Plain-English definitions of the terms you encounter every day — from ACORD forms and coverage types to underwriting concepts and policy language.
An insurance company that is licensed and regulated by the state's department of insurance. Admitted carriers must file their rates and policy forms with the state, and policyholders are protected by the state guaranty fund if the carrier becomes insolvent. Most standard commercial lines are placed with admitted carriers.
An insurance company that is not licensed by a state's department of insurance but is permitted to write certain types of coverage through surplus lines brokers. Non-admitted carriers are used for hard-to-place risks that standard carriers won't write. They are not backed by the state guaranty fund, which means policyholders bear more risk if the carrier becomes insolvent.
Coverage placed with non-admitted carriers for risks that standard (admitted) markets won't write, such as unusual operations, poor loss history, or high limits. Surplus lines are placed through licensed surplus lines brokers and are subject to different regulatory requirements than admitted policies. Premium taxes are paid differently and the state guaranty fund does not apply.
The maximum amount an insurer will pay for all covered claims during a policy period, typically one year. Once the aggregate limit is exhausted, no further claims will be paid until the policy renews. Most general liability policies have both a per-occurrence limit and an annual aggregate limit.
A bundled insurance policy that combines general liability and commercial property coverage into a single package, typically at a lower cost than buying each separately. BOPs are designed for small to mid-sized businesses and may also include business interruption coverage. Not all businesses qualify — carriers set eligibility requirements based on revenue, square footage, and industry.
Coverage that replaces lost income and pays ongoing expenses when a business cannot operate due to a covered property loss (fire, storm, etc.). It typically covers the income the business would have earned plus continuing expenses like rent and payroll. Most policies have a waiting period (often 72 hours) before coverage begins and a restoration period limit.
Insurance that covers vehicles used for business purposes, including company-owned cars, trucks, and vans. Personal auto policies typically exclude business use, so any vehicle used to transport clients, make deliveries, or perform business activities should be covered under a commercial auto policy. Coverage includes liability, collision, and comprehensive.
The most common commercial insurance coverage, protecting businesses against third-party claims of bodily injury, property damage, personal injury, and advertising injury. CGL is almost always required by landlords and contracts. The standard policy has a per-occurrence limit and an annual aggregate limit, and excludes professional errors, employee injuries, and auto accidents.
Coverage that protects a business's physical assets — building, equipment, inventory, and furniture — against perils like fire, theft, vandalism, and certain weather events. Policies are written on either a named-perils basis (only listed events covered) or an all-risk/open-perils basis (all events covered except those excluded). Business interruption coverage is often added.
Coverage that protects businesses from losses related to data breaches, ransomware attacks, and other cyber incidents. First-party cyber coverage pays for the business's own costs (notification, credit monitoring, system restoration); third-party coverage pays for claims from customers whose data was compromised. Increasingly required for businesses that handle sensitive customer data.
Professional liability insurance that protects service-based businesses against claims of negligence, mistakes, or failure to deliver promised services. E&O is essential for agents, consultants, attorneys, architects, and anyone who provides professional advice or services. It covers legal defense costs and settlements even if the claim is unfounded.
Coverage that kicks in after the limits of a specific underlying policy are exhausted. Unlike umbrella insurance, excess liability only follows the terms of the underlying policy and does not fill in coverage gaps. Often used in commercial situations where a client needs higher limits on a specific line of coverage.
Specialized liability coverage for auto dealerships, repair shops, parking lots, and other businesses that work on or store customers' vehicles. It covers bodily injury and property damage arising from garage operations, and can include garagekeepers coverage for damage to customers' vehicles while in the business's care.
See Commercial General Liability (CGL). General liability is the shorthand term agents and clients use for CGL coverage. It is the foundation of commercial insurance and is almost always the first policy a new business should obtain.
Coverage for property that moves or is in transit, including contractor tools and equipment, mobile equipment, fine art, and goods being shipped. Despite the name, it has nothing to do with the ocean — the term comes from historical maritime insurance that was extended to cover goods transported on land. It fills the gap between property and auto policies.
The maximum amount an insurer will pay for a single claim (per-occurrence limit) or all claims in a policy period (aggregate limit). Common general liability limits are $1 million per occurrence / $2 million aggregate for small businesses. Clients who work with larger contractors or government entities may need $2M/$4M or higher.
Insurance that covers claims arising from professional services, advice, or errors. Also called E&O (Errors & Omissions) for most industries and malpractice insurance for medical and legal professionals. Unlike general liability, professional liability covers economic losses caused by the professional's actions, not just bodily injury or property damage.
A policy that provides additional liability limits above the underlying policies (general liability, commercial auto, employer's liability) and may also fill in some coverage gaps. A $1M umbrella on top of a $1M general liability policy gives $2M total protection. Umbrella policies require minimum limits on underlying policies and are broader than excess liability coverage.
Coverage required by law in most states that pays for medical expenses and lost wages for employees injured on the job. In exchange, employees give up the right to sue their employer for workplace injuries (the "exclusive remedy" doctrine). Premiums are based on payroll and job classification codes. Independent contractors are generally not covered, but misclassification is a major audit risk.
