Business Insurance Terminology

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1 Business Insurance Terminology Knowledge Is Power To understand your business policy, it is helpful to have a grasp of basic insurance terms. As a Trusted Choice, independent insurance agency, we are dedicated to not only providing our customers the right coverages and competitive rates, but education and answers as well. Aggregate limits: This is the maximum amount of money that an insurer is contracted to provide the policy holder in a specific policy period. For example, on a particular business liability policy an annual aggregate limit would be the total amount the insurance company would pay for all claims on that policy in a given year. Blanket insurance: This policy allows a business owner to insure multiple property types at one location, or one property type at multiple locations, all under one policy. Builders risk insurance: Provides protections for all building materials - on-site, off-site, and in transport - that a builder uses during the course of a constructions process. Business interruption insurance: If your business must shut down due to a covered loss, this form of coverage can provide reimbursement for the expenses that would have normally occurred if the business had been operating. Business owners policy (BOP): This is a combined policy where property and liability insurance are packaged together at a cost savings for small businesses. Continued on page 2...

2 Fidelity Bonds: This a type of insurance that protects an employer from dishonest employee acts. Commercial property insurance: This policy is meant to protect the building and other business property that you own or lease. Note that equipment is typically a separate policy. Commercial auto insurance: This policy covers you, your employees and company vehicles for injuries and damages, whether the vehicles are leased, owned, or rented. Passengers are also covered. Commercial earthquake insurance: Provides coverage for property damaged in an earthquake. Typical business property insurance will not pay for these damages. Commercial flood insurance: Provided by the National Flood Insurance Program (NFIP), and available through independent insurance agents, this policy provides coverage for flood damage related to high waters, hurricanes, and excessive rain runoff. Data breach insurance: This coverage can provide assistance in preventing a data breach as well as mitigate the consequences of a full blown data breach. Directors and officers liability insurance (D & O): If the directors or officers of a company are accused of wrongful or negligent acts, this coverage can protect the company s financial assets from legal settlements and the cost of legal defense. Employer s liability insurance: If an employee files a lawsuit after being insured on the job, this insurance protects the employer. If an employee has workers compensation benefits, the right to sue is limited. Continued on page 3...

3 Employment practices liability insurance: This coverage provides company protection if someone is accursed of an employment-related claims, such as harassment. Errors and omissions insurance (E & O): This policy provides liability protection in the event that an employee or the business commits a professional error or act of negligence that results in a client s personal loss or injury. This can be anything from a physician s error to advice from a financial adviser that leads to a monetary loss. Exclusions: These are certain risks that are not covered by your insurance policy. You may need to purchase extra coverage for further protection against excluded risks. Fiduciary: An employee or contractor of the company that has entrusted with the handling of benefit funds. General liability insurance: This policy will protect businesses from most situations where the company could be held liable for bodily injury or property damage. It does not include commercial vehicle or professional liability coverage, which are covered separately. Group health insurance: Medical insurance that an employer offers to employees, who are covered or reimbursed for healthcare services according to a specific health plan chosen. Group life insurance: Insurance offered by an employer that allows the employee to select a death benefit, which is distributed to named beneficiaries at the time of the employee s death. Key person insurance: This policy provides the business life insurance on one key person in a business. The beneficiary is the business to help offset earnings loss and find a replacement for the key person. Continued on page 4...

4 Loss control: A risk management tool that aims to reduce the amount of loss a company experiences. Marine insurance: The coverage provides protection for company equipment or goods in transport. If also provides coverage if the vehicle transporting the goods is damaged, and provides liability coverage for third parties. You can choose between ocean marine coverage and inland marine coverage. Named peril: An event or hazard that is listed as covered on your business insurance policy, and will be covered if it occurs. Performance bond: A type of surety bond that ensures the policyholder will complete a contract. Premium: The amount that you pay for insurance coverage. Rider: Also referred to as an endorsement, this is an addendum that will alter or enhance the current policy s terms. For example, you be able to add an equipment rider to your property insurance to protect your equipment. Surety bonds: A surety bond is a three-party bond that guarantees the principal will perform the obligations set forth by the obligee or else the surety will step in to help the obligee recuperate losses. Umbrella insurance: An umbrella policy is extra liability coverage that can dramatically increase a company s ability to settle claims or cover the cost of court judgements in the event of a sizable lawsuit. Typically sold in the increments of $1 million, umbrella insurance is available at a relatively low cost. Underwriting: Underwriting is the process that takes place with most insurance applications. Underwriters review potential Continued on page 5...

5 Continued - Underwriting insurance risks and set the appropriate premiums. Workers compensation insurance: This policy will provide compensation for an employee s medical bills, lost wages, rehabilitation, and disability coverage in the event of a work-related illness or injury. Putting Knowledge to Work for Your Business Now that you are more familiar with business insurance terms, you ll never again have to feel as though you re buying an insurance policy blindly. Between being informed and working with experienced Trusted Choice member agents, you can feel confident that you have the exact coverage you need.

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