged or destroyed. Covers the gap when customers dispute debts you can no longer prove.

A person or business added to your policy who gains coverage under your insurance. Common in contracts when a client requires you to add them to your general liability policy to protect them from claims related to your work.

When higher-risk businesses are more likely to buy insurance than lower-risk ones, skewing the insurer's risk pool. Underwriters use detailed applications and inspections to identify and properly price this risk.

The maximum amount your commercial policy will pay for all claims during your policy period (usually one year). For example, if your general liability has a $2 million aggregate, that's the total available for all claims combined—not per claim.

Extension of inland marine insurance that covers tools, equipment, and materials while you're working on someone else's property. Essential for contractors, electricians, plumbers, and other tradespeople.

Insurance for businesses that temporarily hold customers' property—like dry cleaners, repair shops, or storage facilities. Covers damage to customer property while it's in your care.

Commercial property coverage that covers multiple locations or types of property under a single limit, rather than separate limits for each. Provides flexibility when property values shift between locations.

Coverage for buildings under construction, including materials, equipment, and fixtures. Protects against fire, theft, vandalism, and weather damage during the construction phase. Also called course of construction insurance.

Commercial auto insurance covering vehicles used for business purposes. Includes company cars, trucks, vans, and can extend to employee-owned vehicles used for work. Required when personal auto policies won't cover business use.

Also called business interruption insurance. Replaces lost income and covers ongoing expenses (like rent and payroll) when your business can't operate due to a covered event like fire or storm damage.

A bundled insurance package combining general liability, commercial property, and business interruption coverage. Designed for small to medium-sized businesses and typically costs less than buying coverages separately. Learn more about BOP insurance.

A licensed insurance company created by a business (or group of businesses) to insure its own risks. Offers customized coverage, potential cost savings, and retention of underwriting profits. Growing in popularity among mid-sized companies facing rising premiums.

A document proving you have insurance coverage. Clients and landlords often require COIs before you can start work or sign a lease. Your agent can issue these quickly—usually within minutes.

Coverage for income loss when a key supplier or customer suffers a covered loss that impacts your business. For example, if your main supplier's factory burns down and you can't get inventory.

Coverage for liability you assume through a contract or agreement. Many contracts require you to 'hold harmless' or indemnify another party—this coverage responds when those obligations are triggered.

Protection against losses from criminal acts including employee theft, forgery, computer fraud, and social engineering scams. Covers direct monetary losses and sometimes the cost of forensic investigations.

Professional liability coverage that only covers claims filed during your active policy period, regardless of when the incident occurred. Requires tail coverage when you cancel to protect against future claims for past work.

Core business insurance covering third-party bodily injury, property damage, and advertising injury claims. Protects your business if someone gets hurt on your premises or you damage a client's property. Learn more about general liability insurance.

Customizable insurance combining multiple commercial coverages (property, liability, crime, inland marine) under one policy. More flexible than a BOP but designed for larger or more complex businesses.

Part of general liability that covers claims arising after you've finished a project. For example, if faulty electrical work causes a fire six months after completion, this coverage responds.

Coverage for data breaches, cyberattacks, and network security failures. Pays for customer notification, credit monitoring, legal defense, regulatory fines, and business interruption from cyber incidents. Learn more about cyber insurance.

A component of cyber liability insurance covering immediate costs after a data breach: forensic investigation, customer notification, credit monitoring, PR expenses, and call center setup. Time-sensitive coverage that activates within hours of discovery.

Protects company executives and board members from personal liability for decisions made in their roles. Covers legal defense costs and settlements when directors are sued for alleged mismanagement or breach of duty. Learn more about D&O insurance.

An insurer's contractual obligation to provide and pay for your legal defense when you're sued for a covered claim—even if the lawsuit is frivolous. Defense costs are often paid in addition to policy limits.

Coverage for employee lawsuits alleging wrongful termination, discrimination, harassment, or retaliation. Protects your business even if the claims are groundless—legal defense alone can cost tens of thousands.

Part of workers' compensation that covers lawsuits from employees or their families for work-related injuries. Separate from workers' comp benefits, this responds when employees sue for negligence or unsafe conditions.

A modification to your commercial policy that adds, removes, or changes coverage. Common endorsements include hired/non-owned auto, additional insureds, or scheduled equipment coverage.