A document that provides proof of insurance coverage, listing the policyholder, insurer, policy number, coverage types, limits, and effective dates. Certificates are issued to third parties — like landlords, general contractors, or clients — who require evidence of coverage. A COI does not modify the policy itself and is for informational purposes only.
The summary page of an insurance policy that shows the most important policy information: named insured, policy number, coverage period, premium, coverage types, and limits. The declarations page is what agents reference when quickly reviewing a client's coverage. It is attached to the full policy and does not contain the complete terms and conditions.
A standardized application form used across the insurance industry to collect client information and submit it to carriers. The most common commercial forms are ACORD 125 (Commercial Insurance Application), ACORD 126 (General Liability), ACORD 130 (Workers Compensation), and ACORD 140 (Property). Most carriers require ACORD forms for new business submissions.
The insurance company that issues a policy and is responsible for paying covered claims. Also called the insurer. Agents and brokers place business with carriers on behalf of their clients. Carriers include large national companies (Hartford, Travelers, Chubb), regional insurers, and specialty markets.
The continuation of an insurance policy for another policy period, typically one year. At renewal, the carrier may adjust premiums, change terms, or non-renew the policy. Agents should review renewals 60–90 days before expiration to identify coverage gaps, negotiate rates, and ensure the client's coverage still matches their current risk profile.
A person or organization added to an insurance policy who receives coverage under that policy, typically required by contract. For example, a property owner may require a contractor to add them as an additional insured on the contractor's general liability policy. Additional insureds are listed on a certificate of insurance or endorsement.
A policy that covers claims made (reported) during the policy period, regardless of when the underlying incident occurred (subject to the retroactive date). Common for professional liability and E&O coverage. Contrast with occurrence-based policies, which cover incidents that happen during the policy period regardless of when the claim is filed.
The amount the policyholder must pay out of pocket before the insurance company pays a covered claim. Higher deductibles generally result in lower premiums. Commercial deductibles can be set per occurrence or as an annual aggregate, and vary significantly by coverage type — property deductibles are common, while general liability policies often have no deductible.
A written modification to an insurance policy that adds, removes, or changes coverage. Endorsements take precedence over the standard policy language. Common endorsements include additional insured endorsements, hired and non-owned auto endorsements, and waiver of subrogation. Also called a rider.
A provision in an insurance policy that eliminates coverage for specific risks, losses, or situations. Common general liability exclusions include professional services, pollution, employment practices, and auto liability. Understanding exclusions is critical — a claim can be denied if it falls within an exclusion even if it otherwise seems covered.
The person or entity covered by an insurance policy. The named insured is listed on the declarations page and is the primary party covered. Additional insureds are added by endorsement and receive limited coverage. Employees and spouses may be covered as insured persons under some policies without being named.
An insurance policy that covers a single line of coverage, as opposed to a package or BOP that bundles multiple coverages. A monoline general liability policy covers only GL; a monoline property policy covers only property. Agents sometimes place monolines when a client needs specific high limits or when one coverage type is hard to place.
The person or business specifically named on the declarations page of an insurance policy as the primary policyholder. The named insured has the broadest rights under the policy, including the right to cancel, modify, and receive policy notices. Additional insureds and loss payees are not named insureds.
A policy that covers incidents that occur during the policy period, regardless of when the claim is filed. If a policy was in force when an incident happened, the claim is covered even if reported years later. Most general liability and commercial auto policies are written on an occurrence basis. Contrast with claims-made policies.
The amount paid by the policyholder to the insurance company for coverage, typically billed monthly, quarterly, or annually. Commercial premiums are calculated based on factors including revenue, payroll, location, industry class, claims history, and coverage limits. Agents earn a commission (typically 10–15%) built into the premium.
The date on a claims-made policy before which no coverage is provided, regardless of when the claim is filed. The retroactive date is important because it determines how far back in time the policy will cover incidents. When replacing a claims-made policy, maintaining the same retroactive date (or earlier) prevents coverage gaps.
The right of an insurer to pursue a third party that caused an insurance loss after paying the policyholder's claim. For example, if a delivery truck damages a client's property, the insurer pays the client's claim and then pursues the truck's owner for reimbursement. A waiver of subrogation endorsement prevents the insurer from pursuing a specific third party.
An endorsement that prevents the insurer from seeking reimbursement from a third party after paying a claim. Often required by contract — for example, a general contractor may require all subcontractors to include a waiver of subrogation in favor of the GC. Adding this endorsement may increase the premium.
A multiplier applied to workers' compensation premiums based on a business's actual claims history compared to the expected claims for similar businesses. An EMR below 1.0 means the business has fewer claims than average (and pays lower premiums); above 1.0 means more claims and higher premiums. A high EMR can disqualify a business from certain contracts.
A report from a prior insurer showing a business's claims history over a defined period, typically 3–5 years. Carriers require loss runs to underwrite new commercial accounts. Loss runs show the date of each claim, the type of loss, and amounts paid and reserved. Clean loss runs result in better rates; significant claims may require explanation.
The process by which an insurer evaluates the risk of insuring a business or individual and determines whether to offer coverage and at what price. Underwriters review applications, loss runs, financial statements, inspection reports, and other data to assess risk. The underwriting process determines the premium, coverage terms, and any exclusions or conditions.
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