Commercial insurance glossary

Commercial insurance has a vocabulary that can be confusing for clients — and even for agents new to commercial lines. This glossary covers the key terms you'll encounter in commercial insurance submissions, policies, and client conversations, with plain-language definitions and practical context.

Policy structure terms

Occurrence policy — coverage triggers when the event that causes the claim happens, regardless of when the claim is filed. General liability and commercial property are typically written on an occurrence basis. A policy in force in 2023 that has since cancelled still responds to a 2023 injury claim, even if the claim is filed in 2026.

Claims-made policy — coverage triggers when the claim is made, not when the event occurred. Professional liability, D&O, cyber, and EPLI are typically written on a claims-made basis. If the policy is not in force when the claim is filed, there is no coverage — even if the events occurred while the policy was active. This is why tail coverage (extended reporting periods) matters.

Per-occurrence limit — the maximum the policy will pay for a single claim or event.

Aggregate limit — the maximum the policy will pay for all claims during the policy period. Once the aggregate is exhausted, no further claims are covered until the policy renews.

Deductible — the amount the insured pays before insurance responds. A $5,000 deductible means the insured pays the first $5,000 of any covered claim.

Self-insured retention (SIR) — similar to a deductible but the insured pays defense costs within the SIR as well. SIRs are common in professional liability and D&O policies. Unlike a deductible, the insured manages defense within the SIR themselves.

Retroactive date — on a claims-made policy, coverage only applies to incidents that occurred after the retroactive date. A policy with a retroactive date of January 1, 2020 doesn't cover incidents that occurred before that date, regardless of when the claim is filed.

Extended reporting period (ERP) / Tail coverage — extends the period during which claims can be reported after a claims-made policy expires or is cancelled. A 12-month ERP allows claims to be filed for 12 months after the policy ends for incidents that occurred during the policy period.

Underwriting terms

Admitted carrier — an insurance company licensed by the state insurance department. Admitted carriers must file rates with the state and are subject to state guaranty funds. See our guide to admitted vs. non-admitted carriers.

Non-admitted (surplus lines) carrier — an insurer not licensed in the state but permitted to write business through surplus lines brokers for risks that admitted markets won't cover. Not subject to state guaranty funds.

Experience modification factor (X-mod or EMR) — a multiplier applied to workers comp premiums based on a company's actual loss history compared to similar businesses. An EMR of 1.0 is average; below 1.0 is favorable; above 1.0 indicates worse-than-average loss experience. See our experience mod guide.

Loss run — a claims history report from the carrier showing all claims filed during a policy period, their status, and amounts paid. Required for most commercial underwriting submissions. See our guide to reading loss runs.

A.M. Best rating — a financial strength rating for insurance carriers from A.M. Best Company. Ratings range from A++ (Superior) to D. Most commercial clients and lenders require carriers rated at least A-.

Submission — the package of information submitted to an underwriter to obtain a quote, including the completed ACORD application, loss runs, and supporting information. A strong submission tells the account's story and addresses underwriting concerns proactively. See our underwriting summary guide.

Coverage terms

Additional insured — a party other than the named insured who is given coverage under the policy. Commonly added by contract requirement — a contractor adds their client as an additional insured so the client has direct coverage under the contractor's GL for claims arising from the contractor's work.

Named insured — the party(ies) specifically named on the policy declarations page. Coverage for named insureds is typically broader than for additional insureds.

Certificate of insurance (COI) — a document issued by the agent summarizing the key coverage details of a policy. COIs do not themselves provide coverage — they are a representation of what the underlying policy covers. See our certificate of insurance guide.

Endorsement — a written modification to the policy that adds, removes, or changes coverage. Also called a rider. Endorsements can expand coverage (adding a blanket additional insured endorsement) or restrict it (adding an exclusion for a specific activity).

Exclusion — a provision in the policy that specifically removes coverage for certain losses, circumstances, or causes of loss. Every policy has exclusions — understanding what a policy excludes is as important as understanding what it covers.

Business owner's policy (BOP) — a packaged commercial policy that bundles GL, commercial property, and often business income coverage at a combined premium. Available for qualifying small businesses. See our BOP guide.

Products-completed operations — the portion of the GL policy that covers claims arising from products the business sold or work the business completed. This coverage continues to protect the insured even after a job is finished or a product is sold.

Waiver of subrogation — a provision in a policy where the insurer agrees not to pursue recovery from a third party for losses it has paid. Commonly required in contracts — a general contractor may require subcontractors to waive subrogation so the GC's insurer can't sue the sub after paying a claim.

Primary and noncontributory — a requirement that the named insured's policy pays first before any other coverage, and that the insured's carrier does not seek contribution from another carrier. Common in additional insured contract requirements.

Claims terms

First-party claim — a claim the insured makes against their own policy for their own losses (e.g., property damage to their building, business income loss).

Third-party claim — a claim by a third party against the insured for losses caused by the insured (e.g., a customer injured at the insured's premises sues the insured's GL carrier).

Subrogation — the insurer's right to pursue recovery from a responsible third party after paying a claim. If your insurer pays for damage caused by someone else, it can sue that party to recover what it paid.

Defense within limits vs. defense outside limits — some policies pay defense costs from within the policy limit (reducing available coverage as defense costs accumulate). Others pay defense outside the limits (the limit is preserved for settlements and judgments). This distinction is particularly important in professional liability and D&O policies where defense costs can be substantial.

More resources for commercial insurance agents

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