Insurance for mechanical or electrical failure of equipment like HVAC systems, boilers, refrigeration, or computer systems. Covers repair costs and business income losses—not typically covered by property insurance.

Professional liability coverage for service providers and consultants. Protects when clients claim your advice, work, or services caused them financial harm. Also called Professional Liability Insurance.

Additional liability coverage that sits above your primary policy, adding more limits but following the same terms. Different from umbrella policies, which may provide broader coverage.

A multiplier applied to your workers' comp premium based on your claims history. An EMR of 1.0 is average; below 1.0 means fewer claims and lower premiums, above 1.0 means more claims and higher costs.

Pays for costs above normal operating expenses when you need to keep your business running after a covered loss—like renting temporary space or paying overtime. Often included with business interruption coverage.

Coverage protecting your business from employee theft, fraud, or dishonesty. Essential for businesses handling client funds or valuable property. Different from surety bonds, which protect your clients.

Protection for businesses that manage employee benefit plans like 401(k)s or health insurance. Covers claims of mismanagement, breach of fiduciary duty, or ERISA violations related to these plans.

Commercial auto coverage for businesses with multiple vehicles. Consolidates all vehicles under one policy with one renewal date, often at lower rates than insuring vehicles individually.

Coverage extending your liability protection to business operations in other countries. Standard U.S. policies typically only cover domestic exposures—this fills the gap for international work.

A crime insurance coverage protecting against losses when criminals use social engineering to trick employees into wiring money. Increasingly important as business email compromise scams grow more sophisticated.

Coverage for auto repair shops, parking garages, and valets for damage to customers' vehicles while in their care. Separate from garage liability, which covers your general business operations.

Physical damage coverage for customer vehicles in your care, custody, or control. Available in three forms: legal liability only (when you're at fault), direct primary (any covered loss), or direct excess.

The total amount your general liability policy will pay for all covered claims (except products/completed operations) during the policy period. Typically twice your per-occurrence limit.

Liability protection when employees use rental cars (hired) or their personal vehicles (non-owned) for business purposes. Often added to general liability policies as an inexpensive endorsement.

A contract clause where one party agrees not to hold the other responsible for certain liabilities. Common in construction contracts—your insurance may need to extend coverage for these assumed obligations.

A contractual promise to compensate another party for losses they suffer due to your actions. Many contracts require you to indemnify clients, which creates insurable liability exposure.

Covers business property that moves or is used away from your primary location—like contractors' tools, mobile equipment, or goods in transit. The name is historical; it has nothing to do with water. Learn more about inland marine insurance.

Inland marine coverage for property while being installed at a customer's location. Protects contractors installing equipment, fixtures, or materials against damage during the installation process.

Life or disability insurance on critical employees whose loss would significantly impact the business. Proceeds help the company survive financially while finding and training a replacement.

Coverage for businesses that serve, sell, or manufacture alcohol. Protects against claims when an intoxicated patron causes injury or property damage. Required for bars, restaurants, breweries, and event venues.

Risk management activities designed to reduce the frequency and severity of losses. Insurers may offer discounts for implementing safety programs, training, and loss prevention measures.

See Business Income Coverage. Replaces revenue lost when your business temporarily shuts down due to covered property damage. Includes extra expenses needed to keep operating during repairs.

A suite of coverages protecting company leadership, typically including D&O, EPL, fiduciary liability, and crime insurance. Bundled policies can be more comprehensive and cost-effective than buying each separately.

Coverage for claims arising from content you publish—including defamation, copyright infringement, invasion of privacy, and plagiarism. Essential for publishers, advertisers, and content creators.

No-fault coverage that pays medical expenses for customers or visitors injured on your business premises, regardless of liability. Helps avoid lawsuits by quickly covering minor injuries like slips and falls.

The person or business specifically identified in the policy as covered. Named insureds have full policy rights, unlike additional insureds whose coverage is limited to specific situations.

Cyber coverage for damages caused when your computer systems are compromised and used to attack third parties. Covers claims from businesses harmed by malware or attacks originating from your network.

Coverage that protects against claims based on when the incident happened, not when the claim is filed. If covered today, you're protected even if a claim is filed years later after you've cancelled the policy.

Commercial property coverage for increased costs when rebuilding must comply with current building codes. Standard policies may not cover the extra expense of upgrading an older building to modern standards.

