Our glossary highlights some of the most important definitions for terms that you may encounter when looking for insurance or maintaining existing coverage for your small business.
It is recommended to review your policy documents as some of these terms may be defined in your policy.
Actual Cash Value
Actual Cash Value (ACV) is the dollar amount a covered property item is currently worth if it is lost, damaged, or stolen. Depreciation factors can be taken into consideration such as the age and expected remaining lifespan of an item. It is used to determine the market value of an item if you are expected to receive an insurance claim payout.
Additional Insured
A person or organization, other than the primary policyholder, who is named on an insurance policy.
Adjuster
A professional who investigates, assess, and helps settle claims. They will determine how much an insurance company should pay for damages related to a claim based on the incident and the policy of the insured.
Advertisement
A notice that is broadcast or published to the general public or specific market segments about your goods, products or services for the purpose of attracting customers or supporters.
Appraisal
The maximum amount an insurance company will pay for covered claims during a policy period. If the value of the total claims exceeds the amount, you could be required to pay the difference out of pocket.
Annual Premium
The process to determine the value of an asset. It can help to establish the replacement value of an item in case it becomes damaged, destroyed, or lost in the event of a claim.
Annual Premium
The price of an insurance policy or the cost of coverage for a year.
Business Entity
An organization created by an individual or individuals to facilitate business activities. Some business entities are a sole proprietorship, partnership, LLC, and a corporation. Each business structure is set up at the state level and must comply with state laws and file required documents to legalize their business within the state it operates.
Business Owners Policy (BOP)
A Business Owners Policy (or a BOP) is a policy designed for business owners that combines property, general liability, and cyber insurance into one convenient package. It usually costs less than purchasing each coverage separately. Learn more about
BOP coverage >
Business Personal Property
Business personal property is insurance that is designed to cover the contents owned by a business including tools, equipment, computers, furniture, and other property. It can cover the cost to repair or replace these items if damaged, lost, or stolen.
Claim
A claim is a request made to an insurance company to cover a loss or incident. If the loss is covered by the policy, the policyholder or affected parties could receive compensation.
Claimant
A business or individual who files a claim with an insurance company. They can be an additional insured or third party involved in the incident that is covered by the insurance policy.
Class Code
A code that identifies the type of risk or activities of a business that is being insured.
Commercial Insurance
Commercial insurance is another term used for business insurance. It is a type of protection businesses purchase for unexpected events to help protect them from common risks like lawsuits, injury claims, property theft and damage, and other incidents.
Cyber Insurance
A type of coverage designed to help businesses respond to and recover from data breaches, cyber-attacks, or technology incident that involve sensitive customer or business information. Learn more about cyber insurance >
Data Breach
A security incident where sensitive information is stolen or taken from an organization without their authorization. Sensitive information can include credit card numbers, customer data, or client information.
Endorsement
An extension to an insurance policy that adds, removes, or changes the scope of what your policy covers. They often are accompanied by increases or decreases in premium amounts.
Equipment Breakdown Coverage
Coverage that can help repair or replace business equipment in the event of failure.
General Liability Insurance
Coverage that can protect a business against expenses associated with third-party bodily injury and property damage claims, as well as advertising injuries. Learn more about general liability insurance >
Grace Period
An amount of time in which you can pay your insurance company before your policy expires.
Insurance Agent
A professional who works on behalf of an insurance company to sell insurance policies directly to a consumer. They must be licensed and follow regulations in their state.
Insurance Binder
An agreement issued by an insurance company that provides evidence an insurance policy will be issued. It can serve as proof of insurance and outlines the basic terms, coverages, named insured, and additional information about the policy.
Insured
A person or legal entity that receives benefits of an insurance policy if they encounter loss, damage, or an injury covered under the policy terms.
Insurtech
Insurance companies that utilize technology to help make the process of purchasing insurance faster, easier, and more efficient for consumers.
Named Insured
An individual or organization that is specified by name in an insurance contract within the policy declarations page. They are protected for losses that are outlined in the policy documents. More than one person or entity can be designated as named insured.
Named Perils
An event that is specifically mentioned as being either covered or not coved by an insurance policy. Your policy will only cover damage that is acknowledged as a peril or added as an endorsement to your policy.
Occurrence
An accident, including continuous or repeated exposure to harmful conditions.
Premium
The amount of money that it costs to receive insurance coverage. A premium can be paid in the full amount when you start a policy or installment payments over the course of the policy life.
Property Damage
Physical injury or loss to tangible property at the time of an occurrence.
Property Insurance
A type of coverage that protects against liabilities for damages or injuries for equipment owned or rented by a business. This includes business equipment and fixtures that are damaged, destroyed, or stolen and need to be repaired or replaced. Learn more about property insurance >
Sole Proprietorship
A business run by one individual or a single owner. There is no legal distinction between the business and the owner.
Spoilage Coverage
Coverage that will help pay for financial losses associated with replacing perishable goods due to refrigeration problems caused by equipment breakdown or a power outage.
Stock
Merchandise held in storage or for sale, including supplies used in packaging or shipping, raw materials, and finished goods.
Temporary Worker
A person who is a substitute for a permanent “employee” on leave or to meet seasonal or short-term workload conditions.
Tort
A wrongful act or omission that harms a person or business that prompts the injured party to seek compensation in civil court.
Volunteer Worker
A person who is not your “employee”, and who donates his or her work and acts at the direction of and within the scope of duties determined by a business owner or manager, and is not paid a fee, salary, or other compensation by the business or anyone else for their work performed at the company.
Underwriting
The process used by an insurance company to determine the risks and costs of insuring a business or individual.
Workers' Compensation Insurance
A type of coverage that can provide benefits to employees if they become sick of injured while performing a job. It can cover medical expenses, lost wages, and ongoing care. Learn more about Workers’ Compensation insurance >
Workers' Compensation Class Code
A numerical number developed by a Workers' Compensation rating bureau (the National Council on Compensation Insurance “NCCI” is an example) that indicates an industry of a business or job profession. It can help determine the risk associated with a business and how much to charge for an insurance policy.