Glossary of Insurance Terms

Insurance

Business insurance terminology can sometimes feel confusing. Here are some of the most common terms used in this area of banking and business financial management.

Actual Cash Value (ACV) – repayment value for loss or damage of property, usually calculated as the replacement cost minus depreciation.

Additional insured – a third party to whom coverage is extended under your policy, such as when a client asks you to provide business insurance coverage to a general contractor before working with you.

Adjuster – a person who investigates claims and recommends settlement options based on estimates of damage and insurance policies held.

Aggregate Limit – maximum amount of money your insurer will pay out during the policy period.

Appraisal – estimate of the value of the property. The insurer may require an appraisal during underwriting or after a claim is filed to help calculate how much to pay for a loss under the policy.

Arbitration – an out of court process to settle a dispute.  The process is generally faster and less expensive than the courts.

Certificate of Liability Insurance – proof that you have a general liability insurance policy to protect your business. This is often requested by client before they agree to work with your business.

Claim – notification of a loss to the insurance company and request for coverage as provided under the insurance policy.

Claimant – a person filing a claim. In the case of a liability loss, this can be a person who is seeking coverage from your business insurance policy for their loss.

Claims-Made Insurance Policy – common policy coverage feature where claims made during the time the policy is in effect are covered. Claims made when the policy is no longer in effect would not be covered.

Date of issue – the date the insurance company issues the policy.

Declarations Page – part of the insurance policy that lists important information about your business and the coverages and limits that apply to the policy.

Deductible – the amount of the loss that you are responsible for paying before your insurance coverage begins to pay. Deductibles are chosen when the policy is first taken out and will impact your rate.

Depreciation – the diminishing value of property due to wear and tear, such as usage of machinery or a vehicle.

Endorsement – a change to your core insurance policy to add or remove coverage.

Exclusion – a situation or event that the insurance policy does not cover for damages.

Exclusive Remedy – part of workers’ compensation insurance which prevents an employee receiving benefits from suing the business for a work-related injury or illness.

Expiration Date – the date the insurance coverage ends.

Grace Period – amount time the insurance company allows between the insurance bill due date and the date the coverage is lost if the bill isn’t paid.

Insurance Adjuster – the professional who evaluates damages to determine how much an insurer will pay for losses.

Insurance Agent – person who sells insurance policies from one or more insurance companies.

Insured – person, business, or other parties covered by an insurance policy.

Lapse – a gap in insurance coverage, often caused by a policyholder failing to pay the premiums to maintain the policy.

Loss – the financial cost of an incident such as property damage or a lawsuit. The insurance company may pay to cover the loss according to the conditions in the policy.

Named Insured – the person or business that has business insurance coverage.

Named Perils – list of specific hazards or events that are covered by an insurance policy. Things not on the list are not covered.

Occurrence-Based Insurance Policy – claims are eligible for coverage if the incident happened during the policy period. Claims can get reported at any time, even after the policy’s expiration.

Open Perils – covers losses from all events, hazards, or causes, except for any that are specifically excluded in the policy.  

Peril – something that causes a loss. These are usually specified in an insurance policy as covered or not covered.

Policy – written contract between the insurer and the policyholder that lists the conditions of the insurance coverage.

Premium – the annual cost paid to the insurance company for an insurance policy.

Proof of Loss – document sent by the insured covered by an insurance policy to the insurer that details the cause and the amount being claimed for loss or damage to covered property.

Qualifying Event – listing of events that are eligible for coverage if they cause a loss.

Quote – an estimate of the cost for a unique policy with coverages to help protect your business. The actual premium could be different.

Replacement Value – the cost to replace damaged property with the same or similar property.

Rider – an addition to the policy that provides additional coverage or features.

Underwriting – the process of reviewing and evaluating a company’s risk to determine if the business qualifies for coverage and what the premium will be.

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