Coverage that pays a predetermined amount when a specific triggering event occurs (like wind speed exceeding 100 mph), regardless of actual damage. Provides faster payouts but may not match actual losses perfectly.

The maximum your policy pays for a single claim or incident. For example, with a $1 million per occurrence limit, one lawsuit could max out at $1 million, but you'd still have coverage for other separate claims (up to your aggregate).

Coverage for injuries or damage caused by products you manufacture, distribute, or sell. If your product is defective and causes harm, this pays for legal defense and settlements.

Protects professionals who provide advice or services against claims of negligence, mistakes, or failure to deliver promised results. Also called E&O insurance. Learn more about professional liability coverage.

Specialized coverage for environmental contamination claims. Standard policies exclude pollution, so businesses that handle hazardous materials, operate gas stations, or perform environmental work need dedicated pollution coverage.

Cyber insurance component covering ransom payments, negotiation costs, and business interruption from ransomware attacks. May also cover forensic investigation and system restoration expenses.

Commercial property coverage that pays to replace damaged property with new items of similar quality—no deduction for depreciation. Costs more than actual cash value but provides full rebuilding/replacement protection.

The retroactive date on a claims-made policy. Your policy only covers incidents that occurred after this date. When switching carriers, negotiate a retro date matching your original coverage start date to avoid gaps.

A member-owned insurance company formed by businesses in similar industries to insure their own risks. Like captives but for groups—common in healthcare, transportation, and professional services.

The amount you must pay before your excess or umbrella liability coverage kicks in. Unlike a deductible, you're responsible for managing and paying claims up to your SIR amount.

Crime insurance for losses caused by fraud where criminals manipulate employees into transferring money or revealing sensitive information. Covers increasingly sophisticated phishing and impersonation schemes.

Insurance for perishable goods lost due to temperature changes from equipment breakdown or power outage. Critical for restaurants, grocery stores, pharmaceutical companies, and food manufacturers.

Coverage protecting self-insured employers from catastrophic claims. Comes in specific (per-employee) and aggregate (total claims) forms, capping your exposure when medical costs exceed expected amounts.

Coverage for general contractors when a subcontractor fails to perform or goes out of business. Covers costs to complete work, delays, and damages—an alternative to requiring performance bonds from subs.

A guarantee that you'll fulfill contractual obligations. Common types include contract bonds (guaranteeing project completion), license bonds (required for certain business licenses), and court bonds. Not technically insurance—bonds protect your clients, not you.

Cyber coverage for losses from unintentional technology failures—like software bugs or accidental data corruption—as opposed to malicious attacks. Not all cyber policies include this.

Extended reporting period coverage purchased when you cancel a claims-made policy. Allows you to report future claims for incidents that occurred while your policy was active. Critical for professionals switching carriers.

Professional liability coverage for technology companies covering claims of negligence, mistakes, or failure to deliver on technology services or products. Protects software developers, IT consultants, and SaaS providers.

Coverage for claims brought by anyone outside your organization—customers, vendors, the public. Distinguished from first-party coverage (protecting your own assets) and employer liability (employee claims).

Coverage for goods while being transported between locations. Can be purchased by shippers or carriers, covering theft, damage, and other losses during transit by truck, rail, air, or sea.

Extra liability coverage that kicks in after your primary commercial policies (general liability, auto, employers' liability) are exhausted. Provides an additional $1-10 million in protection against catastrophic claims.

The process insurers use to evaluate your business risk and determine coverage eligibility and pricing. They review your industry, revenue, claims history, safety practices, and other risk factors.

A policy provision reducing or eliminating coverage when a building is vacant for more than 60 days. Important when closing locations or during renovations—special endorsements may be needed.

Insurance for important business documents—contracts, blueprints, customer records—against physical damage or destruction. Covers cost to reconstruct or replace irreplaceable paper documents.

Workers' comp extension providing benefits to employees exempt from state laws (like some agricultural workers) or for injuries not covered by standard workers' comp.

A policy endorsement where your insurer agrees not to pursue reimbursement from another party after paying your claim. Often required in commercial contracts to prevent insurers from suing clients or contractors.

Required in most states, workers' comp covers medical expenses and lost wages for employees injured on the job. Protects both your employees (guaranteed benefits) and your business (lawsuit protection).