Commercial Insurance Glossary

Insurance language should make decisions clearer—not harder. This glossary explains common commercial insurance and risk-management terms in plain language for California business owners, executives, HR leaders, and operations teams.

Definitions are general. The actual policy, endorsements, declarations, exclusions, and applicable law determine coverage.

Additional Insured: A person or organization added to another party’s liability policy for specified protection arising from the named insured’s operations or relationship.
Aggregate Limit: The most an insurer will pay for all covered losses during a policy period, subject to the policy’s terms.
Audit: A review of records such as payroll, sales, classifications, or vehicle information used to determine the final premium for certain policies.
Binder: Temporary evidence of insurance issued while the formal policy is being prepared, subject to its stated terms and expiration.
Business Income: Coverage that may replace lost income and qualifying continuing expenses when operations are interrupted by a covered property loss.
Business Owners Policy (BOP): A package combining core property, general liability, and typically business-income coverage for eligible businesses.
Certificate of Insurance: A document summarizing insurance coverage at a point in time. It does not amend the policy or create rights beyond the policy and endorsements.
Claim: A request for payment or other response under an insurance policy after an alleged covered loss or event.
Claims-Made Coverage: Coverage generally triggered when a claim is first made and reported during the policy period, subject to the retroactive date and other terms.
Coinsurance: A property-policy provision requiring insurance equal to a stated percentage of value to avoid a penalty on a partial loss.
Commercial Auto: Insurance for eligible vehicles used in business, which may include auto liability, physical damage, and other selected coverages.
Commercial General Liability: Coverage that may address specified third-party bodily injury, property damage, and personal or advertising injury claims.
Commercial Property: Coverage for insured buildings, equipment, inventory, furnishings, and other business property against covered causes of loss.
Cyber Liability: Coverage that may address breach response, privacy liability, network security, data restoration, cyber extortion, and cyber business interruption.
Deductible: The amount the insured must pay toward a covered loss before the insurer pays, subject to policy terms.
Directors and Officers Liability: Coverage for certain claims alleging wrongful acts in an organization’s management, governance, or fiduciary decisions.
Endorsement: A document that adds to, removes, or changes the terms of an insurance policy.
Employment Practices Liability (EPLI): Coverage that may address claims alleging discrimination, harassment, retaliation, wrongful termination, or other covered employment practices.
Errors and Omissions (E&O): Another name for professional liability coverage addressing allegations arising from professional advice or services.
Excess Liability: Coverage providing additional limits above specified underlying policies, typically following the underlying terms more closely than a broad umbrella form.
Exclusion: A policy provision identifying losses, circumstances, property, people, or activities that are not covered.
Experience Modification Rate: A factor used in workers’ compensation pricing that compares an employer’s loss experience with expected losses for similar businesses.
General Liability: See Commercial General Liability.
Hired and Non-Owned Auto: Liability coverage that may apply to rented vehicles or employee-owned vehicles used for business, subject to policy terms.
Indemnity: Compensation intended to restore an insured to its financial position before a covered loss, within policy limits and conditions.
Inland Marine: Coverage for certain movable property, equipment, tools, installation materials, or goods in transit.
Insurance Limit: The maximum amount an insurer will pay for covered loss, subject to deductibles, sublimits, aggregates, and policy conditions.
Liquor Liability: Coverage for specified claims alleging that selling or serving alcohol contributed to bodily injury or property damage.
Loss Control: Practices, services, and recommendations intended to reduce the frequency or severity of losses.
Loss Run: A report showing an organization’s claims history for a specified period.
Named Insured: The person or organization identified in the policy declarations as an insured.
Occurrence Coverage: Coverage generally triggered by a covered event occurring during the policy period, even if a claim is reported later, subject to policy terms.
Policy Period: The dates between which an insurance policy is effective.
Premium: The amount charged for insurance coverage.
Professional Liability: Coverage that may address claims alleging errors, omissions, negligence, or failure to deliver professional services.
Property Valuation: The method used to determine the amount payable for covered property, such as replacement cost or actual cash value.
Replacement Cost: The cost to repair or replace covered property with comparable new property, without deduction for depreciation, subject to policy terms.
Retroactive Date: A date in some claims-made policies before which acts are not covered.
Risk Management: The process of identifying, evaluating, controlling, transferring, and monitoring risks that could affect an organization.
Subrogation: An insurer’s right, after paying a covered claim, to pursue recovery from a responsible third party.
Surety Bond: A three-party agreement guaranteeing that the principal will fulfill an obligation to the obligee, backed by the surety.
Umbrella Liability: Additional liability coverage above specified underlying policies, sometimes with broader terms but always subject to its own exclusions and conditions.
Underwriting: The insurer’s process for evaluating risk, determining eligibility, setting terms, and establishing premium.
Workers’ Compensation: Coverage providing statutory benefits for employees with covered work-related injuries or illnesses.

Need Help Applying These Terms to Your Business?

A definition cannot replace a review of the actual policy. Talk with Sacco & Sacco Insurance Brokers about your organization, current program, and upcoming insurance decisions.